Hollowcore v. Visocchi, 2014 ONSC 6802

(NEW) CITATION: Hollowcore v. Visocchi, 2014 ONSC 6802

WINDSOR COURT FILE NO.: CV-01-OC-01327; CV-10-00015354-0000

CHATHAM COURT FILE NO.: 1082/00 A1

DATE: 20140930

2^ND^ CORRECTED RELEASED: 20141104

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Hollowcore Incorporated and Prestressed Systems Inc.

Plaintiffs

– and –

Michael Visocchi and Visco Engineering Inc.

Defendants

– and –

The Royal Insurance Company of Canada, Continental Casualty Company and Certain Underwriters at Lloyd’s Under Contract No. ENC5-98

Third Parties

D. Stephen Jovanovic and Philip S. Chandler, for the Plaintiffs

Myron W. Shulgan, Q.C., for the Defendants

Morris A. Chochla, for the Third Parties

HEARD: September 9-13, 16-20, 23-27, 2013; February 24-26, 2014 and March 4-6, 2014

2^nd^ Corrected decision: The text of the original and corrected judgment was further corrected on November 4, 2014 and the description of the correction is appended. This copy replaces all other copies.

nolan J.:

Introduction

[1] This is an action for damages for breach of contract and negligence commenced by the plaintiffs against the defendants, an engineering company and the principal of the engineering company in his personal capacity as the result of events related to the construction of an addition to an existing parking garage located in Toledo, Ohio in 1999. The third parties are a consortium of insurance companies that provided insurance coverage to the defendants whereby the third parties are liable to indemnity the defendants for claims arising from the defendants’ negligence. The policy of insurance, however, contains a specific exclusionary clause related to any damages arising from the failure to produce drawings, specifications or any other document on time.

Facts/History of the Project

[2] The plaintiff, Hollowcore Incorporated (“Hollowcore”) is a corporation incorporated under the laws of the State of Michigan having its head office in Detroit, Michigan. It is a wholly owned subsidiary of Prestressed Systems Inc., the other plaintiff (“PSI”) which is a corporation incorporated under the laws of the Province of Ontario and having its head office in the City of Windsor.

[3] Early in 1999, Hollowcore was awarded a subcontract by the general contractor of the parking garage project, Rudolph Libbe Inc. (“Libbe”) for the design, supply and installation of the precast concrete components for the addition to the parking garage. PSI was to design and manufacture the precast concrete and the components and also provide for the installation. The subcontract was filed as an exhibit. It called for work by Hollowcore to start on site by October 4, 1999 and to be completed by November 17, 1999. The contract indicated that “time was of the essence”. There was no formal contract between Hollowcore and PSI. PSI considered Hollowcore to be its sales agent in the United States (“U.S.”)

[4] The project involved a five story addition to an existing parking garage with space for approximately 350 vehicles. The work being performed by PSI and Hollowcore and its subcontractors had to be integrated with the existing structure allowing for a crossover between the old parking deck and the new addition. Timing of the project was critical from the beginning so as to cause as little interference as possible to the use of the existing structure because of the revenues it produced. In preparation for bidding on the project Hollowcore had received a quote in December 1998 for the installation of the precast concrete by Assemblers Inc. (“Assemblers”) in the amount of $433,100.

[5] In a facsimile transmission from Hollowcore to Libbe dated January 13, 1999, Hollowcore’s proposed schedule was set out as follows:

Contract Award January 8, 1999

Begin issuing shop drawings February 15, 1999

Return of shop drawings (fully approved) Within 3 weeks of their issue

Mobilization to the site May 1, 1999

Complete precast installation June 30, 1999

At this point in time the above schedule can be improved upon by approximately one month, however the above information was based on information received from you indicating a “ready” date for precast of June 1, 1999.

[6] On January 21, 1999, Libbe wrote to Hollowcore directing Hollowcore to “proceed with shop drawings and the cost incurred for this will thus become a part of your subcontract which will be forthcoming.” Handwritten notes on the letter made by someone at Hollowcore indicated that the project was approximately one month behind, the demolition work would take four to six weeks and Libbe would have an additional four to five weeks of work before Hollowcore or its subcontractors could get on the site.

[7] On March 15, 1999, Mr. Visocchi, at the invitation of PSI, submitted a bid to Hollowcore through Visco Engineering Inc. (“Visco”) to provide erection drawings, calculations, erection details, erection sections and production drawings including the necessary hardware along with all the associated engineering for the precast concrete and connections including beams, columns, spandrels, lite walls, shear walls, stairs, an elevator tower as well as double tees.

[8] There would be approximately 600 drawings required. The bid acknowledged that all the engineering work would be “in accordance with drawings prepared by Rich and Associates and Parking Engineering Inc. All drawings and calculations to be sealed by a registered, licensed professional engineer registered in the State of Ohio.” The total price for Visco’s work was $67,500 plus GST. The bid also included a review of the existing spandrels along the existing parking deck to allow for the connection of the addition. Included in the quotation was an obligation for periodic site visits during the construction to review the work and attend at site meetings.

[9] In addition to submitting the bid, four days later, on March 19, 1999, Mr. Visocchi wrote to Hollowcore:

I have not have a chance to put together a formal schedule for this project, however I have some people available to start erection drawings on April 1, 1999. By the middle of April I will have all of my people available to work on the project. I am sure I can meet your scheduling requirements.

I am going to be out of the office until Wednesday, March 24, 1999 I would be glad to meet with you when I return to discuss this further, I would really like this job for PSI and will do whatever it takes to get the drawings completed on your timetable.

[10] On April 12, 1999, PSI, not Hollowcore, issued a purchase order to Visco. For reasons that were never made clear the purchase order was not signed until August 20, 1999. PSI wrote to Visco on May 4, 1999 confirming the previous discussions and requesting a schedule for the shop drawings.

[11] On April 13, 1999, Libbe wrote to Hollowcore inquiring as to the status of a number of items such as the projected date for the shop drawings submittal after which in writing was the notation “May 25,” the projected mobilization date, and planned erection schedule along with a request for projected monthly billings.

[12] On a facsimile sheet dated May 6, 1999 and headed The Prestressed Group which identified PSI, Prestressed Systems Inc., Hollowcore Incorporated and PSI Prestressed Systems a Limited Liability Company as the companies making up The Prestressed Group, Gino Tomasselli, one of PSI’s engineers, sent a facsimile to Visco asking Mr. Visocchi to contact the architect at Rich and Associates to address the architect’s concerns. The facsimile indicated that the architect was upset about Mr. Visocchi’s lack of response to him. Also on May 6, 1999, Mr. Tomasselli sent a facsimile to Mark Avers, the project manager for Libbe, advising him that he had advised “our engineer” about the architect’s concerns and advising that “our tentative submission date for shop drawings will be on or about May 25, 1999.” The message continued:

With regards to mobilization dates, we will need a revised schedule from your office. This would help us immensely in finalizing our production schedule. The latest schedule we have was from January, and based on the present condition of the site, it appears that this schedule may be inaccurate.

[13] On May 7, 1999, Mark Avers responded with a facsimile advising of the new schedule that was necessary because of demolition delays. The demolition would be completed by May 14, 1999, with the precast erection to begin on June 14, 1999.

[14] On May 25, 1999, Libbe sent a facsimile to Hollowcore advising that the Building Permit Drawings and the Specifications had been couriered on May 24, 1999. Visco and Mr. Visocchi had been working from the bid drawing up to that point. For reasons that were not made clear, the permit drawings were not sent to Visco and Mr. Visocchi until June 18, 1999.

[15] Although Hollowcore had advised Libbe that the shop drawings would be submitted by May 25, 1999, that date was not met. Some erection drawings were submitted by Visco on May 25, 1999, but they were far from complete.

[16] Numerous demands were made by Libbe to Hollowcore commencing May 28, 1999, and continuing through the summer of 1999 for both completed drawings and additions and corrections to the drawings already produced. Some of these corrections were related to parts of drawings, details and specifications that were missing as well as concerns about revisions or corrections required by the engineer of record that were not revised or corrected on the next submissions by Visco and Mr. Visocchi. All of these communications were made exhibits. These demands were passed on to Visco along with queries regarding the ability of Visco to produce accurate drawings on a timely basis, without which the construction schedule was at risk.

[17] On June 18, 1999, Mr. Visocchi sent a facsimile to PSI advising that he had some “problems on a job, which are keeping me out of the office. I have been working at night on the deck and should have some more up to date drawings and calculations by Monday.”

[18] On June 29, 1999, PSI sent a facsimile to Visco and Mr. Visocchi asking for the setting plans for the anchor bolts along with embedding plate details. The message continued “Please call for a meeting here at our office to go over the schedule for production.” On the same day, Mr. Visocchi wrote to Hollowcore in which he advised the following:

As you are aware our first submission of precast shop drawings were returned for this project today. These drawings were not approved and resubmission is required. These drawings were prepared on architectural progress drawings dated 03-24-99 and structural drawings dated 05-03-99. These drawings were not complete and we made our best effort to work within the information provided.

Our first set of progress shop drawings were submitted for approval on June 11, 1999. On June 18, 1999 we received revised architectural and structural drawings, issued for building permit on 05-24-99. These drawings are much more complete and provide the required information to properly complete our drawings. However there are numerous changes and additional details that were not on the first set of contract drawings.

We are currently updating our drawings to reflect the up to date information on these drawings, however it will take us several days to complete this work. We anticipate completing the anchor setting plan and details in the next day or two and will submit these as soon as possible.

The remaining drawings should be updated and completed by early next week at which time they will be submitted. With all future submissions we will be providing complete sealed calculations. Please note in addition to changes in the drawings design loads were also changed forcing us to revise most of our member designs.

[19] Attached to the letter was a list of changes required and divided into two sections: a list of structural changes to contract drawings and a list of architectural changes to the contract drawings. At the bottom of the list of changes, Mr. Visocchi added the following:

Note: The above noted changes are with respect to precast only. Some of the changes are minimal however, some are significant such as the details added, dimensional revisions, elevation revisions and the change in the design loads.

[20] On August 6, 1999, Hollowcore received a memo from Libbe requesting that Visco forward drawings and calculations immediately as well as production and erections schedules. The schedules for production and erection were contingent on Visco completing its work accurately. Mr. Visocchi continued to tell the plaintiffs that accurate and complete drawings would be produced on a timely basis. A further memo from Libbe requested the submittal of twelve different sets of drawings.

[21] On June 27, 1999, Libbe sent a memo to Hollowcore:

We received some of the shop drawings today. Thank you!

Written in capital letters in broad black print was the following:

When Will Balance Of Drawings Be Here?

During a quick review we see that several notations are incomplete or incorrect.

The letter continued with a list of items that were missing, not complete or had not been corrected.

[22] In addition to criticisms of the drawings themselves, Libbe also requested of Hollowcore to provide the requested erection schedule.

[23] Further changes were requested by Libbe and the engineers of record over the summer.

[24] On August 23, 1999, PSI sent a letter to Libbe setting out the tentative fabrication and erection schedule for the project. The schedule indicated that double tees production would start August 25, 1999, pending approval by August 23, 1999. Start of production of the other products would begin September 13, 1999, pending final approval by September 3, 1999. Erection would start at Superior Street on October 4, 1999, dependent on the other approvals that were requested. The expected date for the end of production was to be October 29, 1999 and the end of erection on November 17, 1999. These last three items were all pending the earlier approvals. The letter went on to say:

Please also note that we intend to have the north half of the parking deck completed and released to Rudolph Libbe for your use by the week of October 25, 1999. Once again, this will only be possible if drawing approvals are as indicated above and our alternate for the crossover beams is accepted.

[25] On August 24, 1999, a meeting was held in the PSI board room at which representatives of Libbe, Hollowcore, Assemblers, the architects and Mr. Visocchi were present. Various aspects of the project were discussed with Hollowcore slated to be on site October 1, 1999. It was noted that the spandrels, columns, shear walls, lite walls, the stairs and the remaining crossover beams were still not completed. Erection was planned to start the week of October 25, 1999. As well, assistance from another engineering firm was being considered to assist with the drawings for the elevator/stair tower. On August 25, 1999, Libbe sent minutes from the meeting which were made an exhibit on the trial.

[26] On August 23, Visco billed PSI for $33,000 plus GST. On the invoice it was indicated that the drawing work on the project was 60 per cent complete.

[27] On September 2, 1999, Donald Little, then vice president and general manager of PSI and Hollowcore wrote to Visco and Mr. Visocchi confirming various agreements that had been reached at a recent meeting with Mr. Visocchi, Mr. Collavino and Mr. Little. The letter indicated that all inverted tee drawings as well as the “L” beam and spandrel drawings were to be delivered on September 1, 1999. By September 7, 1999, the drawings for the lite walls, columns, stairs, elevators, crossover beams and shear walls were to be submitted. Work drawings for the columns and lite walls were to be available for pick up on September 2, 1999. The letter also confirmed that Mr. Visocchi was to meet with an engineer from Ghobrial, another engineering firm in Windsor, on September 1, 1999, to provide direction with respect to the elevator shaft drawings. The other engineering firm was prepared to assist in the design of the section and perform any necessary detail and engineering work. The letter continued as follows:

As discussed at the meeting, we have no intention of creating a bad relationship with yourself, nor do we have any intention of back charging your account. The recent meeting with Rudolph Libbe went very well and it appears that we can still satisfy their schedule. However, you must meet the above noted deadlines in order for us to keep this project on track and avoid any possible future charges against ourselves from the owner or Rudolph Libbe.

[28] On September 7, 1999, PSI wrote to Visco and Mr. Visocchi pointing out errors in the spandrel shop drawings.

[29] On September 8, 1999, Hollowcore received a letter from Libbe advising that it would incur many additional costs if Hollowcore’s work at the parking garage was not completed by November 17, 1999.

[30] On September 17, 1999, Mr. Collavino, president of PSI and Hollowcore, met with Mr. Visocchi. Following the meeting Mr. Collavino prepared an interoffice memo setting out the discussions that were had. The memo indicated that Mr. Visocchi admitted that he was “drastically behind” with committed shop drawings. On September 9, PSI had written to Visco and Mr. Visocchi enclosing the letter received from Libbe on September 9, 1999 in which Libbe advised that if Hollowcore was not able to meet the erection dates that Libbe would be in a position to start charging the Hollowcore account. The PSI letter to Visco and Mr. Visocchi went on to say:

I have met with you on a number of occasions and you have promised me again and again that I would receive drawings on certain dates. To date I have yet to receive drawings when you indicate you would be supplying them to us for your information, please note the following.

As of this morning we are still missing the spandrel drawings for production. We do not have any lite walls for shape drawings or for production drawings. We do not have elevator tower, stair drawings, or crossover beams. The crossover beam calculations and methodology still must be submitted and approved by which and sign associates. To the best of my knowledge, you have not resubmitted the erection or erection detail drawings to Rudolph Libbe for their review and finalization.

For the life of me I cannot understand why this is happening. You have had more than enough time to do these drawings, you have committed to certain dates, and yet you continue to miss those dates. I have offered my help, I have offered help from other engineering companies and I have offered you additional funds to take care of this work on an immediate basis; yet you continue to tell me that everything is okay, that you can make the dates, and that you will do whatever you have to do to get the drawings in our hands. This is obviously not happening and we need to address it immediately.

I will be calling Rudolph Libbe this morning asking for an emergency meeting with regard to this project. We will update them at that time as to the status of the drawings, they will update us as to what exactly they require and what is still outstanding, and we will have to make very swift and hard decisions as to what will happen on this remainder of this job to ensure that schedules are met and that product is erected when we committed to them. If you remember, I did not commit to them on erection dates or erection schedules until I receive drawing schedules from you. Unless I receive drawings, I cannot meet these erection dates.

What is the status of all outstanding work as of today’s date? Mike, I ask that you please respond to this letter as quickly as possible so that we can prepare ourselves for this emergency meeting.

[31] On September 15, 1999, Visco sent a number of the AB1 and AB2 drawings, the E1 to E10 drawings and the ED1 to ED5 drawings to PSI.

[32] On September 17, 1999, representatives of PSI and Hollowcore met with Mr. Visocchi. Mr. Collavino prepared a memo on September 20, outlining the substance of the meeting. The memo indicated that Mr. Visocchi had agreed that he was very behind with committed shop drawings and submission dates. In response to that concern, Mr. Visocchi said that all the columns for the deck would be drafted and released on September 20, 1999. The calculations and drawings still needed to be produced and submitted. Mr. Visocchi said he would have the stair shafts, landings and stairs engineered by today and “hopefully” drawings would be ready by Monday for Hollowcore’s review and submittal purposes. He said the lite wall drawings had been started but not completed. Nevertheless, the work should be able to be done by the following Monday. As well, the changes to the shear wall drawings should also be available at the same time.

[33] Mr. Visocchi also had said that he should be able to get the drawings out for the double tees that go around the shear walls and elevator shaft by Monday or Tuesday of the following week. He said he understood that if they were not received, it would affect production. The minutes of the meeting continued to indicate that Hollowcore had offered assistance to Mr. Visocchi by permitting some of Hollowcore’s engineers and draftspersons to help with the project. Mr. Visocchi did not accept the offer and said he would be able to get the work done on his own. The minutes of the meeting also indicated that PSI and Hollowcore were almost past believing Mr. Visocchi about when he would meet his commitments to produce the drawings.

[34] Mr. Visocchi was also told by both Mr. Little and Mr. Collavino that the owners of the building were ready to start back charges to Libbe for delays and that “the owners indicated that would most likely have to heat the structure due to cold weather conditions being prevalent at the time that they will have to do their work, after our work is completed.”

[35] Mr. Visocchi was told that there would be an increase in pricing if the assemblers had to work extended hours to include Saturdays and Sundays to complete the deck by the week of November 17. He was also told that “if the drawings are submitted late, and with the typical turnaround time for approvals, I would most likely have to incur additional costs to set up more forms and work overtime to get our products made and to site to meet the scheduled delivery dates.”

[36] These communications continued through September, 1999. On September 30, 1999, Libbe wrote again to Hollowcore still complaining about the quality of the drawings being submitted as well as the timing. Libbe again demanded that the drawings and calculations be finalized and submitted immediately.

[37] On September 30, 1999, Mr. Visocchi wrote to PSI in which he responded to PSI’s correspondence of the same day. He said:

You note in this correspondence that your proposed dates for delivery of drawings and details that these dates are non-negotiable. I am not writing this correspondence to negotiate anything. However my first responsibility as a Professional Engineer is to protect the public interest. I will not be bullied into delivering any drawings until such time that I am satisfied that these items are safe and have been properly engineered. I will not risk making any errors to meet any schedule.

I am making every effort to spend every available minute to complete this project and have not had time to respond to numerous correspondences, which have been sent to me. It must be nice to have time to sit in your office and write letters that only delay my work. By the way I will have probably have wasted an hour of my time writing this letter instead of being productive. I am tired of receiving numerous phone calls from different people in your office asking the same thing. I now demand that all requests be in writing and faxed to my office. I will then respond by fax or phone as required.

[38] The letter continued by advising the new project manager that much time had been wasted redesigning items that were not required or used. The letter continued:

I will make every effort to meet the dates requested however as noted I will not jeopardize public safety or risk making mistakes on the drawings to meet your schedule.

[39] The letter also advised that neither Mr. Visocchi or any of his staff would be attending the meeting that had been set for that day at 5:00 p.m. nor would he go to any other meetings “unless I deem them to be required.”

[40] Also on September 30, 1999, Visco invoiced PSI for an additional $13,500 plus GST, the invoice indicating that 80 per cent of the drawings were complete.

[41] On October 7, Libbe had provided Hollowcore with a change order which established a cap of $95,000 to be deducted from the subcontract on account of unanticipated future costs that could be incurred by Libbe to accelerate the project due to Hollowcore’s delay in starting its phase of the schedule. “The delay has been due to the lack of timely shop drawings from Hollowcore.” In that particular change order there was the amount of $16,830 deducted from the original contract amount of $2,290,000, leaving an amount of $2,273,170 as the value of the subcontract. Mr. Collavino had amended the change order and returned it to Libbe.

[42] On October 12, 1999, PSI advised Libbe of a tentative erection schedule with a proposed completion date of December 24, 1999.

[43] On October 15, 1999, Libbe sent a letter advising PSI that the proposed schedule and completion dates were unacceptable, given that the original completion date was to have been November 17, 1999, and Libbe’s completion date was to have been January 17, 2000.

[44] Tensions continued to escalate during October 1999 with continuing complaints to Hollowcore by the engineers of record about the errors on the drawings as well as errors that were not being corrected after they were pointed out. On October 20, 1999, Visocchi advised Hollowcore’s project manager that he could not proceed and that he should get someone else to complete the drawings.

[45] On October 25, PSI wrote a letter to Visco and Mr. Visocchi which began “it is with great disappointment that we are forced to write this letter.” The letter went on to point out the failure to meet deadlines for drawing preparations, deadlines that Mr. Visocchi had personally set which has caused serious delay. He was put on notice that Hollowcore would be seeking full indemnity from Mr. Visocchi and Visco for any costs and expenses incurred by “and any possible damage claims against Hollowcore as a result of your failure to meet the drawings submittal deadlines.” The letter further advised that PSI would be withholding any further payments to him “until PSI had determined the costs, expenses and possible damage claims resulting from your delays.”

[46] On October 26, 1999, Mr. Collavino prepared an interoffice memo setting out the details of his meeting with Mr. Visocchi that day. At that meeting, Mr. Collavino advised Mr. Visocchi that because of his inaction, the November 17, 1999 date could not be met and that potential damages were approximately $300,000, with escalating increases if the completion date was pushed further into the future.

[47] The memo included the following comments:

Mike informed us that he has lost confidence in his ability to complete this work and that he has other financial concerns that have hindered his ability to do this work. I informed Mike that we should have been made aware of this situation many, many months ago so that we would have had a chance to complete the work ourselves, or have someone else complete it for us, but that because of his insistence that he would perform his job we did not seek help elsewhere. Mike agreed that he should have walked away from the job many months ago, and allowed us to find someone else to complete the work, but he had hope he would be able to finish it within his own committed dates. He also admitted that he has not worked diligently on this project or concentrated his full efforts on it because of other problems and ongoing concerns he has had within his company. Don and I both asked Mike to let us know one way or the other whether or not he was going to continue doing work on this project. Don also indicated that if it was his decision to complete this work, a firm unwavering schedule must be committed to if further work on this project was to go forth.

[48] The memo ended with an indication that Mr. Visocchi would advise PSI about whether he would be completing the project or not.

[49] On October 27, PSI retained another engineering firm, Hanna Ghobrial and Spencer Ltd. (“Ghobrial”) to assume responsibility for the engineering and shop drawings.

[50] On October 27, 1999, Mr. Little received a letter from counsel for Visco. The letter advised that Visco was treating Mr. Little’s letter of October 25 as a termination of the consulting agreement with Visco. The letter went on to advise:

Accordingly you are in breach of your contract with our client which in addition to indebted payment for outstanding invoices, entitles our client to damages. If you wish to resolve this matter without the necessity of litigation, we urge you to contact Mr. Visocchi or the writer to discuss this matter further.

[51] On November 4, Libbe sent a facsimile to Hollowcore suggesting extra work that Hollowcore might want Libbe to perform in order to speed up the completion of the project.

[52] On November 17, 1999, Libbe responded to Hollowcore regarding the revisions Mr. Collavino had made to the change order of October 7, 1999. Libbe rejected the revisions and returned the change order to him marked “void”. The letter went on to say:

Because you have not commenced erection on or before October 20, 1999 as originally agreed to, we now withdraw the offer proposed in change order #990001-000-104-02 as originally submitted.

We are still awaiting the schedules and other information set forth in our letters of October 15, 1999 and October 26, 1999.

[53] On December 1, 1999, PSI wrote to Visco through Mr. Visocchi setting out a partial list of drawing errors and omissions that PSI had encountered to date based on the drawings completed by Visco. Visco was advised that it would receive further information as more problems were encountered. The problems that had been encountered to date were divided into five categories: delay in drawing submittals, drawing discrepancies, failure to complete the drawings and engineering, field hardware sheets and replacement beam rotation. Mr. Visocchi was asked to notify his insurance company of a potential claim. A response from him was requested by December 3, 1999.

[54] Not having received a written response, PSI wrote again to Visco and Mr. Visocchi on January 18, 2000 expressing concern about the lack of response and advising of another major problem involving excessive shear connector spalling because the double tees had sat in the PSI yard for approximately four months and the cambers continued to grow causing significant repair costs. Visco and Mr. Visocchi were again asked to contact their insurance company and to provide a response to PSI by January 21, 2000.

[55] The work on the garage proceeded. A temporary occupancy permit was issued for the parking garage on February 29, 2000 and the balance of the structure was eventually completed by April, 2000. By that time, certain winter and other costs were incurred which will be discussed later in this judgment when dealing with damages.

[56] The plaintiffs issued their statement of claim on May 12, 2000. Hollowcore and PSI alleged that Mr. Visocchi was negligent in his dealings with them, with the alleged acts of negligence including assuring the plaintiffs that he and Visco staff were capable of completing the necessary structural engineering for the project when they were not, and that Mr. Visocchi and Visco staff had the necessary expertise to produce the drawings and data required for the project. The claim also alleged that Mr. Visocchi and Visco were also negligent because, knowing the expected dates for production of drawings and data, Mr. Visocchi represented that he had the necessary capacity and time to devote to the project to ensure timely delivery of the necessary drawings. In addition, the plaintiffs alleged that Mr. Visocchi approved drawings and data by affixing his engineer’s seal to them when they were deficient, incomplete or contained errors.

[57] As well, the plaintiffs plead that Visco was in breach of its contractual obligations by failing to deliver drawings and engineering data on a timely basis as well as delivering drawings and engineering data that was incomplete or deficient and had to be resubmitted.

[58] The statement of claim also asserted that, as a result of the negligence of Mr. Visocchi and as a result of the breach of contract by Visco, the plaintiffs had sustained damages which included having to compress their manufacturing schedule for the precast components, which resulted in significant expenditures for overtime and additional equipment utilization. As well, Hollowcore was required to compress the erection schedule of the structure, resulting in significant expenditures for overtime and additional equipment rental, as well as incurring back charges against the contract price by reason of the delays, and the incurring of additional costs to have much of the engineering and design work completed by persons other than Visco and Mr. Visocchi.

[59] The plaintiffs also alleged that they had incurred costs to enclose the project to protect it from winter weather that would not have been necessary if the contract had been completed by November 17, 1999. They also alleged that they incurred losses because they manufactured pieces based on the drawings of Mr. Visocchi and Visco which contained errors and the constructed pieces were not able to be used or required significant costs to repair. In all, they were seeking damages in the amount of $700,000 U.S., plus indemnity for any amounts the plaintiffs might have to pay or any amount they might have deducted from funds owed to them for the project. They also sought prejudgment and post judgment interest and costs.

[60] The defendants filed a statement of defence and counterclaim against each of the plaintiffs on July 12, 2000 in which the defendants asserted that Visco was retained by PSI by way of a purchase order dated April 12, 1999 which set out in full the terms and conditions of Visco’s retainer. Both defendants denied that they were retained by Hollowcore and that they owed any duty to Hollowcore. Mr. Visocchi denied that he had been personally retained by either PSI or Hollowcore and that PSI and Hollowcore were both aware that Mr. Visocchi was acting in his capacity as a representative of Visco and not in his personal capacity. Mr. Visocchi further asserted that if the plaintiffs relied on him, they relied on him as a representative of Visco.

[61] Mr. Visocchi also denied that he owed any duty to the plaintiffs and denied all allegations of fault, breach of contract, breach of duty, misrepresentation, delay, omissions and negligence made against him personally.

[62] With respect to Visco, it argued that it faithfully, reasonably and properly performed its limited retainer in a timely and professional manner in accordance with the limited retainer and in accordance with proper engineering standards. It therefore, denied all allegations of fault, breach of contract, breach of duty, misrepresentation, delay, omission and negligence. Visco further asserted that it delivered all drawings in a reasonable and timely fashion, without error, except when prevented from doing so by the negligent acts or omissions of Hollowcore and PSI.

[63] In the alternative, Visco argued that any delay in the performance of Visco’s limited retainer arose directly as the result of the setting of unreasonable deadlines by PSI which were contrary to the interests of public safety and therefore, setting deadlines that were not reasonable to impose on Visco.

[64] The defendants also alleged that the wrongful and negligent acts and omissions of PSI and Hollowcore interfered with Visco’s performance of its limited retainer and caused or contributed to any damages. In particular, Visco and Mr. Visocchi alleged that the plaintiffs started the project without proper engineering data and drawings, provided outdated information and drawings to Visco, failed to provide information to Visco in a timely manner and continually made major and minor changes to designs and specifications. In addition, Visco alleged that the plaintiffs had failed to approve Visco’s submissions in a timely manner, withheld monies due to Visco, thus detrimentally impacting on its ability to perform its limited retainer.

[65] In addition, both defendants alleged that the plaintiffs’ manufactured defective precast concrete components, failed to conduct a proper and efficient manufacturing and construction operation, failed to properly schedule manufacturing and to properly manufacture the precast concrete components, as well as failing to properly store the double tees and wrongfully terminating Visco’s retainer.

[66] The defendants also asserted that the plaintiffs’ failed to mitigate any damages that they may have suffered and counterclaimed against each of the plaintiffs for contribution and indemnity for any amount that the defendants might have to pay to either of the plaintiffs.

[67] For reasons that were never explained, the litigation appeared to languish. Ten years later, on May 4, 2010, the defendants, with leave of the court, issued a third party claim against The Royal Insurance Company of Canada and two other insurance companies (“Royal”) for contribution and indemnity against all sums for which Visco and Mr. Visocchi may become liable to the plaintiffs on account of the insurance policy obtained from the third parties.

[68] On July 7, 2010, the third parties filed a defence in which they acknowledged an obligation to provide insurance coverage to the defendants to indemnify them for claims arising from the defendants’ negligence. The third parties, however, relied on an exclusionary clause under part III of the policy of insurance with respect to any damages resulting from defendants’ obligation to deliver drawings in a timely manner:

The INSURER will not cover YOU, PAY DAMAGES, provide YOU with a defence or make supplementary payments for CLAIMS arising out of YOUR failure to complete drawings, plans, specifications, reports, or schedules on time or YOUR failure to act upon shop drawings on time unless such failure is the result of an error or inaccuracy in the preparation of these documents.

[69] In addition to the defence to the third party claim, the third parties filed a statement of defence to the plaintiffs’ statement of claim, denying that the plaintiffs suffered damages from the delays, denied that there were any errors or omissions in the drawings and calculations that caused any damages, and asserted that if the plaintiffs suffered any damages they resulted from delays in producing the drawings. In addition, the third parties asserted that the plaintiffs were contributorily negligent because they failed to request shop tickets at an early stage to allow for fabrication of the typical double tees, failed to generate schedules for production and erection at the early stages of the project and failed to alter any schedules as necessary to identify important and essential items in the system. In addition, the third parties pleaded that the plaintiffs failed to mitigate their damages and were contributorily negligent.

[70] With respect to the plaintiffs’ claims for damages, the third parties asserted that the plaintiffs did not suffer any damages as a result of the delay or of any errors or omissions in the drawings, any damages suffered are remote, exaggerated and not recoverable in law.

Issues

[71] The main issues to be determined at trial were:

1. With respect to the claim in contract,

a) Who were the parties to the contract;

b) Was there a breach of the contract by either or both of Visco and Mr. Visocchi;

c) Did PSI and/or Hollowcore suffer losses as a result of a breach of contract for which Visco and/or Mr. Visocchi are liable to indemnify one or both of the plaintiffs;

2. With respect to the claim in negligence,

a) Did Visco and/or Mr. Visocchi owe a duty of care to PSI and/or Hollowcore;

b) Did Visco and/or Mr. Visocchi breach the duty or care owed to PSI and/or Hollowcore;

c) What losses were suffered by PSI and/or Hollowcore as a result of a breach of the duty of care owed by Visco and/or Mr. Visocchi to PSI and/or Hollowcore;

3. With respect to liability of the third parties,

a) What portion of any losses suffered by either or both of PSI and Hollowcore for which they may be entitled to recover from Visco and/or Mr. Visocchi result from:

1. errors

2. omissions

3. delay and/or

4. negligence arising from the way Visco and/or Mr. Visocchi performed their professional services;

b) To what extent is the third party liable to indemnify Visco and/or Mr. Visocchi for the losses for which they are liable to PSI and/or Hollowcore;

4. Pre-judgment Interest and costs.

Evidence

[72] In all, there were five witnesses called on behalf of the plaintiffs: Loris Collavino, Donald Little, Thomas D’Arcy, an engineer and the only expert called to testify at the trial by any of the parties, Gary Haas, the recently retired chief project manager in the construction department of Libbe and Frank Sample, a principal of Assemblers which had been subcontracted by Hollowcore to install the precast concrete at the parking garage.

[73] Mr. Visocchi, the only witness for the defendants, testified on his own behalf and as an employee and director of Visco.

[74] The third parties called no witnesses.

[75] In addition to the oral evidence, all the parties submitted volumes of documents and rolls of drawings that were made exhibits at trial. Through the oral and documentary evidence the court heard about a number of other key players in the project such as Mark Avers, Libbe’s project manager, Gino Tomasselli, one of Hollowcore’s project manager, Dr. Ghobrial, who was the engineer who took over the project from Visco and Mr. Visocchi and Ken Kapusniak, who succeeded Mr. Tomasselli as project manager for Hollowcore. None of them testified.

[76] The task of recreating events that occurred almost 15 years earlier is a monumental one and the reasons for the delay in this matter getting to trial were never made clear. In addition to the difficulties in recreating the past, there were also difficulties created by the informal manner in which the plaintiffs and defendants dealt with their relationships. I will deal with these problems and specific aspects of the evidence in more detail in the analysis part of this judgment.

Analysis

Issue 1 – The Contract

1. Was Mr. Visocchi a party to the contract between Visco and PSI?

2. Was Hollowcore a party to the contract between Visco and PSI?

3. Did Visco and Hollowcore enter into an oral contract?

[77] Within the four corners of the contract, the two parties were Visco and PSI. The presumption is that the intent of the written agreement is enforceable; that is, the parties within the written agreement were the parties that were intended to be parties to the contract. In a construction setting, Mr. Visocchi would have to communicate with other subcontractors, as would Hollowcore, in order to complete the work. The level of communication between Mr. Visocchi and Hollowcore does not necessarily mean they entered into an oral contract; rather, Mr. Visocchi was undertaking his duties as the engineer for Visco, who was working on a contract with PSI, in a construction setting where multiple parties are required to work closely. Taking direction from another subcontractor in the completion of those duties does not necessarily mean a contract has formed, but could give rise to a duty of care in tort, an issue that will be dealt with later in this judgment.

[78] Both Hollowcore and PSI are claiming damages for breach of contract by Visco for failing to provide them with accurate and timely engineering drawings and supporting calculations.

[79] It was the position of counsel for the defendants that the contract was made solely between Visco and PSI. Although acknowledging that its original quotation was submitted to Hollowcore, Visco, nevertheless, asserted the position that there was no contract between Visco and Hollowcore. Counsel based that position on the fact that it was PSI that solicited a quote for the costs of preparing the engineer and shop drawings from Visco, pointing out that PSI also sought a quote from another engineering firm at the same time. As well, Visco recognized that it would be working for PSI, it was PSI which issued the purchase order to Visco for the contracted work, it was to PSI that Visco issued its accounts for the work it performed, and it was PSI that made payment on account of the invoices issued to it for the work performed by Visco.

[80] Counsel for the defendants also argued that Hollowcore was not a party to the contract nor was the work performed by Visco for Hollowcore’s direct benefit. The drawings which Visco was contracted to prepare were required by PSI to enable PSI to manufacture the precast components it was intended to supply for Hollowcore’s use.

[81] It was the position of counsel for Mr. Visocchi that Mr. Visocchi, in his personal capacity, was not a party to the contract made between Visco and PSI. PSI recognized that other Visco employees would be engaged to work on the contract and Mr. Collavino acknowledged on cross-examination that there was no discussion addressing what role, if any, Mr. Visocchi would have on the project. Counsel argued that it was not even necessary for Mr. Visocchi to seal the drawings. In addition, counsel for Mr. Visocchi argued that there was no evidence that a representation was made by Mr. Visocchi or that an assurance was sought from him that only he would be involved in the preparation of the required drawings.

[82] The evidence is clear that Mr. Visocchi had worked in the past for PSI and Hollowcore and, as a result, was well aware of their integrated operations as well as their individual roles. Hollowcore entered into contracts with U.S. customers and was the sales arm of PSI while PSI manufactured the precast components for the Hollowcore contracts in the U.S. In addition, Mr. Visocchi was aware that Hollowcore had the contract with Libbe, the general contractor for the parking project. In fact, it was to Hollowcore that Visco submitted a quotation on March 15, 1999. As well, he wrote to Hollowcore on March 19, 1999 confirming his desire and ability to complete the necessary work but also stated in the letter that he would like to do the job for PSI.

[83] Although PSI issued the purchase order in April, 1999 Mr. Visocchi testified that it was not signed until August 20, 1999. In my view, that is not determinative of the issue respecting the contract. The evidence from all the parties establishes that Visco and Mr. Visocchi were performing the drawing services in the months before the purchase order was received and signed. Every drawing that was signed, sealed or checked had the name Hollowcore on it, not PSI. In the letter written by Visco’s lawyer, a clear inference can be drawn that Visco was of the view that its contract was with Hollowcore since the letter was written to Hollowcore indicating that it had terminated its consulting agreement with Visco. In that letter, Visco alleged that Hollowcore breached its agreement with Visco. There was no reference at all made to PSI in the letter written by Visco’s lawyer to Hollowcore.

[84] Even if the purchase order is evidence of a contract between PSI and Visco, there is no reason in law why it cannot be found that Hollowcore, based on the quotation and subsequent direction given to Visco in April 1999 that it could begin work that Visco had an oral contract with Hollowcore to do the work. Such a contract may be expressed or implied. An expressed contract is an agreement expressed in words, written or oral. An implied contract is an enforceable agreement inferred by the conduct of the parties. In McLachlin, The Canadian Law of Architecture and Engineering, 1994, at page 75, the authors deal with express and implied contracts:

Express contracts are those which come into being by an agreement expressed in words, written or oral. An implied contract is an enforceable agreement inferred from the conduct of the parties. For example if a client requests a professional person to do work, there is ordinarily an implied contract that the client will pay a reasonable fee for the work.

[85] With respect to written and oral contracts, the authors say the following, at pp. 75-76:

Subject to certain exceptions, oral agreements constitute valid, binding contracts equally as enforceable as written contracts, provided the necessary elements of contract are established. Contracts which fall under the statute of frauds, certain contracts, notably for the sale of land, are unenforceable unless there is a memorandum of agreement in writing.

[86] I find on the evidence of Mr. Collavino, Mr. Little and Mr. Visocchi himself that Visco had an express contract with PSI and implied contract with Hollowcore. I also find that Mr. Visocchi did not have a personal contract with either PSI or Hollowcore.

Breach of the Contract

[87] The express contract between Visco and PSI and the implied contract between Visco and Hollowcore required that Visco provide accurate and timely engineering documents for the parking garage project. This was required to permit PSI to manufacture the precast concrete correctly and provide the components on a timely basis to Hollowcore. This was so Hollowcore could fulfill its contract with Libbe in accordance with the timetable that would have had Hollowcore complete its work by November 17, 1999. The evidence is overwhelming that Visco breached its contracts with both PSI and Hollowcore.

[88] Exhibit 14 which was admitted on consent and referred to frequently throughout the trial sets out in stark detail the numerous times that many of the drawings had to be submitted and revised before production of the precast components could begin. It was clear from the evidence of Mr. D’Arcy, the plaintiffs’ expert, as well as the evidence of Mr. Collavino and Mr. Sample, that while rarely are drawings approved the first time they are submitted, the number of times that they had to be revised and corrected is not an accepted practice. One of many examples can be seen with respect to the AB-1 and AB-2 drawings for the anchor bolt layout plan. They were first submitted for approval on June 4, 1999. They required revision on July 6, 1999, again on July 26, 1999 and September 15, 1999 before they were revised for construction on October 18, 1999, less than a month before Hollowcore was to have completed all its work on the garage structure.

[89] The photographs that made up Exhibits 16 to 21 illustrated other problems related to the delay in the completion of proper production and installation drawings with the spalling of the spandrels and the camber of the double tees which created further repair issues to properly install them. The drawings that made up Exhibits 22 to 38 clearly show repeated errors in the drawings, many of which were not properly corrected even the first or second times they were returned by the engineer of record for revision.

[90] The evidence of Mr. D’Arcy was helpful with respect to the industry standard regarding the issues of breach of contract and negligence. It was his opinion, not contradicted by any other expert that because of the errors on the drawings, the incompleteness of many of them, the delay in producing correct drawings and the amount of time it took to produce accurate drawings fell much below the industry standards for precast engineering. In his opinion, the engineering drawings should have taken no more than four to five months to produce and that a completion date for all the drawings in August would have been reasonable.

[91] The extensive evidence of Mr. Collavino and the exhibits that were entered into evidence were also compelling with respect to the issues of both breach of contract and negligence. The repeated errors were plain and obvious to anyone, even someone not involved in the construction business.

[92] In his evidence, Mr. Visocchi admitted that the drawings done by him and by others under his supervision were replete with errors that needed numerous revisions which delayed the project. As he agreed on cross-examination, “wasted time is wasted money”. I find on the totality of the evidence that Visco breached its contract with both PSI and Hollowcore to produce accurate drawings within the timeframe that was well known to Visco and that damages were suffered by both PSI and Hollowcore because of Visco’s breach.

Issue 2 – Tort – Negligence

[93] PSI and Hollowcore asserted that both Mr. Visocchi and Visco were negligent in that they breached the duty of care they each owed to both plaintiffs. As a result, both have suffered economic loss for which they are seeking to be compensated by way of damages. By the end of the evidence part of the trial, counsel for the defendants conceded that Visco owed a duty of care to both plaintiffs. There was no concession made that Visco had breached a duty of care.

[94] With respect to Mr. Visocchi personally, counsel for the defendants argued that he owed no duty of care to either PSI or Hollowcore because he had no personal service obligations to either one of them. As a result, Mr. Visocchi cannot be found to have breached a duty that would give rise to liability for pure economic loss.

[95] In Cooper v. Hobart, 2001 SCC 79, 2001 S.C.C. 79; [2001] 3 S.C.R. 537, the Supreme Court of Canada considered when a duty of care arises. In order to establish that there is a duty of care, one must consider whether there is a special relationship between the representor and the representee. In that regard, a two-part test applies.

[96] Cooper involved investors who sued the Registrar of Mortgage Brokers, a statutory regulator, for negligence for failing to oversee the conduct of an investment company which the Registrar licensed, in that case, a mortgage broker. The investors alleged that the Registrar failed to properly supervise the mortgage corporation, with the result that they lost millions of dollars. The court had to determine whether the Registrar owed a private law duty of care to members of the investing public, giving rise to liability in negligence for economic loss that the investors suffered.

[97] The appeal by the investors from the decision of the British Columbia Court of Appeal which had overturned the decision of the trial judge was dismissed by the Supreme Court of Canada. Chief Justice McLachlin writing for the court characterized the case as being one which revisits the Anns test and “highlights and hones the role of policy concerns in determining the scope of liability for negligence”.

[98] The approach used by the court is summarized in the headnote:

In assessing whether a duty of care should be imposed, the approach set out in Anns is still appropriate in the Canadian context. Different types of policy considerations are involved at each stage of Anns. At the first stage, the question is whether the circumstances disclose reasonably foreseeable harm and proximity sufficient to establish a prima facie duty of care. The proximity analysis focuses on factors arising from the relationship between the plaintiff and the defendant, including broad considerations of policy. The starting point for the proximity analysis is to determine whether there are analogous categories of cases in which proximity has previously been identified. If no such cases exist, the question then becomes whether a new duty of care should be recognized in the circumstances. In order to recognize a new duty of care, mere foreseeability is not enough. The plaintiff must show proximity — that the defendant was in a close and direct relationship to him or her such that it is just to impose a duty of care in the circumstances. The factors which may satisfy the requirement of proximity are diverse and depend on the circumstances of the case. They must be grounded in the governing statute where there is one.

If the plaintiff is successful in establishing a prima facie duty of care, the question at the second stage is whether there exists residual policy considerations which justify denying liability. These are not concerned with the relationship between the parties, but with the effect of recognizing a duty of care on other legal obligations, the legal system and society more generally. The second stage of Anns will seldom arise, as questions of liability will be determined primarily with reference to established and analogous categories of recovery. Where a duty of care in a novel situation is alleged, it is necessary to consider the second stage of the Anns test.

Pure Economic Loss

[99] In Feldthusen’s Canadian Tort Law, (Bruce Feldthusen & Allen Linden, Canadian Tort Law, 9th ed. (Canada: LexisNexis, 2011) the author described the two kinds of economic loss at p. 448:

[I]t is necessary to distinguish pure economic loss from consequential economic loss in negligence cases. Consequential economic loss is financial loss causally connected to physical damage to the plaintiff's own person or property. An injured employee, for example, may suffer consequential economic loss in the form of medical expenses or loss of earnings. Consequential loss is usually governed by the same principles of recovery that apply to the physical damage itself. On the other hand, a pure economic loss is a financial loss which is not causally connected to physical injury to the plaintiff's own person or property.

Even without damage to property, pure economic loss is compensable in Canada (see: Ontario (Attorney General) v. Dyde (1990), 38 O.A.C. 154 (Div. Ct.)).

[100] The categories of pure economic loss described above and adopted by the Supreme Court of Canada in several cases are:

1. Negligent misrepresentation.

2. Negligent performance of a service.

3. Defective products or buildings.

4. Relational economic loss (consequent on physical damage to a third party).

5. Independent liability of statutory public authorities.

The plaintiffs rely on the first two categories.

1. Negligent Misrepresentation

[101] In Queen v. Cognos, 1993 CanLII 146 (SCC), [1993] 1 S.C.R. 87, Iacobucci J. outlined five requirements for imposing liability for negligent misrepresentation. First of all, there must be a duty of care based on a special relationship between the representor, in this case between Visco and/or Mr. Visocchi on one hand and PSI and Hollowcore, the representee on the other hand. Second, the representations made must be untrue, inaccurate or misleading. Third, the representor must have acted negligently when the representations were made. Fourth, the representees must have reasonably relied on the negligent misrepresentation. Fifth, the reliance on the negligent misrepresentation resulted in damages to the representees.

2. Negligent Performance of a Service

[102] This category of pure economic loss also applies to the facts of this case. Negligent performance of a service is not limited to cases in which the service was to provide information or advice. This category applies to cases where any professional service was negligently performed. Here, an assumption of responsibility by the service provider to the plaintiff, foreseeable reliance, and proof of negligence and damage generated by the plaintiff’s reliance will ordinarily be sufficient to impose liability (Philip H. Osborne, The Law of Torts, 4th ed, p. 188).

[103] In this case, all the representations to the plaintiff about the accuracy and timelines of the drawings were made by Mr. Visocchi. Counsel for Mr. Visocchi argued that in alleging that Mr. Visocchi is personally liable that the plaintiffs are attempting to “pierce the corporate veil”. Counsel also argued that Mr. Visocchi’s letters and memos that advised of the dates when particular drawings would be completed could not be representations that would trigger liability because there was no detrimental reliance on them. When a drawing was promised, for example, by September 1 but not produced, there was no damage resulting from that failure. The drawing was late but the drawings had been consistently late.

[104] Counsel for Mr. Visocchi also argued that PSI and Hollowcore knew it was Visco, not Mr. Visocchi personally which had the obligation to produce the drawings and that there would be a number of other staff, in addition to Mr. Visocchi, working to produce them. There was no reliance on Mr. Visocchi himself. Counsel also argued that the only cases in which an engineer was found to be personally liable were those in which there was property damage, not cases of pure economic loss.

[105] Counsel for Mr. Visocchi also argued that the plaintiffs did not look to Mr. Visocchi in his personal capacity to fulfill the obligations of Visco nor did Mr. Visocchi give an implied undertaking that he himself would be performing the service. Relying on Edgeworth Construction Ltd. v. N.D. Lea & Associates Ltd., 1993 CanLII 67 (SCC), [1993] 3 S.C.R. 206 at paras. 20 and 25, counsel for Mr. Visocchi argued that an engineer does not incur liability to a third party simply because an engineer reviews and affixes his or her engineering seal to a drawing.

[106] Counsel for Mr. Visocchi also sought to distinguish the facts in the case before me from the facts in Disal Contracting Ltd. v. J. Salamon Holding Inc., [1997] O.J. No. 4402 in which an architect was found liable for defects in a house which resulted from error in drawings, even though the contract for services was with the architectural firm, not the individual architect. Counsel argued that the evidence in that case differed from the evidence in the case before me because in Disal, there were discussions with a specific architect in a two-person firm which established reliance on that architect and an implied undertaking on behalf of the individual architect to perform the work.

[107] Also, in Brett-Young Seeds Ltd. v. K.B.A. Consultants Inc. 2007 MBQB 32, a case was permitted to proceed against an individual engineer even though the contract was entered into with the engineering firm because there was evidence that the plaintiff specifically relied on the engineer’s specific expertise.

[108] In contrast to the facts in those cases, counsel for Mr. Visocchi argued that there was no indication in the purchase order that PSI was relying on Mr. Visocchi nor was there any other evidence to support the plaintiffs’ reliance on Mr. Visocchi himself. There was no evidence that they hired Visco because they were relying on Mr. Visocchi to seal the drawings as an engineer licenced in Ohio or that they were relying on Mr. Visocchi to do the work himself. In fact, he argued that Mr. Visocchi specifically indicated that he would have staff available to work on the project in April 1999.

[109] His counsel also argued that even if I were to find that Mr. Visocchi owed a duty of care to the plaintiffs that I would be required to proceed to the second step of the Anns test and find that I should not give effect to that duty of care for policy reasons because it was the corporation which was contractually obliged to perform the services of providing the drawing for the project. I disagree. There are no policy reasons that would prevent a court from a finding of negligence against a professional who was working as an employee or director of a corporation. The cases which have not followed Edgeworth demonstrate clearly that individual professionals working within a corporate structure can be held responsible in negligence in the proper circumstances.

[110] The claim in tort is properly brought against Mr. Visocchi personally as well as Visco for breaching a duty of care. Although Mr. Visocchi’s counsel relied on Edgeworth for the proposition that there was no proximity in relationship between Mr. Visocchi and PSI or Hollowcore, Edgeworth has been distinguished in a number of cases. In Edgeworth, the engineering company had been hired by the Province and the engineers merely affixed their seals to design documents. This is distinguishable from a case in which the contractor relies on the skill of the engineers to actually carry out the designs. In Strata Plan No. VR 1720 v. Bart Developments Ltd. (1999), 1999 CanLII 5428 (BC SC), 45 B.L.R. (2d) 156, the engineers were more open to personal liability because their firm induced the contractor to rely on their experience and expertise. Most relevant is the comment by Edwards J. at para. 13:

There is no question that all three of the personal defendants had a degree of experience and technical skill nor that each was actively involved in the survey and preparation or presentation of the report to the plaintiffs. The personal defendants must have known the plaintiffs would rely on their report. The extent of their involvement distinguishes them from the engineers in Edgeworth, who merely affixed a seal “without more”.

and at para. 15:

Limited companies cannot exercise professional functions except through qualified individual employees. Those employees must realize it is their skill and experience the clients are engaging and will rely on. They therefore owe a concomitant duty of care to those clients and are potentially liable in tort if they fail meet that duty.

[111] Edgeworth was further distinguished in Boss Developments Ltd. v. Quality Air Maintenance Ltd. (1995), 1995 CanLII 3213 (BC CA), 56 B.C.A.C. 164 at para. 17:

With respect to Mr. Rorison, he is not in the same position as the individual engineers in Edgeworth. The engineers there were absolved from liability because it was not shown that the plaintiff had relied upon “the particular expertise of an individual engineer”. The converse situation exists here. Only an individual can be qualified as an aircraft maintenance engineer in this field of special skill and knowledge. Only an engineer with that qualification can make the certificate entry in the log book. It follows that it is the individual mechanic who certifies whose skill and knowledge is being relied upon.

[112] The facts in the case before me parallel those cases as opposed to the facts in Edgeworth. While it is open to a company to limit its employees’ liability in tort through the language of the contract (see: Edgeworth at para. 16; British Columbia v. R.B.O. Architecture Inc. (1994), 1994 CanLII 1740 (BC CA), 94 B.C.L.R. (2d) 96 (C.A.) at para. 42), the contract must be clear with respect to those duties for it to oust those tort duties. Without such a limitation, the argument that the engineers cannot be liable in tort must fail.

Liability of Mr. Visocchi

[113] Applying the principles set out in Cooper v. Hobart and the other cases which I have referenced to the facts in the case before me, I find that the plaintiffs have established on the evidence that Mr. Visocchi, in addition to Visco, owed a duty of care to both PSI and Hollowcore. The duty of care owed by professionals to the individuals or companies who retain their professional services can apply to the principal of the company as well as the company itself. At para. 27 of Cognos, the court held that the category of professionals to whom a duty of care is owed is very broad and includes almost all professional individuals.

[114] In Hercules Management Ltd v. Ernst & Young, 1997 CanLII 345 (SCC), [1997] 2 S.C.R. 165, the Supreme Court of Canada set out two criteria that give rise to a duty of care: first, the defendant ought reasonably to foresee that that the plaintiff will rely on his or her representation; and second, that the reliance by the plaintiff on those representations is reasonable.

[115] With respect to reasonable reliance, there are five indicia: first, the defendant had a direct or indirect financial interest in the transaction in respect of which the representation was made; second, the defendant was a professional or someone who possessed special skill, judgment or knowledge; third, the advice or information was provided in the course of the defendant’s business; fourth, the information and advice was given deliberately and not on a social occasion; and fifth, the information or advice was given in response to a specific inquiry or request.

[116] I find on the evidence that the circumstances of Mr. Visocchi met each of the criteria. First of all, Mr. Visocchi would benefit financially through his company if he was successful in obtaining the contract. Mr. Visocchi fulfilled the requirements of the second indicia in that he was and is a professional. Third and fourth, the information he provided was given in the course of his business and it was given deliberately and not on a social occasion. Finally, the information and advice was given in response to a request from PSI.

[117] With respect to the reasonableness of the reliance by both PSI and Hollowcore on Mr. Visocchi, he had worked at PSI and was familiar with its relationship with Hollowcore. He knew that PSI was manufacturing the precast components and that Hollowcore was responsible for the installation. PSI and Hollowcore knew Mr. Visocchi and his work. He had provided drawings for them on other projects. He was someone they had relied on before. Further, Mr. Visocchi knew that his work was being done for both PSI and Hollowcore as the latter was the name that appeared on the drawings. As for the argument that Mr. Visocchi was not required to seal the drawings himself and that he could have hired another engineer licensed in Ohio to seal them, that is not what happened.

[118] In the same way, PSI did not hire the services of the other engineering firm from whom it sought a quote. All the representations about when work would be completed all came from Mr. Visocchi. He frequently referred in the transmittals to when “I” would be getting the work done. Most interestingly, while the formal bid for the contract was made by Visco to Hollowcore on March 15, 1999, Mr. Visocchi followed up the formal bid with a letter four days later to Hollowcore. After indicating that he would have some people to start work on the project by April 1 and all his people available to work on the project by mid-April, Mr. Visocchi said, “I am sure I can meet your scheduling requirements.” The letter concluded: “I would really like this job for PSI and will do whatever it takes to get the drawings completed on your timetable (emphasis added). Although a number of the early communications from Visco by Mr. Visocchi made representations as “we”, by the time of his self-serving letter of September 30, 1999, he used the personal pronoun “I” in describing his understanding of his professional obligations.

[119] I find that Mr. Visocchi gave his personal assurances to PSI and Hollowcore that the work would be done right and on time. Given their history with Visco and Mr. Visocchi, it was reasonable for PSI and Hollowcore to rely on his assurances. In his evidence, Mr. Collavino said he would not have contracted with Visco if Mr. Visocchi was not there. I accept that evidence as true and accurate.

[120] Even if the evidence did not support a finding that there was negligent misrepresentation by both Visco and Mr. Visocchi, there is ample evidence that there was negligent performance of a service by both Visco and Mr. Visocchi. The oral evidence of Mr. D’Arcy, Mr. Sample and Mr. Collavino, supported by the exhibits, in particular exhibits 36A, 36B, 37 and 38, the numerous revisions of numerous drawings, along with the photographs clearly support a finding that much of the work done by Mr. Visocchi was negligently performed. Also compelling was Mr. Visocchi’s own admission that his work on this project did not meet his own professional standards.

[121] For all of these reasons I find that Mr. Visocchi is liable along with Visco for negligence in the performance of his obligations to both PSI and Hollowcore and for the damages which resulted.

Issue 3 – Damages

Introduction

[122] Having found Visco liable in contract to PSI and Hollowcore and both Visco and Mr. Visocchi liable in negligence to both PSI and Hollowcore, and for the damages which resulted, I move now to the issue of damages.

[123] The plaintiffs are seeking damages of $629,804 in U.S. funds and $115,641 in Canadian funds (Exhibit 44) made up of three main components: first, back charges imposed by the general contractor, Libbe; second, additional expenses paid by the plaintiffs to complete the contract and for supplying “as built” drawings, and third, added production and management costs incurred by PSI. The damages are detailed in Schedule 1 to this judgment and are based on Exhibit 44 and the various exhibits that make up Exhibits 42 and 43. I will be making reference to the various categories in the schedule later in this judgment.

[124] Initially, the plaintiffs had sought to prove the damages primarily through the testimony of Mr. Little, a chartered accountant who is now the president of the Prestressed Group of companies. In 1999 and 2000, Mr. Little was vice president and general manager of both plaintiff corporations. In that capacity, he was involved in the bidding process for this and other projects, in attempting to solve the problems that arose on this project and in dealing with the financial consequences of the delay and the failure of the plaintiffs to complete their contract on time. Mr. Little dealt with Libbe in negotiating the final amounts of the back charges deducted from the original contract amount to be paid to Hollowcore. The amounts were contained in in the invoices prepared by Libbe and supported by invoices provided to Libbe by approximately 24 subcontractors. Mr. Little was also involved in the payment of additional amounts to erectors and other trades on account of delays and in calculating the additional production costs allegedly incurred by the actions or inactions of the defendants.

[125] On August 20, 2013, prior to the commencement of trial, counsel for the defendants advised counsel for the plaintiffs that he wanted to be able to cross-examine a representative of Libbe about the invoices and the amounts charged by the subcontractors.

[126] On August 28, 2013, counsel for the plaintiffs served notice pursuant to s. 35 of the Evidence Act, R.S.O. 1990, c. E.23 that he intended to present the Libbe invoices and supporting documents as business records.

[127] In his opening statement, counsel for the defendants made an objection to the admission of those records without calling a witness from Libbe who could be cross-examined about the accuracy of the charges and how they were linked to any actions or inactions on the part of the defendants. After argument on the issue, I made a ruling regarding how the plaintiffs would be permitted to proceed with respect to proof of the damages. In making my ruling, I reviewed the relevant law including Ares v. Venner, 1970 CanLII 5 (SCC), [1970] S.C.R. 608, the rulings of the Supreme Court of Canada in R. v. Khan, 1990 CanLII 77 (SCC), [1990] 2 S.C.R. 531, [1990] S.C.J. No. 81, R. v. Smith, 1992 CanLII 79 (SCC), [1992] S.C.R. 919 as well as R. v. Starr, [2000] S.C.R. 114 in which the Supreme Court of Canada articulated the new principled approach to hearsay exceptions: hearsay may be admitted if it can be demonstrated on the balance of probabilities to be necessary and reliable and that the relevance of the evidence outweighs its prejudice to the opposing party.

[128] After considering the reliability of the proposed records as business records and the necessity of admitting them in the proposed manner, I ruled that I was not satisfied that the requirements of reliability of the Libbe invoices and those of the supporting subcontractors as well as the necessity of admitting them had been established. The fact that Libbe was a company in another jurisdiction did not satisfy the necessity requirement, at least at that point in the proceeding. Further, without meeting the test required by the principled approach to hearsay evidence, there could be significant prejudice to the defendants if counsel was not able to cross-examine a representative of Libbe. If an appropriate representative of Libbe was not available to testify at trial I would reconsider argument with respect to necessity in considering whether to admit the documents but that would be a determination to be made later in the trial.

[129] I ruled that the evidence contained in the Libbe invoices would be inadmissible without a reasonable attempt being made to have someone from Libbe testify about the invoices. I also ruled, however, that I was not prepared at that time to require a representative of each of the sub trades to testify, a demand made for the first time by counsel for the defendants at the preliminary argument of the admissibility of the documentary evidence. I also ruled that Mr. Little could testify with respect to the items in the damages brief that did not relate to the back charges of Libbe.

[130] At trial, evidence about the Libbe invoices was given by Mr. Haas, a recently retired manager from Libbe. Evidence was also heard from Mr. Sample who worked for Assemblers during the project and who had supervisory responsibilities on the project. The admissibility of much of the evidence related to many of the damages was challenged by the defendants and to some extent by the third parties and remained an issue at the end of the trial.

[131] Before dealing with the various heads of damages sought by PSI and Hollowcore as well as dealing with the position of the third parties with respect to the damages, I will first deal with the legal principles related to the admissibility of business records at common law, the admissibility of business records by statute and a further consideration of the principled approach to the admission of hearsay. I also want to comment on the obligation of the court with respect to fixing damages. I will deal with the latter issue first.

Fixing Damages

[132] Halsbury’s provides a helpful summary of the current state of the case law on fixing damages:

HDA-40 Difficulty in assessment not a bar to awarding substantial damages for breach of contract. Where the plaintiff has suffered a loss as a result of the defendant’s breach of contract but it is difficult to estimate the value of that loss — that is, to award damages for the loss — the assessor, whether judge or jury, must do their best to estimate the plaintiff’s damages. It does not automatically follow that where it is difficult to assess the plaintiff’s damages the plaintiff is entitled to nominal damages only for the defendant’s breach of contract. Situations where the assessment is difficult because of the nature of the damages proved must be distinguished from situations where the assessment is difficult due to the absence of evidence of loss. Where the first situation exists, the plaintiff is potentially entitled to substantial damages for his or her loss, even if the assessment of those damages is imprecise or involves guess work. However, where the second situation exists, the plaintiff, having failed to prove his or her loss, is, at most, entitled to nominal damages for the defendant’s breach of contract.

[133] I find that the case before me falls into the first category, that is, there was evidence related to damages presented. It is a question of how much of the evidence to accept and of determining which damages resulted from the defendants’ negligence and breach of contract. In Bre-Ex Ltd. v. Hamilton (City), 2012 ONSC 147, [2012] O.J. No. 281, Rady J. was required to determine whether an excavation company was entitled to damages in excess of $1,000,000 arising from the City’s delay in authorizing the company to proceed with the work. Rady J. found that there were two periods of delay, both caused by the actions of the City. These delays resulted in damages to the plaintiff in excess of $850,000 for loss of revenue, fuel and labour costs, refinancing costs and equipment rental costs. In determining those damages, Rady J. had the assistance of three experts. One was an engineer who had prepared delay cost analysis on other occasions, had provided expert reports for trial and arbitrations and had been qualified in other cases as an expert on these issues. The second expert, also an engineer, was retained by the City to critique the report of the first expert and was an expert in project management. The third expert was both a chartered accountant and an engineer who was retained to calculate the plaintiff’s losses. Not surprisingly, each of the experts differed in their methodology which reached different conclusions. Nevertheless, Rady J. had the benefit of their advice and after considering all the reports, selected the approach of one of them which she found the most reasonable.

[134] I did not receive the same assistance. While Mr. D’Arcy was helpful with the liability issues, he was of little or no assistance with the damages aspect of the case. Neither the defendants nor the third parties called any expert evidence with respect to either liability or damages. At various times during his submissions, counsel for the third parties made comments about different aspects of the damages which came close to sounding like opinions. Although counsel clearly has significant technical knowledge in the field of engineering, his views could not be accepted as one might accept those of a witness testifying under oath. As a result, I find myself in a situation in which, having found liability against the defendants which resulted in losses to the plaintiffs, I am left to assess damages “even if the assessment of those damages is imprecise or involves guesswork” (Halsbury’s HAD-40).

[135] With respect to that approach, the most relevant cases in this area are Penvidic Contracting Co. v. International Nickel Co. of Canada, 1975 CanLII 6 (SCC), [1976] 1 S.C.R. 267; Martin v. Goldfarb (1998), 1998 CanLII 4150 (ON CA), 41 O.R. (3d) 161 (C.A.); and Eastern Power Ltd. v. Ontario Electricity Financial Corp., 2010 ONCA 467, 101 O.R. (3d) 81.

[136] The overriding principle was stated in Goldfarb, and recently applied by the Court of Appeal in TMS Lighting Inc. v. KJS Transport Inc., 2014 ONCA 1, 314 O.A.C. 133:

I have concluded that it is a well established principle that where damages in a particular case are by their inherent nature difficult to assess, the court must do the best it can in the circumstances. That is not to say, however, that a litigant is relieved of his or her duty to prove the facts upon which the damages are estimated. The distinction drawn in the various authorities, as I see it, is that where the assessment is difficult because of the nature of the damage proved, the difficulty of assessment is no ground for refusing substantial damages even to the point of resorting to guess work. However, where the absence of evidence makes it impossible to assess damages, the litigant is entitled to nominal damages at best.

[137] The Court of Appeal also warned against mischaracterizing the damages evidence; even in situations where a damages assessment is extremely difficult, since this does not mean there is an “absence of evidence”, and the plaintiff would be entitled to more than nominal damages (Eastern Power).

[138] In assessing the damages in these types of cases, Spence J. in Penvidic cited the decision in Wood v. Grand Valley Railway Co. (1915), 1915 CanLII 574 (SCC), 51 S.C.R. 283:

It was clearly impossible under the facts of that case to estimate with anything approaching to mathematical accuracy the damages sustained by the plaintiffs, but it seems to me to be clearly laid down there by the learned judges that such an impossibility cannot "relieve the wrongdoer of the necessity of paying damages for his breach of contract" and that on the other hand the tribunal to estimate them whether jury or judge must under such circumstances do "the best it can" and its conclusion will not be set aside even if the amount of the verdict is a matter of guess work.

[139] In that case, the jury had found that there had been a breach of contract by the defendant but the defendant argued that the damages were too remote and were unassessable. The court did not agree that the damages were too remote and with regard to the fact that they were unassessable said, “where it is clear that there has been an actual loss resulting from the breach of contract, which it is difficult to estimate in money, it is for the jury to do their best to estimate; it is not necessary that there should be an absolute measure of damages in each case.”

[140] If liability is made out, damages will begin with a review of the amounts claimed. The amount apportioned to the defendants’ breach will inherently involve some “guess-work”.

[141] In this case, plaintiffs have submitted numerous documents and invoices and have called Mr. Haas and Mr. Sample to explain the circumstances under which invoices were sent, received and paid as evidence with respect to damages. This is unlike the case where a plaintiff asks for the court to apply Penvidic and Goldfarb but did not attempt to adduce any records (see: 9071-5392 Quebec Inc. (c.o.b. Construction Phoenix) v. Katsoulis (2007), 63 C.L.R. (3d) 69 (Ont. Sup. Ct. J.)).

Admissibility of Business Records

1. At common Law

[142] The admission of business records is an exception to the hearsay rule. At common law, statements or recordings made by a person under a duty to do an act and record it in the ordinary practice of the declarant’s business are admissible in evidence, provided the recordings were made contemporaneously with the facts stated and without motive or interest to misrepresent the facts.

[143] Historically, the rationale behind this exception to the rule against hearsay was grounded in the fact that the person who recorded the statement in his or her ordinary course of business would fear dismissal should his employer discover an inaccuracy in the record (see: Sopinka, The Law of Evidence in Canada, p. 284). As such, the statement was said to possess a circumstantial guarantee of truth. Additionally, the routine of making such entries provided some likelihood of accuracy (see: Poole v. Dicas (1835), 1 Bing. N.C. 649 at 652; J.D. Ewart, “Admissibility at Common Law of Records” (1981) 59 Can. Bar. Rev. 52, at 54).

[144] In 1970, the Supreme Court of Canada reformed the common law rule in Ares v. Venner, 1970 CanLII 5 (SCC), [1970] S.C.R. 608, [1970] S.C.J. No. 26. It expanded the exception, holding that the notes of a nurse were admissible without the necessity of the original makers of the notes being called as a witness. Although Ares dealt only with hospital records, the decision applies to records of other businesses made in similar circumstances (see: Setak Computer Services Corp. v. Burroughs Business Machines Ltd. (1977), 1977 CanLII 1184 (ON SC), 15 O.R. (2d) 750, at 755, [1977] O.J. No. 2226 (H.C.J.)). Justice McLachlin, in R. v. Khan, 1990 CanLII 77 (SCC), [1990] 2 S.C.R. 531, [1990] S.C.J. No. 81, reiterated the view that admissibility of medical records was not dependant on an ability to cross-examine the nurses who created them.

[145] As explained by David Paciocco & Lee Stuesser, The Law of Evidence, 6thed (Toronto: Irwin Law, 2001) the existence of the common law exception can be very important since it allows for the admission of records that would not be admissible under the Evidence Act, R.S.O. 1990, c. E. 23 (“Ontario Evidence Act”). First, the common law exception applies to both “oral and written” statements, not just writings or records. Second, the common law exception does not require notice whereas, s. 35(3) of the Ontario Evidence Act requires notice to all parties of one party’s intention to tender business records. Finally, the court in Ares admitted much evidence that could be termed “opinion” whereas opinion evidence is not admissible under the Ontario legislation.

[146] The common law exception does have one limitation which s. 35 of the Ontario Evidence Act does not have. Records are not admissible under the common law exception if the maker has a motive to fabricate. Under s. 35(4) of the Ontario Evidence Act, the motive of the maker goes to weight rather than admissibility.

[147] The decision in Ares has also been relied on to permit the admissibility of “double hearsay”. Double hearsay is defined by the Saskatchewan Court of Appeal in R. v. Martin (1997), 1997 CanLII 9717 (SK CA), 8 C.R. (5th) 246 as “information contained in a record which was given to the record keeper who has no knowledge of its accuracy.” The rationale behind admitting double hearsay in the case of business records was summed up in the case of R. v. Grimba (1977), 1977 CanLII 1952 (ON SC), 38 C.C.C. (2d) 469 (Co. Ct.) at 471 as follows:

[T]he inherent circumstantial guarantee of accuracy which one would find in a business context from records which are relied upon in the day to day affairs of individual businesses, and which are subject to frequent testing and cross-checking.

[148] While these cases dealt with s. 30 of the Canada Evidence Act, R.S.C. 1985, c. C-5, s. 35(4) of the Ontario Evidence Act specifically states that “lack of personal knowledge by the maker, may be shown to affect its weight, but such circumstances to not affect it admissibility.” Thus, double hearsay would be admissible under both Acts.

[149] As referenced earlier, in 1990, the Supreme Court articulated a new principled approach to hearsay exceptions (see: Khan, Smith and Starr). Hearsay will be admitted if it can be demonstrated to be necessary and reliable and its probative value outweighs its prejudicial effects. In Starr, Iacobucci J. stated that traditional common law exceptions to the hearsay rule must comply with the new principled approach to hearsay exceptions. At para. 106 he explained:

I conclude that hearsay that does fit within a traditional hearsay exception, as currently understood, may still be inadmissible if it is not sufficiently reliable and necessary. The traditional exception must therefore yield to comply with the principled approach.

[150] The rationale behind the business records exception, mentioned above, is that business records are inherently reliable. Under the principled approach, the reliability requirement is satisfied where circumstances suggest that the hearsay information is accurate and trustworthy. Generally speaking, the business records exception to the hearsay rule would meet the reliability requirement (see: R v. West, 2001 CanLII 28424 (ON SC), [2001] O.J. no. 3413 (Sup. Ct.) and R. v. K(G.B.), 1993 CanLII 116 (SCC), [1993] 1 S.C.R.740 at para. 106).

2. By Statute

[151] The Ontario Legislature has enacted provisions in order to obviate the difficulties of adducing evidence of business records under the more narrow common law exception. The statutory provisions for admitting business records in a legal proceeding are contained in s. 35(1) and (2) of the Ontario Evidence Act:

35. (1) In this section,

“business” includes every kind of business, profession, occupation, calling, operation or activity, whether carried on for profit or otherwise; (“enterprise”)

“record” includes any information that is recorded or stored by means of any device. (“document”)

Where business records admissible

(2) Any writing or record made of any act, transaction, occurrence or event is admissible as evidence of such act, transaction, occurrence or event if made in the usual and ordinary course of any business and if it was in the usual and ordinary course of such business to make such writing or record at the time of such act, transaction, occurrence or event or within a reasonable time thereafter.

Notice and production

(3) Subsection (2) does not apply unless the party tendering the writing or record has given at least seven days notice of the party’s intention to all other parties in the action, and any party to the action is entitled to obtain from the person who has possession thereof production for inspection of the writing or record within five days after giving notice to produce the same.

Surrounding circumstances

(4) The circumstances of the making of such a writing or record, including lack of personal knowledge by the maker, may be shown to affect its weight, but such circumstances do not affect its admissibility.

Previous rules as to admissibility and privileged documents not affected

(5) Nothing in this section affects the admissibility of any evidence that would be admissible apart from this section or makes admissible any writing or record that is privileged.

[152] It is important to note that the provision requires that three criteria be met as preconditions to admissibility: (i) the record must be made in the usual and ordinary course of a business; (ii) it was in the usual and ordinary course of business to make such writing; and (iii) the record is a contemporaneous one. It is the second and third precondition that can affect the type of documents that may be admitted.

[153] In Canada (Minister of Citizenship and Immigration) v. Skomatchuk, (2006), 2006 FC 730, 293 F.T.R. 150, [2006] F.C.J. No. 926 (F.C.), the Minister sought admission of “Transfer Lists” which appeared to record the transfer of Nazi concentration camp guardsmen from one camp to another. In admitting the lists under s. 30 of the Canada Evidence Act, Snider J. held at para. 16:

I first ask myself whether those SS or police officers who prepared these records were part of a “business”. For purposes of s. 30 of the CEA, the term “business” has an expansive meaning and includes “any activity or operation carried on ... by any government ... or by any other body or authority performing a function of government”. While preparing these documents may not resemble the administrative or financial record keeping of a typical business enterprise, the German SS and Police officers responsible for the administration of the Trawniki SS training camp and other concentration camps were performing a function of the Nazi German government. In my view, this was a “business” as contemplated by s. 30(12) of the CEA.

[154] The Evidence Act expressly requires that the record be made “at the time of such act, transaction, occurrence or event or within a reasonable time thereafter.” In Setak v. Burroughs (1977), 1977 CanLII 1184 (ON SC), 15 O.R. (2d) 750 (H.C.J.) at 760, the court held:

A substantial factor in the reliability of any system of records is the promptness with which transactions are recorded. Unless it appears from the context of the record, or the testimony of the witness introducing the writings or records into evidence, that the act, transaction, occurrence or event described therein occurred within a reasonable time before the making of the writing or record, then such writing or record should not be admitted for the purpose of proving those matters. Where there is evidence of some delay in the transcribing, then in each case, it would seem to me, the Court must decide, as a matter of fact, whether the time span between the transaction and the recording thereof was so great as to suggest the danger of inaccuracy by lapse of memory.

[155] The Ontario Evidence Act specifically contemplates the admissibility of a record based upon hearsay. Section 35(4) provides that “lack of personal knowledge by the maker, may be shown to affect its weight, but … not … its admissibility.” Thus, a record based on information given to the recorder is nevertheless admissible (see: The Law of Evidence in Canada, at 297). However, it must be shown not only that the recorder made the record pursuant to a business duty, but also that the informant was also acting under a business duty at the time he passed on the information (see: Johnson v. Lutz, 253 N.Y. 124, 170 N.E. 517 (N.Y.C.A.) 1930). This American case has carried much weight in Canadian courts.

[156] Section 35(4) of the Evidence Act provides that even double hearsay is admissible in some circumstances. In this way, the legislation echoes the common law position in Ares. To reiterate the rationale behind the common law position — now adopted in legislation — the words of the court in R. v. Grimba are helpful:

[T]he inherent circumstantial guarantee of accuracy which one would find in a business context from records which are relied upon in the day to day affairs of individual businesses, and which are subject to frequent testing and cross-checking.

[157] If records are not admissible under the common law exception or the Evidence Act, the court may still admit them if satisfied that the requisite elements of the principled approach are fulfilled. In R. v. Lemay, (2005). 2004 BCCA 604, 247 D.L.R. (4th) 470, [2004] B.C.J. No. 2494 (B.C.C.A.), microfiche prints of cheques, inadmissible under ss. 29 and 31 of the Canada Evidence Act were nevertheless admitted because the tests of necessity and reliability were met.

Necessity and Reliability

[158] In R. v. Khelawon, 2006 SCC 57, 2006 SCC 67, [2006] 2 S.C.R. 787, the Supreme Court of Canada dealt again with the principled approach to admitting hearsay evidence. The case contains an exhaustive review of the jurisprudence on necessity and reliability. The tests draw heavily on the court’s decision in R. v. Mapara, 2005 SCC 23, [2005] 1 S.C.R. 358, which held:

The principled approach to the admission of hearsay evidence which has emerged in this Court over the past two decades attempts to introduce a measure of flexibility into the hearsay rule to avoid these negative outcomes. Based on the Starr decision, the following framework emerges for considering the admissibility of hearsay evidence:

(a) Hearsay evidence is presumptively inadmissible unless it falls under an exception to the hearsay rule. The traditional exceptions to the hearsay rule remain presumptively in place.

(b) A hearsay exception can be challenged to determine whether it is supported by indicia of necessity and reliability, required by the [page367] principled approach. The exception can be modified as necessary to bring it into compliance.

(c) In “rare cases”, evidence falling within an existing exception may be excluded because the indicia of necessity and reliability are lacking in the particular circumstances of the case.

(d) If hearsay evidence does not fall under a hearsay exception, it may still be admitted if indicia of reliability and necessity are established on a voir dire.

[159] In Khelawon, the court noted two ways in which a party can demonstrate that hearsay evidence is sufficiently reliable, at paras. 62 to 63:

One way is to show that there is no real concern about whether the statement is true or not because of the circumstances in which it came about. Common sense dictates that if we can put sufficient trust in the truth and accuracy of the statement, it should be considered by the fact finder regardless of its hearsay form. Wigmore explained it this way:

There are many situations in which it can be easily seen that such a required test [i.e., cross-examination] would add little as a security, because its purposes had been already substantially accomplished. If a statement has been made under such circumstances that even a sceptical caution would look upon it as trustworthy (in the ordinary instance), in a high degree of probability, it would be pedantic to insist on a test whose chief object is already secured. [s. 1420, p. 154]

Another way of fulfilling the reliability requirement is to show that no real concern arises from the fact that the statement is presented in hearsay form because, in the circumstances, its truth and accuracy can nonetheless be sufficiently tested. Recall that the optimal way of testing evidence adopted by our adversarial system is to have the declarant state the evidence in court, under oath, and under the scrutiny of contemporaneous cross-examination. This preferred method is not just a vestige of past traditions. It remains a tried and true method, particularly when credibility issues must be resolved. It is one thing for a person to make a damaging statement about another in a context where it may not really matter. It is quite another for that person to repeat the statement in the course of formal proceedings where he or she must commit to its truth and accuracy, be observed and heard, and be called upon to explain or defend it. The latter situation, in addition to providing an accurate record of what was actually said by the witness, gives us a much higher degree of comfort in the statement’s trustworthiness. However, in some cases it is not possible to put the evidence to the optimal test, but the circumstances are such that the trier of fact will nonetheless be able to sufficiently test its truth and accuracy. Again, common sense tells us that we should not lose the benefit of the evidence when there are adequate substitutes for testing the evidence.

[160] In R. v. Metalore Resourced Ltd., 2012 ONCJ 518, 72 C.E.L.R. (3d) 52, Dechert J. stated, at para. 123:

It is clear that the thrust of Mr. Justice Iacobucci’s decision in Starr is that to the extent that any traditional common law exceptions to the hearsay evidence rule, including the common law business records exception, may conflict with the requirements of the principled approach to hearsay, a principled analysis should be undertaken by the trial court. In Felderhof, Mr. Justice Hryn expanded this analysis to include the statutory business records exception authorized by section 35 of the OEA. In doing so, he applied the statutory interpretation maxim that legislation is presumed to be enacted “in compliance with the norms embodied in Canada’s entrenched constitution”, including “the rights and freedoms protected by the Charter”.

Necessity

[161] The general criteria for the necessity requirement are: necessity to prove a fact in issue and unavailability of a witness or witness is unable to provide a full and frank account or expedience or convenience. Finally, the hearsay must not be unduly prejudicial.

[162] In R. v. Lindsay, 2005 CanLII 479 (ON SC), [2005] O.T.C. 44, aff’d 2009 ONCA 532, leave to appeal to SCC refused, 33455 (December 1, 2009), Fuerst J. held, at paras. 19 to 20:

As the Supreme Court of Canada held in R. v. Khan, supra, the first issue is whether reception of the hearsay statement is necessary. Necessity means reasonably necessary, in other words the direct evidence of the witness is unavailable despite reasonable efforts to obtain it: R. v. F. (W.J.) (1999) 1999 CanLII 667 (SCC), 138 C.C.C. (3d) 1 (S.C.C.). It does not mean necessary to the prosecution’s case. Hearsay evidence does not become inadmissible because corroborative evidence is available: R. v. Smith (1992) 1992 CanLII 79 (SCC), 75 C.C.C. (3d) 257 (S.C.C.); R. v. Wilcox (2001) 2001 NSCA 45, 152 C.C.C. (3d) 157 (N.S.C.A.).

Necessity is met where the declarant is physically unavailable to testify, for example because of death, absence from the jurisdiction, insanity, testimonial incompetence, or non-compellability: R. v. B. (K.G.), supra.

[163] On reliability, Fuerst J. wrote, at paras. 25 and 28:

Reliability under the principled approach is restricted to an assessment of threshold reliability, meaning whether the circumstances surrounding the making of the statement provide circumstantial guarantees of trustworthiness. A circumstantial guarantee of trustworthiness is established if the statement was made under circumstances that substantially negate the possibility that the declarant was untruthful or mistaken: R. v. Smith, supra. In the words of Iacobucci J. at page 535 of R. v. Starr, supra, the trial judge must be satisfied that “notwithstanding the absence of the declarant for cross-examination purposes, the statement possesses sufficient elements of reliability that it should be passed on to be considered by the trier of fact”. The judge must identify the specific hearsay dangers raised by the statement, and determine whether the facts surrounding its making offer sufficient circumstantial guarantees of trustworthiness to compensate for those dangers: R. v. Hawkins (1996) 1996 CanLII 154 (SCC), 111 C.C.C. (3d) 129 (S.C.C.).

Factors that constitute circumstantial guarantees of trustworthiness include absence of a motive on the part of the declarant to lie; safeguards such that a lie could be discovered; possession by the declarant of peculiar means of knowledge of the events described; and the emergence of the statement naturally and without prompting: R. v. Khan, supra; R. v. Starr, supra. Where a statement is vague on a critical point, the reliability criterion is not satisfied: R. v. O’Connor (2002) 2002 CanLII 3540 (ON CA), 170 C.C.C. (3d) 365 (Ont. C.A.).

[164] In R. v. Smith (1992), 1992 CanLII 79 (SCC), 75 C.C.C. (3d) 257 (S.C.C.) Lamer C.J. noted that necessity does not only relate to the unavailability of a witness, it also relates to expediency or convenience. For example, in R. v. C. (W.B.) (2000), 2000 CanLII 5659 (ON CA), 142 C.C.C. (3d) 490 (Ont. C.A.), aff’d 2001 SCC 17, [2001] 1 S.C.R. 530, necessity was established by the inconvenience of requiring a court reporter to prove a prior judicial proceeding and the fact that the transcript is the best evidence. Another example was in R v. L. (C.) (1999), 1999 CanLII 1491 (ON CA), 138 C.C.C. (3d) 356 (Ont. C.A.), where a letter of a doctor to the Therapeutic Abortion Clinic of a hospital indicating paternity was found to meet the necessity requirement because it would be unrealistic to expect medical personnel to recall the specific event due to its unremarkable nature.

[165] Further guidance was given by Cromwell J.A. in R. v. Wilcox, 2001 NSCA 45, 192 N.S.R. (2d) 159 on applying the necessity and reliability tests. He wrote that necessity must be applied flexibly; unavailability is not a requirement for necessity (para. 71). In Wilcox, the detailed nature of the accounting record being adduced did not “lend itself to a witness having an independent recollection of the entries on record” and “any testimony on the record is based on the writing contained within it”. Cromwell J.A. found that there was circumstantial evidence of reliability. Of particular note is the following excerpt where he used a traditional exception to assist in the principled approach, at paras. 66 to 67:

Threshold reliability is not directly concerned with whether the contents of the statement are true, but with whether the circumstances surrounding the statement provide circumstantial guarantees of its trustworthiness: see Starr per Iacobucci J. at p. 534. The question of whether such guarantees are present has two aspects which reflect the underlying rationalia of the hearsay rule and most of its traditional exceptions. The first concerns whether the statement was made in circumstances tending to negate inaccuracy or fabrication. Factors such as the absence of any motive on the part of the declarant to fabricate the evidence are relevant to this inquiry: see e.g. Starr, supra, at [paragraph] 214 - 215. The second aspect of threshold reliability is concerned with whether the statement was made in circumstances which provide the trier of fact with a satisfactory basis for evaluating the truth of the statement: see e.g. Hawkins, supra at [paragraph] 75. Consideration of threshold reliability requires an examination of the specific hearsay dangers raised by the statement and determination of whether the facts surrounding it “...offer sufficient circumstantial guarantees of trustworthiness to compensate for those dangers.”: see Hawkins, supra at [paragraph] 75. The focus, however, remains on circumstances related to the statement itself, not on extraneous matters relevant to ultimate reliability such as whether there is other confirmatory evidence or on the reputation for truthfulness of the declarant.

As mentioned earlier, traditional hearsay exceptions may be of assistance in identifying factors which may or may not serve as circumstantial guarantees of trustworthiness. With respect to business records, the routine nature of their creation, the fact that they are relied on for business purposes and the absence of any motive to misrepresent the information recorded have all been identified in the traditional hearsay exception as factors which provide some circumstantial guarantee of trustworthiness justifying reception for its truth of the hearsay contents of such records. [Emphasis added.]

[166] In 606346 Alberta Ltd. v. Abugov, 2000 ABQB 122, 78 Alta. L.R. (3d) 249 (QB), aff’d 2003 ABCA 51, 11 Alta. L.R. (4th) 206 (C.A.), a case relied on by the defendants with respect to the admissibility of certain invoices presented in evidence by the plaintiff, the plaintiff hired the architect defendants to supply plans to allow for the construction of a conference centre. The plaintiff alleged cost overruns due to delays and other problems on the part of the defendant. In his analysis on proving damages, Nation J. considered the problem of introducing invoices the plaintiff received from various subcontractors to prove damages to the plaintiff.

[167] In that case, the length of time between the completion of the project and the end of the trial was five years. Nation J. did not admit the invoices as either business records or under the principled exception to the hearsay rule, finding that neither the requirements of necessity or reliability had been established. The plaintiff had argued that the fact that he had received them supported by the evidence of two experts, the first being the plaintiff’s accountant who reviewed the invoices and the second who testified about how cost overruns are quantified as damages in the construction industry was sufficient to have them admitted.

[168] On the issues of necessity and reliability, Nation J. found, at paras. 152 to 153:

Under the Khan extension of the hearsay exception, there must be necessity and an innate reliability to the document or hearsay evidence. Here there is no necessity. No one has suggested that there is any reason a subpoena would not cause Mr. Saltman or the sub trades to come and testify about their work. Further, the circumstantial guarantee of trustworthiness required by the court is not found. There is nothing about an invoice sent in the course of a project that gives the document some type of innate trustworthiness as contemplated by the court in Khan. As a result I am not willing to hold that exhibit 760, a compilation of all the invoices paid, can be used as the total cost of the project, from which the cost clause amount would be deducted.

[169] Abugov, relied on by the defendants is not binding on this court and can be distinguished on the facts. In that case, the plaintiff had hired a construction company, which was responsible for the scheduling, costing, budgeting and supervising the construction of the project. Mr. Saltman was the representative of that company and was present at the meeting at which the cost of the proposed project was discussed with various parties, including the defendants. Mr. Saltman was not called as a witness even though he would have had information that would have been of assistance to the court. Had Mr. Haas and Mr. Sample not been called as witnesses by the plaintiffs, the evidence in the case before me would have been similar to that before Nation J. in Abugov in that evidence could have been called that was not called.

Admissibility of the Invoices

[170] With regards to the legislative business records exception, it is clear that notice must be given to all parties to an action to introduce business records under the exception. In this case, notice was given on August 28, 2013.

[171] With regards to reliability, Cromwell J.A. found that records made during the course of business, for business purposes, and are being relied upon for business purposes (in this case, by the contractor being billed), absent any motive to misrepresent the information, may meet threshold reliability with regards to admissibility (Wilcox, at paras. 67 to 68).

[172] With respect to necessity, unavailability is not a strict requirement to admitting hearsay. In Smith, Lamer C.J. held that it also relates to expediency or convenience. In R. v. L.(C.) the court held that calling the doctor who had authored a letter to an abortion clinic regarding paternity a number of years earlier would be unrealistic because it was such a routine letter that the doctor would be unlikely to remember it. The test for necessity had been met.

[173] In similar fashion, the invoices sent to Libbe by their subcontractors for work done by them were equally unremarkable. It would have been a waste of trial time to call all of the subcontractors as witnesses after almost fifteen years. Mr. Haas was a helpful witness. It was his job to oversee the projects in which Libbe was involved to ensure that invoices being paid by Libbe represented goods and services required by Libbe and that they were delivered or provided in the quantity and condition expected.

[174] Counsel for the defendants argued that the plaintiffs could only prove their losses by way of admissible evidence. He acknowledged that there could be cases in which evidence in respect of damages was not found to be admissible but if the court was satisfied that the plaintiff has suffered some loss, but had failed to prove it then a nominal award could be given. In other cases, plaintiffs may allege that they had suffered damages but are unable to provide appropriate evidence in which case counsel argued that the claim for damages should be dismissed.

[175] Counsel for the defendants also argued that I should find the evidence of Mr. Haas that he had spoken to Mr. Avers who told him that certain amounts of money had been spent for various costs to be inadmissible hearsay evidence, even though it is supported by an invoice.

[176] Counsel for the defendants also argued that the Libbe records supported by subcontractor invoices should not be accepted as both the reliability of the subcontractor invoices is suspect and there was no evidence led as to why Mr. Avers could not have testified. An example given by counsel was an invoice for the delivery of some concrete. The practice described by Mr. Haas was that a “ticket” would be left for each delivery of concrete. The invoice would refer to the ticket number. Although he could have done so, Mr. Haas did not go back and check the ticket number on the invoice to the actual ticket that had been left by the concrete delivery person. Counsel argued that there was no inherent reliability in the information on the invoice. He urged me to find that the requirements of principled approach to the admissions of hearsay had not been met. Neither the inconvenience nor the difficulty of calling witnesses to prove the evidence had been established.

[177] Counsel also argued that the evidence should not be admitted as business records as the admission of such a record has to be proven properly; that is, the record has to be made in the usual and ordinary course of business; second, the record has to be made pursuant to a duty to make that record in the usual and ordinary course of business and third, that the record has to be made at the time or within a reasonable period of time thereafter. Counsel also argued that the passage of time does not widen the gates of admissibility, that they always remain the same.

[178] I find the invoices meet the test for threshold reliability. A representative of Libbe was called to testify. It was not necessary to call all of the subcontractors. Libbe, the general contractor relied on those invoices that were prepared by persons who have nothing to do with this proceeding. The invoices were prepared and received in the ordinary course of business. Libbe paid them, after determining them to be commercially reasonable and reliable, making them inherently trustworthy. The documents themselves, supplemented by the evidence of Mr. Haas, fairly described the process undertaken by Libbe to determine whether those costs should be paid and passed on to Hollowcore. Mr. Haas has knowledge of the construction business and the financial systems accepted in the industry to ensure that all the costs involved in a project are captured and appropriately assigned.

[179] In Norfolk Western Railway, the court accepted the evidence of Janet Russell with respect to freight invoices. Ms. Russell had been employed by the plaintiff for over 20 years and was an accounts manager, responsible for unpaid accounts. In her evidence, she was able to describe in some detail the financial practices within the railway business and how freight charges are collected. As in the case before me, counsel for the defendants in Norfolk had put the admissibility of the business records in issue. Counsel argued they were not being admissible as business records pursuant to the Evidence Act or as hearsay and that they could be admitted only if a representative of the company that created the freight invoices was called to testify. The court, in Norfolk, admitted the shipping documents based on the evidence of Ms. Russell who established, as did Mr. Haas, that the practice in the railway industry was to create the documents in question. “It is clear that they were routine documents and that the industry has routine practices it follows in the creation of the documents.”

[180] As in Norfolk, I find that the plaintiffs have established with sufficient probity that the invoices in question were “made in the usual and ordinary course of business and [that] it was in the usual and ordinary course of business to make such a record.” In addition, Mr. Sample’s evidence was helpful in describing the manner in which the additional costs for the Assemblers were calculated. His evidence with respect to how daily time cards were prepared by workers, provided to the foreman and then passed on to payroll for payment was similar to the evidence of Mr. Haas in regard to pay systems for Libbe workers.

[181] Mr. Little was also a helpful witness. His knowledge of the financial processes within both Hollowcore and PSI as well as his explanations as to how each invoice was scrutinized looking for duplications and overcharges was credible and reliable. He would acknowledge when he was not sure of an answer or did not know the answer rather than guessing at an answer which might have been helpful to the plaintiffs. His forthrightness added to the credibility and reliability of his overall evidence.

[182] The admission of lay witness evidence is a matter of judicial discretion. The lay opinions from Mr. Haas, Mr. Sample and Mr. Little were being tendered to outline the business practices at the time that the business records were created. While Mr. Haas did not create the business records, he was involved in the business to an extent that he is knowledgeable in the creation of the records and their use.

[183] The opinions must be considered in the context of the myriad of factors that necessitated these opinions: the delay in getting this matter to trial, the sheer volume of records that would require a number of individuals to speak to, in circumstances in which those individuals are unlikely to remember the creation of the records and the importance of the opinion is to the issues before the court.

[184] Generally, a non-expert may not give opinion evidence but may testify only to facts within her or his knowledge, observation and experience (Sopinka, Lederman & Bryant’s The Law of Evidence in Canada, 3d Edition, §12.2). The Supreme Court of Canada set out the modern approach to lay opinion in R. v. Graat, 1982 CanLII 33 (SCC), [1982] 2 S.C.R. 819. This was established because “the line between fact and opinion is not always clear”. The approach is summarized in Sopinka at §12.14:

(1) the witness has personal knowledge;

(2) the witness is in a better position than the trier of fact to form the opinion;

(3) the witness has the necessary experiential capacity to make the conclusion;

and

(4) the opinion is a compendious mode of speaking and the witness could not as accurately, adequately and with reasonable facility describe the facts she or he is testifying about.

[185] In Graat, Dickson J. set the general principle regarding lay opinion is helpfulness. He wrote, “The witness had an opportunity for personal observation. They were in a position to give the court real help.”

[186] In this case, the lay witnesses testified about financial processes and procedures within their organization. In my view, their evidence on what they had observed and experienced with regards to those processes is admissible. The evidence goes to the routine nature of the creation of the business records in the analysis on reliability.

[187] In addition, I had the evidence of Mr. D’Arcy with respect to the nature of the errors which led to some of the damages including those identified in PSI’s letter to Visco of September 7, 1999, including shop drawings missing lifting devices, deficiencies providing a sufficient level of concrete over the stirrups as well as a number of deficiencies with respect to the spandrels. By September 20, 1999, Libbe commented in a letter to Hollowcore about the previous errors in the drawings that had not been corrected in subsequent drawings. Mr. D’Arcy identified numerous other errors that “produced problems in the field and added costs.” In particular, he pointed out the errors in the spandrel piece drawings that resulted in the spandrel not matching the slope of the deck resulting in PSI having to provide a special column cover to hide the misalignment. As well, the column drawings did not confirm to the design calculations which, if not caught and corrected could lead to serious structural problems. All of these problems led to delay, and the cost of which is being sought from Mr. Visocchi and Visco.

[188] Unlike the predicament in which Bellamy J. found herself in Eastern Power, I had witnesses who I found to be both credible and reliable and who were experienced in the aspects of the business about which they testified. Because of these findings, I do not find it was necessary or practical to call representatives of all the sub trades to testify.

[189] Even though I have admitted the invoices, it is still necessary for me to determine whether individual costs can be linked to the breach of contract by Visco and or the negligence of Mr. Visocchi and Visco.

[190] Before addressing each of the categories of damages being sought by the plaintiffs, I want to comment briefly on the positions of the defendants and of the third parties with respect to the damages.

Position of Defendants Regarding Damages

a) Hollowcore Damages

[191] With respect to the damages claimed by Hollowcore, the defendants disputed the amounts for which it was back charged by Hollowcore, in particular the claims for excess wages that Libbe had to pay to its employees for work that would not have been necessary, had Hollowcore performed its contract. In addition to arguing that the records on which the wage claims were based were not admissible as business records.

[192] The defendants also argued that there was no evidence on behalf of Libbe that the amount of the wages, losses claimed exceeded the amount of wages it would have incurred in performing its contract. As well, there was no evidence to link the need for payment of additional wages to mistakes made in the defendants’ drawings.

[193] With respect to the winter works costs that Libbe charged back to Hollowcore, the defendants argued that Hollowcore was not obligated to complete its contractual obligations to Libbe until November 17, 1999. That date was agreed to on August 23, 1999. In addition, Mr. Haas acknowledged that Libbe would have required an additional two and one-half months to complete its work on the project, bringing the Libbe completion date to at least the end of January 2000. As a result, the winter works costs would have been incurred in any event. With respect to the invoices supporting the winter works costs, the defendants argued that they were not properly admissible as business records.

[194] Regarding the remedial work expenses and the miscellaneous expenses back charged to Hollowcore by Libbe, it was the defendants’ position that there was no evidence to prove that the expenses resulted from errors in the drawings prepared by the defendants.

[195] With respect to the increased administration expenses for project manager and superintendent expenses charged back to Hollowcore by Libbe, it was the position of the defendants that they were not costs that were actually incurred by Libbe in addition to what they paid the project manager and superintendent. The defendants argued that they were not costs that would have been avoided but for the errors made in the drawings by the defendants.

b) Damages Related to Assemblers Inc.

[196] There are two kinds of damages sought by Hollowcore in relation to Assemblers: charges related to wages paid by Libbe to have its employees assist the Assemblers Inc. for work Assemblers were contracted to provide and for the $125,000 Hollowcore paid Assemblers Inc. in addition to the original subcontract price. It was the position of the defendants that it was not established on the evidence what portion of the work for which these charges are claimed would have been required to be performed if Hollowcore delivered access to the site to Assemblers Inc. on an earlier date. The defendants also argued that Mr. Sample could not identify whether the need for the work for which Assemblers sought additional payment resulted from mistakes in the defendants’ drawings or mistakes in which the components were made.

c) Damages Claimed by PSI

[197] The defendants argued that PSI did not call evidence to prove that it was not fully paid for costs that it incurred in fulfilling its obligations to Hollowcore from revenues received by Hollowcore from Libbe. Although affiliated companies, PSI and Hollowcore are separate corporate entities; further, it is only Hollowcore which had a contract with Libbe. It was PSI’s obligation to manufacture and supply the precast components to Hollowcore for Libbe.

[198] The defendants argued that the documents relied on by PSI are only internal documents generated by PSI in relation to this project. They consist of a calculation of cost overruns prepared by Mr. Kapusniak and an internal PSI documents prepared by Mr. Little to show production overruns for various components. In addition to arguing that they were inadmissible as business records, which I have dealt with earlier in this judgment, the defendants argued that these costs were measured against the estimated costs without leading any evidence from the estimator. The fact that costs exceed the estimate is not proof that the losses could have been avoided if the defendant had not breached the contract or the defendants had not breach the duty of care.

Position of the Third Parties Regarding Damages

[199] The third parties agree that the policy of insurance obligates them to indemnify the defendants for any damages that either or both of them have to pay “as a result of an error, omission or negligent act in performance of a professional service for others.” Those damages would include the cost of corrective work if the plaintiffs’ manufactured concrete pieces based on produced and approved drawings. If, however, they manufactured them without approved drawings that would not be covered.

[200] If the plaintiffs prove damages as a result of inexplicable delays, the third parties rely on the exclusion in the policy, the content of which was set out earlier in this judgment.

[201] Counsel for the third parties acknowledged that the exclusion contains an exception which provides “. . . unless such failure (to provide the drawings on time) is as a result of an error or inaccuracy in the preparation of those documents.” There is no insurance coverage if an insured fails to do his or her work in a timely manner or if he or she fails to devote sufficient resources, time and energy to the assignment. It is the third parties’ position that the circumstances in this case arise from the failure of the defendants to complete drawings in a timely manner.

[202] Counsel for the third parties argued that I must be suspect about the evidence of Mr. Collavino and Mr. Little because the plaintiffs are aware that, in the event I find that the exclusion clause applies, the plaintiffs will end up with a “hollow” judgment. Counsel also suggested that I should be suspect of Mr. Collavino’s evidence with respect to Mr. Visocchi’s actions as he suggested that because Mr. Visocchi and Mr. Collavino were related by marriage that somehow that would influence the evidence that Mr. Collavino gave with respect to Mr. Visocchi.

[203] Where the plaintiffs and defendants argued that the failure to complete the drawings was as a result of errors and inaccuracies in the first place and therefore, the exception to the exclusion applies, the third parties argued that the essence of the plaintiffs’ claim as set out in the statement of claim is the failure of the defendants to do the work in a timely manner. The exception to that submission was paras. 30 and 31 of the statement of claim in which the third parties acknowledged that specific allegations were made about errors that resulted in corrective work and therefore damages.

[204] Counsel for the third parties also argued that the plaintiffs had failed to link many of the alleged costs to the actual drawings and errors that were made in the drawings which led to the deficiencies and the need for correction.

The Damages

[205] I will deal with each of the categories of damages sought by the plaintiffs in turn and do so in accordance with the direction given by Laskin J.A. in Eastern Power and by Spence J. in Penvidic discussed earlier in this judgment.

[206] In assessing the damages as they have been presented to me, I am mindful of the fact that the burden to prove damages on the balance of probability lies with the plaintiffs. At the same time there was no evidence led by either the defendants or the third parties which challenged the plaintiffs’ theory on damages. The only witness who testified for the defendants was Mr. Visocchi who did not address the issue of damages. In dealing with the damages, I will be making reference to the categories of damages set out in Schedule 1. The amounts set out in the schedule are backed up by documentation found in Exhibits 42 and 43 as summarized in Exhibit 44.

[207] The plaintiffs did their own calculation of Canadian equivalent funds for U.S. amounts as set out in Exhibit 44. The third parties have done the same in their submissions. The rates used for equivalents by each side differ. For the purposes of my determination on each kind of damage sought, and Schedule 1, I will be using the currency in which the costs were incurred and paid. Later in the judgment, I will set out my determination of how the damages in U.S. funds will be converted.

1. The Back Charges of Libbe to Hollowcore

[208] Back charges were imposed by Libbe on Hollowcore on account of winter costs that were incurred because Hollowcore failed to meet its commitment to complete its work by November 17, 1999. These costs were made up of labour and materials provided by Libbe directly as well as charges incurred by Libbe on account of labour and materials supplied to them by third party sub trades.

[209] Back charges were also imposed by Libbe on Hollowcore on account of drawing errors that resulted in additional work or supply of materials by Libbe or by third party sub trades to Libbe.

[210] I will deal first with the winter costs. The plaintiffs urged me to find that the project could have been completed by Hollowcore on or before September 30, 1999 had Mr. Visocchi and Visco completed the drawings in mid-August, the date by which Mr. D’Arcy testified the work should have been completed, permitting the site to be released to start its work immediately after. Thus, regardless of when Libbe was able to complete its work, there was no possibility of any winter costs being charged back to Hollowcore.

[211] The defendants argued that by August 25, the date agreed on by Libbe for Hollowcore to be finished was November 17. Libbe would then have been completing its work during the winter months and would have incurred winter costs in any event. Thus, there should be no charge back to Hollowcore for which the defendants should be responsible.

[212] The third parties argued that the reason the work extended into the winter was all the result of the delay in the defendants completing their work on time and thus, the costs are not recoverable from the third parties.

[213] With respect to the arguments of the plaintiffs and defendants, I find that neither is supported by the evidence that I accept. As for the position of the third parties, I will deal with them later in the judgment when I deal with the third party claim.

[214] I find that it was appropriate that Libbe charge back some of the winter costs to Hollowcore but that not all of them are recoverable by way of damages from the defendants. The agreed-upon date for completion was November 17, 1999. Hollowcore did not finish its work until well into January 2000. Libbe would have incurred some winter costs even if Hollowcore’s work had been completed on November 17. Thus, it is appropriate to apportion the winter costs between Hollowcore and Libbe on a two-thirds, one-third basis. An appropriate amount for damages for winter costs, not including the $93,000 for the labour or the charge back to Assemblers, is $86,879 USD. This amount represents two thirds of the costs of items at Tabs 1 to 9, 20 and 23 on Schedule 1.

[215] With respect to item 24, the evidence regarding the back charges to the Assemblers was less clear. This was related to work that the Assemblers should have done but which was carried out by Libbe to keep the project on schedule. The evidence of Mr. Haas as to what exactly that work consisted of was unclear. At least some of it related to damage done to an office by the Assemblers. Why this was included in the charge back to Hollowcore was unclear. While I accept the evidence of Mr. Haas that Libbe employees did work that should have been done by Assemblers, I have reduced the amount to one-half or $13,000 USD.

[216] With respect to the back charges related to errors in drawings, I find that the following amounts are recoverable by way of damages:

Tab 10 sample spandrel cover $ 117.00

Tab 11 concrete on double T $ 170.00

Tab 12 core drill floor drains $ 1,210.00

Tab 13 shear wall repairs $ 2,748.00

Tab 15 Western Waterproofing $ 3,170.00

Tab 17 reworking handrails $ 745.00

Tab 18 cut missing openings $ 3,310.00

Tab 21 shear connector repairs $19,600.00

Tab 22 extra drawing reviews by Rich $ 9,737.00

& Associates

and by Paragon $ 9,800.00

$50,607.00 USD

[217] I accept the evidence of Mr. Collavino that the extra work related to items at Tabs 10, 11, 12, 13, 15, 17, 18 and 21 related to errors in the drawings. With respect to the extra work of the architects and the engineers required to review the drawings produced by Mr. Visocchi and Visco, Exhibit 14 clearly demonstrates the number of time numerous drawings had to be sent back for correction and re-reviewed on account of errors or omissions. It is reasonable that extra work was required by the architects and engineers and that this cost would be charged back to Hollowcore.

[218] With respect to the items at Tabs 14, 16 and 19, the evidence was not clear that the costs were related to errors in drawings or delay in producing the drawings.

[219] Both the defendants and third parties disputed the amount paid to Libbe by Hollowcore on account of additional labour costs incurred by Libbe for its own employees and those of subcontractors. The plaintiffs negotiated down the total amount claimed by Libbe to a total payment of $186,000 which they divided arbitrarily between winter costs and drawing issues. I accept the evidence of Mr. Collavino that he was frequently on the site and observed the extra work being done or the results of the extra work being done both by Libbe employees or subcontractors. I also accept the evidence of Mr. Collavino and Mr. Little that they “drilled down” into the expenses claimed by Libbe and were satisfied that they were successful in removing duplicated expenses and unnecessary expenses. At the same time, I am concerned that they included in those expenses notional costs claimed by Libbe for Mr. Avers being unable to work on other projects. Accordingly, I reduce the damages in relation to labour costs to Libbe both for their own and subcontractors to $150,000 USD.

2. Additional Expenses to Complete Contract

[220] In addition to the back charges to Libbe, Hollowcore is also claiming damages for other costs they incurred to fulfill their contractual obligations to Libbe. One of those costs was the result of work done by Brint Electric (“Brint”). Brint invoiced Libbe for $25,152. Hollowcore obtained permission from Libbe to negotiate directly with Brint. As a result of the negotiations, Hollowcore was successful in reducing the amount to $11,000. Given that I had reduced the damages allowed for the winter costs by one-third, and Hollowcore was able to reduce the amount owing to Brint to less than half, I fix Hollowcore damages in the full amount of $11,000 USD.

[221] With respect to the cost of the installation of the column cover panels and the ongoing inspections of the covers in the respective amounts of $25,475.69 and $3,725, they were acknowledged by the third parties to be the result of errors in the drawings, I fix damages on account of these items in the total amount of $29,200.69 USD.

[222] With respect to the back charges by Assemblers to Hollowcore, these related to additional labour required beyond the scope of the original contract, totalling almost $280,000. Although Hollowcore settled with Assemblers for $125,000, the evidence from Mr. Sample made clear that some of the extra work resulted from production errors. When Mr. Little was questioned about which parts of the additional work related to errors in the drawings, Mr. Little was unable to say. He said that Mr. Kapusniak had identified a number of them as being “Visco” or “”Visocchi” errors. Mr. Little had no direct information as to how Mr. Kapusniak might have made those determinations. When Mr. Sample was asked whether he was aware whether the extra work was related to drawing errors, he could only identify a few. It was Mr. Little’s evidence that the Assemblers would not likely have enough information to make that determination.

[223] The evidence related to this claim for damages was not conclusive as to how errors in the drawings related to specific aspects of the additional work required to be done by the assemblers. Some of the additional work authorizations (“AWA’s”) had notations that indicated certain components had been produced incorrectly. Mr. Collavino acknowledged that in an effort to try to reduce the delay, PSI manufactured some items from drawings that were not approved. They also manufactured items that were wrong because of drawing errors. Counsel for the third parties argued that none of the AWA’s had been linked directly to drawing errors.

[224] Given the numerous corrections that were required of the drawings as shown in Exhibit 14, the nature of the extra work required to be done by Assemblers, and the detailed evidence of Mr. Collavino over almost eight days with respect to the numerous drawing errors, I conclude that two-thirds of the extra work reasonably related to drawing errors and the resulting delay. I, therefore, fix damages for the extra payment to Assemblers at $83,325 USD. Counsel for the third parties argued that since the payment of $125,000 represented 45 per cent of the original claim of $280,000, and thus any amount fixed for damages as a result of the payment by Hollowcore to Assemblers should be reduced by the same percentage. I was not provided with any authority for the novel argument and decline to make such an adjustment.

3. Additional Production and Management Costs

[225] The rest of the damages sought by the plaintiffs relate to costs claimed by both Hollowcore and PSI for losses they sustained as a result of the breach of contract by Visco and the negligence of Visco and Mr. Visocchi. The documents are found at Tab 35 of Exhibit 43.

[226] Hollowcore sought a total of $32,860 for their labour costs relating to repairing product and installing the winter enclosure. The costs were incurred beginning December 27, 1999 to July 3, 2000. From December 27, 1999 to January 14, 2000, the costs were related to tarping the building for winter conditions. Labour costs were calculated at $35 per hour which Mr. Little testified was the average hourly wage. There was no other evidence led to dispute this amount and I accept it as accurate. Hollowcore incurred room and board costs as well. Labour costs are allowed at $15,960 and room and board costs at $4,095 for a total cost of $20,055.10 USD. Hollowcore had not completed its work by November 17, 1999 and it continued into January 2000. This cost was incurred during that time and it is attributed to the delay by the defendants in producing accurate and timely drawings.

[227] From January 25, 2000 until July 3, 2000, Hollowcore employees spent 268 hours at $35 per hour repairing various installations such as double tees, patching, cutting rustification groves, and repairing walls. In addition to the hourly wages which totalled $9,380, Hollowcore incurred room and board costs of $2,690 for a total of $12,070. The third parties argued that few of the entries except for $280 which related to the column covers could be proven to be the result of problems arising from the drawings. Some of the repairs related to production error which was the result of premature production. The necessity for some of the repairs could not be explained. As a result, I fix damages for repairs at $8,000 USD.

[228] Hollowcore also sought $35,133.54 in damages for supplier costs related to the repairs and installation of the tarp. The documents are found at Tab 38 of Exhibit 43. The items related to Triden Construction from which the tarp was obtained amount to $12,541. An additional $1,440 was spent for field measures related to the column covers. There were additional entries for hardware used to install the tarp and supplies related to the repairs. Again, the evidence as to how the other supplies were related to errors or delay in producing accurate drawings was not clear. In all, I fix damages in the amount of $21,000 USD for supplier costs.

[229] PSI sought damages for the cost of providing “as built” drawings to Libbe for the owner. Mr. Collavino testified that the owner demanded them and I accept that evidence. The cost was $4,770 USD. That is a reasonable expectation for an owner to have at the completion of a project of this kind and I allow that amount in damages. I also allow PSI $11,048.48 CAD in damages for the cost of the production and shipping of the column covers. Counsel for the third parties argued that this amount should be reduced because it included a profit factor of 25 per cent which was “inappropriate”. Counsel gave no authority for his position and I decline to accept that submission. PSI is entitled to the profit on the additional production.

[230] PSI also sought $11,250 CAD for management time that was lost on account of time that Mr. Collavino and Mr. Little had to spend on this project that was over and above what would be expected. In the same way that I declined to include in the back charges of Libbe costs related to Mr. Avers’ inability to work on other projects because there were no actual funds given to Mr. Avers, I decline to include these costs in PSI’s damages. Neither Mr. Collavino nor Mr. Little received additional funds.

[231] The final damages sought by PSI in the amount of $93,343 are for inefficiencies related to inaccurate drawings. The documentation for this claim is found at Tab 36 of Exhibit 43. The amount sought by PSI was comprised of labour cost overruns based on estimates prepared for the job. It is PSI’s position that the extra labour costs are related directly to the errors made in the drawings.

[232] Counsel for the third parties argued that there was insufficient evidence on which to come to this conclusion. The basis on which the estimates were prepared was not established at trial. The estimator did not testify and estimating is not an exact science. Without knowing how the estimates were prepared, the cost overruns could not be linked to the problems with the drawings.

[233] Like other internal documents provided by the plaintiffs, I accept that they are business records as they meet the definition contained in s. 35 of the Ontario Evidence Act set out earlier in this judgment. Counsel for the plaintiffs argued that the amounts claimed do not relate to profits that PSI expected to make but rather to losses they incurred due to the negligence of the defendants. The losses relate to the difference between what it would take to break even on their bid and what they ended up having to pay to produce those items. The defendants and third parties took the position that these are not losses that are compensable. It is the nature of business that not all ventures are successful.

[234] While there is some truth in the positions of all the parties, I accept the detailed evidence of Mr. Little as to how he arrived at these figures. While I am not satisfied that each of the losses can be linked directly to an error in a drawing, I can conclude that the significant number of errors made by the defendants would more likely than not affect the efficiency of the production process and lead to some losses. I fix damages related to those losses at $35,000 CAD.

Conclusions Regarding Damages

[235] In summary, the plaintiffs are entitled to the following damages:

1. Libbe back charges for winter costs $ 86,879.00 USD

2.a) Libbe back charges for errors in drawings $ 50,607.00 USD

2.b) Libbe back charges for the Assemblers $ 13,000.00 USD

Libbe back charges for labour costs $163,000.00 USD

$287,486.00 USD

3. Brint Electric costs $ 11,000.69 USD

4. Costs related to column covers $ 29,200.69 USD

5. Extra payment to Assemblers $ 83,325.00 USD

6. Additional labour and repair costs $ 28,055.00 USD

7. Supplier costs $ 21,000.00 USD

“As built” drawings $ 4,770.00 USD

Total Damages in U.S. Funds $477,837.38 USD

8. Cost of production and shipping of column covers $ 11,048.48 CAD

PSI “Inefficiencies” $ 35,000.00 CAD

Total Damages in Canadian Funds $ 46,048.48 CAD

The Third Party Claim

[236] It was the position of the defendants that the liability sought to be imposed against the defendants resulted from errors and inaccuracies in the way in which the defendants prepared the drawings. Thus, the defendants are entitled to seek indemnity from the third parties for any damages for which the defendants are found liable.

[237] The defendants acknowledged that the policy of insurance contains the exclusion clause that is set out earlier in this judgment. They argued, however, that the exclusion clause contains an exception which provides that coverage is provided if the failure to complete drawings on time is the result of an error or inaccuracy in the preparation of the drawings. It was the position of the defendants that the delays in Visco and Mr. Visocchi to provide drawings on a timely basis was because of the time that was involved in correcting and re-correcting errors in the drawings. In asserting this position, the defendants relied on the evidence of Mr. Collavino and Mr. Visocchi.

[238] The third parties, however, argued that the delay in producing the drawings was the result of failure of Mr. Visocchi to do the work and to provide sufficient resources to produce the work in a timely fashion. They acknowledged that both Visco and Mr. Visocchi were covered by the policy of insurance but urged me to find that delay was the cause of the problems in this case. Counsel pointed out that the statement of claim pleaded delay as the primary cause of the plaintiffs’ losses. Although drawing errors were also identified, the primary focus of the pleadings was the losses sustained as a result of the delays.

[239] Counsel for the third parties urged me to put little weight on the trial evidence of the plaintiffs as they emphasised errors only to bring the claim within the exception to the exclusion. Mr. Collavino described the project as a “simple uncomplicated deck” and that he had expected the shop drawings to be completed by the end of May. All of the correspondence and memos described in the beginning of this judgment primarily referred to the delay in producing the documents, with very few references to errors. Counsel for the third parties argued that it was only in his evidence at trial that Mr. Collavino was determined to try to emphasise the errors as opposed to the delay. Even Mr. D’Arcy said that very little work was produced in the first three months beginning April 1, 1999, and that the drawings should have been ready by mid-August.

[240] As for the evidence of Mr. Visocchi, counsel for the third parties urged me to find it was not credible. At his examination for discovery to which I was referred, Mr. Visocchi had said that he did not know why he was so delayed in getting the drawings completed. It was only at trial that he claimed that one of the reasons for the delay was because he was correcting errors.

[241] In his submissions, counsel for the third parties put to me four propositions with respect to how to consider the evidence. He said if a drawing of a part is submitted which shows an incorrect length and it is manufactured in accordance with the error, any corrective steps would be covered by the insurance policy. If, however, no dimensions were inserted in the drawing, they were returned and resubmitted with no dimensions, sent back again and finally inserted, that would not be an error but just unfinished work. With respect, I disagree with the latter proposition. The original problem was an error as was the second submission.

[242] Counsel also argued that unless a particular error in a drawing can be related to a specific problem, there is no evidence of damage.

[243] Counsel asserted that errors in drawings should be expected as no one expects hundreds of drawings to be perfect the first time and that they are often resubmitted. I agree. I do not agree, however, that drawings which are returned repeatedly as demonstrated in Exhibit 14 are simply unfinished and, therefore, fall under the delay exclusion.

[244] Finally, counsel argued that if an error is made and the drawing is returned for correction and the insured refuses to correct it or takes two months to correct it, that is considered delay which is non-compensable. If it took one day to correct it, that delay would fall within the exception to the exclusion and be compensable. A two-month delay would not be covered.

[245] In Cabell v. Personal Insurance Co. (2010), 2011 ONCA 105, the Court of Appeal set out the principles of interpretation with respect to insurance policies. At para. 11, Rosenberg J.A. writing for the court said:

The general principles of interpretation that apply to insurance policies are well-established. A clause in the policy providing coverage will be broadly interpreted in favour of the insured. An exclusion clause limiting coverage will be strictly interpreted. Since insurance contracts are contracts of adhesion, any ambiguity in the policy will be construed against the insurer, applying the contra proferentem doctrine: Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co. 1993 CanLII 150 (SCC), [1993] 1 S.C.R. 252 (S.C.C.), at 268-69; Consolidated-Bathurst Expert Ltd. c. Mutual Boiler & Machinery Insurance Co. (1979), 1979 CanLII 10 (SCC), [1980] 1 S.C.R. 888 (S.C.C.). However, these principles of interpretation cannot create ambiguities: if the exclusion clause is clear, it is to be applied according to its terms, subject to the nullification of coverage doctrine discussed below.

[246] Applying those principles to the facts before me, I find that the errors related to the design of the column covers including all the costs related to their correction are caught by the exception to the exclusion as are the items set out at Tabs 10, 11, 12, 13, 15, 17, 18, 21 and 22 of Exhibit 42 identified earlier in this judgment at para. 216 for a total of $50,607 USD.

[247] With respect to the damages related to the column covers, they are set out at para. 221 and total $29,200.69 USD plus $280 USD for subsequent repairs to the column covers for a total of $29,480.69 USD.

[248] With respect to the balance of the damages, it is almost impossible to determine with absolute accuracy the damages that are related to errors as opposed to delays. That does not mean that the defendants are not entitled to rely on the exception to the exclusionary clause for coverage for some of the damages for which I found they must compensate the plaintiffs. I find it is acceptable in the construction industry that drawings are rarely accepted for approval on first submission. Nevertheless, the number of times that many of the drawings had to be resubmitted for approval, including the number of times that the necessary corrections were not made, is clearly demonstrated in Exhibits 14, 36A, 36B and 38. Based on those exhibits and the oral evidence, I find that an appropriate allocation of damages related to delay as opposed to damages related to errors is 45 per cent for delay and 55 per cent for errors. Therefore, the third parties shall indemnify the defendants for 100 per cent of the following:

Costs associated with column covers $29,480.69 USD

Libbe back charges for errors in drawings $50,607.00 USD

$80,087.69 USD

Cost of production and shipping of column covers $11,048.48 CAD

The third parties shall also indemnify the defendants for 55 per cent of $384,749.69, or $211,612,32 USD and 55 per cent of $35,000 CAD or $19,250 CAD.

Exchange Rates

[249] I have determined the damages in accordance with the currency in which they were incurred. Thus, those damages calculated in U.S. funds must be converted to Canadian funds.

[250] Exchange rates are governed by s. 121 of the Courts of Justice Act, R.S.O. 1990, c. C.43:

(1) Subject to subsections (3) and (4), where a person obtains an order to enforce an obligation in a foreign currency, the order shall require payment of an amount in Canadian currency sufficient to purchase the amount of the obligation in the foreign currency at a bank in Ontario listed in Schedule I to the Bank Act (Canada) at the close of business on the first day on which the bank quotes a Canadian dollar rate for purchase of the foreign currency before the day payment of the obligation is received by the creditor.

(2) Where more than one payment is made under an order referred to in subsection (1), the rate of conversion shall be the rate determined as provided in subsection (1) for each payment.

(3) Subject to subsection (4), where, in a proceeding to enforce an obligation in a foreign currency, the court is satisfied that conversion of the amount of the obligation to Canadian currency as provided in subsection (1) would be inequitable to any party, the order may require payment of an amount in Canadian currency sufficient to purchase the amount of the obligation in the foreign currency at a bank in Ontario on such other day as the court considers equitable in the circumstances.

[251] The Ontario Court of Appeal has held that the “general rule” is that foreign currency obligations are to be converted to Canadian dollars at the date of recovery under the judgment. In Stott v. Merit Investment Corp., (1988), 1988 CanLII 192 (ON CA), 63 O.R. (2d) 545 however, the court held that it would have been inequitable to do that, and the conversion was made as of the date the defendant was to have paid for the goods.

[252] Where a conversion is required, one party, such as the third party in this case, will typically rely on the “general rule” under s. 121(1) while the other, the plaintiff, will rely on the exception under s. 121(3). The onus is on the party relying on s. 121(3) to show that there has been an inequity (see: Esses v. Friedberg & Co., [2007] O.J. No. 3029 (Sup. Ct. J.); Zucchetti Rubinetteria S.p.A. v. Natphil Inc., 2011 ONSC 3845). A change in the exchange rates alone does not create inequity (see: Governor and Co. of the Bank of Ireland v. Gardner, [1989] O.J. No. 269 (H.C.J.)). Also, the plaintiff having use of the money in the interim time period should not be a factor as that is what prejudgment interest is meant to address (see: Moritex Europe Ltd. v. Oz Optics Ltd., [2005] O.J. No. 5525 (Sup. Ct. J.)).

[253] In upholding the general rule, barring some type of “compelling reason,” compelling reasons not discussed or identified in any detail in the case law, the court usually asserts that it is exercising its discretion under s. 121(3)), Himel J. incorporated a quote from Fridman’s Law of Contracts in General Refractories Co. of Canada v. Venturedyne, Ltd., [2002] O.T.C. 10 (Sup. Ct. J.):

The underlying philosophy of damages is compensation for what the plaintiff has lost. Giving the plaintiff the nominal value of his debt or damages is, in one sense compensating him. Allowing the debtor to pay off the creditor in devalued currency results in no realistic compensation of the plaintiff. Conversely, the creditor may reap an unexpected windfall by an appreciation of the currency. Can the law ever ensure perfect justice in this respect? Can it guard against every conceivable possibility of this kind? The law certainly recognizes that physical events cannot always be taken into account in assessing liability. Why should the law have to concern itself with fiscal or economic events that might even be thought of as within the foresight of the parties and, therefore, something with respect to which they should plan?

Thus, trial judges should apply the general rule (s. 121(1)) unless there are exceptional circumstances, not including a mere change in exchange rates or that the plaintiff would have had access to that money in the interim, that would cause s. 121(3) to be operative.

[254] Counsel for the third party argued that the judgment should be in U.S. dollars with the exchange rate being as provided for in s. 121(1) of the Courts of Justice Act, that is, the exchange rate in effect at the time judgment is pronounced, not the rate in effect at the time the obligation arose, as is urged by the plaintiffs. Counsel for the third parties relied on the Esses and Zucchetti cases in support of his position. In the former case, the plaintiff acknowledged that he was not concerned about the exchange rates since he had not deposited the cheques in question for five months. In Zucchetti, the goods in question were sold between February 2008 and July 2009 and the decision was in 2011, three years from the date of the breach.

[255] In support of its position that the exchange rate should be the rate when this action was commenced in 2000, counsel for the plaintiffs relied on Zesta Engineering v. Cloutier, 2010 ONSC 5810, [2010] O.J. No. 4485. In that case, the breach of fiduciary duty and the conversion of an employer’s funds occurred between June 1997 and December 1999. The judgment was issued in 2010, approximately 11 years later, a period of time even less than the case before me. At para. 296, in that case, the court said:

Since the sales to Husky Buffalo were in the U.S. dollars it is necessary to convert that currency to Canadian dollars for purposes of valuing the loss suffered by Zesta. Although s. 121 of the Courts of Justice Act provides a mechanism for converting a foreign money obligation for the purposes of an Ontario judgment, s. 121(3) also permits the court to depart from that standard approach where the court considers it equitable. In the present case, there has been a dramatic shift in the respective values of the Canadian/U.S. dollar over the past decade. To place the innocent party, Zesta, in the position it would have been in but for the wrong committed by Cloutier, I direct that the conversion of the U.S. dollar amount (or the lesser sum, if the restitution order has been complied with) to Canadian dollars to be made at the Bank of Canada closing rate as at November 20, 1999. This will more properly reflect the loss to Zesta at the time the wrong was committed.

[256] With respect to the conversion rate, I adopt the reasoning of Stinson J. in Zesta and exercise my discretion pursuant to s. 121(3). The conversion rate shall be as at May 15, 2000.

Prejudgment Interest

[257] The plaintiffs seek prejudgment interest commencing the date the losses were incurred by them, that is, in 2000.

[258] Section 128(1) of the Courts of Justice Act provides:

A person who is entitled to an order for the payment of money is entitled to claim and have included in the order an award of interest thereupon at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order.

[259] Section 130(1) of the Courts of Justice Act provides:

The court may, where it considers it just to do so, in respect of the whole or any part of the amount on which interest is payable under s. 128 or 129,

a) disallow interest under either section; (referring to prejudgment and post judgment interest)

b) allow interest at a higher rate or lower than that provided in either section;

c) allow interest for a period other than that provided in either section.

Subsection (2):

For the purposes of subsection (1), the court shall take into account,

a) changes in market interest rates;

b) the circumstances of the case;

c) the facts that an advance payment was made;

d) the circumstances of medical disclosure by the plaintiff;

e) the amount claimed and the amount recovered in the proceeding;

f) the conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceeding; and

g) any other relevant consideration.

[260] A review of the cases in which prejudgment interest has been awarded as well as cases in which it was not awarded, has led me to conclude that to override the prima facie right of a successful plaintiff to prejudgment interest requires some exceptional circumstances, which have not been identified by either counsel for the defendants or for the third parties at this point. It was agreed by counsel that they would make brief written submissions on the issue of prejudgment interest when they make their submissions on costs.

Costs

[261] The plaintiffs are entitled to their costs on a partial indemnity basis from both the defendants and the third party. If the parties are unable to agree on the amount of the costs or if there were offers to settle which might result in a different scale of costs, I will receive costs submissions and cost outlines from all parties within 15 days of the release of this decision. I will also receive cost submissions from the defendants and third parties in respect of any cost issues between them that cannot be agreed to within the same timeframe.

[262] In addition, all parties shall make any submissions no longer than five pages in length regarding prejudgment interest within 15 days.

Conclusion

[263] In summary, the following order shall issue:

1. The defendants, jointly and severally shall pay damages to the plaintiffs in the total amount of $477,837.38 USD to be converted to Canadian funds at the rate in effect at May 15, 2000;

2. The defendants, jointly and severally shall pay damages to the plaintiffs in the amount of $46,048.48 CAD;

3. The third parties shall indemnify the defendants for damages in the amount of 100 per cent of the damages for the costs associated with the column covers in the amount of $29,480 USD and $50,067 USD for other drawing errors, payable by the defendants after conversion to Canadian funds; the third party shall indemnity the defendants for 55 per cent of all other damages for which the defendants are liable after conversion to Canadian funds;

4. The counterclaim of the defendants is dismissed without costs;

5. Costs and prejudgment interest to be determined in accordance with my direction at paras. 261 and 262 of this judgment.

Original stamped “Nolan J.”

Mary Jo M. Nolan

Madam Justice

Released: September 30, 2014

2^nd^ Corrected Released: November 4, 2014

2^nd^ Corrected Decision

At para. 173, the first sentence: “In similar fashion, the invoices from the subcontractors to Libbe sent almost 15 years before for work done by them for Libbe were equally unremarkable to be a waste of trial time to call all the subcontractors as witnesses.” is now replaced with the following two sentences: “In similar fashion, the invoices sent to Libbe by their subcontractors for work done by them were equally unremarkable. It would have been a waste of trial time to call all of the subcontractors as witnesses after almost fifteen years.”

Schedule 1 is also attached as it was inadvertently missed in the Corrected decision.

Schedule 1

Damages Sought by Plaintiffs

Tab #

Nature of Expense

Winter

US Funds

Drawings

US Funds

Rudolph Libbe

1

Winter Concrete

$ 7,393.00

2

Hardware for Building Enclosure

$ 1,847.00

3

Temporary Heaters

$ 21,374.00

4

Circulating Fans

$ 1,800.00

5

Natural Gas Hook-up

$ 2,288.00

6

Propane Bottles

$ 1,965.00

7

Ground Thaw Machine

$ 5,550.00

8

Change Caulking due to Winter

$ 8,030.00

9

Inclement

Weather

$ 1,003.00

10

Sample Spandrel Cover

$ 117.00

11

Pour Topping on Unfinished Double T

$ 170.00

12

Core Drill Floor Drains

$ 1,210.00

13

Shear Wall Repair

$ 2,748.00

14

Additional Resteel for DTs

$ 1,085.00

15

Western Waterproofing Additional Work

$ 3,170.00

16

Masonry Wall Ties (missing dovetail Slots)

$ 200.00

17

Rework Handrails

$ 745.00

18

Cut Missing Openings

$ 3,310.00

19

Rework Window Ledge

$ 520.00

20

Blankets, Heaters, etc.

$ 20,000.00

21

Shear Connector Repairs

$ 19,600.00

22

Rich & Assoc. Extra Re Dwg Review

$ 9,737.00

22

Paragon Extra Re Dwg Review

$ 9,800.00

23

Gas for Heaters

$ 59,021.00

24

Backcharges to Assemblers

$ 26,000.00

25

Swing Stage Rental

$ 882.00

26

Labour Costs

$ 93,000.00

$ 93,000.00

Sub Total

$249,241.00

$146,294.00

Rudolph Libbe

Total of Drawing and Winter Costs

$395,565.00

Tab #

Nature of Expense

US

Funds

Cdn. $

Damages

Brint Electric

27

Charge for light and heater wiring

$ 11,000.00

Assemblers

28

Install Column Cover Panels

$ 25,475.69

29

B/C Settlement

$125,000.00

30

Inspection of Column Covers

$ 3,725.00

Assemblers Total

$165,200.69

Hollowcore Incorporated

35

Labour Costs – repair product and installing winter enclosure

$ 32,860.00

38

Supplier Costs related to repairs and winter enclosure

$ 35,133.54

Hollowcore Total

$ 67,993.54

Prestressed Costs

34

Engineering Costs for “As Built” Drawings

$4,770.00

36

Inefficiencies Due to Inaccurate Drawings

$ 93,343.00

32

Production and Shipping of Column Covers

$ 11,048.48

Total Prestressed Costs

$111,546.48

Management Time

$ 11,250.00

TOTALS

$633,529.23

$122,796.48

(NEW) CITATION: Hollowcore v. Visocchi, 2014 ONSC 6802

WINDSOR COURT FILE NO.: CV-01-OC-01327; CV-10-00015354-0000

CHATHAM COURT FILE NO.: 1082/00 A1

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Hollowcore Incorporated and Prestressed Systems Inc.

Plaintiffs

– and –

Michael Visocchi and Visco Engineering Inc.

Defendants

– and –

The Royal Insurance Company of Canada, Continental Casualty Company and Certain Underwriters at Lloyd’s Under Contract No. ENC5-98

Third Parties

REASONS FOR JUDGMENT

Nolan J.

Released: September 30, 2014

2^nd^ Corrected Released: November 4, 2014