Court File and Parties

COURT FILE NO.: CV-15-356-SR DATE: 2019 April 30

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

2099042 ONTARIO LIMITED Plaintiff / Defendant by Counterclaim – and – VARCON CONSTRUCTION CORPORATION and TRISURA GUARANTEE INSURANCE COMPANY Defendants / Plaintiffs by Counterclaim

Counsel: Kenneth J.M. Coull, for the Plaintiff / Defendant by Counterclaim Zach Flemming-Giannotti and Todd D. Storms, for the Defendant, Varcon Construction Corporation / Plaintiff by Counterclaim Defendant, Trisura Guarantee Insurance Company, not appearing, the action having been dismissed as against Trisura.

HEARD at Kingston: March 6, 2019

MACLEOD-BELIVEAU j.

Reasons for Decision

(Motion for Summary Judgment)

[1] This is a motion for summary judgment under Rule 20 brought by the plaintiff, 2099042 Ontario Limited, carrying on business as AWD Contractors (hereinafter “AWD”), to dismiss the counterclaim of the defendant, Varcon Construction Corporation (hereinafter “Varcon”) with costs, and for an order that the holdback money paid into court be paid out to AWD.

[2] On May 25, 2017, AWD obtained judgment after a motion for summary judgment on its statement of claim for $39,064.87 which sum was paid into court. AWD’s statement of claim was for the balance due under its construction subcontract with Varcon. Varcon’s statement of defence did not disclose a reasonable defence and summary judgment was issued. Leave was granted to Varcon to re-open pleadings and to serve a fresh counterclaim on or before June 30, 2017 which was done with the condition of the balance due under the subcontract being paid into court. The claim against Trisura was discontinued and dismissed.

[3] AWD brings this motion for summary judgment to have the counterclaim of Varcon dismissed in its entirety. The motion was originally returnable before Hurley J. on December 6, 2018. The motion was adjourned to March 6, 2019 for hearing, with a timetable imposed for responding materials to be filed, cross-examinations to be conducted, and facta to be delivered. Costs were reserved to the presiding judge hearing the motion on March 6, 2019. The parties had examinations for discovery on April 4, 2018. Cross-examinations on the affidavits filed on this motion were conducted on January 28, 2019.

[4] By way of overview, Varcon’s counterclaim against AWD is for damages as a result of soil consolidation and the subsequent deflection of sanitary sewer piping which caused the sewage system to fail after the construction of an inmate dormitory consisting of a main building and three adjoining pod buildings at Pittsburgh Institution near Joyceville, Ontario for Public Works and Government Services Canada on behalf of Correctional Services Canada (hereinafter “Public Works Canada”). Varcon was the general contractor and AWD was one of its subcontractors. Varcon alleges that AWD failed to adequately back fill the area over which the sewer pipes rested and failed to adequately compact the back filled area. These allegations are based on the fact that the native soil under the main external sewer pipe into the main building and another branch sewer pipe line to one of the pod buildings had consolidated and moved which caused the sewer pipes to deflect and impeded the flow of sewage. Varcon was required to remediate and incurred damages as a result. Native soil was specified in the specifications of the subcontract and is the soil naturally found at the site. Varcon seeks reimbursement of its remediation costs from AWD.

[5] It is not disputed that the soil did in fact consolidate and that the sewage was in fact impeded by the deflection of the sewer pipes and caused the sewage system to fail. It is not disputed that the soil settled in two locations under the external sewer pipe leading to the main building and in one location under one branch of an adjoining sewer line leading to one of the pod buildings.

[6] What is disputed is why the soil consolidated or settled under the sewer pipes as it did and if AWD, under the terms of its subcontract with Varcon, is liable to Varcon in damages for the cost of the remediation work done by Varcon to repair the sewage system done after the construction was substantially completed.

Result

[7] Partial summary judgment shall issue in favour of AWD. A separate order shall issue directing a trial on the warranty issues and damages, if any, in the subcontract between AWD and Varcon as pleaded in the counterclaim of Varcon. Varcon shall be the plaintiff by counterclaim and AWD shall be the defendant.

[8] I find that this is a proper case for determination by way of a motion for summary judgment. The defendant Varcon’s counterclaim does not raise genuine issues requiring a trial in relation to issues (a), (b), and (c) as set out in paragraph [12] below. AWD’s motion for summary judgment is granted and Varcon’s counterclaim is dismissed in relation to the claims as outlined in issues (a), (b), and (c) of paragraph [12] below as AWD has established that there are no genuine issues requiring a trial with respect to these claims made in the counterclaim of Varcon.

[9] The defendant Varcon’s counterclaim does raise genuine issues requiring a trial in relation to issue (d) as set out in paragraph [12] below. AWD’s motion for summary judgment is dismissed in relation to issue (d) as in paragraph [12] below. Varcon has established that there are genuine issues requiring a trial with respect to the warranty claims in the counterclaim of Varcon as to whether or not AWD is liable to Varcon pursuant to the warranties in the subcontract, even if AWD’s work was done in a workmanlike manner to the required standard in accordance with all the specifications of the subcontract and was not deficient in any way.

[10] If AWD is successful in obtaining a finding that the warranties are not applicable in all the circumstances and facts of this case, Varcon’s counterclaim will be dismissed in its entirety.

[11] If Varcon is successful in obtaining a finding of liability against AWD under the warranties in the subcontract, an assessment of damages on a quantum meruit basis will be additionally required. An assessment of damages on a “quantum meruit” basis means that the amount of damages assessed shall be on the basis of a reasonable sum of money to be paid for services rendered or work done, as the amount is not otherwise stipulated in the subcontract between Varcon and AWD.

The Issues

[12] The central issue between AWD and Varcon on this motion is whether or not AWD has established that there are no genuine issues requiring a trial with respect to Varcon’s counterclaim. The specific issues and my specific answers to those issues are as follows:

a. The Deficiencies: (Counterclaim at paras 13-17). Was AWD’s work under the subcontract for backfilling, compaction, and pipe bedding construction, as more particularly described in the subcontract, deficient? Answer: AWD’s work under the subcontract was done in a workmanlike manner to the required standard and in accordance with all the specifications of the subcontract and was not deficient in any way.

b. Failure to Warn: (Counterclaim not specifically pleaded, but included within paras 35-36 which allege breach of the subcontract and the principal contract). Is AWD liable to Varcon for breach of contract for failure to warn Varcon of the unsuitability of the excavated material, namely native soil, as specified in the subcontract and used by AWD for the compaction work done under the subcontract? Answer: No.

c. Failure to Rectify Deficiencies: (Counterclaim at paras 18-24). Is AWD liable to Varcon for breach of contract for failure to remediate the deficiencies caused by the sewage backup at Varcon’s direction under the subcontract? Answer: No.

d. Breach of Warranty: (Counterclaim at paras 25-28). Is AWD liable to Varcon for breach of contract pursuant to the warranties in the subcontract, even if AWD’s work was done in a workmanlike manner to the required standard and in accordance with all the specifications of the subcontract and was not deficient in any way? If the answer is no, Varcon’s counterclaim will be dismissed in its entirety. If the answer is yes, what is the proper assessment of the reasonable cost of the remediation work done be Varcon, payable by AWD as damages to Varcon under the subcontract? Answer: There are genuine issues requiring a trial with respect to AWD’s liability to Varcon pursuant to the warranties in the subcontract.

Position of the Parties

[13] The position of AWD is that there are no genuine issues requiring a trial and it asks that Varcon’s counterclaim be dismissed in its entirety with costs. It is AWD’s position that their work was done in a workmanlike manner to the required standard and in accordance with all the specifications of the subcontract and that their work was not deficient in any way. Their work passed all the compaction engineering tests done by Inspec-sol Inc., a geotechnical engineering firm hired by and reporting to Public Works Canada. Inspec-sol provided written copies of their test results as well to Varcon at the construction site which allowed construction by AWD to proceed. AWD’s work was tested by Inspec-sol and found to be done to the required standard.

[14] AWD’s further position is that once their work passed all the appropriate compaction tests done by Inspec-sol, that they are not responsible for the soil’s consolidation or movement under the sewer pipes after the completion of its work. It is AWD’s position that the soil’s consolidation was ultimately caused by an early stage design flaw and mistake by the design consultant, Norr, hired by Public Works Canada, discovered long after AWD’s work was done and after the soil had consolidated and the sewer pipes had failed. Norr had specified in the contract that native soil was the material to be used for the compaction. Native soil, naturally found at the site, was specified in the subcontract. No change order for the areas of the sewer pipe was sought by Varcon or Public Works Canada. As it ultimately turned out, native soil was not suitable as it was unstable and subject to movement even when properly compacted, which was known at the bidding stage in the soils report. AWD’s position is that the fact that the native soil consolidated after proper compaction by AWD is not due to any fault, neglect or deficiency in the work done by AWD. It is AWD’s position that AWD carried out its subcontract in a workmanlike manner to the required standard in accordance with all the specifications of the subcontract and that AWD’s work was not deficient in any way. AWD’s position is that it is not liable to Varcon for any damages as a result.

[15] The position of Varcon is that there are several genuine issues requiring a trial as set out in paragraph [12] above. Varcon’s position is that AWD’s work was deficient, that AWD failed to warn Varcon about the unsuitability of using native soil, that AWD failed to remediate when required by Varcon to do so, and that AWD is liable to Varcon in any event under the warranties of the contract regardless of the cause of the deficiencies, even if AWD’s work was done in a workmanlike manner to the required standard in accordance with all the specifications of the subcontract and was not deficient in any way.

[16] It is Varcon’s position that the soil under the exterior portion of the main sewer pipe into the building and under one exterior adjunct branch sewer pipe consolidated causing the exterior sewer pipes to deflect which impeded and backed up the flow of sewage. As a result, Varcon was required to undertake extensive remediation work for which it claims AWD is liable under the terms of the subcontract, payable as damages by AWD to Varcon.

Background

[17] Varcon is a general building contractor based in Brampton, Ontario that entered into a contract with Public Works Canada on October 2, 2012 for the construction of a 50 bed dormitory unit for inmates at Pittsburgh Institution, a federal penitentiary off Highway #15, near Joyceville, Ontario. Varcon entered into a subcontract with AWD signed by Varcon on February 19, 2013 for compaction and other related work for the project.

[18] AWD is a construction company based in Perth, Ontario that conducts soil compaction and other related construction work. AWD entered into a subcontract with Varcon signed by AWD on December 18, 2012, for the supply of labour and materials related to excavation, installation of granular base, construction of pipe bedding, and installation of exterior sanitary pipe, backfilling, and compaction of the backfill. This included work to excavate the basement for the main building on site, and to backfill the perimeter after the basement walls were erected by another subcontractor. Part of the area for the three concrete slabs was excavated and backfilled by AWD. AWD laid the main exterior sewer pipe from the roadway down the exterior wall of the main building and compacted the area on which the main sewer pipe was laid. AWD placed granular fill on top of the soil under the sewer pipes as specified in the subcontract.

[19] The subcontract price, inclusive of approved extras, was $390,815.52 plus applicable taxes. AWD was paid the sum of $351,733.55. The balance owing under the subcontract was $39,081.97 which is the approximate amount of the 10% holdback of $39,064.87 paid into court, an insignificant difference of $17.10. The subcontract between AWD and Varcon incorporates by reference portions of the principal contract between Varcon and Public Works Canada.

[20] The dormitory project consisted of four buildings. There was a main building which was built on a foundation and had a basement. On three sides of that building were three adjoining buildings or pods which were built slab on grade, without a basement foundation. The floors of the three pods are concrete slabs built directly on graded soil, which were later by way of a significant change order, more fully reinforced by another subcontractor. The reinforcement work was done on the slab floors after AWD finished its work. The pods were built on grade beams that sat on concrete piles right down to the bedrock which meant that the building weight sat on the bedrock, not graded soil. The main sewer pipe passed from the roadway down the external wall of the main building and into the basement where it conjoined three branch lines running to and then under the slab of each pod. The main external sewer pipe was laid over the excavated area and was about four feet underground.

[21] AWD excavated the area beneath the external sewer pipes and part of each branch line for the purpose of constructing a basement in the main building which was subsequently back filled and compacted by AWD as part of its subcontract. AWD placed granular fill directly under the sewer pipes as specified in the subcontract. AWD did not construct the pipe bedding for the sewer pipes inside the main building or inside the pods which was done by a different subcontractor. The work done by AWD happened at the end of June and all of July of 2013. AWD completed its compaction and other work under its subcontract and left the worksite. Construction continued as was expected by other subcontractors. Varcon held back the 10% holdback and later unreasonably refused to pay AWD the balance of the subcontract price.

[22] On August 21, 2015, AWD commenced its statement of claim claiming $72,210.92 in damages, plus pre-judgment interest and costs as against the defendants.

[23] On October 7, 2015, the building project was certified as being substantially complete.

[24] On November 6, 2017, the defendants’ statement of defence was delivered. No counterclaim was advanced.

[25] On September 20, 2016, Varcon received notice from Public Works Canada that the sewage system had failed. Varcon much later determined that the soil had consolidated and moved in two areas under the main external sewer pipe and in one area of one of the branch sewer lines causing the sewer system to back up. Varcon sent a notice immediately to AWD that a remediation proposal was required as Varcon required remediation of the work done as the sewer pipes had backed up and failed. By this time, the main building and the three pod buildings were constructed. The remediation costs at this point were substantial. Varcon solely blamed AWD for the sewage system failure.

[26] On September 21, 2016, AWD responded that it would rectify only those issues that could be established to be AWD’s responsibility. Varcon did not provide further details. AWD did not then provide a remediation proposal.

[27] On September 23, 2016, Varcon sent a second notice for a remediation proposal to AWD. AWD continued to refuse to submit a remediation proposal unless it could be established that it was AWD’s work that was responsible for the sewage back up. While some efforts had been made by Varcon to do this, including CCTV footage, AWD was not satisfied that any of its work was deficient as it had passed all the compaction tests done by Inspec-sol during construction. AWD maintained that it was not responsible for the sewage back up, which could have been contributed to by many other subcontractors including the mechanical and plumbing subcontractors, as well as the design consultant who specified that the compaction material of native soil was to be used. AWD’s position was that it was not obligated to go back and fix someone else’s problem.

[28] On October 6, 2016, the 12 month warranty period as specified in the subcontract between Varcon and AWD expired.

[29] On February 1, 2017, Varcon submitted its own remediation proposal to Public Works Canada.

[30] On March 7, 2017, Varcon retained Edward Wong & Associates Inc., a geotechnical engineering firm, to determine why the sewage system had failed and to assist Varcon in executing its remediation plan.

[31] On May 2, 2017, a representative from Mr. Wong’s firm, Edward Wong & Associates Inc., attended at the site. As a result of probe testing, Mr. Wong’s firm determined that the soil had consolidated in three areas under the sewer pipe lines and further that the cause of the failure of the soil was likely due to inadequate compaction.

[32] On May 3, 2017, Varcon provided a final notice that it was proceeding with remediation work. Mr. Ghinn from AWD then later attended to observe part of the remediation work being done by Varcon and was given proper notice of same.

[33] On May 25, 2017, the amount outstanding between the parties on the statement of claim was determined on a motion for summary judgment to be $39,064.87, or in essence the amount of the 10% holdback. A final judgment for that amount was granted on May 25, 2017 together with an order requiring that sum to be paid into court by June 15, 2017, which was done. The payment into court was a term of the order which granted leave to Varcon to deliver a fresh counterclaim on or before June 30, 2017.

[34] On June 29, 2017, Varcon delivered its amended statement of defence and counterclaim. As expected, there were no amendments made to the statement of defence. Amendments were made in Varcon’s fresh counterclaim where Varcon claimed damages in the amount of $150,000 as against AWD for deficiencies, failure to rectify deficiencies and breach of the subcontract, breach of warranty under the subcontract, negligence, and damages. The claim for damages by Varcon are now particularized and claimed at $116,550.36. I note that the specific reference to applicable charge back rates and fees for remediation work done in the contract in Article 21 of the subcontract was contracted out of and eliminated in the contract between Varcon and AWD by Appendix F. As a result, damages, if any, are to be assessed on a quantum meruit or reasonable basis and not at the charge out rates otherwise specified in the subcontract.

[35] On August 17, 2017, the action was dismissed on consent as against the defendant Trisura Guarantee Insurance Company who did not appear on this motion.

[36] On November 20, 2018, AWD brought this motion for summary judgment to dismiss Varcon’s counterclaim, returnable December 6, 2018. The motion was adjourned with a timetable to March 6, 2019 for a contested hearing which is when it was heard.

Analysis

[37] Hryniak v. Mauldin, 2014 SCC 7 requires the summary judgment rule to be interpreted broadly, favouring proportionality and fair access to affordable, timely and just adjudication of claims. Central to the principles in Hryniak is the intent to improve access to justice. Summary judgment is available to litigants in simple as well as highly complex, technical and complicated matters if there are no genuine issues requiring a trial.

[38] The new powers in Rule 20 of weighing evidence, making findings of credibility, and drawing reasonable inferences are purposely designed to reduce the number of cases that require a trial on every issue to serve the goals of timeliness, affordability, and proportionality when considering the litigation as a whole and to achieve a just result.

[39] I find this is a proper case for determination by way of a motion for summary judgment.

[40] AWD and Varcon have been litigating since August 21, 2015. Varcon had pleaded no reasonable defence to the statement of claim which was in essence for the amount of the 10% holdback. Summary judgment on the claim was granted on May 25, 2017. On June 29, 2017, Varcon delivered its counterclaim. The counterclaim is for $150,000 in remediation costs for work done by Varcon as a result of the soil under the sewer pipes consolidating which Varcon attributes to be the sole fault of AWD. The quantum of damages, if any, is disputed. The damages now claimed for remediation are $116, 550.36, exclusive of engineering costs.

[41] In considering this motion for summary judgment, I have read and carefully considered the evidence contained in the affidavit of James Ghinn, sworn November 13, 2018, the affidavit of Scott Mason, sworn November 13, 2018, the cross-examination of James Ghinn on January 28, 2019, the cross-examination of Scott Mason on January 28, 2019, the supplementary affidavit of James Ghinn sworn January 29, 2019, the examination for discovery of James Ghinn on April 4, 2018, the affidavit of Gian Paolo (Paolo) Lombardo sworn January10, 2019, the affidavit of Edward Wong sworn January 10, 2019, the examination for discovery of Paolo Lombardo on April 4, 2019, and counsels’ motion records, facta, and authorities provided. When I refer to the evidence of a given individual in these reasons, I am referring to all of that individual’s evidence given by way of either affidavit, cross-examination, or examination for discovery, all of such evidence being given under oath.

[42] There is no issue that the soil consolidated and that the sewer pipes deflected. There is no issue that the sewage backed up and that the sewage system failed and required remediation. The issue is why did the soil consolidate and who is responsible in law for the remediation damages?

[43] It is not disputed that by September 20, 2016, the sewer pipes had backed up as the soil under two areas of the external sewer lines, and under one branch line had consolidated or moved. It is not disputed that this failure of the external sewer pipes and the one branch line occurred within the one year warranty period of AWD’s subcontract. It is not disputed that the concrete floor slabs in all three pods cracked during the construction by Varcon which necessitated a significant revision to the construction plans by Varcon.

[44] The main allegation of misfeasance against AWD by Varcon is that AWD failed to adequately compact the backfill in the area over which the sewer pipes would rest.

[45] The evidence of James Ghinn, the sales and contract manager for AWD, is that the compaction work underneath the external sewer pipes and for part of each branch line to the pods was excavated, backfilled and compacted using native soil as specified in the subcontract and the work was done in a workmanlike manner to the required standard by AWD and that there were no deficiencies in the work. Mr. Ghinn was present and verified that the work was done. The owner of the site, Public Works Canada retained Inspec-sol Inc., a firm of geotechnical engineers, to conduct compaction tests at each stage of the back filling by AWD. Mr. Ghinn’s evidence is that the work tested at each stage met the proper compaction standard each time which allowed the dormitory construction project to proceed. I accept and find Mr. Ghinn’s evidence to be reliable and credible. It is consistent with other evidence that AWD’s work was tested and met the required standard and the construction project did in fact proceed.

[46] Mr. Ghinn’s evidence is supported by the evidence of Mr. Scott Mason, who was at the time of the project, the site supervisor for Varcon during the construction of the dormitory. Mr. Mason’s evidence confirmed that the soil used by AWD was in accordance with the engineering specifications of the subcontract. He confirmed that the compaction testing met all required standards as determined by Inspec-sol Inc. Mr. Mason’s evidence confirmed that Inspec-sol carried out compaction tests as the backfilling was being done, and submitted written test reports to Varcon confirming that the compaction met the required standards. Mr. Mason submitted regular construction reports to Varcon. After completion of his contract with Varcon, Mr. Mason commenced employment with AWD. I do not draw any adverse inference in relation to Mr. Mason’s evidence due to the change of his employer.

[47] I find that the written compaction test results were provided to Public Works Canada and to Varcon. Despite repeated requests from AWD, complete copies of these compaction tests were never provided to AWD, nor has any reasonable explanation, I find, been given as to what became of these written test results. The test results for other various areas of compaction were provided to AWD, but not the test results related to the sewer pipes which is the main area of dispute between AWD and Varcon.

[48] Mr. Paolo Lombardo’s evidence was that he was the project manager for Varcon. In general, his evidence revealed that he knew little of the specific details of this construction project when he was questioned. He was asked directly if the area under the external sewer pipes was compacted by AWD. He answered he was unsure. He was asked why the backfilling consolidated and he did not, I find, provide a reasonable answer. No further corrections to his answers has been provided. Mr. Lombardo’s ultimate answer was that it was in the reports, referring to the reports of Mr. Edward Wong, the geotechnical engineer Varcon had hired to assist with the remediation work.

[49] Varcon hired Mr. Edward Wong, as well, for his opinion evidence. His opinion in his reports dated March 9, 2017, May 3, 2017, and January 5, 2018 are that the soil’s consolidation in question was due to its inadequate compaction. AWD submits that Mr. Wong’s conclusions are based on assumptions that are not established in the evidence, and in fact, the soil was compacted properly and to the required standard. Mr. Wong admitted in his evidence that that he had not seen the compaction reports for the area under the sewer pipes in dispute and he did not make any further investigations or conduct any compaction tests himself. Mr. Ghinn’s evidence was that he had never heard of compaction testing being done with a probe as used by Mr. Wong’s office. I agree with the submissions of AWD as to the lack of a proper factual foundation for Mr. Wong’s expert opinion evidence, and I give his opinion evidence little weight.

[50] I do not accept Mr. Wong’s evidence as being either reliable or credible. Mr. Wong gives no reason for his opinion, and simply arrives at his conclusion that the soil compaction was not adequately done. His opinion as to the reason why the soil consolidated is not supportable, I find, without doing a review of the compaction reports under the area of the sewer pipes done at the time of construction by Inspec-sol. Mr. Wong’s opinion is not supportable when compared to other credible evidence that it was likely a design specification error to use native soil on this construction project under the sewer pipes. The objective evidence is that the design consultant, who would have spent significant amounts of time designing this project, was aware that the native soil at the project site was going to move, which indeed it did. The movement of the native soil was evident in the three concrete floor slabs of the three pod buildings which cracked half way through construction. The slabs had to be reinforced before construction continued and required a significant change order to be made to ensure the cement slab floors stability. What was not addressed by the design consultant, Inspec-sol and/or Varcon before or during the construction, was the issue of the similar likely consolidation and movement of the native soil under the sewer pipes for the project, which I find, based on the objective evidence, is the most likely reasonable cause of the ultimate failure of the sewage system for the project.

[51] Mr. Ghinn’s evidence for AWD, is that Varcon has failed to disclose the compaction test reports for the area under the sewer pipes, and that Varcon has further failed to disclose the daily construction reports made by Mr. Scott Mason, Varcon’s site supervisor at the material time, for the months of June and July of 2013, when the backfilling and compaction work was done by AWD. Mr. Ghinn’s evidence, which I accept as being reliable and credible, is that he was personally present on the job site, he witnessed the back filling and compaction, he observed Inspec-sol conducting regular testing of AWD’s compaction work, and that Inspec-sol informed AWD that its work met the compaction standard on each test at the time the work was done.

[52] Mr. Ghinn’s evidence is that Varcon never complained about the quality of AWD’s work during construction. Mr. Ghinn’s evidence was that AWD and Varcon did have a dispute over a change order where time and materials at a given rate were agreed to and then Varcon refused to pay AWD the full agreed upon rate. Mr. Ghinn’s evidence was, according to Mr. Ghinn, that Varcon did not have the money and were an unscrupulous company to work for, and that there was no basis for Varcon not to pay AWD for this time and material change order as they had agreed to do.

[53] Mr. Lombardo’s evidence was that the compaction and construction reports were simply “missing”. In particular, Mr. Lombardo refused to agree in his evidence that Varcon had “lost” these reports. Mr. Lombardo would not even say that the areas around the sewer pipes were even compaction tested.

[54] Inspec-sol Inc. was retained by Public Works Canada to conduct the relevant soil compaction tests during construction of the project. I accept and find reliable and credible, Mr. Ghinn’s evidence that Inspec-sol’s written reports were specifically delivered to Varcon. The reports for the material time of AWD’s compaction of the sewer pipe area have gone “missing” and have not been made available to AWD or to the court. I accept Mr. Ghinn’s evidence that despite repeated requests from AWD, that copies of these reports have never been delivered nor has Varcon given any reasonable explanation as to what became of them. Copies of compaction reports for other areas of excavation work and back filling done by AWD not related to the sewer pipes have been delivered by Varcon, but not the relevant reports concerning the compaction testing for work done by AWD for the sewer pipe areas. The inference I draw from this evidence is that these compaction test reports, received by both Varcon and Public Works Canada for the area under the sewer pipes, are highly relevant and are inexplicably missing and they have not been produced to either AWD or to the court by Varcon.

[55] AWD attempted to obtain the relevant missing compaction reports directly from Public Works Canada. Mr. Duncan Parker, the construction project manager for Public Works Canada for this project, refused to give the reports directly to AWD and advised Mr. Ghinn that either a court order or a request to access to information and privacy would be required. Mr. Parker did provide a letter that stated that Public Works Canada was in fact invoiced for the compaction work done by Inspec-sol Inc. during the relevant period for nine tests done, on June 24 and 27, and July 3, 4, 5, 9, 11, 17, and 19, of 2013, which is when the work was done, I find, by AWD in the sewer pipe areas. I am satisfied that these compaction reports therefore do in fact exist and are available to Varcon through Public Works Canada, either directly or indirectly through a request for information, or by a thorough review of Varcon’s own construction records.

[56] I draw an adverse inference against Varcon for failure to obtain and produce these highly relevant compaction test reports and the construction reports of Mr. Scott Mason which, I find, are within Varcon’s power and control to obtain and to provide to AWD and to the court. Varcon has had lots of time to do this. The evidence of Mr. Lombardo is that they asked Public Works Canada for the reports, which is I find in all the circumstances and facts of this case, to be an insufficient explanation. Varcon was directly provided with copies of these missing reports at the construction site, in addition to Public Works Canada. I find that this is a failure by Varcon to provide relevant evidence to the court which is mandatory on a motion for summary judgment and that due diligence is required by Varcon. Varcon is required to take all reasonable and necessary steps to obtain the missing reports which I find Varcon failed to do. The adverse inference that I draw is that these reports are available and have been suppressed or not obtained due to lack of due diligence by Varcon, as they are likely supportive of AWD’s position that all of AWD’s work in the subcontract was done in a workmanlike manner to the required standard in accordance with all the specifications of the subcontract and that AWD’s work was not deficient in any way. This is not a spoliation doctrine issue case.

[57] The scope of the work is outlined in the subcontract specifications including Appendix A. As provided in subsection 21 (j) of Appendix A, the backfilling was to be completed with native excavated material pursuant to the soils report. The soils report available at the bidding stage indicated that the native soil was going to move. As I have said, during the construction and after AWD’s work was long completed, the soil under the concrete slab floors of the pods did indeed move and a significant change order was approved by the design consultant and Varcon to put in a contraction joint to solve the problem. The concrete slab floors were not part of AWD’s scope of work. No impropriety for AWD’s work was ever alleged at the time of construction by Varcon. In relation to the slabs, Varcon accepted the design consultant’s significant remedial change order request before continuing on with the construction of the pod buildings. No concerns were raised at the time by the design consultant and/or Varcon that similarly, a change order and expansion joints would be required for the sewer pipes which were below ground, and resting on the same native soil.

[58] AWD was responsible to ensure its compliance with the contract. Mr. Ghinn’s evidence from AWD is that the design consultant of the project, Norr, should have realized and provided for expansion joints for the external sewer pipe as well which they failed to do. It was only long after the fact that this design flaw became apparent to Mr. Ghinn. Mr. Ghinn’s evidence is that when thinking long after the fact about why the sewer pipes had failed, it made sense that if the concrete slab floors of the pods are moving up and down on the ground above, so are the sewer pipes four feet below ground. AWD was not responsible for the design of this project and/or the contract specifications.

[59] I find that the evidence of Mr. Ghinn and Mr. Mason is reliable and credible. They both had a detailed memory of the events in question and provided forthright evidence in relation to the facts and issues in dispute. They were at the work site regularly and almost daily. The same cannot be said about the evidence of Mr. Lombardo and Mr. Wong. Mr. Lombardo’s answers were, in general, not responsive to questions asked. He lacked detailed knowledge of the facts and issues in dispute. He was not present at the work site on a regular basis and attended weekly. Mr. Wong’s evidence as to his opinion of why the soil consolidated causing the sewer pipes to deflect failed to consider other realistic causes, and concluded that it was due to failure of the compaction. He had an inadequate factual basis in the forming of his opinion, and I give his opinion of why the soil consolidated little, if any weight.

[60] Varcon had a duty to inspect any work before it was covered up by further construction. Varcon laid a sidewalk over the area of the main external sewer pipe and poured concrete slab floors over the branch lines of the sewer pipes to the three pods. Varcon did, I find, inspect the work done by AWD and found that AWD’s work under the subcontract was done properly and met the standard required when it was completed. I draw the inference from the evidence that as Varcon relied upon appropriate compaction testing and continued with the construction of the dormitory project, that Varcon had no issue with the quality of the work done by AWD.

[61] On September 20, 2016, it became clear that something had clearly gone terribly wrong with the construction project. The sewage system had backed up and was not working. Varcon solely blames AWD and says AWD failed to properly compact the soil. Varcon relies on the one year warranty for AWD’s work in the subcontract. AWD says that Varcon also has a warranty with Public Works Canada and that the failure of the sewage system due to deflecting sewer pipes is due to an engineering design flaw and/or Varcon in specifying or failure to change the specification during construction that native soil was to be used for the backfill under the sewer pipes. Native soil was used as opposed to bringing in more expensive granular fill of a higher specification.

[62] The reasonable evidentiary inference that I draw from the evidentiary record before me on this motion for summary judgment, is that the work done by AWD under the subcontract was done in a workmanlike manner and met all required standards in accordance with all the specifications of the subcontract and was not deficient in any way. I find the most likely cause of the soil consolidation was due to errors made by the design consultant in the design stage in specifying in the contract that native soil was to be used for the backfill and compaction of the site, when they knew, or ought to have known, that the native soil was going to move from the soils report before construction began, and further that change orders were not made at the site during construction to add appropriate granular fill as required when the design consultant and/or Varcon knew or ought to have known, that the soil under the sewer pipes would likely consolidate and move as it had done under the three concrete slab floors in the pods.

[63] Native soil as it turned out was an inappropriate compaction material to use under the sewer pipes. The contract specifications of use of native soil are not the fault or the responsibility of AWD. Varcon makes a bald, unsustainable assumption that AWD’s compaction work was solely to blame for the sewer pipes deflecting. I find that AWD has established on a balance of probabilities that the likely reason the sewer pipes deflected was that native soil was specified for this construction project in the design specifications under the sewer pipes, and that during construction the design consultant and/or Varcon failed to consider that if the soil under the concrete slab floors was moving, that ultimately, so would the soil underneath the sewer pipes. It was just a matter of time.

[64] In consideration of all the evidence before the court, including the important relevant missing compaction tests and construction reports which I have found are in Varcon’s control and/or Varcon’s ability to obtain with due diligence, and the finding that AWD’s work was done in a workmanlike manner to the required standard in accordance with all the specifications of the subcontract and was not deficient in any way, I find that the claim by Varcon that AWD’s work was deficient cannot succeed.

[65] I find as a fact that AWD’s work under the subcontract with Varcon was done in a workmanlike manner to the required standard in accordance with all the specifications of the subcontract and was not deficient in any way. I specifically find as a fact that AWD’s work was done in compliance with all of the specifications of the subcontract. I specifically find that there was no breach of contract for deficiencies by AWD.

[66] Varcon claims that AWD had a duty to warn Varcon under the terms of the subcontract that native soil was inappropriate to use on the site under the sewer pipes. I find in all the circumstances and facts of this case that AWD is not liable under the duty to warn terms of the subcontract. Inspec-sol had a constant presence on this work site and its soils engineer monitored and tested the compaction work done as it was being done on the site. After each layer of soil was compacted, AWD was given approval to proceed with the next layer.

[67] The evidence is that the soils engineer determined that in some other areas of AWD’s work on the project that native soil was indeed not appropriate, and that a minor change order needed to be implemented to provide for additional granular fill to ensure the soil’s stability. A minor such change order was given to AWD to put in granular B fill instead of using the native soil in relation to a small area of AWD’s scope of work. Mr. Ghinn’s evidence is that this was for about 8 out of the 350 truckloads of backfill AWD used at the site. The evidence is that the cement slabs, not part of AWD’s scope of work, were the subject of a significant major change order to ensure the soil stability underneath them and to ensure the slabs would not crack further.

[68] The evidence is that movement of the native soil was front and centre in the minds of the design consultant, Varcon and/or Inspec-sol at the site during construction. It is not reasonable to assert that in these factual circumstances that AWD failed in its duty to warn about the use of native soil. AWD can properly rely on the approvals of the soils engineer of Inspec-sol, an expert on soil compaction construction issues on site, to direct AWD if any changes were required to the work done by use of a different excavation material. There were no such change orders required by the soils engineer for the compaction under the sewer pipes within the scope of AWD’s work. Some granular fill was specified and placed directly under the sewer pipes by AWD. This case is not about the lack of appropriate testing or of trying to shift responsibility by AWD to Varcon and/or Inspec-sol. This project involved numerous tests being conducted during construction which confirmed that the soil compaction was in fact done properly to the required standard as detailed and specified in the subcontract.

[69] I find that AWD could not have recognized the defects that would occur months later with the native soil under the sewer pipes in all the circumstances and facts of this case. Further, I find that Varcon did not rely on AWD’s skill and judgment as to the suitability of the use of native soil, but rather Varcon relied on the design consultant and/or Inspec-sol, who had superior and advanced knowledge and skill in relation to the appropriateness of the chosen compaction material of native soil and in testing the compaction to the standard required. The claim by Varcon that AWD failed to warn Varcon about the use of native soil, I find, cannot succeed. I find there was no breach of contract for failure to warn Varcon in the use of native soil by AWD.

[70] Varcon was required by the terms of its contract with Public Works Canada to remediate and do the necessary work to fix the sewage problem which Varcon did. Varcon claims that AWD had a duty to complete the remediation work of $116,550.36 when requested to do so by Varcon. The evidence is that AWD did not complete the remediation work as instructed by Varcon, because Varcon could not particularize any deficiencies in AWD’s work. There were many other subcontractors involved in this project’s construction, including subcontractors who were working directly with the interior sewer pipes, hook up of the sewer pipes, cement pours, and compaction inside the basement walls of the main building to list but a few.

[71] Varcon, I find, did not provide satisfactory evidence of the deficiencies in AWD’s work to AWD, at that time or now, sufficient for AWD to make the determination that AWD was responsible for the remediation. Varcon, I find, failed to particularize and establish any deficiencies and in doing so, cannot require AWD to do or pay for the remediation under this portion of the subcontract. If it was ultimately determined that it was not AWD’s work that made the remediation necessary, and AWD had gone ahead and done the remediation work when it was not required to do so, AWD would be left in the position of trying to collect the remediation costs from other subcontractors and/or Varcon which, I find, is unreasonable. The claim by Varcon that AWD failed to remediate when required to do so, I find, cannot succeed. I find there was no breach of contract for AWD’s failure to remediate under that portion of the subcontract in all the circumstances and facts of this case.

[72] I find that the most significant issue between AWD and Varcon is the claim by Varcon against AWD under the warranties section of the subcontract. This issue is the essence of the dispute between the parties. The issue is whether or not AWD is liable to Varcon for breach of contract pursuant to the warranties in the subcontract, regardless of who or what caused of the deficiencies, even if AWD’s work was done in a workmanlike manner to the required standard in accordance with all the specifications of the subcontract and was not deficient in any way. If the answer is no, Varcon’s counterclaim will be dismissed in its entirety. If the answer is yes, what is the proper assessment of damages, which are disputed, based upon the reasonable cost of the remediation work done be Varcon, payable by AWD as damages under the subcontract?

[73] AWD provided an express warranty in Article 35 of the subcontract in respect of the work done and the materials furnished for any damages or fault in the work within one year after its completion, or as stated in the principal contract documents, whichever is the later, as a result of imperfect or defective work or material furnished by AWD for which AWD could then become responsible in damages. The soil consolidated within the one year period. The guarantee is for loss or damage arising from any defects in material or workmanship furnished by the subcontractor under the subcontract. In this case, I have found that there are no such defects in the material or lack of workmanship furnished by AWD as AWD met all the specifications of the subcontract.

[74] In addition to Article 35 of the subcontract, the principal contract documents, incorporated by reference, contain a further requirement by AWD in relation to the work done in Articles GC3.11 (1) and GC3.13 of the principal contract. Article GC3.11 (1) titled Defective Work requires AWD to promptly remove from the work site any defective work and replace and re-execute defective work, whether or not the defective work has been incorporated in the work, and whether or not the defect is the result of poor workmanship, use of defective material, or damage through carelessness or other act or omission of the contractor. Article GC3.13 titled Warranty and Rectification of Defects in Work requires AWD to rectify and make good any defect or fault in the work or comes to the attention of Public Works Canada within 12 months of the date of substantial performance and or the certificate of completion. Varcon claims AWD is liable in damages to Varcon under these warranties provisions.

[75] The subcontract and the principal contract both contain warranty provisions in Article 35 of the subcontract and Articles GC3.11 (1) and GC3.13 of the principal contract. It is not disputed that the sewage system failed before the warranty time period had expired. What is disputed is whether or not the warranty provisions apply to AWD in all the circumstances and facts of this case.

[76] From the evidentiary record before me, and the legal arguments made, I am unable to determine the applicability of the warranty provisions in respect of the subcontract and the principal contract in all the circumstances and facts of this case, within the context of the factual finding that AWD’s work under the subcontract was done in a workmanlike manner to the required standard and in compliance with all the specifications of the subcontract, and was not deficient in any way. There are potential overlapping warranty issues that need to be considered as between Varcon and Public Works Canada.

[77] The warranty issues, I find, require further evidence and legal argument for a just determination. I find AWD has not established that there are no genuine issues requiring a trial in relation to the warranty issues of the subcontract and the principal contract. AWD’s motion for summary judgment on the warranty issues on the basis that there are no genuine issues requiring a trial cannot succeed. Simply put, I am unable to determine those issues based on the evidentiary record and more particularly the legal arguments made before me and the legal authorities provided.

[78] The warranty issues were specifically pleaded in Varcon’s counterclaim and were dealt with in portions of the evidentiary material and argument of both counsel. While the warranty issues were certainly addressed, in fairness to counsel, the warranty issues were not the primary focus of the half-day motion argued before me. For these reasons, I am unable to make a just and final determination of the applicability of the warranty provisions of the subcontract between AWD and Varcon by way of a summary judgment decision in all the circumstances and facts of this case.

[79] I find, therefore, that there are genuine issues requiring a trial in relation to the warranty provisions of the subcontract as to whether or not AWD is liable to Varcon pursuant to the warranties in the subcontract, even if, as I have found, AWD’s work was done in a workmanlike manner to the required standard in accordance with all the specifications of the subcontract and was not deficient in any way. Depending on the finding of the applicability of the warranty provisions, an assessment of damages for the remediation work done by Varcon on a quantum meruit basis may, or may not, be required.

Findings of Fact

[80] Based on the comprehensive evidentiary record before me, and in addition to the findings of fact made throughout these Reasons for Decision which are binding on the parties, I make the following list of findings of fact which are binding on the parties:

a. AWD and Varcon had a valid signed subcontract in relation to the construction of an inmate dormitory at Pittsburgh Institution. b. The subcontract by reference incorporated terms of the principal contract between Varcon and the owner of the property, Public Works Canada. c. The work done by AWD is described generally as the backfilling, compaction, and pipe bedding construction, which work is more particularly specified in the scope of work and the specifications of the subcontract. d. AWD’s work under the subcontract was completed in a workmanlike manner. e. AWD’s work under the subcontract passed all required compaction tests to the required standard. f. AWD’s work was done in compliance with all the specifications of the subcontract. g. AWD’s work done under the subcontract was not deficient in any way. h. AWD did not breach the subcontract by failing to warn Varcon of the unsuitability of the excavated material or native soil in all the circumstances and facts of this case. i. AWD did not breach the subcontract by failing to undertake remediation at Varcon’s direction under the subcontract as Varcon failed to reasonably specify or establish what aspects of AWD’s work were deficient. j. The subcontract between the parties specified that there was a one year warranty for the work done by AWD. k. The project was certified substantially complete on October 7, 2015. l. The 12 month warranty period under the subcontract expired on October 6, 2016. m. Native soil was specified in the subcontract to be used for compaction in the disputed area under the exterior sewer pipes and the area under the adjoining branch sewer pipes leading to the three pod buildings. n. No change orders were made by Varcon in relation to the type of compaction material to be used for the disputed area under the sewer pipes. o. AWD used native soil for compaction under the sewer pipes as specified in AWD’s subcontract with Varcon. p. The soil under two portions of the exterior sewer pipe and a portion of one of the adjoining branch sewer pipes consolidated or moved within the one year warranty period, which caused the sewer pipes to deflect and led the sewer pipes to back up and the sewage system to fail requiring remediation work to be done by Varcon. q. Varcon notified AWD on September 20, 2016 that it required AWD to remediate the work. r. AWD reasonably refused to remediate the work when asked to do so by Varcon as it was not reasonably established that any of AWD’s work under the subcontract was deficient in any way in all the circumstances and facts of this case.

Conclusion

[81] The defendant Varcon’s counterclaim does not raise genuine issues requiring a trial in relation to issues (a), (b), and (c) as set out in paragraph [12] above. AWD’s motion for summary judgment is allowed and Varcon’s counterclaim is dismissed in relation to the claims as outlined in issues (a), (b), and (c) of paragraph [12] above. AWD has established that there are no genuine issues requiring a trial with respect to these claims made in the counterclaim by Varcon.

[82] The defendant Varcon’s counterclaim does raise genuine issues requiring a trial in relation to issue (d) as set out in paragraph [12] above. AWD’s motion for summary judgment is dismissed in relation to issue (d) as in paragraph [12] above. Varcon has established that there are genuine issues requiring a trial with respect to the warranty claim in the counterclaim by Varcon as to whether or not AWD is liable to Varcon pursuant to the warranties in the subcontract, even if AWD’s work was done in a workmanlike manner to the required standard in accordance with all the specifications of the subcontract and was not deficient in any way.

[83] If AWD is successful in obtaining a finding that the warranties are not applicable in all the circumstances and facts of this case, Varcon’s counterclaim will be dismissed in its entirety.

[84] If Varcon is successful in obtaining a finding of liability against AWD under the warranties, an assessment of damages pursuant to the subcontract on a quantum meruit or reasonable basis will be additionally required.

[85] Partial summary judgment shall issue in favour of AWD. A separate order shall issue directing a trial on the warranty issues and damages, if any, in the subcontract between AWD and Varcon as pleaded in the counterclaim of Varcon. Varcon shall be the plaintiff by counterclaim and AWD shall be the defendant. The warranty issues to be determined are whether or not AWD is liable to Varcon pursuant to the warranties in the subcontract, even if AWD’s work was done in a workmanlike manner to the required standard in accordance with all the specifications of the subcontract and was not deficient in any way. Depending on the finding of the liability on any of the warranties as between AWD and Varcon, an assessment of damages on a quantum meruit basis may, or may not, be required. The balance of the counterclaim by Varcon is hereby dismissed.

[86] I am not seized of the trial in this matter. The trial can be heard by any judge of the Superior Court of Ontario. My sitting schedule does not permit me to hear the matter within a reasonable time. The issue of liability under the warranties is a separate and distinct issue that requires an expeditious, just and final determination in the most timely and reasonable manner available.

[87] Counsel, and/or the assigned trial judge are able to determine what measures can be taken to reduce the trial time required to save further expense to the parties, including the manner in which the evidence can be introduced. Rule 20.05 provides that a judge may give such directions or impose such terms as are just. In this case, the use of the Rule 20.05 provisions would appear to greatly reduce the trial time required to determine the outstanding warranty issues between the parties.

Costs

[88] If counsel are unable to agree on costs for this motion before me and before Hurley J. which were reserved to me as the motions judge, I will receive written submissions on costs from AWD’s counsel on or before May 31, 2019, written submissions from Varcon’s counsel on or before June 20, 2019, and AWD’s reply submissions, if any, on or before June 30, 2019 after which time I shall determine the issue of costs based upon the material filed.

Madam Justice H. MacLeod-Beliveau Released: April 30, 2019