Total Cost Claims: Canada's Five-Part Test, 2015 J. Can. C. Construction Law.

121

2015 J. Can. C. Construction Law. 121

Journal of the Canadian College of Construction Lawyers

2015
Steven Richardsa1

Copyright © 2015 by Thomson Reuters Canada Limited; Steven Richards

Total Cost Claims: Canada's Five-Part Test

Editor's Note

Quantification of damages in construction cases can be difficult, particularly where the claimed losses arise from many different
individual events and causes. It is trite law that a plaintiff must prove causation, meaning that the loss being claimed was caused
by a proven breach of contract. However, where there are many overlapping and intertwining causes, segregating the effects can
be challenging, and in some cases, impossible. These difficulties arise particularly, although not exclusively, in cases involving
delay claims. There are preferred methods for quantifying productivity losses and impact claims, such as the “actual cost” and
“measured mile” methods.

Despite the difficulty (or impossibility) of segregating the effects of multiple causes, Canadian case law is clear that such
difficulty does not preclude recovery. The court must do the best that it can in the circumstances. In some cases, the “actual
cost” and “measured mile” methods may not be applicable, for example where there is no unaffected portion of the project that
can be used as a measured mile. In such cases, the plaintiff may be forced to use either a “total cost” approach or a “modified
total cost” approach. In a total cost claim, damages are measured by deducting the original estimated value of a project from
the actual cost of the work performed. It is based on several assumptions which may be difficult to prove. These assumptions
include the accuracy of the original estimate, and lack of fault on the part of the contractor in causing any of the losses on
the project. Under the modified total cost approach, the plaintiff will deduct some portion of the losses that it says were not
attributable to the defendant.

There are very few Canadian cases in which these approaches have been used and accepted. Therefore, we must look to U.S.
jurisprudence for guidance.

Steven Richards, in this paper, examines the American experience in dealing with total cost claims. There is now a four-part
test widely accepted in the U.S.:

1. The plaintiff was justifiably unable to prove its damages by more reliable means.

*122 2. The plaintiff's bid was reasonable and did not contain material errors.

3. The plaintiff's costs were reasonable.

4. The plaintiff was not responsible for the costs incurred above its bid.

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Total Cost Claims: Canada's Five-Part Test, 2015 J. Can. C. Construction Law. 121

This paper begins with a comprehensive review of the development of the law regarding total cost claims in the U.S., with
emphasis on the leading cases. The paper then reviews various Canadian judicial decisions on point, including McNamara
Construction Co. v. Newfoundland Transshipment Ltd. and the cases that could be described as the “high watermark” for
plaintiffs, Golden Hill Ventures Ltd v. Kemess Mines Inc. and Opron Construction Co. v. Alberta.

Finally, the author proposes that the American four-part test be modified for use in Canada, by adding a fifth part to the test:

5. the defendant has committed multiple interrelated wrongful acts.

This paper will a useful resource for any party involved in pursuing or defending claims that are advanced on a total cost or
modified total cost basis.

1. INTRODUCTION

This paper will familiarize the reader with the predominantly U.S. provenance of the total cost method of damages assessment,
canvass its comparatively smaller Canadian juridical history and bibliography, and posit a view that the prevailing “four-part”
legal test in the U.S. is, to the extent applicable in Canada, subject to a fifth criterion thusly creating a five-part test.

1.1 Damages

1.1.1 Generally

To establish that damages should be awarded for a breach of contract, a plaintiff is required to show: (i) the contract was
breached; (ii) the party claiming damages has suffered a loss; and (iii) the loss results from a breach of the contract. Therefore, a
plaintiff who claims damages for breach of contract must, generally speaking, be in a position to prove that he has in fact suffered
the damages which he is claiming and that there is a causal connection between those damages and a breach of the contract.1

*123 Where a plaintiff can prove that he has suffered a loss as the result of a breach of contract, the measure of damages
to which he is entitled is the net loss occasioned by the breach; that is, the extra costs incurred as the result of the breach of
contract.2 Courts have acknowledged that damages flowing from a contractual breach can be difficult to quantify, particularly
in complex construction cases.

However, courts have also been clear that difficultly in determining which damages flow from a breach is not a sufficient reason
to avoid awarding substantial damages.3 Courts have continually emphasized that damages are assessed, not calculated, and
therefore a mathematical degree of precision is not required in order for damages to be awarded. To be recoverable, damages
must be ascertainable within an acceptable range of reasonable certainty.4

1.1.2 Total Cost Damages

The total cost method has surfaced as a proposed means of assessing damages in complex construction cases. Under the total
cost method, damages are measured by deducting the original estimated value of a project from the actual cost of the work
performed. The difference between these two figures represents the cost overrun, and is the measure of damages sought. The
total cost method presumes several things, including that the original estimate was accurate; that all extra costs incurred during
performance were caused by the change; and that the contractor had no responsibility for the costs caused by the change.5

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*124 A related method of assessing damages in complex cases is the modified total cost claim. Under this approach, in
addition to deducting the original estimated value of a project from the actual cost of the work performed, any costs not properly
attributable to the defendant will also be deducted.

Canadian courts have acknowledged that in some situations the total cost claim method is the only means by which to assess the
quantum of damages. The total cost method is generally not accepted by the courts if there is a more reliable method available
to calculate damages, and case law suggests that a court will not be willing to consider using the total cost method to quantify
damages unless several, interrelated breaches are established. Although there are currently only a limited number of decisions
in Canada on this issue, the case law suggests that a court will be more likely to apply the modified total cost approach (as
opposed to the total cost method) and deduct expenses not properly attributable to the project or to the defendant from the
total cost overrun.

1.2 U.S. History

The total cost method has received substantially greater judicial consideration in the United States than in Canada. One of the
earliest cases is C Norman Peterson Co. v. Container Corp of America.6

Norman Peterson entered into a contract with the Container Corp. for the modernization of Container Corp.'s paper mill.7
Construction drawings were to have been provided to Norman Peterson before the work actually commenced. However,
deficiencies in the drawings led to “hundreds of changes, many of them significant, resulting in extra work having to be
performed by Norman Peterson.”8 As a result of the numerous change orders, the court determined that the contract had
been abandoned by the parties.9 For that reason, the guaranteed maximum provisions of the contract were not enforceable by
Container Corp., therefore Norman Peterson was permitted to recover the costs of its work.10

*125 In determining that Norman Peterson was entitled to recover on a total costs basis, the court made note of the fact that
“due to the many errors and omissions in the drawings furnished by Container Corp ... it was impossible for Norman Peterson
to keep accurate cost records for each and every change.”11 The court concluded its analysis by noting that while other methods
may be more preferable to the total cost claims method, “under proper safeguards and where there is no better proof it has
been upheld.”12

The “proper safeguards” alluded to in Peterson eventually developed into a more clearly defined test that must be met by a
plaintiff seeking to collect damages under the total cost method. Servidone Constr. Co. v. United States13 was one the first cases
to set out the test, and it has remained largely unchanged since. The test is:

1. the plaintiff was justifiably unable to prove its damages by more reliable means;

2. the plaintiff's bid was reasonable and did not contain material errors;

3. the plaintiff's costs were reasonable; and

4. the plaintiff was not responsible for the costs incurred above its bid.14

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(the “Four-Part Test”)

In Servidone, the court found that Servidone's bid was unreasonably low, and therefore did not meet the second part of the
test.15 However, the court held that this was not fatal to its claim, and that it was within the power of the court to substitute
Servidone's unreasonable bid with a reasonable bid.16

*126 Although the court found that Servidone had met the Four-Part Test permitting the total cost method, the court cautioned
that such an approach should be used “with caution and as a last resort.”17 Of note, despite apparently meeting the Four-Part
Test, recovery was granted under the modified total cost method.18 Such an approach may not always be followed, however, as
a number of decisions have also held that each stage of the test must be satisfied before total cost damages may be awarded.19

Amelco Electric v. City of Thousand Oaks20 is an example of a Court refusing to allow a plaintiff to collect under a modified total
approach when its claim has been submitted under the total cost method. In this case, the Supreme Court of California reversed
a trial decision wherein Amelco had successfully sued Thousand Oaks on the basis of contract breach and abandonment, and
been awarded damages calculated using the total cost method.21 The Court set out the Four-Part Test and stated that Amelco
had failed to adduce sufficient evidence to satisfy the fourth part of the test, namely that it was not responsible for the added
costs of the project.22 Additionally, the Court held that not only must a plaintiff establish that it was not responsible for the
increased cost, it must also establish that it was the defendant, and not any other party, that was responsible.23 The Court was
critical of the plaintiff's general inability to correlate any alleged breach of the contract by the defendant with damage to the
plaintiff and a lack of effort on behalf of the plaintiff to separate its own inefficiencies on the project, which were admitted,
from those of the defendant that allegedly caused the loss.24

In Dillingham-Ray Wilson v. City of Los Angeles,25 the City of Los Angeles sought to deny DRW's total cost claim on the
grounds that the decision in Amelco precluded any total cost or modified total cost recovery in California.26 The court disagreed.
After setting out the Four- *127 Part Test, the court held that a modified total cost claim simply requires that if any of the
plaintiff's costs are found to be “unreasonable or caused by its own errors or omissions, then those costs are subtracted from the
damages to arrive at a modified total cost”.27 The Court ultimately remitted the issue of calculation of damages, but did make
specific note of the fact that the modified total cost claims are permitted in California.28

1.3 Current Standing in U.S.

The case law from the U.S. indicates that while the total cost approach is a recognized method of assessing damages, it has
been confined to very specific fact situations, and even then has been met with judicial criticism. In an article for the American
Bar Association Forum on the Construction Industry, the authors note that there exists a hierarchy for proving damages, with
the “Actual Cost” and “Measured Mile” methods ranking among the more preferable, while the total cost and modified total
cost methods ranking near the bottom.29 In a separate article, the authors affirm the criticisms of the total cost method outlined
in the case law, noting that it is “frequently criticized as a method of ‘last resort’ because it is often based on many tenuous
assumptions.”30

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It has been noted though that in some instances courts may be inclined to view a plaintiff's total cost claim sympathetically.31
In cases where there is evidence of breaches of the contract by the defendant resulting in significant extra work for the plaintiff,
but where the extra work has “become so ‘inextricably intertwined’ as to be unsegregable,”32 a *128 plaintiff may be more
likely to be awarded damages under the total cost method.

2. CANADIAN CONTEXT

2.1 Case Law

There is not an abundance or deep history of case law on total cost claims in Canada. Although the principle that uncertainty in
quantifying damages does not preclude recovery in the construction context was confirmed in Penvidic,33 the full development
of the role of the total cost method in Canada had yet to fully emerge.34 In Eco-Zone Engineering Ltd. v. Grand Falls-Windsor
(Town),35 the court was faced with a contractual dispute arising out of the building of a new water treatment plant. In this
case, Eco-Zone was awarded a contract to perform work on the plant for the town of Grand Falls-Windsor. Throughout the
course of the construction work, several disputes arose between Eco Zone and Grand Falls-Windsor. Eco-Zone was eventually
removed from the project and commenced an action against Grand Falls-Windsor claiming losses for delay and impact costs,
among other things.

Before determining whether Eco-Zone was entitled to any delay or impact costs, the court reviewed and relied upon an article by
Stephen G. Revay, “Calculating Impact Costs.”36 In this article, Revay outlined the difficulty with determining the quantum of
impact cost claims and stated that the total cost method of determining the quantum of a claim may sometimes be the only way
open to the claimant to calculate damages. Revay went on to set out and accept the Four-Part Test developed in the United States.

The court in Eco-Zone appeared to adopt the Four-Part Test and to endorse Revay's proposed approach to using the total cost
method, *129 stating “[i]n the words of Revay, the contractor first must prove that all of the increases in costs (over and above
the estimated costs) resulted from the change/breach and that the contractor is not responsible for any part of the increase.”37
Ultimately, the court in Eco-Zone determined that there was no delay attributable to Grand Falls-Windsor and dismissed Eco-
Zone's delay claim. With respect to impact costs, the court did find that Eco-Zone's work on the project had been disrupted
by two change orders as well as by some waterproofing work that was performed by another party. When assessing damages
for these impact costs, the court stated:

I cannot address compensation for these disruptions with any degree of mathematical precision, but I am of the
opinion that the sum of $20,000 will amply compensate Eco Zone for the two foregoing “disruptions” as well
as any other minor disruptions which Eco Zone may have experienced as a result of the actions of the owner
or NDAL.38

Although the court in Eco-Zone appeared to endorse the total cost method in circumstances where the Four-Part Test is met, the
court did not use the total cost method when calculating damages for impact costs. Instead, the court merely asserted that the
amount of impact costs could not be calculated with precision and awarded the sum of $20,000 without clear justification.39 The
total cost method was not used by the court in Eco-Zone, however, this decision suggests the Canadian courts may be willing
to adopt total cost claim method when the Four-Part Test is met.

In McNamara Construction Co. v. Newfoundland Transshipment Ltd.,40 McNamara was subcontracted by Bantrel to perform
work on an oil tanker berthing facility. A dispute arose between the parties and McNamara brought an action against Bantrel

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claiming various breaches of contract, negligence and the commission of certain specific torts. McNamara asserted that Bantrel
breached the subcontract by: (i) causing delays in McNamara's performance of the subcontract; (ii) interfering with McNamara's
performance of the contract; and (iii) changing the scope of the work covered by the subcontract, among other things. McNamara
asserted that because of the complexity of the construction work and the interrelationship of all of the various breaches, it was
not possible to isolate the damages or costs flowing from any particular *130 breach. Therefore, McNamara took the position
that the measure of damages for the above listed breaches should be calculated using the total cost claim method.

The court agreed with McNamara's assertion that in some breach of contract cases, the effects flowing from numerous individual
breaches will be extremely difficult or impossible to quantify precisely. The court noted that:

[i]n such a case, it is recognized and accepted that the plaintiff cannot prove its damages to the same degree of
precision as would normally be required [ ... ] the court is not however relieved of its burden of assessing damages
and may properly resort to one or other of the ‘global’ approaches here suggested by the plaintiff.

(emphasis added)41

The court in McNamara went on to qualify this statement by stating that the fact that the rigour of the proof of quantification of
damages may be relaxed in the case of numerous interrelated breaches does not mean that the plaintiff is relieved of establishing
that some compensable loss flowed from any particular alleged breach of contract, noting “[t]here must be evidence from which
the court can conclude [ ... ] that some adverse economic consequences to the plaintiff resulted from the breach”.42 In other
words, even if the total cost method is used to calculate damages, the plaintiff is not excused from establishing some level of
causation between the breach and the damages. In that case, the court was unable to find a contractual breach based on delay
or interference and, even if a contractual breach were found, the court emphasized that McNamara had not adduced sufficient
evidence to establish a causal connection between a breach and any loss suffered by McNamara. As such, the McNamara claims
were not established and no damages were assessed. The court concluded on this point by stating:

Considering all of the contractual, commercial and other circumstances of the project, McNamara did not establish
that what it was legally required to do was so fundamentally different than what it actually did or that that Bantrel
committed so many interrelated breaches of contract as to entitled McNamara to a global quantification of any
damages. Further, and in any event, McNamara's quantification of its *131 global claim is unreliable, and in
particular lacks the necessary causal relationship between the impugned acts and the damages claimed.43

The decision in McNamara suggests that if a contractual breach results from actions that are numerous and interrelated, the
total cost claim method may be available to calculate damages so long as the plaintiff is able to establish, not only a contractual
breach, but also some causal connection between the breach and the damages suffered by the plaintiff. Merely pointing to
inconveniences or delays that do not result in a loss to the plaintiff will not be sufficient to establish a causal connection such
that damages will be awarded under the total cost method.

In Golden Hill Ventures Ltd. v. Kemess Mines Inc.,44 the plaintiff successfully bid on a unit price contract to perform an
earthworks project. The plaintiff commenced work on the project in July 1996. The project was scheduled to be completed in
October 1996 but, due to a number of factors, the work took longer than anticipated. The plaintiff worked on and off on the
project during the winter of 1997 but eventually stopped work in June 1997 alleging that the defendant had failed to pay monies

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owing to the plaintiff. The plaintiff subsequently filed a builder's lien against the defendant and brought an action for damages
for breach of contract and tortious acts. The plaintiff alleged damages as a result of breaches of the actual and implied terms of
the contract as well as for misrepresentations and other tortious acts, including a failure to obtain permits in a timely manner
and a breach of the defendant's duty of good faith and fair treatment.

The court found the defendant concurrently liable in tort and contract for several of the allegations asserted by the plaintiff.
Before discussing damages, the court noted that, where a party has made concurrent claims in contract and tort, if both causes
of action are established, the party is entitled to the greater of the contract measure or the tort measure of damages.45 In that
case, the court determined that the plaintiff was entitled to the tort measure of damages. As the court in this case was assessing
damages under the tort measure of damages, it is not clear how the court's treatment of the total cost method would have differed
had damages been assessed under the contractual measure of damages. With respect to calculating damages, the defendant took
the position that a detailed calculation was required to prove damages. The *132 court disagreed with the defendant, stating
that there was ample authority to support the position that a detailed calculation was not necessary to prove damages,46 and
that it would be inappropriate to disentitle the plaintiff to damages properly attributable to the defendant even though it may
be impossible to specify the direct costs from the specific breach of contract. The court highlighted that the complexity of the
relationship among countless small events which occur on a large project renders it difficult, if not impossible, to calculate with
precision the financial impact of one particular wrongful act. The court went on to describe the task of calculating damages
precisely as ‘virtually impossible’ when numerous wrongful acts combine in a complex matrix with other contributing factors
to cause overlapping and interrelated losses.47 The court emphasized that, “[i]t is a long-standing principle of law that, where
liability is established and a loss is proved, the fact that it may be difficult to accurately calculate the loss does not relieve the
wrongdoer from having to pay damage.”48 The court concluded that, in cases where there are multiple interrelated breaches, it
is appropriate to use the total cost overrun of the project as a “starting point” for the assessment of damages.49 In that case, the
court did use the total cost method as a starting point for assessing damages; however, in the end, the court adopted a modified
total cost claim method. In other words, the court took the cost overruns as a starting point for damages but deducted any cost
overruns not attributable to the defendant.

In Opron Construction Co. v. Alberta,50 Opron was claiming damages against the Province of Alberta arising out of a
construction contract to build a dam. Opron successfully bid on a unit price contract to perform the work. A dispute arose
between the parties and Opron claimed damages for misrepresentation, non-disclosure and contractual breach, among other
things. The court found that the Province was liable for actionable misrepresentation, actionable non-disclosure and breach of
contract. With regards to the quantification of Opron's damages, the Province proposed using a “modified total cost approach”
because the documents and information generated by Opron did not allow for a more detailed breakdown of the claim. In this
case, the court adopted the modified total cost approach proposed by the Province. The court in *133 Opron explained the
modified total cost approach as using total costs minus total revenues as the starting point for the calculation of damages. From
this starting point the losses due to bid inefficiencies, unbalancing the bid, errors in production, errors in supervision, errors in
labour and equipment utilization, errors in scheduling and weather errors relating to any misinterpretation of the site conditions
were deducted.51 In allowing the modified total cost approach, the court noted:

Counsel recognized how difficult it would be to fix the final damage or figure; that is evident because they provided
little in assistance to the court to arrive at a precise number. Nor are they to be blamed. They obviously recognize
that the task was an impossible one ... Any attempt to calculate the plaintiff's claimable loss is so fraught with
pitfalls that I would be foolish to attempt it ... [t]here are so many contingencies that no matter how often I attack
the problem, the final figures vary.

In the end, the court determined that Opron's claimable loss was under $1,000,000 but above $750,000. Beyond this, the court
decided to use “round figures and approximates” and set Opron's claimable loss at $875,000.

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2.2 Current Canadian Standing

Although a plaintiff is required to establish that they have suffered a loss resulting from a contractual breach in order to receive
contractual damages, Canadian courts appear to be willing to consider using the total cost claim method or the modified total
cost approach as a starting point when calculating damages in complex cases. By allowing damages to be calculated using the
total cost approach, Canadian courts seem to be trying to strike a balance between the requirement that a plaintiff establish a
causal connection before being entitled to damages and the longstanding legal principle that difficulty in assessing damages is
not a sufficient reason to deny a substantial damage award.

The decision in McNamara suggests that the total cost method will only be available where a plaintiff has successfully
established multiple, interrelated breaches. The corollary of the position taken in McNamara is that where a plaintiff is only
successful in establishing the occurrence of a few contractual breaches, the total cost method will not be an appropriate starting
point for the assessment of damages. Additionally, the *134 decision in McNamara makes it clear that, although the total cost
method may relax the degree of causal connection that a plaintiff is required to establish, the use of the total cost method does
not relieve the plaintiff from showing some evidence that an adverse economic consequence to the plaintiff resulted from the
breach. As the court in McNamara determined that no contractual breach had occurred, it is not clear what kind of evidence
will be sufficient to show “some causal connection.” Despite not finding a breach, the court in McNamara did state that even
if they had found a breach, the evidence adduced by McNamara would not have been sufficient to establish causation.

While the court in Eco Zone appeared to approve of the Four-Part Test set out in the American case law as well as in the Revay
article, the court did not appear to methodically apply the test. Furthermore, there is an absence of other Canadian case law
that specifically adopts the Four-Part Test.

The decision in Golden Hill confirms that courts may be willing to adopt the total cost method as a starting point for damages
calculations where multiple breaches are established. However, as the court in that case ultimately used the modified total
cost approach to calculate damages, this case seems to suggest that, where possible, a court will prefer to modified total cost
approach to the total cost approach.

3. GOING FORWARD

From a Canadian contractual damages standpoint, the major concern with the total cost claim method is that it relaxes that
requirement that the party seeking damages prove a causal connection between the breach and the alleged amount lost. Although
there does not yet appear to be a single authoritative source clearly stating whether the total cost method is permitted in Canadian
law when calculating contractual damages, a review of the case law suggests that Canadian courts may be willing to implement
the total cost method when concurrent, recurring and compounding events complicate a situation to the extent that a total cost
claim is the only available method for approximating the impact of the delays.

To that end, if and when Canadian courts come to a decision on total cost claims, it is likely that it will not be in the form of
a direct adoption of the American Four-Part Test, but rather will reflect the cautious and conservative nature of the Canadian
judiciary on this issue demonstrated *135 to date. In effect, an additional criterion or “fifth part” of the test seems a probable
conclusion:

5. the defendant has committed multiple interrelated wrongful acts.

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The point at which multiple wrongful acts become multiple interrelated wrongful acts is of course the critical question, but the
case law suggests that when contractual breaches and tortious acts occur concurrently, the threshold will be met.

Finally, as accounting systems become more sophisticated and allow for more accurate allocation and segregation of costs, it
seems likely that the courts will be less willing to accept a total cost claim on the basis that there is no better source of proof.52
As the case law currently stands, while Canadian courts may be willing to implement the total cost method, whenever possible
courts seem to avoid using the total cost method and, at a minimum, implement the modified total cost approach.

Footnotes
a1 From J.S.R. (Steve) Richards, General Counsel & Corporate Secretary, PCL Construction.
1 Online Constructors Ltd. v. Speers Construction Inc., 2011 ABQB 43, affirmed 2012 ABCA 132 at para 114: a contractor claiming
for delay damages is only “entitled to recover losses which can be tied to a breach of contract, or arising from a tortious act about
which the plaintiff complains.”
2 Harvin Pitch et al, Damages for Breach of Contract (consulted on 19 October 2014) (Toronto: Thomson Reuters, 2013) (looseleaf).
3 See, for example, Penvidic Contracting Co. v. International Nickel Co. of Canada Ltd., [1976] 1 S.C.R. 267 [Penvidic]; Wood v.
Grand Valley Railway, 51 S.C.R. 283: “It was clearly impossible under the facts of that case to estimate with anything approaching
to mathematical accuracy the damages sustained by the plaintiffs, but it seems to me to be clearly laid down there by the learned
judges that such an impossibility cannot ‘relieve the wrongdoer of the necessity of paying damages for his breach of contract’ and
that on the other hand the tribunal to estimate them whether jury or judge must under such circumstances do ‘the best it can’ and its
conclusion will not be set aside even if the amount of the verdict is a matter of guess work”; Begro Construction Ltd. v. St. Mary
River Irrigation District, 1994 CarswellAlta 471 (Q.B.), additional reasons 1994 CarswellAlta 738 (Q.B.), additional reasons 1995
CarswellAlta 388 (Q.B.): “The fact that the damage cannot be assessed with certainty does not relieve the wrongdoer of the necessity
of paying damages. Begro must prove that it has suffered quantified or quantifiable loss, and if precise evidence is obtainable, that
evidence should be adduced. On the other hand, difficulty in assessing damages is in itself no bar to recovery.”
4 See, for example, Perrin v. Commonwealth Holiday Inns of Canada Ltd. (1985), 37 Man. R. (2d) 227 (Q.B.), affirmed (1986), 40
Man. R. (2d) 239 (C.A.).
5 Damages for Breach of Contract, supra note 2.
6 172 Cal.App.3d 628, 218 Cal. Rptr. 592 (1985) [No A015136 Court of Appeals of California, First Appellate District, Division Three,
September 26, 1985] [Peterson]. For an examination of the origins of the total cost method, developed in anti-trust cases from the
1920s and 1930s, see Karl Silverburg, “Construction Contract Damages: A Critical Analysis of the ‘Total Cost’ Method of Damages
for ‘Extra Work”’ (2003), Journal of Civil Rights and Economic Development: Vol. 17, Issue 3, Art. 12.
7 Ibid. at p. 1.
8 Ibid. at p. 5.
9 Ibid. at p. 6.
10 Ibid.
11 Ibid. at p. 7.
12 Ibid.
13 931 F.2d 860, 37 Cont Cas Fed (CCH) 76,082 [Servidone].
14 American Bar Association Forum on the Construction Industry-- Quantum: The Forgotten Element, By: Richard Smith and Dean
Thomson, 2011, citing Ryco Constr. v. United States, 55 Fed. Cl. 184, 200 (2002) (citing Cavalier Clothes, Inc. v. United States, 51

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Total Cost Claims: Canada's Five-Part Test, 2015 J. Can. C. Construction Law. 121

Fed. Cl. 339, 418 (2001)); see also Philip L. Bruner&Patrick J. O'Connor, Jr., Bruner and O'Connor on Construction Law §19:94,
at n.4 (2011) (“[I]mplicit in the historical four part test are two additional elements: (1) the owner's liability is clear; and (2) the
contractor's bid was not only realistic but contained no material bid mistakes.”); id. (noting that the judiciary views unsegregated
methods “sympathetically” when costs are inextricably intertwined but still imposes evidentiary safeguards to minimize any windfall).
But cf. Berhard A. Aaen, The Total Cost Method of Calculating Damages in Construction Cases, 22 PAC. L.J. 1185, 1190 (1991)
(“Other courts have accepted the total cost method without explicitly acknowledging the four part test.”).
15 Supra note 13 at para. 6.
16 Ibid.
17 Supra note 13 at para. 10. See also Yonni D. Fushman, “Deconstructing Delay Claims” (2014), 27 Construction Law Reports 181.
18 Supra note 13 at para. 11.
19 Supra note 13, citing Propellex Corp. v. Brownlee, 342 F.3d 1335, 1343 (Fed.Cir., 2003) (“The four requirements of the total cost
method are distinct requirements and a contractor must prove all of them before it can obtain the benefit of the total cost method.”);
cf Servidone Constr. Co. v. United States, 931 F.2d 860, 861-62 (Fed. Cir., 1991) (recognizing that the contractor failed to prove the
reasonableness of his bid and nonetheless upholding the lower court's decision to award relief by substituting a reasonable bid in
place of the contractors calculations).
20 115 Cal Rptr 2d 900, 27 Cal 4th 228, 38 P3d 1120 [Supreme Court of California] [Amelco].
21 Ibid. at I.
22 Ibid. at B.2.
23 Ibid. at B.2.
24 Ibid. at B.2.
25 B192900 (Los Angeles County Superior Ct No BC208414).
26 Ibid. at p. 2.
27 Ibid. at p. 13.
28 Ibid. at p. 13.
29 American Bar Association Forum on the Construction Industry-- Searching for the Holy Grail? Is there a New Way to Measure Lost
Productivity and Will it Pass the Daubert/Kumho Threshold? By Lewis J. Baker, Watt, Tieder, Hoffar & Fitzgerald, LLP and Virginia
McLean, May 6-8, 2004 at p. 7.
30 Supra note 13, citing Servidone Constr. Co. v. United States, 931 F.2d 860, 861-62 (Fed. Cir., 1991) (stating that the total cost
method is a “last resort” because it may reward “bidding inaccuracies” and “performance inefficiencies” by making the resulting cost
discrepancy recoverable as damages); Youngdale & Sons Constr. Co. v. United States, 27 Fed. Cl. 516, 541 (1993) (“[T]his method
is highly disfavored ..., because it blandly assumes that ... the plaintiff's costs are prima facie reasonable, that the bid was accurately
and reasonably computed, and that the plaintiff is not responsible for any increases in cost.”). But cf. Berhard A. Aaen, The Total
Cost Method of Calculating Damages in Construction Cases, 22 PAC. L.J. 1185, 1187-88 (1991) (“Although traditionally disfavored,
this method has gained acceptance in recent years ... [such that] courts have generally accepted the total cost method where the four
part test has been met.”) (footnotes omitted)
31 Bruner and O'Connor on Construction Law - Database updated July 2014, Philip L. Bruner and Patrick J. O'Connor, Jr. - Chapter 19.
Remedies and Damage Measures - XI. Contractor's Common-Law Measure for Owner Breach of Contract.
32 Ibid. at §19:117.
33 Supra note 3.

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Total Cost Claims: Canada's Five-Part Test, 2015 J. Can. C. Construction Law. 121

34 In 1964, the decision in Electric Power Equipment Ltd. v. RCA Victor Co. (1964), 49 W.W.R. 193 (B.C. C.A.), made use of what was
effectively a total cost method of calculating damages. A clause in the contract obligated the defendant to pay for “additional costs”
of performing the work under winter conditions. The provision did not define either “costs” or what they would be “additional” to,
and therefore the analysis was an exercise in contractual interpretation. It was determined that what amounted to a total cost method
was the only reasonable basis for calculating the additional costs. There is a lack of a substantive discussion of the legal principles
or justification underlying the use of the total cost method, although the court is careful to confirm the reasonableness of the actual
cost and estimated cost figures.
35 2005 NLTD 197, additional reasons 2006 NLTD 33, additional reasons further 2007 NLTD 182, varied 2012 NLCA 7, additional
reasons 2012 NLCA 45 [Eco-Zone].
36 (1988) 27 CONSTRLR-ART 239.
37 Supra note 35 at p. 242.
38 Ibid. at p. 286.
39 Ibid.
40 [2002] N.J. No. 127, 2002 CarswellNfld 124 (T.D.) [McNamara].
41 Ibid. at para. 206.
42 Ibid. at para. 207.
43 Ibid. at para. 9.
44 2002 BCSC 1460 [Golden Hill].
45 Ibid. at para. 928.
46 Ibid. at para. 938. See also Begro Construction Ltd. v. St. Mary River Irrigation District, 1994 CarswellAlta 471 (Q.B.) at 200,
additional reasons 1994 CarswellAlta 738 (Q.B.), additional reasons 1995 CarswellAlta 388 (Q.B.).
47 Golden Hill, supra note 44 at para. 930.
48 Ibid. at para. 931.
49 Ibid. at para. 940.
50 1994 CarswellAlta 470 (Q.B.) [Opron].
51 Ibid. at para. 934.
52 Supra note 31 at §19:116.

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