RC117 MarApr 2025 - Magazine - Page 28
LEGAL
A DAM IN THE RIVER
Potential barriers to recovering subcontractor
losses via flow-through claims in Canada.
by Catherine Gleason-Mercier and David Leck
ONG-STANDING PRACTICE on Canadian construction projects has been to structure contractual relationships in
a pyramid. In this regard, the construction pyramid
brings together (in a loose sense of the word) a variety of parties while limiting contractual rights and
responsibilities to a speci昀椀c tier of the pyramid with
a speci昀椀c contracting counterparty.
By way of example, the owner contracts directly with
the general contractor (by way of a “prime contract”), and
in doing so, generally limits its liability to claims from the
general contractor. In turn, the general contractor enters
into separate contracts with its subcontractors and/or
suppliers (the “subcontracts”), generally in a manner that
satis昀椀es the general contractor’s obligations under the
prime contract. Further down the contractual pyramid,
subcontractors and suppliers may enter into direct
contracts with sub-subcontractors and sub-suppliers, and
the pyramid thus continues.
When a subcontractor has sustained unintended losses,
allegedly caused by the conduct of the owner such as
project delays or untimely design changes or through
other unanticipated events such as events of force majeure,
a subcontractor may have a claim against the general
contractor for those losses notwithstanding that the
losses are not the result of the conduct of the contractor.
The question then becomes how a general contactor
can resolve the subcontractor claim while nevertheless
claiming against the owner for such a claim.
This article discusses the possible risks faced by
general contractors when settling a subcontractor’s
claim while advancing a claim against the owner
for the subcontractor’s losses, also known as a 昀氀owthrough claim. By way of summary, the 昀氀ow-through
claim is an e昀케cient and appealing solution for both
L
Catherine-Gleason-Mercier is
a Partner in the Construction
and Infrastructure Practice
Group at Singleton Urquhart
Reynolds Vogel LLP.
David Leck is an Associate in the
Construction and Infrastructure
Practice Group at Singleton
Urquhart Reynolds Vogel LLP.
28
RENEW CANADA – MARCH/APRIL 2025
general contractors and their
subcontractors when faced
with a potential owner-caused
issue; however, such an
approach must be carefully
considered and appropriately
framed in order to be
successful.
What is a flow-through claim?
Generally speaking, a 昀氀owthrough claim arises when a
general contractor advances
a claim against an owner
seeking compensation for
the losses of its subcontractor
(who has claimed against
the general contractor).
Flow-through claims are frequently used as a means for
general contractors to seek recompense upon settling the
subcontractor’s claim as between the general contractor
and subcontractor only.
It bears noting that a general contractor may seek to
昀氀ow-through di昀昀erent types of claims provided that
the general contactor can establish that the owner is the
party at fault or that compensation is due as a result
of speci昀椀c provisions in the prime contract. A common
昀氀ow- through claim is often grounded in allegations of
owner caused delay.
Alternatives to flow-through claims
A general contractor is of course not required to resolve
its subcontractor’s claim via a 昀氀ow-through claim against
the owner. Instead, the general contractor could settle
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