Executive Summary: Key Legal and Evidentiary Issues

• Allocation of risk for major construction material price increases under fixed-price (forfaitaire) contracts between owner, general contractor and subcontractor during the Covid-19 period
• Scope of the general duty of good faith, loyalty, collaboration and cooperation in contractual performance, including the creation and disappointment of “legitimate expectations” through party conduct
• Adequacy of pre-litigation notices of dispute and claims (avis de différend, avis de réclamation), and their role in preserving contractual and extra-contractual recourses
• Legal sufficiency of alleged assurances and exchanges between STM and MGB to ground a potential claim in warranty notwithstanding the formal contract wording
• Threshold for striking out a call in warranty under article 168 C.p.c., particularly when factual context and intent are contested
• High bar for a finding of abuse of procedure under article 51 C.p.c. at an early stage, especially where a “fragile” but arguable legal thesis is advanced

Factual background and contractual framework

The dispute arises out of a major public construction project for the refurbishment of the Pie-IX metro station in Montréal. The owner, Société de transport de Montréal (STM), entered into a principal construction contract in 2020 with MGB Associés inc. (MGB) as general contractor. MGB in turn subcontracted part of the work to Bruneau Électrique inc. (Bruneau) by a subcontract dated 20 September 2021. Both the principal contract between STM and MGB and the subcontract between MGB and Bruneau are fixed-price (prix forfaitaire) contracts, in the global amount of $8,818,921 plus applicable taxes, for a total of $10,139,554.42. The clauses of the STM–MGB principal contract are incorporated by reference into the subcontract between MGB and Bruneau, so that the subcontractor’s performance is framed by the same general contractual regime as the main contract. After these contracts were concluded, the construction industry experienced a significant spike in the price of materials, a phenomenon closely tied to the Covid-19 pandemic context. Bruneau claims that this unforeseen and substantial escalation in costs generated additional expenses of $293,031.42 that were not covered by the original fixed price, and seeks to have MGB compensate it for these increases. MGB, however, refuses to pay Bruneau, relying in part on the position of the owner, STM, which declined to recognize any corresponding entitlement to compensation under the principal contract.

Course of dealings and exchanges leading to the dispute

In reaction to the material cost escalation, MGB sent to STM, on or around 8 June 2021, “Avis de différend #7”, relating to a claim tied to increased material costs. This notice expressly included not only MGB’s own additional costs but also claims from its subcontractors and suppliers, including Bruneau. According to MGB’s pleaded version of events, a further series of exchanges followed. On 8 July 2021, STM’s representative, Éric Fauteux, is alleged to have sent material such as construction price index statistics to MGB’s representative, Benoit Lussier. MGB also alleges that, by telephone on that same day, the parties agreed that MGB’s claim, including the component relating to its subcontractors’ cost increases, would be reviewed and dealt with at the end of the project. Bruneau later issued its own “Avis de différends” on 23 August 2022 in relation to the cost escalation, initially for an undetermined amount, followed by a formal claim on 31 January 2023 for $293,031.42. The next day, 1 February 2023, MGB forwarded Bruneau’s claim to STM. On 28 February 2023, STM refused to proceed with the claim as presented, stating that the file was incomplete and insufficiently argued to be accepted as-is. STM pointed to contractual clauses which required bidders to factor anticipated material cost increases into their bids and identified three elements it expected to be demonstrated before moving forward: proof of the actual increase in material costs between bid and performance, the portion of that increase borne by the contractor, subcontractors and suppliers, and the share of the increase ultimately being sought from STM. In response, MGB issued a formal “avis de réclamation” on 20 March 2023, again including Bruneau’s claim among the amounts it sought to recover from STM. Bruneau later provided further particulars to MGB on 15 May 2023; MGB then passed these on to STM on 16 May 2023, along with a revised version of “Avis de différend #7.” Ultimately, after no compensation was forthcoming, Bruneau sent a formal demand letter to MGB on 25 November 2024, and MGB in turn sent a formal demand to STM on 4 December 2024. Bruneau commenced its lawsuit against MGB in February 2025, and MGB responded by bringing STM into the proceedings by way of an appeal in warranty.

Claims and theories advanced by the parties

Bruneau sues MGB for $293,031.42, which it characterizes as additional costs caused by the exceptional increase in material prices. Bruneau argues that MGB’s refusal to compensate it is incompatible with the general duty of good faith in contractual relations. Specifically, Bruneau alleges that MGB misled its legitimate expectations and undermined the harmonious performance of the subcontract by failing to act cooperatively once STM declined to pay. In Bruneau’s view, MGB should have continued to cooperate and find ways to accommodate the subcontractor’s interests despite STM’s refusal. To protect itself if Bruneau’s claim succeeds, MGB has called STM in warranty, essentially mirroring Bruneau’s theory and transposing it into the owner–contractor relationship, while adding factual allegations about its own exchanges with STM. MGB contends that STM also owed duties of good faith, collaboration and cooperation and that STM created legitimate expectations through its conduct and communications—particularly by allegedly agreeing to defer detailed treatment of the cost-increase claim to the end of the project and by requesting and receiving additional documentation. STM, for its part, contests the legality and appropriateness of MGB’s call in warranty. STM maintains that the principal contract is purely fixed-price, contains no clause allowing for upward adjustment or renegotiation of the contract price due to market fluctuations, and does not contemplate shifting to STM any responsibility for how MGB deals with its subcontractors’ claims. STM further denies having behaved in any way that could reasonably generate legitimate expectations of financial compensation in MGB’s mind. On that basis, STM argues that there is neither a sufficient legal link nor adequate connexity between the principal action (Bruneau vs. MGB) and the call in warranty (MGB vs. STM) to justify STM’s involvement in what it characterizes as a dispute limited to the subcontract relationship.

Procedural posture and legal framework

The judgment focuses exclusively on STM’s preliminary attack on the call in warranty. STM seeks dismissal of the call in warranty on two grounds. First, it invokes article 168 of the Code of Civil Procedure (C.p.c.), arguing that, even assuming all alleged facts are true, the appeal in warranty is legally unfounded and thus inadmissible. Second, it alleges an abuse of procedure under articles 51 and following C.p.c., characterizing MGB’s recourse as manifestly ill-founded and a misuse of the court’s process. The Superior Court carefully recalls the well-established principles governing a motion to dismiss under article 168 C.p.c. The judge emphasizes that such a remedy is reserved for clear and obvious situations where the inadmissibility appears from the face of the pleadings and supporting documents; the facts alleged are taken as true, while their legal qualification by the plaintiff does not bind the court. The role at this stage is not to weigh evidence or predict the chances of success, but only to decide whether the factual allegations are capable, if proven, of supporting the conclusions sought. In case of doubt, prudence dictates allowing the matter to proceed to a full hearing. With respect to calls in warranty more specifically, the court notes that two conditions must be satisfied: there must be a legal relationship—contractual or extra-contractual—between the parties to the warranty action; and there must be sufficient connexity between the principal proceedings and the warranty proceedings such that inconsistent judgments could result if they were decided separately.

Application of the legal standards to the call in warranty

Applying these principles, the judge finds that the conditions for a valid call in warranty are met. The existence of a contractual relationship between STM and MGB is undisputed. The allegations in the call in warranty also demonstrate sufficient connexity with the main action: both sets of proceedings turn on the same core legal issues, namely the contractual duties of good faith, collaboration and cooperation, and the possibility that conduct and communications during performance may create legitimate expectations that cannot later be dismissed without breaching the duty of loyalty. The court underlines the doctrinal and jurisprudential recognition that good faith in performance includes an obligation not to create false expectations and then abruptly revert to the strict letter of the contract to the detriment of the other party. In that context, MGB’s allegations that STM agreed to address the cost-increase claims (including those of subcontractors) at the end of the project, that STM provided market data and requested further documentation, and that MGB relied on these exchanges, are considered specific and detailed enough to potentially ground a remedy. While the judge acknowledges that the evidentiary burden on MGB may ultimately prove heavy, that assessment is reserved for the merits stage. It would be premature at the preliminary stage to declare the warranty claim legally doomed when the factual exchanges, their context, and their legal implications must still be explored at trial. The court therefore concludes that the call in warranty is not inadmissible under article 168 C.p.c.

Rejection of the abuse of procedure argument

Turning to the allegation of abuse under article 51 C.p.c., the court again adopts a cautious approach. STM simply asserts that the appeal in warranty distorts the ends of justice and has no valid legal foundation. The judge recalls that although article 51 can apply to a broad array of situations, the threshold for a finding of abuse remains intentionally high in order not to trivialize the concept and impede fair access to justice. Courts must be particularly careful not to treat a novel, uncertain, or “fragile” legal thesis as abusive solely because its ultimate success is doubtful. In this case, while the theory advanced by MGB—anchoring a call in warranty largely on alleged breaches of good faith and the creation of legitimate expectations in a fixed-price public contract—may be demanding to prove, it nonetheless rests on coherent factual allegations and recognized legal concepts. At the early stage of the proceedings, the judge is not prepared to conclude that the recourse is so devoid of foundation as to constitute an abuse of procedure. Accordingly, the court rejects STM’s request for a declaration of abuse.

Outcome and implications for the parties

In its dispositive portion, the Superior Court dismisses STM’s motion for inadmissibility and for rejection of the modified forced intervention (appeal in warranty). The effect is that MGB’s appeal in warranty against STM survives and will proceed alongside Bruneau’s principal claim against MGB. The judge also orders that costs (frais de justice) will follow the ultimate outcome of the case, leaving any final allocation of legal costs to the trial on the merits. In this interlocutory decision, MGB is thus the successful party, having preserved its right to seek recovery from STM if it is eventually held liable to Bruneau. However, the judgment does not decide the underlying liability or the amount, if any, that STM or MGB may ultimately owe to Bruneau or between themselves. No damages or specific monetary sums are awarded at this stage, and the total amount of any future award or costs in favour of the successful party cannot yet be determined from this decision.