The Ontario Divisional Court has recently heard appeals from two decisions of the Discipline Committee of the Ontario Association of Architects. In both cases, the appeal was dismissed. Di Sarra v. Ontario Association of Architects, 2021 ONSC 2697, dealt with a conflict of interest arising from an architect bidding on construction work on a project designed by himself. The second case, Saplys v. Ontario Association of Architects, 2021 ONSC 2784, concerned the question whether a design was “intended to govern the construction of a building” and therefore constituted the practice of architecture.
Conflict of Interest – Di Sarra v. Ontario Association of Architects
The Regulation under the Ontario Architects Act prohibits an architect who provides architectural services on a building project from also having an ownership interest in another company that has submitted "tenders or bids" on a project. To do so would constitute a conflict under section 43(1)(f) of the Regulation.
The architect in this case provided millwork drawings used by the owner of the home to solicit quotes for the work, and at the same time was an owner in a company that submitted a quote to carry out that work.
The Discipline Committee of the Ontario Association of Architects found that the architect was in a conflict of interest in doing so and was guilty of professional misconduct.
The architect appealed to the Divisional Court and argued that "tenders or bids" as used in the Regulation were misinterpreted by the Committee, had no application to the informal process of obtaining quotes for the millwork on this renovation project and should be limited to a formal process of tendering, in which an invitation to tender is made and the presentation of a responding offer creates a binding contract between the parties, of the kind referred to as "Contract A" in the Supreme Court of Canada's decision in R. v. Ron Engineering.
The architect argued that the Discipline Committee's interpretation created an illogical or absurd result; was inconsistent with the plain wording of the provision; was inconsistent with the purpose of the legislation; and was inconsistent with the legislative history of the conflict of interest provisions.
The Divisional Court rejected all of these arguments.
Section 43 of the Regulation provides as follows:
43. (1) A member or holder has a conflict of interest where the member or holder or an officer, director, partner or employee of the member or holder,
(a) has a direct or indirect financial or other interest in any material, device, invention or service used on a building project with respect to which the member or holder provides architectural services;
(b) makes use of any service offered by a contractor, subcontractor or manufacturer or supplier of building materials, appliances or equipment, that may adversely affect the judgment of the member or holder as to any question that arises on a building project with respect to which the member or holder provides architectural services;
(c) has a direct or indirect financial or other interest, whether personal or otherwise, in or with a person, firm, partnership or corporation that is the owner, contractor, subcontractor, construction manager, design-builder or project manager of a building project with respect to which the member or holder provides architectural services;
(d) has a direct or indirect financial or other interest in a contract or transaction, other than the agreement between the architect and the client, to which the owner, contractor, subcontractor, construction manager, design-builder or project manager is a party on a building project with respect to which the member or holder provides architectural services;
(e) has a direct or indirect financial or other interest, whether personal or otherwise, that may adversely affect the judgement of the member or holder as to any question that may arise on a building project with respect to which the member or holder provides architectural services; or
(f) has a direct or indirect financial or other interest, whether personal or otherwise, in or with any person, firm, partnership or corporation that submits or has submitted tenders or bids on a building project with respect to which the member or holder provides architectural services.
(2) Clause (1) (a) does not apply to create a conflict of interest where the interest is disclosed in the contract documents and the consent in writing of the client is obtained.
(3) Clause (1) (c) or (d) does not apply to create a conflict of interest where the interest is disclosed in the contract documents.
(4) Subsection (1) does not apply to create a conflict of interest in the provision of architectural services with respect to a building project of which the member or holder is a substantial owner or that is controlled by the member or holder where the interest is disclosed in the contract documents.
The court focused on subsections 43(1)(c) and (f) and noted that while under the previous version of the Regulation, if an architect simply had an interest in a company that provided construction services, that construction company was categorically barred from providing services on any project in which the architect was retained, s. 43(3) of the current version removed the general prohibition if the architect's interest in the construction company is disclosed in the contract documents.
Importantly, however, there is no such exemption for s. 43(1)(f). If a company in which the architect has an interest "submits or has submitted tenders or bids" on a building project with respect to which he or she is providing architectural services, that is deemed to be a conflict of interest, and disclosure to the owner or the owner’s consent or waiver does not change that.
As for legislative intention, the architect submitted that the language in ss. 43(1)(f) flowed directly from the decision in Ron Engineering and was enacted with the intention that it would apply only in a Contract A/Contract B scenario as set out in that case. The Divisional Court held that there was nothing to support that contention apart from the possible coincidence of timing and dismissed that argument.
The architect next argued that the purpose of the legislation was the protection of the public, not the protection of other contractors, and the Committee’s finding that the architect had an "unfair advantage over other bidders by having this pre-tender knowledge of the requested scope of millwork services" misconstrued the purpose of the Act. That argument was rejected as well. The Divisional Court held as follows:
If an owner of property decides to accept multiple bids on work to be carried out on the property, surely it is in the public interest for there to be fair competition amongst the bidders for the work. This may also be in the best interests of the other firms involved in the bidding process, but that does not take the matter outside the public interest.
The architect submitted that the Committee’s finding led to an absurd result by prohibiting an architect from having an interest in a company that "bids" on a project, with no exceptions, but at the same time allowing the architect to have an interest in a company doing other work on the project provided there is full disclosure of the architect's interest. In other words, the architect can do the work, but is not permitted to bid on the work.
The Divisional Court disagreed again, finding that there was nothing absurd about such a finding. It is perfectly permissible for an owner to hire whoever they want on a project without engaging in a competitive process, and to have any architect do some of that work, again without a competitive process as long as any conflict is disclosed. However, once the owner chooses to procure the work by way of a competitive process, the owner is entitled to an actual competitive process, not one in which a company owned by the architect has an advantage over everybody else, and the designing architect cannot bid to do work on that project as well.
The architect’s final argument was that this reading of the Act led to the anomalous result that it would be in an unscrupulous architect's interests to persuade an owner not to seek competitive bids so that the architect can have their own company do the work. While the court agreed with that argument, it held that that danger arose when the Regulation was changed to permit such relationships to exist provided disclosure was made.
The Ontario Association of Architects has provided guidelines on conflict of interest. The OAA takes the position that construction services should not be provided through a certificate of practice in Ontario. The OAA is also of the view that with the design-bid-build project delivery model, there is an inherent conflict of interest where the architect provides both architectural and construction services to the same project. Therefore, while the OAA does not discourage its members from pursuing other avenues of business such as construction services under separate entities, architects should avoid conflicts by not performing construction services on projects in which they are involved as design professionals.
Saplys v. Ontario Association of Architects – When is a design “intended to govern the construction of a building”?
Section 11 of the Architects Act prohibits the "practice of architecture" by any person who is not a licensee or a holder of a certificate of practice. The practice of architecture includes the provision of a "design" to govern the construction of a building. Design includes a "plan, sketch, drawing, graphic representation or specification intended to govern" the construction, of a building.
In this case, a service corporation which was neither a licensee nor the holder of a certificate of practice under the Act prepared drawings and plans for a hotel project. The architect stated that the drawings in question here were made for the purpose of obtaining branding approval from the hotel chain. That statement was apparently accepted by the Committee. Nevertheless, the Committee found that the drawings were intended to govern the construction of the hotel.
The appeal was from a finding of professional misconduct on the following count:
During the years 2012 and 2013 you provided architectural services [all parties concede that this was meant to say 'engaged in the practice of architecture'] with respect to the construction of a hotel, Hampton Inn & Suites at 12700 Hwy 50, Bolton, Ontario, through "API International Marketing and Architecture & Planning Initiatives", which does not hold a certificate of practice, contrary to Subsection 1 of Section 42 of the Regulation and contrary to Section 11 of the Act.
The Committee decided that the appellant had caused his service corporation to engage in the practice of architecture, contrary to s. 11(1)(b) of the Act. The architect appealed from that finding.
The architect argued that a plan, sketch or drawing could only be said to be intended to govern construction if it was prepared with the intention that it be submitted for the issuance of a building permit. The Committee rejected the argument and held that this interpretation of the word "design" was too narrow. The Committee found that pre-building-permit drawings could also have a controlling influence on the construction of the building. The Committee held that "design" includes "everything in the process from initial concept to final construction documentation."
The Divisional Court first established the applicable standard of review based on the Supreme Court of Canada decision in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65. Where the legislature has provided for an appeal from an administrative decision to a court, as it did here, the court hearing the appeal is to apply appellate standards of review to the decision. In considering questions of law including questions of statutory interpretation and those concerning the scope of a decision maker's authority, the Court must apply the standard of correctness. Where the scope of the statutory appeal includes questions of fact, the appellate standard of review for those questions is palpable and overriding error (as it is for questions of mixed fact and law where the legal principle is not readily extricable).
The Divisional Court found that whether the drawings referred to in Count 5 were intended to govern the construction of the hotel was a question of fact or mixed fact and law, with no extricable legal issue. Therefore, the finding of the Committee could only be set aside if the Committee made a palpable and overriding error. A palpable error is one that is readily or plainly seen. An overriding error is one that must have altered the result or may well have altered the result.
In reviewing the Committee’s decision on that standard, the court held that the test was whether the drawings were intended to govern, i.e., to exert a controlling influence on, the construction of the hotel. The court rejected the architect’s argument that that could only be the case if the drawings were entirely sufficient to construct the hotel. Nor did the court accept the argument that the drawings had to be prepared for the purpose of obtaining a building permit.
The Discipline Committee had held that the drawing in this case satisfied the test:
In this case, each of the four sets of drawings at issue in Allegation 5 was prepared with the understanding of both the Architect and his client that the ultimate intended product of the design was the construction of a building. As described in more detail in our first Reasons for Decision in this matter, these four sets of drawings were prepared between April 2011 and January 2012 and followed in October 2012 and April 2013 with drawings issued for building permit and construction respectively. While the initial four sets of drawings were issued for brand approval rather than to obtain a building permit, the content of these drawings and circumstances surrounding their production demonstrate to us that they were produced on the understanding that the ultimate intended product of those designs was the construction of a Hampton Inn &Suites in Bolton. Our review of the content of the six drawings also shows that the designs in the first four sets of drawings established the parameters for and had a controlling influence on the subsequent drawings, as one would expect in the design process. As a result, in our view each of these four sets of drawings can be properly regarded as "designs" within the meaning of s. 1 of the Act.
The court agreed with the architect’s argument that “design” could not possibly mean "everything in the process from initial concept to final construction documentation”. However, the court also held that when reading the Committee’s decision as a whole, especially the paragraph cited immediately above, it was clear that the Committee applied the correct test, i.e. it found that the drawings were intended to “govern” the construction.
The court held that it was open to the Committee to review the drawings and surrounding circumstances for itself and to make an assessment of whether these drawings were intended to exert a controlling influence on the construction of the hotel. The Committee was within its rights to reject the appellant's argument that only drawings in support of a building permit could ever be "intended to govern" construction. Nor was there anything wrong with the Committee’s finding that because the drawings were initially used for branding approval by Hampton Hotels, the drawings could not also have been intended to govern construction. There was consequently no error of law or palpable and overriding error of fact committed by the Committee.
The Committee’s finding of professional misconduct was therefore upheld.
The Divisional Court has helpfully clarified the test as to whether a design professional’s work product constitutes “design” for the purposes of the Architects Act. Architects should be aware that not all drawings from the early stages of their engagement will be construed as “design”, but those which are intended to govern or exert a controlling influence on the construction of the project will be captured by section 11(1)(b) of the Act.