Post-Judgment Interest Under a Construction Management Contract

The Dispute

A construction project manager had been awarded money at the end of a long dispute with the association that engaged it. Years passed between the work and the hearing that settled what was actually payable. Money it had already received, a deposit and two earlier payments, had to be set against those awards first. What the passage of time was worth, and who would carry the cost of the trial, were still open.

The Parties’ Positions

JM Bay Properties Inc. claimed interest on the sums it had been awarded, both for the period before judgment and for the period after, and sought its costs of the action. It put the interest claim on Article A-6.2 of the Construction Management Contract, the provision setting out the rates payable under the parties’ own agreement. The sums it asked the court to run interest on were the three awards in its favour: a construction management fee of $4,500, a fee of $6,500 for rezoning work, and $152,727.50 for loss of anticipated profit. Against those it accepted credit for the deposit of $31,500 and for two earlier payments, less $875 attributable to pole transportation and a tree protection sign. On costs it sought Scale B, together with the days occupied by the trial and by the time before Registrar Gaily.

Tung Chengyuen Buddhist Association was represented at the hearing by its own counsel, and the court reserved its decision for two weeks before pronouncing the order. The court allowed the claim for interest after judgment, and the claim to costs, but dismissed the claim for pre-judgment interest.

The Court’s Decision

The most interesting result was that court dismissed the claim for pre-judgment interest on the basis that no amounts were due and payable until the judgment was rendered, and did not treat JM Bay’s submissions on court ordered interest at all. In our view, although the contract prevented contractual interest from running until an award or judgment, the court should have addressed the argument for court ordered interest in the alternative, but Justice Walker did not.

The court allowed post-judgment interest commencing March 12, 2025 (the date that the court determined the amounts payable), calculated on the construction management fee, the rezoning work fee and the loss of anticipated profit, net of the deposit and the two prior payments, and at the rates set out in Article A-6.2 of the Construction Management Contract. Costs were awarded to JM Bay at Scale B for the action, with the costs of the trial fixed at six and a half days and the costs of the time before Registrar Gaily fixed at one day.

The commercial effect is that interest on this judgment is measured by the parties’ own contract, and that it runs on the net figure after credit for the deposit and the earlier payments rather than on the gross awards. The dismissal of the pre-judgment claim leaves the period before March 12, 2025 carrying no interest at all.

Key Lessons for Construction Managers and Project Owners

• Set the interest rate in the contract, and check the clause is drafted to keep running once judgment has been given. Interest here was allowed at the rates in Article A-6.2 of the Construction Management Contract, so a provision agreed years before trial determined what the judgment carried.
• Treat a claim for interest before judgment as a separate claim on its own footing. It was dismissed here while the claim for interest after judgment succeeded, and the two do not necessarily stand or fall together.
• Do not expect to receive court ordered interest in the alternative, particularly where there is an agreement with respect to interest (even if the agreement is not comprehensive).
• Record every deposit and progress payment against the specific work it answers. The awards here were reduced by a deposit and two earlier payments, less $875 for pole transportation and a tree protection sign, and a credit calculated that finely depends on traceable payments.

The outcome of this hearing turned on the terms of the Construction Management Contract and on the awards made earlier in the action. A similar claim for interest and costs may resolve differently.

ATAC LAW acts for owners, construction managers and contractors in construction disputes, including the hearings that fix interest and costs once judgment has been given.

Mike C. Stewart acted for JM Bay Properties Inc. at the hearing that fixed interest and costs.