COURT FILE NO.: 4265-08, 60766
DATE: 20130725
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BRUELL CONTRACTING LIMITED
Plaintiff
-and-
J. & P. LEVEQUE BROS. HAULAGE LIMITED and HER MAJESTY THE QUEEN
IN RIGHT OF ONTARIO, AS REPRESENTED BY THE MINISTRY OF
TRANSPORTATION OF ONTARIO
Defendants
AND BETWEEN:
J. & P. LEVEQUE BROS. HAULAGE LIMITED
Plaintiff
-and-
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO, EARTH TECH CANADA
INC. NOW DOING BUSINESS UNDER THE NAME OF AECOM CANADA LTD.,
BRUELL CONTRACTING LIMITED and MCASPHALT INDUSTRIES LIMITED
Defendants
COUNSEL: Michael B. McWilliams and Jason Cicchetti, for Bruell
James LeBer and Marcia J. Oliver, for Leveque
Henry Weilenmann and Edmund Huang, for Her Majesty The Queen (Ontario) MTO
Jeffrey S. Percival, for AECOM
HEARD: October 10 to 29, 2012 and January 9 to 11, 2013
(with written closing submissions)
THE HONOURABLE MR. JUSTICE DAVID NADEAU
REASONS FOR JUDGMENT
BRIEF OVERVIEW
[1] Contract 2007-5182 was awarded by Ontario’s Ministry of Transportation (MTO) to J. and P. Leveque Bros. Haulage Limited (Leveque) on June 19, 2007. Under this Contract, Leveque and sub-contractor Bruell Contracting Limited (Bruell) constructed a double lift surface treatment on 17.9 kilometres of Highway 575, a provincial secondary highway connecting the Community of Verner and the Community of Field. The Contract Administrator, and the Highway Designer, for the project by contract with MTO was Earth Tech Canada Inc., now AECOM Canada Ltd. (AECOM).
[2] The initial double lift surface treatment placement occurred from September 24, 2007 to October 1, 2007. On October 10, 2007 that surface treatment began to exhibit visible signs of deterioration. On November 2, 2007 the MTO issued a Work Directive requiring that surface treatment to be removed. Leveque removed the initial surface treatment by November 18, 2007, and once again placed another double lift surface treatment commencing June 23, 2008. This extra work of removing and replacing was performed by Leveque under protest.
[3] This trial is to establish responsibility for this double lift surface treatment being performed twice by Leveque, as demanded by MTO. Pursuant to the 19 witnesses and the 66 exhibits proffered, each of the parties has presented written closing submissions.
ISSUES
[4] Although there are a number claims by these parties brought against one another, and a plethora of secondary issues, the principal issue to be determined is the respective liability of these parties for the deterioration of the initial double lift surface treatment and the resulting events. MTO specifies this material issue in dispute as being ‘whether the contractor ought to be held to the Warranty provisions in the Contract as a result of his selection of Class 2 aggregate’?
[5] Once liability is established, are there damages as claimed by the parties and in what amount?
OUTLINE OF EVIDENCE AND ARGUMENT RELATING TO LIABILITY
[6] During this trial over 17 days, my function is to consider the whole of this evidence, and to find facts where possible. In this matter, I must decide whether the party with the burden of proof has or has not established a certain set of facts to the requisite standard. These reasons, viewed in the context of this trial record and the submissions of all Counsel on the live issues in this trial, seek to explain why this decision was reached; by establishing a logical connection between the evidence and the law on the one hand, and my conclusion on the other.
[7] My experience has been that the testimony of a witness occasionally may be unreliable for any number of reasons. I have therefore assessed the credibility of each witness presented in this trial for any deception, but also for their reliability on the larger set of issues that may have affected their testimony stemming from inaccurate observations, or even difficulties with memory or their recall. And although fact-finding does not always depend upon conclusions regarding the credibility or the reliability of certain witnesses, this decision does. In order for me to determine what happened with this Highway in October, 2007, it was necessary to decide whom to believe and how much to believe from certain witnesses of their varying accounts of these events. The particular challenge in this trial was primarily the diverse testimony as provided from a couple of the expert witnesses. These reasons seek to explain how any credibility or reliability concerns were resolved, and why this version of these events was preferred over others presented.
[8] On the basis of all the expert evidence in this trial, I am left with conflicting and divergent expert opinions primarily as to this Contract being either a method specification contract or a mixed specification contract, and also most importantly on the issue of causation for the deterioration. With such conflicting expert evidence, my role is to determine which, either or any, of the experts to accept. However also of significance for my determination here was the testimony provided by many of the other non-expert witnesses.
[9] MTO essentially submits that Leveque “did not meet his contractual obligations when it failed to take reasonable steps to ensure that the Class 2 aggregate it selected and used was suitable for the project.” MTO relies upon the “Key Contract Provisions” outlined in paragraphs 12 to 43 of their Closing Submissions to deny the characterization of this Contract as a pure method specification contract as submitted by Leveque. MTO states that it is a mixed specification contract incorporating many performance based elements. MTO relies upon the testimony of Dr. Michael Maher and Derek Thompson to establish the performance aspects of the Contract, and points out that Leveque could choose any aggregate source it wished in order to create a satisfactory product as per their contractual Warranty.
[10] As elaborated upon in substantial detail from both its Closing Argument and Reply, Leveque submits that the Contract, including OPSS 304 April 1999 applicable to surface treatment, is a method specification contract and that Leveque did supply material fit for the purpose of this Contract as these requirements were prescribed by the specifications. The aggregate source selected by Leveque from the Beauparlant Quarry (that did not have a proven history of use in surface treatment projects in Northeastern Ontario), as well as the binder selected by Bruell, were tested by MTO and the materials passed all the tests required by the Contract. Leveque further submits that the designer of the prescribed system is responsible for their design’s performance, and that pursuant to their Warranty “the Contractor shall be responsible for the proper performance of the work only to the extent that the design and specifications permit such performance.”
[11] The initial double surface treatment application placed in late September 2007 began to deteriorate in October 2007 such that it was not reasonably fit for the purpose of traffic on a provincial secondary highway such as Highway 575. The question of whether or not Leveque had a contractual obligation to warranty that deterioration, and the continued deterioration that followed, requires that I examine its cause.
[12] MTO submits that the primary cause of the deterioration was the severe incompatibility of the Class 2 aggregate chosen by Leveque with the binder; as such Leveque failed to ensure its suitability for the project. MTO argues that since Leveque could choose the Class 2 aggregate, it “ought to have taken steps to ensure compatibility”. These steps may or may not include compatibility testing of the aggregate with the binder. According to this position espoused by the MTO, compatibility of this aggregate with the binder becomes a performance based element assumed by Leveque in this Contract.
[13] Leveque states that there was no contractual obligation in this Contract to test for compatibility of this chosen aggregate with the binder. MTO elected not to include a requirement for such aggregate-binder compatibility testing in this Contract, as they had included for other projects before and after this Contract. Leveque submits that there is no basis to imply such compatibility testing here, and that there is no implied term that surface treatment contractors must “ensure suitability”. Furthermore, Leveque submits that incompatibility of this aggregate to the binder is not the primary cause of the deterioration in October 2007; there were other material causes. It is posited that MTO argues for incompatibility of the materials as the primary cause in order to support their main argument that Leveque assumed such a performance based element in this Contract, in the absence of a specific contractual obligation on Leveque to test for aggregate-binder compatibility.
[14] Upon a complete review of this evidence and argument relating to the issues raised, my determination of liability essentially boils down to the following respective positions of MTO and Leveque, which I reproduce verbatim in part. The MTO generally submits:
"65 Throughout the proceedings, the plaintiff has continued to mischaracterize the Crown’s position in respect the contractor’s obligations. Simply, the Crown holds the contractor responsible under the General Warranty for the surface treatment that it was contracted for but failed to deliver in 2007. The terms of the Contract are clear and unambiguous in the respect that, in addition to the warranty obligations, the plaintiff is responsible for the means of methods of the Project, as well as responsible for its own Quality Control system, which includes the suitability of the materials chosen and used by it. Because of its discretion to select the Class 2 Aggregate, the plaintiff ought to have taken steps to ensure compatibility.
66 The Crown’s position is not that there was an industry standard to conduct compatibility test on surface treatment projects. It states that as a result of selecting the Class 2 Aggregate, the plaintiff ought to have taken whatever steps as reasonably required to ensure that it was suitable for the Project. These steps may or may not have included compatibility testing. Because the ‘means and methods’ and Quality Control is left up to the contractor, the Crown would not be in a position to specify a particular method of ensuring suitability, nor would it be appropriate to require any specific compatibility testing required under this mix design contract.
B. Standard of Contractor
71 As stated, the Crown relies on the express terms of the Contract, including both the Warranty and the Quality Control provisions which the plaintiff failed to meet. It does not argue that there is an industry standard that requires compatibility testing specifically, however, the Crown does state that there is a recognized implied terms in construction contracts that the contractor perform the work in a proper and workmanlike manner, or that the work must be of a quality or suitable workmanship. If not, the contract is in breach.54There is also an implied duty on the contractor to perform the work in a manner that is suitable for the purpose it was designed to achieve where that purpose is reasonably known by the contractor.
75 The Crown submits that in addition to the contractor’s express obligations under the contract and as part of the implied term to act in a good and workmanlike manner, that to meet this obligation, the plaintiff ought to have educated himself and learned of the industry’s practice on the selection of, and in the use of new or unknown aggregate materials for surface treatment.
Fit For Purpose
76 Interconnected with the duty to perform a contract in a good and workmanlike manner, there is an implied duty that the product will be fit for its intended purpose, especially when the knowledge of the service provider is relied upon by the other contracting party.63These two implied terms are interconnected because the fitness term helps in assessing the quality of the workmanship.”
[15] In reply, Leveque generally submits:
“34. The cases referred to by MTO do support the implication of “good and workmanlike manner” or “fitness for purpose” terms, in certain circumstances. The contracts in these cases must be carefully reviewed as they are always distinguishable based upon the specific terms of the contracts as found at trial. In all contract interpretation cases the express terms are paramount. Due to the differences in contract language, the value of other contract cases interpreting contract items is marginal.
On this point, consider the case of EBC Inc. v New Brunswick, relied upon by MTO at Tab 8. At paragraph 10 of that decision this excerpt from the contract in question is noted: “The NB DOT Standard Specifications, dated January 1998 represents a departure from the “Method Specifications” of the past to a more “Performance based Specification”. Under these Specifications, the Contractor will have more opportunity to be innovative...” It starts with a disclosed and distinguishable risk allocation.
Secondly, these cases require a careful consideration of the facts. There are general policy approaches which can be discerned running through these cases. They are influenced by the degree to which: the contractor took it upon itself to develop and implement a design; the relative experience and sophistication of owner and contractor; and the degree to which the owner then relied upon the contractor’s development of something that included a design solution which can support a finding that in the bargain the contractor agreed to some design performance risks.
For example, (MTO’s Tab 4) Abalon Construction v Hanaschuk the Manitoba County Court (see para 28 and 32) makes this clear. Justice Jewers in paragraph 29 mentions Keating’s text and says ‘In many cases, the design is provided by an architect, who is responsible for it, and is implemented by the contractor, who is only responsible, to build the work in accordance with the design as embodied in the plans and specifications. The contractor is not responsible for the design. The text observes that the principle is often not consistently applied, and in any event, there have always been some contracts where the contractor has, to a greater or less degree, accepted responsibility for design.’
None of the cases referenced by MTO was a clear Method Specification, nor is there discussion in the Court’s analysis of those cases recognizing the significant risk allocation exercise (and resulting price impacts) inherent in moving between a performance based specification and a method specification. Peshkin’s testimony discussing this industry’s contract context, leave this case to stand apart from the reported cases. This case requires its own unique analysis.
This was a method specification. Leveque did supply material fit for the purpose of the contract as those requirements were prescribed by the specifications and Contract Documents. Earth Tech and MTO’s testing and subsequent evidence at trial have verified the work to have been done in a good and workmanlike manner.”
[16] Certainly this matter does require its own unique analysis on these particular facts for this Contract.
THE EXPERTS
[17] David Peshkin was qualified as an expert in the areas of development of road rehabilitation designs and best practices in design development including designs for combinations of binder and aggregates for roadways in North America generally described collectively as surface treatments, and also on surface treatment contract document preparation, and for the standard of care for engineers performing surface treatment design and contract administration on road surfacing projects including surface treatments in North America, as well as on surface treatment failure investigations and general remediation strategies and implementation of those strategies for roadways in North America.
[18] Donald Headley was qualified as an expert in the area of surface treatments defined broadly as emulsion and aggregate installation on any sub-base, installation procedures as well as performance issues and all the factors, both internal and external to the process that effect installation and subsequent performance.
[19] Dr. Michael Maher was qualified as an expert to give opinion evidence on pavement and materials engineering, which includes aggregate properties, hot mix asphalt and thin surfacing, including surface treatment projects, and also on pavement engineering design projects and contract preparation, including surface treatment projects, as well as on the standard of care for surface treatment projects, and also on surface treatment failure investigations.
[20] David Hein was qualified as an expert on the subjects of pavement rehabilitation, design and construction, forensic evaluations of pavement structures, construction materials, quality assurance and quality control and pavement condition evaluations in Ontario and across North America relative to all these subjects which includes surface treatment.
[21] One of the principal issues upon which the opinion evidence was received is whether this Contract was a method specification without any requirement of performance guarantees as is argued by Leveque, or whether this Contract is a mixed specification incorporating many performance based elements as is submitted by MTO. Dr. Maher stated that MTO indeed conducted quality assurance on the aggregate and the binder, however his opinion concluded that it was the contractor’s responsibility to get it right in terms of delivering a surface treatment that meets the performance requirements as set out in the 12 month Warranty. Dr. Maher also supported the view that there is now much more responsibility being downloaded to contractors to do quality control, especially in a case such as here where the contractor chose the aggregate source.
[22] The expert opinion of David Peshkin is that this Contract is a method specification. For many of the reasons elaborated upon in paragraph 26 (a) to (i) inclusive of the Leveque Closing Argument, I completely agree with David Peshkin’s thoughtful, detailed and compelling analysis. Pursuant to this particular Contract, the work of the placement of this binder with this Class 2 aggregate was performed by the contractors and administered by MTO and AECOM as a method specification contract. I agree that the designer of this prescribed system under the Contract is responsible for their design’s performance. The Warranty provides that the contractor shall be responsible for the proper performance of the work “only to the extent that the design and specifications permit such performance.”
[23] I have therefore determined from this trial that the risk of performance of this work as placed here under this method specification Contract is with the owner MTO as it was designed and administered.
[24] I also have the obligation to reconcile the significant issue of the causation of this deterioration of the initial double lift surface treatment. The expert opinion of David Peshkin, and also from a different perspective that of Donald Headley, clashed dramatically with that of Dr. Maher. It is obvious that Dr. Maher is extremely experienced, and MTO submits that his evidence surrounding the issue of aggregate-binder compatibility is the most reliable in respect of the primary cause of the deterioration. Dr. Maher called it a “catastrophic failure” over the full length and width of the placement, even though the photographic evidence does not support such an expressive opinion. Based on the nature of the deterioration and the poor compatibility between the binder and the Class 2 aggregate from the Beauparlant Quarry when tested in a laboratory, Dr. Maher opined that the incompatibility of these materials was the primary cause of the deterioration. However his expert opinion evidence is not very helpful for the following reasons.
[25] In Carmen Alfano Family Trust (Trustee of) v. Piersanti, 2012 ONCA 297, the Ontario Court of Appeal provides my guidance as follows:
“105 In determining whether an expert’s evidence will be helpful, a court will, as a matter of common sense, look to the question of the expert’s independence or objectivity. A biased expert is unlikely to provide useful assistance.
106 Courts have taken a pragmatic approach to the issue of the independence of expert witnesses. They have recognized and accepted that experts are called by one party in an adversarial proceeding and are generally paid by that party to prepare a report and to testify. The alignment of interest of an expert with the retaining party is not, in and of itself, a matter that will necessarily encroach upon the independence or objectivity of the expert’s evidence.
107 That said, courts remain concerned that expert witnesses render opinions that are the product of their expertise and experience and, importantly, their independent analysis and assessment. Courts rely on expert witnesses to approach their tasks with objectivity and integrity. As Farley J. said in Bank of Montreal v. Citak, [2001] O.J. No. 1096, “experts must be neutral and objective [and], to the extent they are not, they are not properly qualified to give expert opinions.”
108 When courts have discussed the need for the independence of expert witnesses, they often have said that experts should not become advocates for the party or the positions of the party by whom they have been retained. It is not helpful to a court to have an expert simply parrot the position of the retaining client. Courts require more. The critical distinction is that the expert opinion should always be the result of the expert’s independent analysis and conclusion. While the opinion may support the client’s position, it should not be influenced as to form or content by the exigencies of the litigation or by pressure from the client. An expert’s report or evidence should not be a platform from which to argue the client’s case. As the trial judge in this case pointed out, “the fundamental principle in cases involving qualifications of experts is that the expert, although retained by the clients, assists the court.”
[26] The expert evidence presented through Dr. Maher was called by one of the MTO trial counsel, Mr. Weilenmann. There is convincing evidence that Mr. Weilenmann was pivotal in the development of MTO defence strategies including being extremely influential in instructing Golder Associates pursuant to their Retainer Agreement. Exhibit 37 is but one striking example. Exhibits 30, 34, 35, 36, 38, 40, 41 and 42 display much of the same. For all of the reasons submitted in paragraph 92(c) (i) to (vi) of the Leveque Closing Argument, such MTO influence and suppression has definitely tainted any “fair, objective and non-partisan” opinion ultimately presented by Golder Associates. It is now clear to me that Dr. Maher was not performing his independent analysis, assessment and conclusion.
[27] Upon observing the cross-examination of Dr. Maher, and perhaps due to such MTO manipulation, I have also concluded that many of his opinions rested on factual foundations inconsistent with the facts that I have found during this trial. One example is his opinion that the “parking lot” was not acceptable as a good surface treatment. Even considering the rather obvious difference in traffic patterns of that parking lot from the fast-moving commercial traffic expected on Highway 575, I have determined from the exhibits and the testimony of personal observations of it by David Peshkin, Donald Headley and even Derek Thompson that this parking lot continues to be in very good condition, and its appearance is not that different than Highway 575.
[28] I therefore have significant concerns, both documented and exhibited during this trial, that Dr. Maher “was committed to advancing the theory of the case of his client, thereby assuming the role of an advocate” (Carmen Alfano Family Trust (Trustee of) v. Piersanti, [2009] O.J. No. 1224, at para. 11). Appreciating the exceptional nature of excluding expert evidence on this ground, I also fully realize that here as in “most cases, the issue of whether an expert lacks independence or objectivity is a matter of weight to be attached to the expert’s evidence rather than as a matter of admissibility” (Carmen Alfano Family Trust (Trustee of) v. Piersanti, 2012 ONCA 297, at para. 110).
[29] For these reasons, I attach very little weight to most of the opinions advanced by Dr. Maher from this engagement by his instructing and manipulating client. For the purposes of clarity, I prefer the thoughtful, independent, fair, objective and non-partisan expert opinion evidence presented by David Peshkin and Donald Headley over that from Dr. Maher and Golder Associates.
ANALYSIS
[30] In any event, upon considering all of the evidence presented during this trial, I have not at all been satisfied that incompatibility, this Class 2 aggregate chosen by Leveque with the binder, was the primary cause of the deterioration that occurred in October 2007. In my view, there were other material causes for which I am able to fault MTO.
[31] As is often the case, chronology is important. From the time MTO elected to opt for surface treatment on Highway 575 rather than the hot mix design previously approved, and throughout the redesign to a double treatment surface without additional review by Merlex Engineering and without input or modification from AECOM, the conduct fairly attributed to MTO can be generally stated as intentional risk taking, unwise decisions, and a refusal to implement self-help options.
[32] Subsequent to the award to Leveque, MTO demonstrated that Leveque had to solely manage the very tight schedule, even with obstacles created by MTO such as the delay of the pre-construction meeting. Even as it was obviously recognized that late season work was not optimal for placing surface treatment, I was not at all impressed by the lack of cooperation from MTO. Time was certainly of the essence in this Contract, and MTO was pompously oblivious or completely unconcerned.
[33] With respect to the initial double lift surface treatment placement which therefore had to be performed late in the season with less than favourable weather conditions and temperatures, I have been satisfied that the binder application rates were too high; especially given the heavy commercial traffic allowed by MTO on Highway 575 during the curing period. All of the testimony supports that “curing” is a critical time period, affected by factors of air and road surface temperatures, humidity and rainfall. Since the binder application rates specified were higher than MTO recommendations, in my determination “bleeding/flushing” initially produced this “mess”.
[34] The evidence is absolutely clear that the initial double surface treatment was quite well constructed by the contractors in the circumstances. In my determination, the highway loading of extremely heaving trucking on or around October 10, 2007 either caused or accelerated the deterioration of the initial double surface treatment in October 2007. As well, the increased stripping subsequent to the significant rainfalls on both October 10 and 19 does reinforce my finding that rain was another accelerating factor in the deterioration.
[35] The “perfect storm” was created from the design using excessive binder application rates for such heavy commercial traffic, coupled by the rainfall with the cool temperatures inhibiting curing. These conditions were ripe for the known problems addressed by the National Cooperative Highway Research Program (NCHRP) article at Tab 13 of the Joint Reference Brief commencing at page 40; “A rainfall, during or shortly after the construction of a chip seal, can cause a chip seal project to fail. If an unexpected rainstorm ensues, sufficient aggregate should be spread to cover all of the applied binder. If possible, the road should be closed to traffic and if not, traffic must be kept to a minimum speed during this period, because adhesion between the binder and aggregate is at risk (Asphalt Seal Coats 2003). The amount of rolling should be reduced, if not completely ceased, while the aggregate is wet, because the binder may emerge from the voids and be picked up on the wheels of the roller (Bituminous Sprayed Surfacing Manual 2003).”
[36] The cool temperatures had delayed curing such that the conditions warned of by NCHRP during application remained at this site prior to the proper completion of curing in October, 2007. The weight of the evidence in this case is that excessive binder application rates, cool temperatures, rainfall, and the surge of heavy trucking permitted on the road prior to the completion of curing led to “picking” of the roadway. Untreated by sanding or relieved by the suspension of such heavy trucking, this “picking” led to the potholing and the further deterioration witnessed.
[37] The evidence confirms that there was low compatibility between the Class 2 aggregate from the Beauparlant Quarry chosen by Leveque and the binder, based on testing undertaken by Bruell, Leveque and MTO after the deterioration exhibited from October 10, 2007. However, on all of the evidence regarding causation of the deterioration, I have determined that low compatibility of this aggregate with the binder may have been a contributing factor but was certainly not the sole, or even the primary, cause of the deterioration that occurred in October, 2007.
[38] I therefore find that there was only a tenuous causal link between the low compatibility of this aggregate to the binder and the visible signs of deterioration of the surface treatment on October 10, 2007, then characterized by aggregate lifting from the road, the formation of potholes and the attachment of binder and aggregate to vehicle tires. The next question is to what extent did the MTO cancelling and refusal of sanding, and their failure to manage the trucking or impose a half-load restriction on October 11, 2007, exacerbate the damage to the initial double surface treatment? In my view, substantially. And for no apparently valid nor justifiable reason.
[39] Sanding is the industry recognized approach when “bleeding/flushing” occurs. Bruell called for sanding trucks immediately upon learning of the “picking” conditions on the Highway first noticeable on October 10, 2007. Sanding of the Highway was commenced, and was cancelled by MTO. They would not permit sanding, and MTO now submits that sanding would not have worked due to the extent of the “failure” (their characterization) and that it would simply exacerbate the problem. I disagree. Sanding to mitigate the “picking” that was opening potholes on the Highway was the wise decision, rather than the MTO decision to discontinue sanding.
[40] Another glaring example of the high-handed disregard for self-preservation as exhibited by MTO is their allowing the surge of heavy truck traffic on the Highway prior to the completion of curing, and thereafter. The contractors raised their concern about the winter sand hauling at the pre-pave meeting, and MTO indicated that it would attempt to have this operation delayed until the surface treatment was completed. However, MTO did not wisely manage the trucking; it allowed extremely heavy truck traffic to travel the Highway shortly upon completion. I find that the surge in truck traffic did occur prior to the completion of curing. I agree that allowing this volume of trucks, with their loads, on that Highway, at that time, was in fact an extreme risk taken by MTO.
[41] It is my determination that the failure of MTO to permit sanding or to manage the heavy truck traffic after completion of the initial surface treatment contributed substantially to the deterioration of the Highway on and after October 10, 2007. These mitigating failures by MTO are examples of the intentional risk taking, unwise decisions and a refusal to self-help that permeated throughout the evidence in this trial. MTO appears to have the faulty impression that the contractor is solely responsible contractually for all of the consequences, therefore MTO can be indifferent to their own important role. Although it is unnecessary here to make such a speculative finding for my ultimate determination in this trial, upon considering this evidence of abuse by MTO I can safely suggest that deterioration and “picking” would likely have occurred on this surface treatment even if an anti-stripping agent could have been added to address the low compatibility of this aggregate to the binder (as MTO suggests would have solved that issue).
[42] There are numerous examples from the evidence where time was definitely not “of the essence” for MTO in this Contract; my finding is that MTO was responsible for this initial double lift surface placement occurring very late in the season with the incumbent unfavourable weather conditions. MTO certainly did not properly manage the heavy truck traffic on it prior to the completion of its curing, especially considering the design using excessive binder application rates. As well, MTO cancelled and refused to permit sanding when “bleeding/flushing” occurred. Such conduct, in the breach of contract context, amounted to “contributory fault” by MTO. Their conduct here represents such an abuse that any Warranty by Leveque pursuant to this Contract does not apply.
[43] With respect to the liability of AECOM, firstly I agree in these circumstances that there is no privity of contract between Leveque and AECOM. As well, there are no claims between MTO and AECOM. As evidenced from the direct involvement by MTO after the events of October 10, 2007, and the sole discretion and responsibility of MTO to authorize implementation of reasonable mitigating measures such as applying sand or load restrictions on Highway 575, I have determined that I cannot impose any liability on the Highway Designer and the Contract Administrator of this project.
[44] One of the reasons in determining MTO solely liable here is also my finding that there was certainly no proven standard industry practice in September 2007 requiring contractors to conduct aggregate-binder compatibility testing. Such as “industry standard” only became an issue in late October 2007 after the deterioration of the Highway. And that became an issue only because, while the MTO was in a position to specify aggregate-binder compatibility testing as part of the testing requirements in the Contract for the project had they wished, MTO did not make aggregate-binder compatibility testing a requirement. Although David Hein considered such testing to be good industry practice, he also disagrees that there was a standard industry practice requiring contractors to conduct aggregate-binder compatibility testing. As a result, AECOM could not even require such compatibility testing to be conducted by Leveque. Apparently nor could Leveque have conducted such testing pursuant to this Contract and unilaterally add any anti-stripping agent in these circumstances presented here. In any event, the demonstrated attitude by MTO would likely have resulted in their questioning and denying any such request.
[45] I have previously indicated that I much prefer the expert opinions of David Peshkin and Donald Headley over those from Dr. Maher and Golder Associates. Although the opinion of Dr. Maher of such a standard industry practice requiring contractors to conduct aggregate-binder compatibility testing is one that he apparently held only in 2012, I reject his opinion if his interpretation is that such an industry standard also existed in 2007. I accept the evidence of Stanley Dodds, Donald Teddy and Ms. Jordan that, in 2007, Dr. Maher’s interpretation was not the standard industry practice, nor the practice of the MTO.
[46] Overall, I have been clearly satisfied on a balance of probabilities that Leveque met all of its obligations and specifications in this Contract, and that any Warranty in this Contract does not apply in these specific circumstances due to the design and specifications of this project and the identified “contributory fault” exhibited by MTO. Leveque and Bruell performed the work in a good and workmanlike manner, and did supply material fit for the purpose of this Contract as these requirements were prescribed by the specifications and Contract documents.
DAMAGES
[47] As a result of my finding that there is no liability upon Leveque and Bruell, and that MTO is solely responsible and liable for their breach of contract, I have reviewed in detail the Damage Claim by Leveque, and considered the MTO submissions from paragraphs 100 to 115 as well as the Leveque Reply. Essentially MTO submits that the damages claimed for their breach of contract is grossly exaggerated and unwarranted, however the only real challenge to the quantum was from their cross-examination of Jerry Leveque. I however accept the credibility of Jerry Leveque, and find that the totality of this evidence satisfies me that these damages claimed in these circumstances are not remote, they are remedial in nature, and these are entirely reasonable for this breach of contract by MTO.
[48] With respect to the Damage Calculation for Late Payment submitted by Leveque. MTO does not raise any challenge to the contract interest rate of 5.25%. As well, my awarding contract based interest is consistent with all the evidence and also avoids rewarding MTO for the delay in payment caused from their breach of contract.
[49] Much has been disputed of Leveque’s claim for aggravated, punitive and exemplary damages. I have thoughtfully considered all of the evidence as well as the conduct demonstrated at trial. I have reviewed paragraphs 85 to 113 of the Leveque Closing Argument, paragraphs 116 to 189 of the MTO Closing Submissions, paragraphs 49 to 61 of the Leveque Reply, and the legal authorities presented. Although I am left with serious concerns from the conduct exhibited by MTO during this litigation including the trial itself, I must cautiously exercise my discretion to award punitive damages in addition here in a case which, at its core, is about a breach of contract claim. It is difficult to disregard however the significance of these patently inaccurate and false Minutes of meetings, as confirmed by Donald Teddy and Roland Legault, as well as the incidents of material non-disclosure here by MTO.
[50] Punitive damage awards represent an exceptional remedy restricted to advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own. Punitive damages will rarely be awarded in a case involving breach of contract, because the remedies are generally only those that arise from the contractual relationship. I note however that recent cases have rejected any absolute rule against the award of punitive damages for breach of contract, particularly for a demonstrated breach of the duty of ‘good faith’.
[51] Even as I consider the testimony expressed by Greg Godin that there was an expectation that these parties would act “fairly and reasonably”, and though I obviously forcefully disagree that MTO always acted “fairly and reasonably” in this Contract, I have not been satisfied that Leveque has established a separate actionable wrong; either the breach of a different obligation under the Contract or of a duty such as a fiduciary obligation. The conduct exhibited here by MTO is extremely troublesome, but does not rise to the lofty level of requiring punitive damages. And although I remain sympathetic of this ordeal for Jerry Leveque and his family, Leveque does not represent the kind of vulnerable party which warrants the relationship necessary to support an exceptional remedy for punitive damages here in essentially what has been a contract dispute with extremely well-defined boundaries. I therefore will not make such an award based on these facts as found here.
CONCLUSION
[52] This Court determines on the balance of probabilities that Leveque by its own actions, and through their subcontractor Bruell, complied to their Contract with MTO. Therefore, the refusal and failure by MTO to pay for the initial surface treatment was in breach of the Contract. The removal of the initial surface treatment, and the replacement work performed by Leveque as demanded by MTO, is additional work for which appropriate compensation is payable to Leveque.
[53] Since this Court has not been satisfied that there was a standard industry practice in October 2007 requiring contractors to conduct aggregate-binder compatibility testing, combined with the decision of MTO specifically not to include such compatibility testing as part of this Contract, reinforces my determination that Bruell is in no way responsible or liable.
[54] Furthermore, both as Designer of the rehabilitation of Highway 575 and as Contract Administrator, AECOM is not liable for any breach of contract claim in relation to Leveque. I find that MTO was in complete control, and on its own directed the breach of contract proven here by Leveque. As well, this Court has not been satisfied that AECOM owed a duty of care to Leveque in relation to potential compatibility issues between the Class 2 aggregate selected by Leveque with the binder selected by Bruell, or that it breached any such duty of care. And having regard to the MTO’s sole discretion and direct involvement with any mitigation failures from October 2007, this Court also determines that AECOM was not itself responsible for these.
[55] On the questions of liability raised on this trial this Court concludes that, as a result of their breach of contract, MTO is to pay damages as follows:
a) As set out in Exhibit 10, $2,555,303.38 minus $124,950.43 (as calculated to only January 12, 2009) for a total of $2,430,352.95, including the share of Bruell; and
b) $13,314 for the 2013 road premium; and
c) $637,240.43 for interest on late payments adjusted from January 12, 2009 to January 11, 2013, and from that date further pre-judgment interest at the contract rate of 5.25% to the date of Judgment; and
d) From these amounts, Bruell is entitled to its share of $615,698.56, and also $160,026.00 as interest to January 11, 2013, and further pre-judgment interest from that date at the contract rate of 5.25% to the date of Judgment; and
e) These amounts shall be subject to the applicable post-judgment rate of interest.
[56] If the parties cannot agree on the issue of costs for this trial, I will entertain written submissions dealing with all aspects of the award of costs. Any party claiming costs shall serve and file written submissions and a bill of costs no later than 30 days from the date of this Judgment. Any responding submissions shall be served and filed within 30 days thereafter.
The Honourable Mr. Justice David Nadeau
RELEASED: July 25, 2013
COURT FILE NO.: 4265-08, 60766
DATE: 20130725
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
BRUELL CONTRACTING LIMITED
Plaintiff
-and-
J. & P. LEVEQUE BROS. HAULAGE LIMITED and HER MAJESTY THE QUEEN
IN RIGHT OF ONTARIO, AS REPRESENTED BY THE MINISTRY OF
TRANSPORTATION OF ONTARIO
Defendants
AND BETWEEN:
J. & P. LEVEQUE BROS. HAULAGE LIMITED
Plaintiff
-and-
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO, EARTH TECH CANADA
INC. NOW DOING BUSINESS UNDER THE NAME OF AECOM CANADA LTD.,
BRUELL CONTRACTING LIMITED and MCASPHALT INDUSTRIES LIMITED
Defendants
REASONS FOR JUDGMENT
The Honourable Mr. Justice David Nadeau
Released: 20130725