While economic experts say Canada is set to feel some effects from the significant slowdown in the U.S., business for Ontario’s construction lawyers is remaining robust - although some say a bit of refocusing will still be necessary this year.
Investment in non-residential building construction was up 3.1 per cent in Ontario in the first quarter of this year, compared with the last quarter of 2007, including gains in investment in the commercial, industrial, and institutional construction areas, and was up 4.2 per cent in Toronto, according to Statistics Canada.
The number of non-residential building permits in the province was up 0.3 per cent in the first three months of the year, compared with January to March 2007, but was down in Canada as a whole.
With 10 lawyers practising construction law, both on the front-end contract negotiation drafting, project structuring side, and the dispute resolution, and litigation side, Bob Beaumont, a lawyer with Osler Hoskin & Harcourt LLP in Toronto, says that things have been “extremely busy.” And the firm sees it continuing for a period of time.
In the industrial construction area, for example, there is a huge amount of work being carried out in the province and on the books, says Beaumont.
The sources of that work are organizations including the Ontario Power Authority, Ontario Power Generation, and Infrastructure Ontario, which has 16 projects under construction, including hospitals, a youth detention centre, the Durham courthouse, and 24 projects in various stages of coming on-stream, he says.
He notes that this is “a good news story in Ontario.”
To date, things have stayed busy in terms of commercial construction; however, Beaumont says he wouldn’t be surprised if that slows down a little bit.
“But with Infrastructure Ontario and the OPA, [and] Ontario Power Generation, I think the market is going to continue to be very vibrant in Ontario,” he says.
Beaumont says that over the last couple of years, and as the level of activity has increased, the risk allocation has shifted a bit, in that contractors have had more options available to them and are not willing to take on some of the risk on projects that they had previously.
“I see a little bit of a shifting of the pendulum back, where contractors are pushing back on liability and responsibility and trying to limit their exposure on these projects,” he says.
Another change that they’re seeing a bit of, and that contracting clients are seeing as the U.S. economy slows, are a number of U.S. contractors and construction participants looking to Canada to try and take advantage of the activity, he says.
“From a firm perspective, we’ve fortunately been the beneficiary of that on a number of occasions,” he says.
Through involvement in an association called the Forum on the Construction Industry, part of the American Bar Association, the firm has developed a lot of contacts with firms in the States, and, as their clients start to look at opportunities in Canada, the firm has been assisting contractors to get established here, he says.
In terms of the projects happening at the moment, Gowling Lafleur Henderson LLP construction lawyer Ken Movat also notes that there is a refocusing happening towards the government-participation jobs, or P3 projects.
On the litigation side, Movat adds that an example of something that this area of law will be seeing more of, as a potential result of the way the economy is turning, is an increasing number of Companies’ Creditors Arrangement Act applications in court.
Movat notes it’s something that has occurred infrequently in the last few years. “I think its going to occur with more frequency; we’re going to find that there are people who are in financial difficulty due to harder economic times,” he says.
“As a result, the impact on the legal practice will be that people like me will be finding that they’re doing more of this kind of work, representing trade contractors and other people in the construction business who are faced with the fact that there are other players in the business who are falling upon hard financial times,” he says, or a lot more work that has an insolvency aspect to it.
He says that it has not occurred a lot at this point in time, but he thinks the profession will see more of it.
“My sense of it is my partners at this firm who are on the financial services side and banking side are probably seeing less activity on the lending side. Less money is out there; as a result, less construction is going on,” he says.
Greg Hersen, a construction lawyer with Torkin Manes Cohen Arbus LLP, says that it has been a really good run for contractor clients over the last few years. While the crash in the U.S. residential market hasn’t yet hit here, Hersen doesn’t necessarily think that it will.
He cautions that the construction market in Ontario has been so overheated for so long that a slowdown is inevitable, but there is a difference between this inevitability and a crash.
“Before a construction lawyer is going to be affected by a slowdown in the economy it has to hit my clients,” he says.
Possible effects from a slowdown may include busier construction litigation practices if there are more defaults, while the corporate side may slow down, as less projects are being started, he says.