Canadian court interprets ‘integrated project delivery contract’ Canadian court interprets ‘integrated project delivery contract’

The construction industry is witnessing a growing interest in collaborative contract models. Parties continue to weigh the pros and cons of contract models such as integrated project delivery (IPD), with some project participants electing to employ less traditional contract models in the hope of increasing the likelihood of achieving positive project outcomes. Despite the growth in interest in IPD, there continues to be little judicial consideration of IPD contract models in Canada, leaving project participants with questions as to how Canadian courts might resolve disagreements arising from such contract models.

Recently, a Canadian court considered a dispute involving an IPD contract in connection with the construction of a wind turbine project in Inuvik, Northwest Territories. In Onec Construction Inc. v. NWT Energy Corp. Ltd. et al, 2025 NWTSC 56, an application for summary judgment was brought before the Supreme Court of the Northwest Territories in respect of disputes arising on the Inuvik High Point Wind Project (the Project). NWT Energy Corporation (03) Ltd. (NTE) was the owner of the Project. ONEC Construction Inc. (ONEC) and Northland Builders Ltd. (Northland) were construction businesses involved in the completion of the Project. Liberty Mutual Insurance Company (Liberty) was ONEC’s surety under a labour and material bond.

During the performance of the Project, disputes arose between the parties. ONEC filed a Statement of Claim against NTE and Northland. Northland filed a counterclaim against ONEC, Liberty and NTE. Northland sought summary judgment dismissing ONEC’s claim against Northland and granting Northland’s counterclaim against ONEC, Liberty and NTE.

The Court was faced with the task of contractual interpretation, including the interpretation of a contract titled “Integrated Project Delivery Contract”. Following the hearing of the Application, the Court partially granted the application for summary judgment.

Background

In November 2020, NTE obtained permits and licenses for the construction of the Project, which included the construction of a wind turbine, a battery storage system, an access road, and a distribution line connecting to existing lines near Inuvik’s Mike Zubko Airport.

The nature of the contractual relationships between the parties was in dispute. On December 27, 2021, NTE entered into a Prime Contract (the Prime Contract) for the construction of the access road with ONEC. ONEC argued that Northland was also a party to the Prime Contract as a contractor, acting in partnership with ONEC. NTE and Northland took the position that Northland was not a party to the Prime Contract.

On March 15, 2022, ONEC and Northland entered into a contract titled “Integrated Project Delivery Contract” (the IPD Contract), which related to the construction of the access road. At the application hearing, the parties did not agree on the nature of this contract. ONEC and Liberty submitted that this was a partnership agreement, while Northland argued it was a subcontract. The IPD Contract set out how ONEC would pay Northland for its participation in the construction of the access road.

On February 3, 2022, ONEC executed a Labour and Material Payment Bond (the Bond) with Liberty in favour of NTE. The Bond provided that claimants who have a direct contract with ONEC for labour and material, used or reasonably required for use in the performance of the Prime Contract, could seek compensation from Liberty if ONEC defaulted in payment.

In early 2022, work on the construction of the access road started. ONEC’s role was the management of the Project, procuring materials, surveying, supervision and quality control. In the application, Northland’s involvement was in dispute. Northland took the position it was supplying labour and materials for the preparation of the site and performing civil work, while ONEC submitted that Northland also played an important role in managing the Project in partnership with ONEC.  

During the performance of the Project, Northland invoiced ONEC monthly. ONEC made payments to Northland and claimed some of these payments were advances because Northland did not have the necessary funds to perform the work. ONEC disputed the accuracy of Northland’s invoices and claimed that they did not comply with the terms of the IPD Contract. Northland took the position that ONEC approved the method of invoicing, and that further payments were due under the IPD Contract.

On September 23, 2022, in accordance with the IPD Contract, Northland sent a Notice of Default to ONEC for the outstanding amount it claimed was owed for the work performed. ONEC did not make any payments to Northland following the receipt of this notice.

On November 9, 2022, ONEC directed Northland to stop work on the construction site due to a dispute between ONEC and NTE. Northland complied with this direction and never returned to work on site.

On January 14, 2023, Northland terminated the IPD Contract with ONEC for non-payment of the outstanding amounts it claimed were due. About one month later, on February 10, 2023, NTE sent Northland a “Notice to Subcontractors of ONEC Construction Inc.” indicating that NTE had terminated its contract with ONEC and that any subcontractor who had performed work for the Project may be eligible to claim under the Bond.

Shortly after that, on March 3, 2023, Northland submitted a notice of claim to the surety, Liberty, for payment of the outstanding amounts it claimed ONEC owed Northland for labour and materials used or reasonably required for the performance of the Prime Contract. Liberty denied the claim, asserting that Northland did not fall into the definition of a “claimant” under the Bond.

On April 27, 2023, ONEC filed a Statement of Claim against NTE and Northland alleging that Northland

• induced NTE and ONEC’s subcontractors to breach the Prime Contract and subcontracts
• in committing the inducements, breached the terms of the IPD Contract
• caused damage to equipment belonging to ONEC, and
• continued to use fuel provided by third parties under contract with ONEC after the termination of the IPD Contract

On September 21, 2023, Northland filed a Statement of Defence and Counterclaim. The counterclaim alleged ONEC breached the IPD Contract by failing to pay the outstanding invoices and stand-by charges incurred when ONEC directed Northland to stop work. Northland sought contractual damages for this breach. Northland also argued that it squarely falls within the definition of “claimant” under the Bond and that Liberty was liable for the amount owed by ONEC. In the alternative, Northland claimed that the Defendants by Counterclaim, including NTE, were liable for unjust enrichment.

Roughly one year later, Northland filed an application for summary judgment seeking the dismissal of ONEC’s action against Northland, as well as judgment against the Defendants by Counterclaim (NTE, ONEC and Liberty).

The Court’s findings

In its decision, the Court considered each element of Northland’s motion for summary judgment.

1. ONEC’s claim

First, the Court determined ONEC’s claim against Northland.

(a) Inducing breach of contract

With respect to ONEC’s claim of inducing breach of contract, the Court determined that, due to the lack of evidence supporting the essential elements of the tort of inducing breach of contract, Northland successfully demonstrated that this claim by ONEC had no merit.

(b) Breach of the IPD Contract

With respect to ONEC’s allegation that Northland breached the IPD Contract, ONEC argued that Northland breached the IPD Contract when it terminated the contract and refused to remobilize to the work site after the dispute that arose between ONEC and NTE in November 2022 was resolved. ONEC submitted that Northland’s claim for payment of the outstanding invoices was not justified under the IPD Contract. As a result, ONEC claimed that the decision to terminate the contract on that basis was equally unjustified and was a breach of the IPD Contract.

The Court found ONEC’s allegations problematic as, among other things, they were not pled in the Statement of Claim. The Court ruled that Northland met its burden to establish that ONEC’s claim that Northland breached the IPD contract had no merit.

(c) Damage of equipment and use of fuel claims

ONEC also sought compensation alleging Northland damaged equipment owned by ONEC and for the costs of fuel charged to ONEC and stored at Northland’s facility. The Court found that ONEC’s claims related to the damage of equipment and the use of fuel had no merit.

2. Northland’s counterclaim

The Court then addressed Northland’s counterclaim. In this regard, the Court concluded that the affidavit evidence before it provided sufficient context for the Court to determine who the parties were to the Prime Contract and the nature of the IPD Contract. The Court also noted that it could decide whether Northland fell into the definition of “claimant” under the Bond and, as a result, could resolve the questions related to liability of ONEC and Liberty. However, the Court found that, due to conflicting evidence and credibility issues regarding Northland’s invoicing, it could not decide on the scale of the damages.

The Court noted that the main point of contention between ONEC and Northland was whether Northland’s invoices to ONEC were compliant with the terms of the IPD Contract and any other agreements reached by the parties and, as a result, whether Northland was entitled to further payments from ONEC. ONEC did not dispute that, under the IPD Contract, it had the obligation to reimburse Northland for the costs Northland incurred in the performance of the IPD Contract. The terms that governed the reimbursement of Northland’s costs were stated at Article 5 of the IPD Contract and stipulated that “reimbursable costs” were actual costs supported by receipts, invoices and other suitable documentation. The Court noted that the real issue was whether Northland had proven that it had incurred reimbursable costs in an amount that exceeded what ONEC had already paid. The Court determined that whether the contract was a partnership or a subcontract did not change ONEC’s legal obligation to pay for admissible reimbursable costs.

Having determined that ONEC had an obligation to pay Northland, the Court went on to address the liability of the surety, Liberty. The Court noted that the nature of the contractual relationship between NTE, ONEC and Northland was relevant to Liberty’s liability. Liberty claimed that Northland was a party to the Prime Contract, acting in partnership with ONEC. It also noted that the IPD Contract set out that ONEC and Northland shared a common purpose and interest in the Project and had equal right of control in the Project. Liberty highlighted that the IPD Contract created a “risk pool” condition that indicated the parties intended on sharing both the profits and any losses of the Project. Liberty argued that this created a contractual relationship between Northland and ONEC that was different from a traditional subcontract. As a result, Liberty submitted that Northland did not qualify as a “claimant” under the Bond.

At the hearing, both Northland and NTE took the position that Northland was not a party to the Prime Contract, but rather a subcontractor. Northland also submitted that irrespective of the label attached to the IPD Contract, Northland fell within the definition of “claimant” under the Bond.

The Court held that it was satisfied that Northland was not a party to the Prime Contract. It noted that on the cover page of the Prime Contract, in the box “Name of Contractor” the following appeared: “ONEC Construction Inc In Partnership with Northland Builders Ltd”. The Court indicated that two affiants explained in their respective affidavits that Northland’s participation in the Project was essential to securing the bid for the Prime Contract because Northland was a Gwich’in business and the prominent role of Gwich’in businesses was key to obtaining this contract. The Court went on to state that this explained why Northland’s name had to appear on the Prime Contract, whether it was a party to the contract or not. The Court held that the simple mention of Northland on the cover page of the contract was not determinative of this question. Moreover, the Court noted the signature page identified only two parties to the Prime Contract: ONEC and NTE. ONEC and NTE were also the only parties identified under “Notice Address” in the Prime Contract.

Ultimately the Court found that, considering the text of the Prime Contract and the circumstances known to the parties at the time they entered the Prime Contract, an objective and reasonable person would conclude that Northland was not a party to the Prime Contract.

Liberty argued that the conditions of the IPD Contract regarding the sharing of responsibilities, as well as the sharing of profits and losses, created a partnership, such that Northland did not fall within the definition of “claimant” under the Bond. The Court agreed with Liberty that the IPD Contract created a form of collaboration between ONEC and Northland that was not typical of a construction subcontract. However, the Court went on to state that “Article GC 2.1.2. specifically states that “[a]lthough the Contract establishes a relationship of mutual trust and good faith […], it does not create an agency relationship, fiduciary relationship, partnership, or joint venture” (emphasis added).” The Court added that the Bond defines a “claimant” as “one having a direct contract with the principal for labour, material, or both, used or reasonably required for use in the performance of the contract”, and found that this language was broad and did not limit claimants to traditional subcontractors.

The Court went on to find that, in this case, the IPD Contract identified the “Owner” as ONEC and the “Contractor” as Northland, creating a form of subordination. The Court further found that Article 5 Reimbursable Costs and Article A-6 Payment set out an obligation on ONEC to pay Northland all actual costs supported by receipts, invoices and other suitable documentation it incurred in performing the contract, plus overhead of 8%. It determined that these terms set out a direct contract between ONEC and Northland for labour, material, or both, reasonably required for use in the performance of the contract.

In the end, the Court concluded that ONEC and Liberty were liable for the costs Northland incurred for the work performed on the Project. Lastly, having found that Northland was not a party to the Prime Contract and that ONEC and Liberty were liable to Northland for any proven outstanding amounts, the Court found that the owner, NTE, was not liable to Northland.

Remarks

Although the facts of this case may not depict a typical scenario involving the use of an IPD contract model, the decision in Onec Construction Inc. v. NWT Energy Corp. Ltd. is one of the few cases in which Canadian courts have weighed in on the interpretation of a contract the parties have termed as an IPD contract. As interest in collaborative contracting models continues to rise, it is reasonable to anticipate Canadian courts will increasingly be asked to interpret these models as disputes involving these relatively novel contractual frameworks come to light.

This blog post was previously published in the Canadian College of Construction Lawyers Legal Update #174 on May 3, 2026.