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Spike in Steel Prices Renews Interest in Escalator Clauses

The word on the street is that steel producers did not wait for Donald Trump to apply the steel tariffs to Canada before they increased the price of steel.  Contractors and subcontractors are worried about committing to fixed prices without knowing where steel prices are headed. 

 

A material price escalator clause is a potential solution to the problem.  However, such clauses are like pet rocks and polyester pants:  They have been out of fashion for so long that it is a challenge to find the genuine article.  I have combed through the archives and found three examples. 

  

The first is from Bethlehem Steel Co. v. Turner Constr. Co., 2 N.Y.2d 456:

"The price or prices herein stated are based on prices for component materials, labor rates applicable to the fabrication and erection thereof and freight rates, in effect as of the date of this proposal. If, at any time prior to completion of performance of the work to be performed hereunder, any of said material prices, labor rates and/or freight rates shall be increased or decreased, then in respect of any of said work performed thereafter there shall be a corresponding increase or decrease in the prices herein stated."

 

The second is from Einhorn v. Ceran Corp., 177 N.J. Super. 442 involving a contract for the sale of a residential condominium: 

"This agreement is conditioned upon the ability of Seller to complete the unit at present prices for materials and labor. If Seller is at any time or for any reason, unable to complete the unit at the present prices for materials and labor, Seller shall have the option to cancel this contract upon written notice to Buyer, in which event the full deposit shall be returned to Buyer without interest and this agreement cancelled. However, the Buyer shall have the option of paying any increased costs of labor and material, and if Buyer, within ten (10) calendar days after notice of any increase in cost, agrees in writing to pay such increased costs at closing, this agreement shall continue in full force and effect."

And finally, an example from a Canadian case, H.T. Drywall Ltd. v. Carriage Holdings Ltd., 1979 CarswellAlta 452:  

"These prices to take effect as of now, May 13, 1976, and will remain until Sept. 30, 1976, or as such time as further increase in cost of materials. At such time, the price increase shall be passed on to the General Contractor, immediately (sic)."

 

In my view you should consider these clauses as a good starting point rather than the finished product that you can put directly into a contract.  Of course, the hard part is likely to be convincing your client to accept an escalator clause in the first place. 

 

Ted Dreyer is a construction and insurance lawyer at Madorin, Snyder LLP. Madorin, Snyder LLP is a full service law firm serving Kitchener, Waterloo, Cambridge, Guelph and the surrounding area.  Please visit our construction law page.

 

The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers are advised to seek specific legal advice in relation to any decision or course of action contemplated.

 

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Introduction to Bill 142 - The Construction Lien Amendment Act

 

Watch a video by Ted Dreyer about Bill 142 and the new Construction Act.

 

 

Ted Dreyer is a construction and insurance lawyer at Madorin, Snyder LLP. Madorin, Snyder LLP is a full service law firm serving Kitchener, Waterloo, Cambridge, Guelph and the surrounding area.  

 

The information contained in this video is provided for general information purposes only and does not constitute legal or other professional advice. Viewers are advised to seek specific legal advice in relation to any decision or course of action contemplated.

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Coulter A. Osborne Award

 

 

 

 

James H. Bennett, a senior partner at

Madorin, Snyder LLP, will be awarded the

Coulter A. Osborne Award by the Waterloo Region Law Association at the upcoming annual general meeting.
 

 

 

 

 

 

 

 

 

 

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Making Payment With Joint Cheques

It is not uncommon in the construction industry for a subcontractor to reach out to the owner where the general contractor is in default of its payment obligations to the subcontractor.  If keeping the subcontractor working is vital to maintaining the project schedule, the owner may have a strong interest in seeing that the subcontractor get paid.  Often there is an underlying concern that the general contractor is using the funds it has received from the owner for something other than paying the trades.  While there is more than one way to solve this problem, issuing a joint cheque is one method of ensuring that money paid to a general contractor reaches a particular subcontractor. 

 

How to joint cheques work?  A cheque is one example of a 'bill of exchange' and they are regulated by the federal Bills of Exchange Act.  Section 62(2) of the Act provides that both parties named in a joint cheque must endorse the cheque before it can be cashed: 

 

Two or more payees

62(2) Where a bill is payable to the order of two or more payees or endorsees who are not partners, all must endorse, unless the one endorsing has authority to endorse for the others.

 

Going back to the our example, if an owner issues a joint cheque to a subcontractor and a general contractor, the bank will not cash the cheque unless it is endorsed by both the subcontractor and general contractor.  Assuming the general contractor agrees that the subcontractor should be paid, a general contractor who receives a joint cheque should endorse the back of the cheque and give it to the subcontractor.  The subcontractor can then endorse the cheque and deposit it in the subcontractor's bank account. 

 

Ted Dreyer is a construction and insurance lawyer at Madorin, Snyder LLP. Madorin, Snyder LLP is a full service law firm serving Kitchener, Waterloo, Cambridge, Guelph and the surrounding area.  

 

The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers are advised to seek specific legal advice in relation to any decision or course of action contemplated.

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Admission to the Partnership

We are pleased to announce the admission of Rob Bickle, Fil Mendes, Dawn Phillips-Brown and Christopher Clemmer to the partnership at Madorin, Snyder LLP

 

 

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WSIB Coverage for Chronic Mental Stress

On January 1, 2018, amendments to the Workplace Safety Insurance Act ("WSIA") came into effect to create coverage for work-related chronic mental stress.  The changes have prompted some to ask whether we will see a flood of claims for chronic mental stress.  As a lay observer on matters of WSIB coverage, I am inclined to think that these changes will not prompt a flood of claims, at least not yet.  

 

The scope of coverage for work-related chronic mental stress is defined by the WSIB's new Operational Policy for Chronic Mental Stress[1].  The policy provides that a worker will generally be entitled to benefits for chronic mental stress if an appropriately diagnosed mental stress injury is caused by “a substantial work-related stressor” arising out of and in the course of the worker’s employment.  The policy says that the WSIB must be able to identify the particular event or events that gave rise to chronic mental stress: 

 

 

“In order to consider entitlement for chronic mental stress the WSIB decision-maker must be able to identify the event(s) which are alleged to have caused the chronic mental stress.  This means that the event(s) can be confirmed by the WSIB decision-maker through information or knowledge provided by co-workers, supervisory staff, or others.” 

 

Furthermore, the policy indicates that chronic mental stress brought on by “routine stress” will only succeed where the claimant’s employment exposes him or her to extreme danger or matters of life or death:   

 

 

“In some cases, therefore, consistent exposure to a high level of routine stress over time may qualify as a substantial work-related stressor.

 

Jobs with a high degree of routine stress would typically have one or both of the following characteristics:

  • responsibility over matters involving life and death, or
  • routine work in extremely dangerous circumstances.”

Reading between the lines, the policy is really geared to claims for mental stress sustained by first responders and front line emergency room staff.  No doubt we will see an increase in claims by workers in those professions.  However, the policy largely excludes claims for chronic mental stress brought on by routine stress in workers in other professions.  As such, the new policy is unlikely to trigger a flood of new claims. 

 

The real question, I think, is not whether the policy is too broad, but whether it is too narrow to withstand a Charter challenge.  Section 15 of the Canadian Charter of Rights and Freedoms prohibits legislation from discriminating upon various grounds, including mental and physical disabilities.  The Ontario Government extended WSIB coverage to include claims for chronic mental stress in response to a 2014 decision of the Workplace Safety and Insurance Tribunal which concluded that the blanket prohibition on compensation for mental stress that had existed up until that time violated the section 15 of the Charter[2]. If a blanket policy of excluding claims for work-related mental stress violates the Charter, it strikes me that a policy that excludes claims for work-related stress suffered by a worker other than a first responder or front line hospital staff may be equally difficult to defend.  The new policy may not survive a Charter challenge.  We may yet see a flood of mental health claims.   

 

Fil Mendes is a civil litigator at Madorin, Snyder.  Madorin, Snyder LLP is a full service law firm servicing Kitchener, Waterloo, Cambridge, Guelph and the surrounding area.  

    

The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers are advised to seek specific legal advice in relation to any decision or course of action contemplated.

 

[1]  www.wsibresources.ca/CMSPolicyPDFS/150314advanceversion.pdf

[2]  Decision No. 2157/09, 2014 ONWSIAT 938

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Court of Appeal Affirms Minimum Maintenance Standards Defence in Winter Highway Maintenance Case

The Court of Appeal has recently released an important decision which could have wide-ranging implications for municipalities and those involved in winter highway maintenance cases.  Madorin, Snyder LLP was successful both at the original trial and on the Appeal in defending the Municipality.

 

The Court of Appeal has affirmed the trial decision of Justice James Kent which, among other things, found no liability on the part of the municipal road authority, The Corporation of the Township of Wilmot (the "Township"), as a result of a motor vehicle accident which involved a fatality and serious injuries.  This decision is a significant one, as the Court of Appeal used the Minimum Maintenance Standards as partial justification for a finding of no liability as against the municipal road authority.  Similarly, the Court of Appeal affirmed that the resources available to a municipal road authority are properly considered in the analysis of the potential liability of the road authority.  As such, this important decision has the potential to play a significant role in the future disputes involving lower-tier, rural municipalities which have met their Minimum Maintenance Standards obligations yet are faced with lawsuits alleging the failure under Section 44 of the Municipal Act, 2001.

 

The facts of the case are summarized briefly as follows: 

 

On February 25, 2009, four young men drove west along Huron Road from Kitchener, Ontario.  The driver of the vehicle was Tyler House.  The owner of the vehicle was Donald Baird, who was also a backseat passenger in the vehicle.  There were two other passengers in the vehicle.  Just west of the intersection with Pine Hills Road, at 9:00 p.m., House lost control of the vehicle, which drifted into the opposite lane and into the path of Robert Scott Murray.  Despite his fast reaction, Murray was unable to stop and a collision ensued.  One of the occupants of the House vehicle was killed and both Baird and House were seriously injured.  House (by his Litigation Guardian) and several Family Law Act Plaintiffs sued Donald Baird, Robert Scott Murray, and the Township. 

 

The action as against the Township was dismissed following a lengthy trial.  The Court of Appeal affirmed the dismissal as against the Township.  Wilmot Township is a small rural lower tier Municipality with a population of 13,000.  All of its road are below a Class 3 and the Township is responsible for the maintenance of approximately 250 two-lane kilometres of highways.  The Roads Department has a Foreman/Supervisor and seven full-time employees who operate seven plows and salters during the winter months.  Although those Operators work regularly-scheduled shifts, they can be called in at other times, if necessary.  At all times, there is someone on call.  The on-call operator monitors the weather from home after hours.  This on-call individual could organize a winter maintenance crew, if necessary.   Similarly, the on-call operator regularly monitors weather forecasts and will call-out winter operators as necessary. 

 

On the day of the accident, the on-call Operator noted that there was a brief snowfall around dinnertime but that snow was melting on contact which left the surface slightly wet but the Operator did not consider this to be a situation which required patrol or maintenance.  At the scene of the accident, however, it would appear that the weather conditions were such that some ice and/or slush may have formed.  Therefore, one of the key issues in respect of the Township, was whether it met its obligations under Section 44 of the Municipal Act, 2001, which incorporates by reference the Minimum Maintenance Standards. 

 

At trial, the Township called expert Brian Malone who indicated that having an on-call Operator after hours was a common practice, especially for lower-tier rural municipalities.  The on-call Operator's decision to take no action was consistent with his observations and the forecast.  Similarly, Mr. Malone indicated that the Minimum Maintenance Standards imposed no requirement for winter patrolling but, for Class 3 roads, required icy roadways to be treated "as soon as practicable" and within eight hours after the Township began aware of the icy state. 

 

The trial Judge and the Court of Appeal agreed with Mr. Malone, who opined that the municipal road authority did not have a duty of "ensuring driver safety" which, while a commendable aspiration, is not a legal obligation.  The trial Judge concluded and the Court of Appeal affirmed that Wilmot had in place an adequate system of winter road maintenance vis-à-vis the Minimum Maintenance Standards.

 

As a lower-tier rural municipality, the Township was not obligated to adhere to the same standards as a Regional Municipality or the Province.   Similarly, a municipal road authority's duty of repair is limited to maintaining its road to enable ordinary drivers exercising reasonable care to use the roads safely. 

 

The trial Judge found that the highway was in a state of non-repair and, as such, an analysis as to whether the municipal road authority established any of the statutory defences under subsection 44(3) of the Municipal Act, 2001 had been made out was necessary.  The trial Judge found that the Municipality had met all three of the statutory defences.  Importantly, however, the trial Judge found that the Minimum Maintenance Standards for a Class 3 highway only required that a municipality treat an icy highway within 8 hours of becoming aware that the highway was icy, which the Township had done.  The trial Judge, for this and other reasons, found that the municipal road authority was not liable for the accident.  This decision was affirmed by the Court of Appeal. 

 

The result in this Court of Appeal decision is an important one because of the emphasis placed on both  the Minimum Maintenance Standards and the fact that the Township was a lower-tier rural municipality and thus had a subjectedly lower maintenance requirement.  This decision represents one of the first analyses by the Court of Appeal which emphasizes these particular factors.  As such, this decision may well represent the beginning of an evolution of municipal liability law, such that Courts will consider not only compliance with the Minimum Maintenance Standards but will also consider the size and resources available to a road authority discharging its maintenance obligations.  It will be interesting to watch and see how this law continues to develop. 

 

James Bennett, a Senior Partner and Litigator at the firm of Madorin, Snyder LLP argued this decision successfully at both trial and at the Court of Appeal.  Mr. Bennett and the entire litigation department have considerable experience in both municipal defence matters and all manners of litigious dispute.

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Update on Tarion Warranty Claims

Do builders face double jeopardy on the Tarion Warranty? 

 

The Ontario New Home Warranties Plan Act  ("ONHWPA") is consumer protection legislation for new home buyers.  ONHWPA deems certain warranties with respect to the quality of materials and workmanship (the "Tarion Warranty") to be terms of any contract between a builder and a new home buyer.

 

Tarion is a non-profit corporation that is designated by the government to adjudicate claims by new home buyers regarding alleged breaches of the Tarion Warranty.  At the risk of oversimplifying, there are two stages to the Tarion claims process.  The first stage is the conciliation process.  If the parties cannot resolve their dispute amongst themselves, then the conciliation process ends when Tarion issues a ruling on the new home buyer's warranty claim.  The second stage of the Tarion claims process is the new home buyer's right of appeal to the Licence Appeal Tribunal.

 

Tarion does not have exclusive jurisdiction to enforce the Tarion Warranty.  The Tarion Warranty forms part of a contract between the builder and the new home buyer, and the Court system has concurrent jurisdiction to enforce the terms of a contract.  Therefore, a new home buyer can elect to make a claim to Tarion or it can start a lawsuit against the builder.  

 

Can a new home buyer do both?  Yes and no.     

 

Metropolitan Toronto Condominium Corporation No. 1352 v. Newport Beach Development Inc. is a 2012 decision of the Ontario Court of Appeal.  A condominium corporation made a claim to Tarion.  The condominium corporation lost at the conciliation stage, and it started an appeal before the Licence Appeal Tribunal.  Significantly, the condominium corporation abandoned its appeal to the Licence Appeal Tribunal before a ruling was made.  The condominium corporation then brought a lawsuit against the builder.  The builder brought a motion to have the condominium corporation's lawsuit struck out on the basis that the condominium corporation was bound by the outcome the Tarion claims process.  The Court of Appeal dismissed the builder's motion.  The Court of Appeal decided that a ruling by Tarion against a new home buyer at the conciliation stage did not bind the new home buyer or the Court in a lawsuit regarding a breach of the Tarion Warranty. 

 

Therefore, in the Metropolitan case the new home buyer was permitted to re-litigate a warranty claim that it had lost in the conciliation stage of the Tarion claims process.   

 

The outcome was different in the Gorscak case, summarized below.  

 

Gorscak v. 1138319 Ontario Inc. is a 2003 decision of the Ontario Superior Court of Justice.  The new home buyer made a Tarion claim regarding allegedly deficient brickwork.  The new home buyer lost at the conciliation stage and lost again on appeal to the License Appeal Tribunal. The new home buyer then brought a lawsuit against the builder seeking the replacement of all the brick.  The builder brought a motion for a stay of the lawsuit.  The Court granted the builder's motion and stayed the new home buyer's lawsuit.  The Court would not permit the new home buyer to re-litigate a warranty claim that had been already been ruled upon by the License Appeal Tribunal.  

 

The bottom line is that the Court of Appeal has permitted new home buyers two kicks at the can provided they abandon the Tarion claims process before the end of the second stage of the process.

 

The foregoing is for information purposes only and is not legal advice.  If you are interested in receiving more information, feel free to contact us.

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Proposed Amendments to the Building Code Act Much Narrower than Recommended By The Elliot Lake Inquiry

On June 23, 2012, a steel beam at the Algo Mall in Elliot Lake, Ontario, gave way.  Tonnes of concrete, steel and glass fell into the Mall below.  Two people were killed and 19 others were injured.  The collapse of the Algo Mall set in motion a process that is leading towards amendments to the Building Code Act

 

Six days after the collapse, Premier McGinty announced a government inquiry.  Justice Paul R. Belanger released his report on October 14, 2014.  In his report, Justice Belanger recommended the government enact mandatory province wide minimum maintenance standards for "large mercantile"  buildings in Ontario.  Furthermore, he recommended that all such buildings be inspected by properly qualified structural engineers whenever the building is sold and, at a minimum, "at a frequency that is commensurate with the risk of harm from a failure to meet the standard".  Although Mr. Belanger recommended these standards apply to all buildings with "mercantile occupancies", as defined in the Building Code, he urged the government to extend the minimum standards to all publically accessible buildings and multi-residential occupancies.  Mr. Belanger wrote the following: 

 

 

"The Building Code provides that buildings exceeding 600 square metres or three storeys in height used for major occupancies classified as mercantile occupancy must comply with Division B of Part 4 of the Code, which sets out structural design requirements common to a wide variety of large structures in Ontario. 

 

Since the Algo Mall would come within this definition, which is already recognized by the law of Ontario relating to standards designed to ensure safe construction of buildings, it is appropriate that I draft my recommendations to apply to all such buildings.  …  I believe, however, that these recommendations ought to apply to all publically accessible buildings in Ontario, including workplaces and multi-unit residential condominium and tenant-occupied buildings."

 

Therefore, Justice Belanger recommended that the province enact standards for the maintenance and inspection of all publically accessible and multi-residential buildings in Ontario. 

 

The day the Belanger Report was released, the provincial government announced the appointment of the Building Safety and Technical Advisory Panel (the "BSTAP") to make further recommendations regarding the screening and inspection of buildings.  The BSTAP released its report on January 27, 2016.  The BSTAP recommended that buildings with rooftop parking structures constructed before 1988 be subject to a Risk Screening Evaluation within 3 years.  Furthermore, it recommended that a Risk Screening Evaluation be performed on all other buildings constructed before 1976 within 6 years and all other buildings within 10 years.  

 

On November 14, 2017, the provincial government issued a consultation paper regarding proposed amendments to the Building Code Act arising out of the recommendations of Justice Belanger and the BSTAP.  The paper describes a Building Condition Evaluation that will apply to "prescribed structures".  Significantly, the class of "prescribed structures" that will require Building Condition Evaluation is limited to buildings with rooftop parking structures.  The consultation paper describes the buildings to which the new legislation will apply: 

 

 

All buildings, regardless of the date of construction, that contain parking on the roof or part of the roof of the structure and that also have levels beneath the parking occupied with non-parking uses. This would include retail/commercial uses (e.g., shopping malls), industrial and residential uses, and also parking structures with car rental kiosks or car wash/auto detailing stands.

 

So, whereas Justice Belanger and the BSTAP recommended a process of risk evaluation that applies to all major occupancies, the proposed changes to the Building Code Act only apply to the buildings with rooftop parking.

 

Presumably, the underlying premise of the proposed amendments is that Justice Belanger and the BSTAP overreached in their recommendations.  An important link in the chain of events that led to the collapse of the Algo Mall was that the water that leaked through the roof of the Algo Mall was full of dissolved salts that had been spread on the rooftop parking structure and which accelerated the corrosion of the steel structure that eventually collapsed.  It is not apparent to a layman that the risk factors that led to the collapse of the Algo Mall are present in all other building types.  The risk that other types of buildings may collapse may not justify the cost of periodic risk evaluation. 

 

The consultation period regarding the proposed changes to the Building Code Act ends on January 4, 2018.  If you have any comments on the proposed changes you can send them to the Minister of Municipal Affairs at buildingcodeconsultation@ontario.ca

 

Ted Dreyer is a construction and insurance lawyer at Madorin, Snyder LLP.  Madorin, Snyder LLP is a full service law firm serving Kitchener, Waterloo, Cambridge, Guelph and the surrounding area.  

   

The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers are advised to seek specific legal advice in relation to any decision or course of action contemplated.

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Hiring a Contractor? Do you need to obtain a WSIB Clearance Certificate?

Do you need to obtain a WSIB Clearance Certificate from your construction contractor?  The short answer is "yes" unless the contractor is performing "exempt home renovation work."

 

Section 141.1 of the Ontario Workplace Safety and Insurance Act, 1997 requires anyone who hires a contractor to perform construction work to ensure that the contactor has registered with the WSIB and paid its premiums. An owner who obtains a WSIB Clearance Certificate has complied with its obligations pursuant to section 141.1 of the Act.  A "Clearance Certificate" is issued free of charge to owners, contractors, and subcontractors by the Workplace Safety Insurance Board (the "WSIB").  The Clearance Certificate shows that the contractor or subcontractor is in good standing with the WSIB.  An owner who fails to obtain a Clearance Certificate may be liable for the contractor's payment obligations to the WSIB, including outstanding WSIB premiums. 

 

However, contractors performing "exempt home renovation work" are exempt from section 141.1 of the Act.   An owner for whom a contractor is performing "exempt home renovation work" does not need to obtain a Clearance Certificate and has no potential liability for the contractor's payment obligations to the WSIB. 

 

The definition of "exempt home renovation work" is set out at section 12.2 (10) of the Act as follows: 

“exempt home renovation work” means construction work that is performed,

 

  1. by an independent operator, a sole proprietor, a partner in a partnership or an executive officer of a corporation, and
  2. on an existing private residence that is occupied or to be occupied by the person who directly retains the independent operator, sole proprietor, partnership or corporation, or by a member of the person’s family;

“member of the person’s family” means,

  1. the person’s spouse,
  2. the person’s child or grandchild,
  3. the person’s parent, grandparent, father-in-law or mother-in-law,
  4. the person’s sibling, or
  5. anyone whose relationship to the person is a “step” relationship corresponding to one mentioned in clause (b), (c) or (d); (“membre de sa famille”)

“private residence” includes,

  1. a private residence that is used seasonally or for recreational purposes, and
  2. structures that are,

            (i)normally incidental or subordinate to the private residence,
            (ii)situated on the same site, and
            (iii)used exclusively for non-commercial purposes.

 

The bottom line is that an owner who hires a contractor to perform construction work should obtain a WSIB Clearance Certificate unless the contractor is performing "exempt home renovation work".  If you have questions about what qualifies as "exempt home renovation work" you can contact the Workplace Safety Insurance Board at 1-800-387-0750.

 

The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers are advised to seek specific legal advice in relation to any decision or course of action contemplated.

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