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Riddell Kurczaba Architecture Engineering Interior Design Ltd v Governors of the University of Calgary, 2018 ABQB 11

In 2006, the University of Calgary (“the University”) decided to begin the design and construction of a building that would provide European-style boutique hotel rooms along with additional housing for international graduate students. The University wanted to proceed quickly with design and construction, and was looking for a renowned architect to design a building with state-of-the-art environmental performance.

The University issued an RFP for architectural services, and the winning bidder was Riddell Kurczaba Architects (“RKA”), along with a signature architectural firm based in Ontario, Baird Simpson. Once RKA had been selected, the process allowed for the beginning of negotiations for the specifics of the Service Agreement alongside the commencement of RKA’s work, pursuant to an ‘early-start’ letter agreement.

Over the course of construction, the University issued a series of Purchase Orders, authorizing payment for services laid out in the Service Agreement. This included the work described in six different Change Orders, where the scope of some work had been altered. These changes included: adding a floor, filling in an area originally designed as an atrium, reducing the square footage of the basement, and exterior modifications.

Once the majority of the work on the new building was finished, the University’s accountants together with RKA’s accountants conducted a reconciliation process, meaning that the amounts for which RKA invoiced were compared to the amounts paid by the University. Both parties agreed, in March 2010, that the records matched.

However, the two parties had also signed a separately negotiated contract, the FFE Agreement, for RKA to provide furniture, fittings, and equipment services. After the reconciliation, the University was still dissatisfied with the service RKA had provided under this latter contract. In particular, the University claimed that RKA mismanaged the interior design and room layout for the building’s hotel rooms: the furniture ordered did not fit the rooms, and rooms had to be modified at additional cost and delay. The University claimed that this delay led to a later opening date for the hotel, causing it associated losses. The University advised RKA to notify its insurers, as it would be seeking reimbursement.

Up until this point, the lead RKA consultant had been Ronald Kurczaba. However, once RKA was made aware of the potential claim for negligence, Kurczaba’s partner John Riddell became involved. Riddell re-read the Service Agreement, concluded that the University had not properly followed the contract, and in August 2011 sent a letter to the University demanding payment of $1.8 million that Riddell claimed was outstanding. A Statement of Claim was filed by RKA in May 2012 seeking payment of $1,926,343.86. RKA argued that they were entitled to be paid a percentage of the total cost of construction, rather than as per the billing practices actually used.

The University filed its Statement of Defence and Counterclaim in April 2013, maintaining that RKA was properly paid and further that RKA is barred from seeking further payment pursuant to Alberta’s Limitations Act. The University’s counterclaim requested reimbursement of $360,047.97, based on breach of contract and negligence with regard to the FFE Agreement. The University also sought punitive damages for abuse of process.

In order to determine these issues, the court first considered the original RFP. In section 4.5, the RFP clearly stated that the fee guide produced by the Alberta Association of Architects would provide the basis for fee negotiations, and further that such fees would be calculated as a percentage of the total construction cost. However, the University reserved the right to request a future conversion of that percentage into a fixed dollar amount at the time the contract was negotiated. RKA argued that when read as a whole, the contract clearly grants RKA a percentage-based cost, and that any additional lack of clarity in the matter should, according to the long-standing contractual interpretation rule of contra proferentum, be read against the interest of the University – the University had drafted the contract. The University, while acknowledging the sometimes ambiguous and confusing contract wording, argued that a fixed fee contract was the clear objective if the contract is assessed in light of the surrounding

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The judge carefully scrutinized the RFP and the Service Agreement in order to determine the objective intention of the parties when they entered the contract – that is, not what the parties themselves were actually thinking, but what a reasonable person in their position would have understood from the contract’s wording. The judge looked at headings and capitalization to determine that the parties objectively intended for the price to be a fixed fee. In further support of this finding, the judge noted that RKA had asked for and received additional compensation to this base fee, which it would not have needed if it had not been a fixed fee in the first place. The judge further held that the language in the RFP allowed the University to exercise some control over cost by reviewing and approving Change Orders. Finally, the judge determined that contra proferentum had very little application here: where there are ambiguities but the two parties are both very experienced, contra proferentum is of only limited use and looking to the surrounding circumstances will be more useful . Thus, the contract was held to provide for a fixed fee, and RKA’s claim for nearly $2 million was dismissed.

In assessing the University’s claim that RKA had breached the FFE Agreement or had been negligent, the judge looked to the history of how decisions about design were made and the process of the working group who managed the furniture, fittings, and equipment. In August 2009, the furniture arrived – but it did not properly fit. Headboards did not fit between wall-mounted light fixtures, there was no space between the ends of beds and the desks for desk chairs, and the placement of some beds along outside walls would make it difficult for housekeeping staff to perform their tasks. Within a few days of the furniture’s arrival, RKA’s interior designer solved the problem by moving some furniture, eliminating a dressing bench in some rooms, and using different lighting. The University congratulated this designer on her quick thinking. While the University then argued that RKA had contracted to provide service that was free of deficiencies and errors, RKA argued that it was obliged not to provide perfect, error-free service, but rather to promptly address and correct design problems as they became apparent. The judge held that RKA had fulfilled their contractual and professional obligations – while at least one mistake was made in the January 2009 drawings, not every mistake will “constitute an actionable wrong” (para 90).

After eight days of trial, both claims were dismissed with costs.

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Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case.  For any particular legal problem, seek advice directly from your lawyer or in-house counsel.  All dates, contact information and website addresses were current at the time of original publication.