Transcript Contracts, Legal Issues and Dispute Resolution

Roles and Responsibilities of
Professionals
APEGGA Annual Conference
April 21 and 22, 2005
Calgary
Dr. George F. Jergeas PEng
Department of Civil Engineering
University of Calgary
1
References
This presentation is based on:

Law for Professional Engineers, 3rd Edition,
Canadian and International Perspectives, (1996)
(ISBN:00755268-X) by D.L. Marston,
2
References

Instructor and guest speakers notes.






Roles and responsibilities of engineers, presentations by Prof.
George Jergeas PEng, ENGG 513, U of C.
Industrial Safety and Loss Management presentation by: Prof. Doug
McCutcheon, P.Eng. ENGG 400, U of A.
MJB case, by Don Goodfellow Q.C., Calgary, ENGG 513, U of C
Health and Safety Act, presentation by Sig Ruud and Dan Stachnik,
Q.C., Miller Thompson, Calgary, ENGG 513, U of C
Environmental Law for Engineers, presentation by Alex MacWilliam
and Brent Walden PEng.. Fraser Milner Casgrain, Calgary, ENGG
513, U of C.
Environmental Impact Assessment, presentation by Professor Bill
Ross, Faculty of Environmental Design, U of C.
3
Schedule for the two days

Day 1: Legal

Morning




Day 2: PM

Law of Contract
Law of Tort
Morning

Cost overrun on Mega
projects
Afternoon



Health and Safety
Environmental Law
Environmental Risk
Assessment

Afternoon

Fast-tracking project
4
Objectives


Understand the consequences of what we do
Understand the probability that something will
cause harm


Physical or financial
Improve understanding of roles and responsibilities



Society
Environment
Stakeholders and team
5
Objectives

Assist to exercise independent judgement
and leadership

Provide some survival tools and techniques

Help choose the right next step

Improve chances of success
6
Canadian Legal System

Common Law




Judge made law
Legal principles are established by court decisions
Based on English system
Legislation


Statutes
Can be enacted by provincial or federal government
7
Canadian Legal System

Theory of Precedent


Courts apply legal principles established in
previous court decisions to decide cases
Differences between cases, as well as
similarities are important
8
Possible Causes of Action


Breach of Contract
Torts such as:







Negligence
Negligent misrepresentation
Fraudulent misrepresentation
Abuse of power
Abuse of rights
Breach of duty to warn
Defamation
9
Law of Contract
CONTRACT:
1. An agreement between two or more persons,
recognised by Law, which gives rise to
obligations that the courts may enforce.
2. A promise, or a set of promises, which one
person gives in exchange for the promise, or
set of promises, of another person.
G.H.L. Friedman, The Law of Contract in Canada,
2nd ed. (Carswell, 1986)
10
The Primary Ingredients of a Contract
OFFER AND ACCEPTANCE


A real and complete agreement between the
parties

i.e. an offer should be accepted without
qualification
MUTUAL INTENT


The parties intend to enter into a contract
11
The Primary Ingredients of a Contract

CAPACITY TO CONTRACT

The competency of the parties to make valid and
enforceable contracts



(e.g. no minors, lunatics or drunkards)
The proper officer of a corporation
CONSIDERATION

Something of value given by one party to the other party
in exchange for something else (e.g. $1 for a 2005 Harley
Davidson!)
12
The Primary Ingredients of a Contract

LAWFUL PURPOSE


The object of a contract must be lawful; the
law will not enforce an illegal obligation
Contract must not be contrary to statute law


Construction Lien Act
Contract must not be contrary to public policy
13
Question
A sent B the plans and specifications for the
complete electric lighting system for a new
factory. B replied that she would do the
work for $4500. A announced that “hereby”
awarded the contract to B but that certain
fixtures were to be changed and relocated
and other revisions made in the plans. Is B
bound to go through with the project? Why?
14
The Form of a Contract

Offer terminates




Some types of contract must be in writing to be
valid



A counter-offer
Offer withdrawn
Time lapses
The sale of real estate
Oral contracts are usually legal and valid
Oral contracts may not be enforceable

My word against yours!
15
Contractual Obligations

Owners









Make site available
Owner-supplied materials
Design responsibility
Timely approvals
Not to interfere with method of execution
Owner supplied facilities
Issue change orders
Duty to disclose superior knowledge
Owner’s discretion exercised reasonably
16
Contractual Obligations

Engineers






Prepare design, specifications and drawings
Prepare bid documents
Prepare cost estimate
Assist in procurements
Oversee execution and maybe inspection
Contractors


Build the project according to specs, time, budgets
Comply with laws and regulations
17
Case Study
GFJ established its own construction company and decided to bid
on a major infrastructure project for a Government agency. In its
bid price of $2,750,000, GFJ made a mistake by failing to include
an amount of $750,000. This mistake resulted in its bid being
substantially lower than the second lowest bidder of $3,400,000.
Within an hour, subsequent to opening of bids, GFJ requested to
withdraw its bid, which had not yet been accepted, and asked for
its bid deposit of $150,000 to be returned.
When the owner rejected GFJ request to withdraw its bid, GFJ
refused to proceed with the work. The owner sued the GFJ for
the bid deposit amount and the difference between the GFJ’s bid
price and the second lowest bidder’s price.
18
Case Study
Answer the following questions using your common
sense:






Is GFJ allowed to withdraw its bid after submission
and before award?
Is GFJ allowed to withdraw its bid after award?
Is GFJ entitled to a return of its bid deposit?
Must the lowest bid be accepted?
What if all bids come in over budget?
What if contractor qualifies (conditions) his/her bid?
19
Invitation to Tender v. Ron
Engineering 1981
Invitation
Call for tenders
by owner
Offer
Call for
Tender
Offer
Acceptance
by owner
by contractor
Acceptance
Submission
of tenders
Contract A
Bid Bond
Award of
contract
Completion
of contract
Contract B
Performance
Bond
20
Question
The precedent set by the Ron Engineering case now
enforces the principle that a contract is formed when:
a) A contractor accepts the offer made in the invitation
to tender by issuing a letter of intent.
b) An owner accepts the offer made by a contractor by
opening the tender submission.
c) A contractor accepts the offer made in the invitation
to tender by issuing a notice to proceed.
d) A contractor accepts the offer made in the invitation
to tender by submitting a bid.
21
Another Question

A
called a builder, B, describing in
considerable detail an additional room that
she planned to build on her house, and she
asked B how much he would charge to build
it. After lengthy discussion, B said, “It will
cost you $3000.”
A said, “That will be
satisfactory.” The next day B called A and
said that, after making a careful estimate of
the job, he found the addition would cost
$3400.
A claimed that B had already
contracted to do the work for $3000. Is A
correct? Why?
22
And Another One
If a subcontractor makes a mistake in its tender
and this is included as part of the contractor’s
submission, then:
a) The subcontractor is only obligated to perform
the work if a written quote was provided
b) The contractor is not obligated to perform the
work
c) The subcontractor is not obligated to perform
the work
d) The subcontractor is obligated to perform the
work.
23
M.J.B. Enterprises Ltd. vs.
Defense Construction Canada
April 1999
Supreme Court of Canada




Three phase contract
Fixed price for construction pump
house
Fixed price for demolition of water
tank
Unit prices for installation of water
distribution system
24
M.J.B. Enterprises Ltd. vs.
Defense Construction Canada
April 1999,
Supreme Court of Canada
The tender submitted by Sorochan
Enterprises Ltd. included a handwritten
note stating:
“Please note:
Unit Prices per metre are based on
native backfill (Type 3). If Type 2
material is required from top of pipe
zone to bottom of sub-base material for
gravel or paved areas, add $60.00 per
25
metre.”
M.J.B. Enterprises Ltd. vs.
Defense Construction Canada
April 1999,
Supreme Court of Canada



Privilege Clause: The
lowest or any
tender not necessarily accepted
Sorochan bid was the lowest and was
accepted
MJB disputed on the basis that the
Sorochan bid was qualified
26
The application for leave to appeal to the
Supreme Court of Canada is granted on
the following issues only:
To determine if the standard clause (the lowest or any
tender shall not necessarily be accepted), also known as
the privilege clause:
(i) Allows a person calling for tenders to completely
disregard the lowest proper and acceptable valid tender
and to award the contract to anyone, including a noncompliant tenderer or to a contractor which did not
submit a tender through the tendering process, and that
such is an issue of national and public importance to
commerce and to the construction industry regarding the
law of tendering in Canada.
27
(ii) Allows the person calling for tenders
an absolute and unfettered discretion in
awarding the contract, and that such is an
issue of national and public importance to
commerce and to the construction
industry regarding the law of tendering in
Canada.
28
(iii) Allows the person calling for tenders to then
commence bid shopping with contractors
submitting tenders and contractors not
submitting tenders and that such is an issue of
national and public importance to commerce
and to the construction industry regarding the
law of tendering in Canada.
29
Appeal allowed by the
Supreme Court of Canada

Judgment entered for M.J.B. against
Defense Construction Canada
30
Lessons
Tender Calling Authority




Did not have an absolute and
unfettered discretion
Cannot accept a non-compliant bidder
Cannot award on basis of undisclosed
criteria
Cannot bid shop
31
Tender Calling Authority




Can only accept a compliant tender
But which compliant tender?
Is a tender that best meets the criteria
contained in the tender call?
Can consider:
 Expressed terms
 Implied terms

to determine the intentions of the
parties
32
Practical Implications






Treat all bidders equally
Bid should be submitted on time
Contractor cannot withdraw bid
Award to lowest compliant bidder
Describe selection procedures
Subcontractor tenders irrevocable
33
Valid Contracts

ENFORCEABILITY
The law will enforce the provision of a valid
contract; the law will not intervene to impose
more favourable contract terms

CHANGES
An existing contract can be altered by mutual
agreement, providing it is within the
framework of the existing contract
34
Terms and Conditions of
Contracts

Expressed Terms


The conditions which are written in the contract
Implied Terms




Valid conditions which are not explicitly stated
Often rely on established customs and practice
Obvious terms, which should reasonably be applied
e.g. contract to build staircase implies conformance to
appropriate building code
(G. Ford Homes Ltd. v. Draft Masonry (York) Co. Ltd., 43 O.R. (2d) 401)
35
Case Study: Disclaimer
Clauses
A contracting firm entered into a contract with an owner
to construct three bridges over a canal in the city of
Calgary. During the bidding process, the Contractor
made a cursory inspection of the site, including berms,
which had been constructed by the owner upstream
and down stream of each bridge site.
 When contractor commenced work, water leaked
through the berms. Work was delayed and became
more difficult. Contractor sued for compensation.
Is contractor entitled for compensation?
 Contract included the following two disclaimer clauses

36
No Damage for Delay
“… the contractor shall not have any claim
for compensation for damages against the
owner for any stoppage or delay from any
cause whatsoever.”
37
Examination of Work
“The bidder is required to investigate
and satisfy himself of everything and
every condition affecting the work to be
performed and the labour and material
to be provided, and it is mutually
agreed that submission of tender shall
be conclusive evidence that the bidder
has made such an investigation.”
38
Question

In general, when a party signs a standard
form contract without reading and
understanding its terms,
a) The court will reject the contract
b) The court will delete ambiguous terms and then
enforce the contract
c) The court will delete unfair terms and then enforce
the contract
d) The court will enforce the contract
e) The court will impose a penalty on the other party
39
Contract Interpretation

Contracts are a method of communication


Draft contracts in precise and unambiguous
language


Use them to ensure that all parties have the same
understanding
Where a contract is ambiguous it will be
interpreted against the party that drafted it - rule
of CONTRA PROFERENTEM
Read your contract

Clarify any potentially problematic areas
40
Contract Violation
BREACH OF CONTRACT
 This occurs when either party fails to
comply with their respective obligations
Owner’s obligation to pay for work done
 Contractor’s duty to perform the work
 Any other obligation contained in the
contract document either expressly or
implied
Does not enable injured party to avoid their
41
own obligations


Contract Violation
FUNDAMENTAL BREACH




Where the breach is so major and fundamental as
to go to the root of the contract
Only if a breach is fundamental can the contract
be rescinded
 Contractor providing unsuitable system for its
purposes
 Failure of a machine to achieve the promised
level of performance
Disclaimer clause would not protect the vendor
42
Fundamental Breach:
Harbutt’s Plasticine Ltd v. Wayne
Tank and Pump Co. Ltd [1970]





Design and installation of storage tanks for
stearine, greasy wax- main ingredients of
plasticine
The contractors designed a plastic pipeline
wrapped with electrical heating tape; the
pipeline was to be used to liquefy the
stearine, in order to convey it from one point
to another.
The plastic pipeline sagged and cracked
Stearine escaped and became ignited
43
The factory was completely gutted by the fire
Fundamental Breach:
Harbutt’s Plasticine Ltd v. Wayne
Tank and Pump Co. Ltd [1970]


The court stated: “In a breach of their contract the
defendants designed, supplied and erected a
system which was thoroughly unsuitable for its
purpose, incapable of carrying it out unless
drastically altered …. the supply of the useless and
dangerous dura-pipe, coupled with the useless
thermostat was a breach of the basic purpose …
going to the root of the contract.”
Court also held that: “because of the fundamental
breach, the contractors were not entitled to rely on
the liability-limiting provision”
44
Remedies for Contract Violation

DAMAGES



A non-defaulting party is entitled to damages incurred if
it can be established that:
1. There has been a breach of contract
2. The party has suffered a loss
3. The loss is as a result of the breach
Purpose of damages is to return the injured party to the
position it would be in if the breach had not occurred
i.e., damages are what is reasonably contemplated or
agreed at the time the contract is formed.
Duty to mitigate
 The injured party must minimize the damages
45
suffered
Remedies for Contract Violation

DIRECT DAMAGES


Losses directly suffered as a result of the breach
INDIRECT DAMAGES





Losses consequential to the breach
Must have been reasonably foreseeable when the
contract was contemplated
Liquidated damage clauses must be genuine
estimates of potential losses
Penalty payments not enforceable
Liability limiting clauses enforceable
46
Remedies for Contract Violation

QUANTUM MERUIT




“As much as one reasonably earned or deserved”
A reasonable payment made to cover the cost of work
performed
Usually applies if no contract exists, or if contract is
unjustifiably terminated
SUBSTANTIAL COMPLIANCE


If a party substantially complies with the terms of a
contract, it is entitled to be paid the contract price less
the cost of any non-compliance
Minor deficiencies only
47
In-class Discussion

Some contracts contain a provision that
failure of the contractor to complete the
work by a specific date will result in the
contractor being required to make a
specified payment to the owner for
each day, week, or month that
completion of project is delayed. Is
such a penalty provision enforceable?
Discuss.
48
Answer



The court will not enforce a penalty
clause that does not represent a
genuine pre-estimate of damages
These pre-estimated damages are
called “Liquidated damages”
The term “Penalty” should be avoided
49
Notice Provisions

Strict Compliance
“Any claims which the contractor may have against the
Owner shall be presented to the Engineer in writing not
later than seven (7) days after the occurrence of the
delay.
Failure by the contractor to present any claim within the
seven (7) day period shall be deemed to be an absolute
waiver of such claim.”
50
Limitation Period




The new Alberta Limitations Act -1999
An action (law suit) for breach of contract must
commence within a specific period of time:
Two years of Discovery Rule:
 Claims must be brought within 2 years from the
date the claimant knew, or ought to have known
that injury/default occurred.
Drop Dead Rule:
 Claims must be brought within 10 years when the
claim arose - normally when the conduct causing
injury occurred
The terms of the contract may expressly limit the
51
time period
Law of Tort
52
Tort
Wrong to another person





Generally, an injury other than a breach of contract for
which recovery of damages is permitted by the law.
Torts may be committed intentionally or unintentionally
and with or without force.
Tort liability may arise where “services” are performed
gratuitously
No contract need exist for Tort liability to occur
But Tort liability may occur where there is a contract:
concurrent liability
J.G. Fleming, The Law of Torts, 8th ed. (Sydney: Law Book, 1992)
53
Law of Tort

FUNDAMENTAL PURPOSE
 To compensate victims of torts
 Not to punish wrongdoers
 A person who by his or her fault
causes damage to another may be
held responsible
54
Types of Tort







Trespass
Defamation
Nuisance
Occupiers Liability
Deceit
Inducing Breach of Contract
NEGLIGENCE
 Important tort for professionals!
 Misrepresentation
 Duty to warn
55
Negligence




Causing harm through negligent conduct
There is no requirements that the wrongdoer intended to cause such an injury
It is sufficient that a reasonable person
should have foreseen the harm and
prevented it
Consist of a failure to follow such a pattern
of behaviour, of doing what a reasonable
person would not have pursued.
56
Principles of Tort
Plaintiff must establish:



That the defendant owed the plaintiff a duty of care
That the defendant breached that duty by his
conduct and ought to have known that damage to
the plaintiff would be reasonably foreseeable
That the defendant’s conduct caused the damage to
the plaintiff
The plaintiff has the BURDEN OF PROOF
57
Step 1: Negligence (Duty of Care)

Donoghue v. Stevenson [1932]
 A consumer of a bottle of ginger beer became ill
as a result of consuming the remains of a snail
 No contract existed
 Courts held the manufacturer liable
 Established principle that a duty of care
existed between the maker and consumer in
respect of actions or omissions that could
reasonably be foreseen to result in injury
58
Step 2: Reasonable Degree of Care



When tort principles are applied to a particular
situation, reasonableness plays a major role.
Must apply amount of care, consideration and
effort which an average (qualified) person should
be reasonably expected to apply in the same
circumstances
Failure to exercise the required skills and care can
be negligence
59
Step 2: Standard of Care

Standard of care yardstick ingredients:



Normal intellectual capacity, memory ability …
Minimum knowledge, skill, and experiences is
deemed common to nearly everyone
Whatever additional or superior knowledge,
skill and experience the particular defendant
may posses i.e., a family doctor will be held to
that degree of care expected of physician
generally, while a specialist has an even
higher standard to meet.
60
Step 3: Defendant’s Conduct Caused
the Damage



There is no requirement that the
wrongdoer intended to cause damage
or injury
It is sufficient that a reasonable person
should have foreseen the harm and
prevented it
Damage that is too remote is not
recoverable
61
Negligent Misrepresentation

Hedley Byrne v. Heller & Partners [1964]





An advertising agency (HB) requested information on
the credit-worthiness of a potential client
The agency’s bank was advised by the potential
client’s bank (H & P) that the client was credit-worthy
The information given to HB’s bank was given
negligently
The letter from the potential client’s bank expressly
stated that the advice was “without responsibility”
The client went bankrupt and the agency sued the
client’s bank
62
Negligent Misrepresentation


The House of Lords determined that had there
not been an express disclaimer of responsibility,
Heller would have owed a duty of care to Hedley
Byrne and would have been liable to Hedley Byrne
for the damage suffered as a result of Heller’s
misrepresentation.
Where a party relies on the special skill and
judgement of another, and that person knows
he/she is being relied upon, the person giving the
advice must take reasonable care in exercising the
63
special skill.
Importance of Hedley Byrne vs
Heller & Partners


Confirmed that damages are available
for negligence and in this case
negligence that arises from
misrepresentation by a professional
with special skills.
Expanded the scope of damages from
physical injury and property damage to
include financial loss or economic loss.64
Importance of Hedley Byrne vs
Heller & Partners

Liability requires:




One person to rely on the special skill and
judgement of another
The second person knows of that reliance
The second person is duty bound to take
reasonable care
Therefore, the second person will be
responsible for any resulting damage unless
clearly disclaimed
65
Quality of Design

Edgeworth Construction v. N.D. Lea (1993)






In 1977 Edgeworth won a contract with B.C. Ministry of
Highway for road construction
N.D. Lea prepared the design
Contractor alleged errors in the plans and specification,
based on Hedley Byrene principles
Supreme Court found N.D. Lea liable and can be sued
by the contractor
Owner used disclaimer clauses
Vicarious liability: N.D. Lea was held responsible for the
acts of its engineers
66
Vicarious Liability



The employer is held responsible in Tort for the
negligent acts and omissions of its employee
In some circumstances an individual engineer
employed by a firm may be personally liable in
Tort
Vicarious liability may apply under statutory law

Alberta’s Environmental Protection and Enhancement
Act
67
Is This a Solution?
“Any representations in the tender
documents were furnished merely for the
general information of bidders and were
not in any way warranted or guaranteed by
or on behalf of the Owner or the Owner’s
consultants’ and its sub-consultants’
employees, and neither the Owner nor its
consultants or its employees shall be liable
for any representations, negligent or
otherwise contained in the documents”
68
Omission of Information

Brown & Huston v. City of York (1983)






Construction of underground pumping station
Did not require the contractor to satisfy himself about the
sub-surface conditions
Engineer failed to include soils and ground-water reports
Court held that contractor bid on the job assuming there
was no water problem
The engineer was found 75% liable
Owner with superior knowledge has a duty to disclose
69
Negligent Misrepresentation
Cardinal Construction v. Corporation of
Brockville (1984)





Storm sewer construction and a water main
construction
Tender drawings referred to “Underground Bell
Cables” (2 inch flexible plastic cable)
Reality: Concrete encased duct structure
Municipality became aware of this discrepancy
before tender but did not advise bidders
Sued successfully by Cardinal for negligent
misrepresentation
70
Fraudulent Misrepresentation

Intentionally made to be false
representation or not caring whether or
not it is true
71
Deceit
Must intend reliance on a false statement

The general requirements for a negligent
misrepresentation


Proximity, reliance and damage
Plus the representation must be intentionally
made:


Knowing it to be false
Not caring whether or not it is true
72
Deceit
Opron Construction v. Alberta [1994]
 Paddle River Dam Project




Contract for embankment stage II
Province did not include information it had
regarding the erratic pocketing of the gravel
required for construction
Province did not disclose the extent of the
previous work and published contract documents
containing erroneous as-built drawings
Province was found liable for deceit (and
negligence and breach of contract!)
73
Winnipeg Condominium Corporation v.
Bird Construction [1995]





Design and construction of an apartment
building completed in 1974
Converted into condominium and sold to a new
owner in 1978
In 1989 a section of the cladding fell to the
ground
Owner was advised that further sections could
fall, thereby creating a dangerous situation
Cladding removed and replaced at $1.5 Million
74
Winnipeg Condominium Corporation v.
Bird Construction [1995]


The owner sued the original contractor, the
original sub and original architect
Liability was imposed because:


The harm involved (a dangerous building) was
foreseeable
Socially responsible to impose liability to
encourage subsequent owners to repair
building before it actually injures anyone
75
Proximity
C.N.R. v. Norsk Pacific S.S. Co. [1992]

The Norsk ship crashed into a railway bridge owned
by Public Works Canada. CNR used the bridge and
subsequently had to re-route its rail traffic which
caused extensive economic loss.
 Supreme Court of Canada upheld C.N.R.’s claim for
damages (pure economic loss) as the parties
relationship was of sufficient closeness
(proximity) to justify liability.
 Proximity may consist of various forms of
closeness - physical, circumstantial, causal
or assumed
76
Limitation Periods



An action in tort must be commenced within a specific
period of time:
Two years of Discovery Rule:
 Claims must be brought within 2 years from the date
the claimant knew, or ought to have known that
injury occurred.
Drop Dead Rule:
 Claims must be brought within 10 years when the
claim arose - normally when the conduct causing
injury occurred
The terms of the contract may expressly limit the time
period
77
Damages

The purpose of damages is to return the parties
to the position they would be in had the tort not
occurred


If a misrepresentation had not occurred then the
contract would not exist - therefore pay all actual
damage
Can be claimed for



Personal injury
Property damages
Pure economic loss
 If there is sufficient proximity
78
Concurrent Liability
B.G. Checo v. B.C. Hydro





[1993] 2 W.W.R. 321
Contract to install transmission lines
Contract stated that a right of way had been cleared
The right of way was not adequately cleared
B.C. Hydro knew this and failed to inform tenderers
B.C. Hydro was found simultaneously liable in both tort
and contract
79
Concurrent TORTFEASORS:
Corporation of District of Surrey v.
Carrol-Hatch et al 1979

Where more than one party is liable in a
tort action



Architect designed a new police station
Engaged an engineer for structural design
No proper soil tests conducted - shallow




Engineer originally recommended deep soils tests Architect rejected it
Building settled
Architect and engineers both held liable 60%/40%
They breached their duty to warn the owner that
additional soil test should be taken
80
Health and Safety Act
Sig Ruud, LLB
and
Dan Stachnik, Q.C.,
Miller Thompson,
Calgary, Alberta
81
Agenda

Obligations under the Occupational
Health and Safety Act


Due Diligence
Bill C-45, Criminal Code
82
Obligations under the
Occupational Health and Safety
Act
Every employer has an obligation to:


Provide a safe working environment
Ensure compliance with the working
alone rules
83
Occupational Health and
Safety Act (OHS Act)

Amended December 2002


March 31, 2003 new OHS regulation



uses the OHS Code for detailed
technical requirements
deals primarily with administrative and
policy issues
November 2003 OHS Code released
April 30, 2004 OHS Code in force
84
OHS Regulations and Code

The OHS Regulation and OHS Code together
replace 11 of Alberta’s existing occupational
health and safety regulations:










Chemical Hazards Regulation AR 393/88
Designated Work Sites AR 306/77
Designation of Joint Work Site Health and Safety
Committee AR 218/77
Explosives Safety Regulations AR 272/76
First Aid Regulation AR 48/2000
General Safety Regulation AR 448/83
Joint Work Site Health and Safety Committee Regulation
AR 197/77
Mines Safety Regulation AR 292/95
Noise Regulation AR 314/81
85
Ventilation Regulation AR 326/84
Who is a Worker?

OHS Act defines “worker” as a person
engaged in an occupation:


the definition includes volunteers
“occupation” means every occupation,
employment, business, calling or pursuit,
except:



farming and ranching
work in, to or around a private dwelling that is
performed by an occupant or an owner or
household servant (nanny or housekeeper)
students receiving training in an educational
86
setting
Who is not a Worker?


Does not apply to a federal
government worker
Does not apply to workers in federally
regulated industries such as:




banking
telecommunications
television and radio broadcasting
interprovincial transportation
87
Obligations of employers

Every employer shall ensure:


the health and safety of its workers
and other workers on the work site
that its workers are aware of their
responsibilities and duties under the
OHS Act, regulations and OHS Code
88
Obligations of workers

Every worker shall:


take reasonable care to protect the health
and safety of himself or herself and of other
workers present
co-operate with his or her employer for the
purposes of protecting the health and safety
of:



the worker
other workers engaged in the work of the
employer, and
other workers not engaged in the work of
that employer but present at the work site
89
New OHS Code

3 broad subject areas:





Core Requirements Applicable to All Industries (3
Parts)
Requirements Applicable to All Industries (26
Parts)
Requirements Applicable to Specific Industries
and Activities (10 parts)
39 parts total
What’s new:




minimizing the danger from violence in the
workplace
biohazard protection
residential roofing fall protection requirements
mandatory written hazard assessments
90
Workplace Violence
Policy and Procedures


Written policy and procedures required
(Code Section 390)
Employers must:




Instruct workers how to recognize workplace
violence
Communicate the organization’s policy and
procedures
Develop procedures for reporting,
investigating and documenting incidents
Develop appropriate responses to workplace
violence
91
Workplace Violence

Employers must:



Investigate incidents
Prepare a report which includes
corrective actions to prevent
reoccurrence
Have the report available for inspection
by OHS officer and workers affected
92
Hazard Assessment




A logical and organized method of identifying
real and potential hazards
Must be in writing
Involve workers, if practicable, in
assessment, control and elimination
Must be revised at:





Reasonable intervals
When new work process introduced
Work process or operation changes
Before construction of new work site
Must be communicated to workers
93
Hazard Assessment

Assess work site and activities

Identify existing and potential hazards

Identify methods to be used to control
or eliminate hazards
94
Hazard Control


The Code mandates that if a hazard or
potential hazard is identified then the
hazard must be eliminated if reasonably
practicable to do so.
If hazard cannot be eliminated, then it
must be controlled:




Engineering controls
Administrative controls
Personal protective equipment
Combination
95
OHS Code – Explanation
Guide and Code

Explanation Guide


www.gov.ab.ca/hre/whs/law/ohs_regcode_dow
n.asp#eg
OHS Code

www.gov.ab.ca/hre/whs/publications/pdf/OHS
C-1.pdf
96
OHS Code Highlights

Section 7


Employees must access work site and
identify existing and potential hazards
Prepare hazards assessment report



results of assessment
methods used to control or eliminate
hazards
Section 8


Report to be in writing and available to
workers
Involve workers, if possible, in hazard
97
OHS Code Highlights

Asbestos – Sections 32 through 34


provisions are transferred from the
Alberta Building Code
Only workers who have successfully
completed an approved asbestos
course can work in a restricted area
98
OHS Code Highlights



Employers must establish an emergency
response plan for emergencies requiring
rescue or evacuation (Section 115)
Designated rescue and emergency workers
must receive appropriate and adequate
training (Section 117)
Designated rescue and emergency workers
must be provided with personal protective
clothing and equipment appropriate to the
work site and the potential emergencies
identified in the emergency response plan 99
OHS Code Highlights



Workers riding bicycles or using in-line
skates must wear helmet (Section 235)
Circumstances under which a mechanical
ventilation system is used to control worker
exposure to hazardous substances or
atmospheres (Section 386)
Ventilation systems to be designed, installed
and maintained in accordance with
established engineering principles (Section
387)
100
OHS Code Highlights

Employers must remove all chemical and
biological substances that could be
hazardous from structures that are to be
demolished (Section 417)
101
OHS Regulations - Highlights

Critical workplace documents must be in
writing and available to affected workers


if an employer is required by the OHS Act
to prepare a report or plan, or develop or
put procedures in place, the report, plan or
procedures must be in writing and available
at the work site to workers affected by the
report, plan, or procedures
Employers must ensure that workers carry out
the safety-related duties required of them

if the Act, a regulation, or OHS Code
imposes a duty on a worker, the worker’s
employer must ensure that the worker
performs that duty
102
OHS Regulations - Highlights

A worker must report any unsafe
equipment to the employer


instead of requiring a worker to remove from
service any unsafe equipment under his or her
control, the worker must immediately report
the unsafe equipment to the employer
A worker must be trained in the safe
operation of equipment

the need for workers to be trained in the safe
operation of the equipment they operate has
now been made explicit
103
Working Alone


A worker is considered to be working
alone if the worker works by himself or
herself at a work site in circumstances
where assistance is not readily available
when needed
For Working Alone Hazard Assessment
Checklists, see Working Alone Safely –
A Guide for Employers and Employees
www.gov.ab.ca/hre/whs/publications/pdf/workingalon
104
e.pdf
Working Alone Rules

If an employer has employees who work
alone, the employer must:




Conduct a hazard assessment to determine the
hazards associated with working alone
Implement safety measures to reduce the risk to
employees from the hazards they identify, and
Ensure that employees have an effective method
of communication should there be an emergency
See Workplace Health & Safety - Working
Alone Bulletin, October 2000
www3.gov.ab.ca/hre/whs/publications/pdf/wa001.pdf
105
Employer Requirements

New:




Workplace Violence Policy and
Procedures (in writing)
Hazard Assessment (in writing)
Industry Specific requirements
Existing:

Working Alone Rules
106
Due Diligence
107
Due Diligence Defence



The defence of due diligence is
available to a charge pursuant to the
OHS Act
The obligations of employers, suppliers,
contractors and prime contractors
respecting health and safety extend “as
far as it is reasonably practicable”
The obligations of workers include to
“take reasonable care”
108
Due Diligence Defence



Onus is on you to establish due
diligence
To establish that you have acted in a
manner that is “reasonably practicable”
you must meet the “reasonable person
test”
“Reasonable person” standard is
gauged against members of your
industry
109
Due Diligence Defence


The test is “what would a reasonable
member of your industry have done in
similar circumstances”
The factors a judge will consider in
determining whether the test has been
met for a due diligence defence:



Forseeability
Preventability
Control
110
Due Diligence Defence

Forseeability: Would the incident have
been forseeable to a reasonable
member of your industry?


Ignorance is not an adequate defence
Was the event so unlikely that members of
your industry would never have expected it
to occur
111
Due Diligence Defence

Preventability: You must show that
everything reasonable was done to
prevent the incident with documented
proof you had:





Identified work place hazards
Prepared and enforced safe work
procedures
Trained workers
Monitored workers after training
112
Implemented progressive disciplinary policy
Due Diligence Defence

Control: You had no control over the
circumstances that resulted in the
incident:



Policies and procedures in place to
delegate responsibility
Policies and procedures meet or exceed
industry standards or accreditations
Policy and procedure followed in delegating
responsibility
113
Due Diligence Defence

How to set the ground work to protect
yourself and enable the establishment of
the due diligence defence:




Implement a management and training system to
identify, manage and control hazards
Your systems and procedures must meet or exceed
industry standards
Your efforts and systems must be well documented.
Have a third party available to examine your
program
114
Due Diligence Checklist
Yes
No
Do you know and understand your safety and health responsibilities?
Do you have definite procedures in place to identify and control hazards?
Have you integrated safety into all aspects of your work?
Do you set objectives for safety and health just as you do for quality, production and
sales?
Have you committed appropriate resources to safety and health?
Have you explained safety and health responsibilities to all employees and made sure
that they understand them?
Have employees been trained to work safely and use proper protective equipment?
Is there a hazard reporting procedure in place that encourages employees to report all
unsafe conditions and unsafe practices to their supervisors?
Are managers, supervisors and workers held accountable for safety and health just as
they are held accountable for quality?
Is safety a factor when acquiring new equipment or changing a process?
Do you keep records of your program activities and improvements?
Do you keep records of the training each employee receives?
Do your records show that you take disciplinary action when an employee violates safety
procedures?
Do you review your OSH program at least once a year and make improvements as
needed?
115
Offences and Penalties

First Offence:



Second and Subsequent Offences:



fine up to $1,000,000 ($60,000/day)
imprisonment up to 12 months
Failure to comply with Order relating to dangerous
work sites:



fine up to $500,000 ($30,000/day)
imprisonment up to 6 months
fine up to $1,000,000
imprisonment up to 12 months
False statement during inspection or investigation


fine up to $1,000
imprisonment up to 6 months
116
Consequences of Failing to
Comply with Your Obligations

Additional or Alternative Penalties


Provide the court with more flexibility to
penalize offenders
Court can take into account the nature and
circumstances of offence
117
Consequences of Failing to
Comply with Your Obligations
(cont’d)

Examples of penalties include:






Establish or revise your health and safety
program
Provide specific safety training for workers
Run a safety workshop for industry
Perform community service
Judges are given a wide discretion to tailor
penalties to offenders
Prosecutors have two years after an
incident to begin prosecution
118
Recent Fines for Fatalities

Red’s Oilfield Service Ltd. – explosion at
Crispin Energy Inc. site



Red’s Oilfield Services Ltd. - $75,000
Crispin Energy Inc. - $80,000 plus 15%
victim fine surcharge
Burlington Resources Canada Ltd. –
worker overcome by H2S fumes


$5,000 fine plus 15% victim surcharge
$100,000 paid to Job Safety Skills Society
119
Recent Fines for Fatalities




Hy-Mark Builders: $138,000
Millar Western Forest Products:
$172,500
Edmonton Fibreboard: $143,750
Fiesta Party Rentals: $100,000
120
Dan Stachnik, Q.C
Bill C-45, an amendment to
the Criminal Code
121
Bill C-45


New act of parliament
Made it easier to be charged with
criminal negligence in Work place health
and safety related incidents

Strong impact on current health and
safety standards
122
Bill C-45
Purpose:
(i) organizations criminally liable for the acts of the
representative
(ii) liability for all persons directing work to take
reasonable steps to ensure safety of workers and the
public
(iii) factors for court to consider when sentencing
(iv) optional conditions concerning sentence - probation
123
Organizations
Broad category of potential parties, including:
1. Corporations
2. Senior management
3. Public bodies
4. Trade unions
5. Municipalities
An organization includes any association which:
(a) is organized for a common purpose
(b) has an operational structure
(c) holds itself out to the public as an association of
persons
124
New Legal Duty Under the
Criminal Code
Who it applies to:
 All persons directing work including senior
management and owners, down to supervisors

Organizations including its employees

Any person directing work
125
Crown burden
(a) establish that individuals within an
organization failed to act reasonably in
relation to work place health and safety
(b) establish that a senior manager
operated in a manner that insulated him
from obtaining the knowledge to act
(c) Crown need not show direct
involvement of senior official
126
Options Available
Crown
to
the
1. Proceed with an OHS prosecution
2. Proceed with a Criminal Code charge as
against the organization and/or senior
officers
3. Proceed with a “shotgun” approach,
pursuing as many charges and as many
individuals as possible
127
OHS Act vs Criminal Code
1. OHS Act promotes safe work place and
procedures
- Criminal Code promotes adversarial
proceedings between the employer and the
Crown
2. R.C.M.P. investigators not familiar with work
sites - building codes - features of equipment
- regulations - safe work procedures
3. OHS Act - has trained or experienced
investigators
128
Work place health and safety officer can enter
work site and inspect the same:
-
Work place health and safety inspectors can compel
records and take copies
-
Employer (including prime contractor) required to
prepare a report involving a serious injury or accident
-
Criminal Code - cautioned statements - right to remain
-
Criminal Code - Voluntary statements are admissible in
-
Criminal Code - Right to legal counsel
silent
criminal law
129
Considerations to be Made by an
Organization at the Investigative
Stage
1. Retain competent legal counsel
2. Conduct interviews with workers at site
3. Conduct interviews of management - right to remain silent
4. Retain experts regarding accident investigation - to
determine cause
5. Preparation of OHS report
130
Sentencing Issues
1. Criminal Code:
(a) Summary conviction - fine of $100,000 - maximum - six
months jail
(b) Indictable offence - no maximum fine – life imprisonment
(for individuals)
2. Fines - OHS Act:
(a) Fine for first offence - $500,000 and imprisonment not
exceeding six months (or both)


For a second offence a fine not more than $1,000,000
and a term of imprisonment not exceeding 12 months (or
both)
A conviction for a failure to comply with an Order relating
to dangerous work sites can result in a fine of up to
131
$1,000,000 and/or imprisonment of 12 months
Factors the Court May Consider
in Sentencing in a Criminal Code
Case
1. Any advantage realized by the organization as a result
of the offence - cost savings
2. The degree of planning involved in carrying out the
offence
3. The duration and complexity of the offence
4. Whether the organization attempted to conceal its
assets
5. Impact of sentence on the economic viability of the
organization and continued employment of its
employees
132
Factors the Court May Consider in
Sentencing in a Criminal Code Case
6. Cost of public authorities concerning the
investigation and prosecution
7. Whether a regulatory penalty has been imposed
8. Penalty imposed by the organization or on its
representatives in relation to their involvement
in the offence
9. Any orders for restitution
10.Any measures that the organization has taken to
reduce the likelihood of recurrence
133
Factors to be Considered in a
Sentence Under an OHS
Prosecution
1. Nature of victim
2. Impact on the victim
3. Degree of negligence of the employer
4. Remorse
5. Prior related record
6. Economic impact regarding the fine
7. General deterrence
134
Industrial Safety and Loss Management
by:
Prof. Doug McCutcheon, P.Eng.
University of Alberta
Edmonton, Alberta
135
What is Safety and Loss/Risk Management?
It is the continuous reduction of risk to:

People

The environment

Company assets

Ability to produce products

Security and vulnerability of our business

Sustainability into the distant future
136
Incident Pyramid
Serious/Disabling/Fatalities
1
Medical Aid
10
30
Property/1st Aids
Near Misses
600
10,000
Unsafe Behaviors/Conditions
Culture
137
Incidents Causes
5%
10 %
Design Problem
Other Causes
Human Factor
85 %
138
Challenger Disaster - January 28, 1986

A rubber “O” ring failed because the outside
temperature was too low.

O2 and H2 leaked and ignited

7 astronauts were killed

Cost of the shuttle was $2.8 billion

Law suits and insurance claims resulted

NASA lost face. The public was angered

The space program was set back several
years
139
Management Failure

Did not listen to technical advice

One person overruled the process

The process was not strong enough to resist
outlying pressures

Risk assessment was not carried out

Poor organizational communication
*
The good companies ensure their
decision making processes cannot be
compromised
140
Columbia Disaster - February 1, 2003

Space shuttle design?

Space shuttle construction?

Space shuttle maintenance?

Space shuttle operation?

Unsafe conditions? ---- (1/10,000)

Near misses? ---- (1/600)
141
RISK MANAGEMENT
PROCESS
DETERMINE
RISK REVIEW
REQUIREMENTS
IDENTIFY
HAZARDS
REDUCE
RISK
“Risk
Management”
ASSESS
RISK
YES
CAN
RISK BE
REDUCED
NO
TOLERABLE
?
?
NO
DISCONTINUE
ACTIVITY
YES
MANAGE
RESIDUAL RISK
“Safety & Loss
Management”
142
Typical Integrated Safety and Loss
Management Program Elements

Management leadership

& commitment
Operations and
maintenance
Risk assessment and

Management of change
management

Contractors
Design and construction



Process & facilities

information,

documentation

Personnel & training

Incident investigation
and analysis
Community awareness
& emergency response
Program continuous
improvement
143
Typical Integrated Safety and Loss
Management Program Elements (cont’d)
*Each element

is defined

has specific standards & objectives
forms the basis for designing, constructing
and operating the company’s facilities

forms the basis for stewardship of
performance

144
Professionalism and Ethics
*





The public (law) expects this of us
Recognize your responsibilities in the law
Know where your limitations are and ask for
assistance
Know what information you require
Know to speak out when professional or
ethical conduct is compromised
Know how to handle conflict of interest
concerns
145
Negative Results in Alberta





Workplace fatalities are not going down
The number of serious injuries are not
dropping significantly
WCB costs are very high
Engineering work involves high hazard
activities
Young workers are hurt more often
146
Causes of Young Worker Injuries

Lack of experience

Poor orientation

Lack of supervision

Failure to ask

Following other workers examples

Negative peer pressure

“It can’t happen to me” attitude
147
Occupation Health & Safety Act
(the Law)

Employer’s responsibility

Worker’s responsibility

“No worker shall carry out work that is
unsafe”

“No one will be dismissed or disciplined for
acting in accordance with the act”
148