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COURT FILE NO.: CV-09-092778-00

DATE: 20150910

IN THE MATTER OF THE CONSTRUCTION LIEN ACT, R.S.O. 1990, c.C.30

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

INTERBOROUGH ELECTRIC INCORPORATED
Plaintiff

– and –

724352 ONTARIO LIMITED, UNITED PARCEL SERVICE OF CANADA LTD. and MAPLE REINDERS CONSTRUCTORS LTD.
Defendants

E. Bisceglia, for the Plaintiff

J. Speigel, for the Defendants

HEARD: May 13, 14, 15, 16, 17, 21, 22, 23, 24, 27, 28, November 12, 13, 14, 15, 18, 19, 20, 21, 25, 26, 27, 28, 29, 2013, March 31, April 1, 2, 3, 4, 7, 8, 9, 10, 11, 14, 15, 16, 17, May 20, 21, 22, 23, 26, 27, 28, 29, 30, June 2, 3, 4, 5, 6, 26, 27 and 30, 2014

Index

Contents

INTRODUCTION
The Project
The Parties
The Dispute
Issues

THE PROJECT CONTRACTS
Contract A
Contract B
Contract C

THE CONTRACT BETWEEN INTERBOROUGH AND MAPLE
What are the terms?
Interborough’s Position
Maple’s Position
Analysis
Summary

DELAY
What was the impact on Interborough? What caused the delay?
Causes of Delay
Impact on Interborough
Evidence of Mr. Sean Keegan, P.Eng.
The Length of the Delay
Mr. Keegan’s Analysis of Delay and Disruption Costs
Productivity Loss
Mechanical Contractors Association of America Productivity Factors
Period 1: January – February
Period 2: March 3 to April 27
Period 3: April 28 – August 20
Period 4: August 21 to September 28
Period 5: September 29 to December 4
Hourly Rate
Time Dependant Delay Costs
Extended Supervision
Extended Head Office Overhead
Extended Trailer Rental
Equipment Rentals
Labour Escalation Rate
Extended Holdback Financing
Consulting Fees
Loss of Profit

Amounts Owing on the Contract
Change Orders
Disputed Claims
Summary of Amounts Owing on Contract, Approved Changes and Disputed Changes
Mark Ups
Summary of Interborough’s Claim

Evidence of Mr. Gerald Winters, P.Eng.
The Leonard method
Period 1
Period 2
Period 3
Period 4
Period 5
Unproductive hours for periods 3, 4 and 5
Recoverable/Compensable Hours
Time dependent delay impact costs/extended supervision costs
Extended Head Office Overhead
Scissor Lifts
Labour Rate Escalation Rate
Profit and Overhead

Delay Calculation Methods

Evidence of Mr. Richard Fogarasi, P. Eng.
Length of the Original Contract
Length of Delay
The Validity of Interborough’s Estimate
Methods for Calculating Loss of Productivity
Extended Site Supervision
Extended Office Overhead
Loss of Profit

Analysis of Delay Claim
What is the period of delay?
Difficulties in calculating loss of productivity due to delay
Is the Leonard method appropriate to use?
Are the MCCA factors appropriate to use?
Cost to Interborough during the delay period
Value of labour overrun based on Interborough’s actual and budgeted hours
Management Salary

ALLEGED PRE-TERMINATION DEFICIENCIES
Conduits

Evidence of Mr. Juraj Rottko, P.Eng.
Report 1 – June 20
Report 2 – July 3
Report 3 – August 11
Electrical Safety Authority Inspection
Kyneta Report 4 – November 5
Report 5 – December 26
Report 6 - January 15, 2009
Report 7 – January 21, 2009

TSH/AECOM Inspections
Evidence of Mr. Bernard Legare, P.Eng.
The Special Intensive Inspection
Evidence of John Campbell, P.Eng.
Further Evidence of Mr. Legare

M7 Light Switches
AECOM Report Deficiencies
Further Evidence of Mr. Campbell

Deficiencies Analysis
Conduits
Wiring

TERMINATION
Events Precluding Termination
The Maintenance Garage
Interborough’s Demobilization
The Termination

Evidence of Anthony Mulvale
Evidence of Neil McGilley
Evidence of Peter Eikelboom

Was Interborough Lawfully Terminated?
Applicable Legal Principles
Maple’s Position
Analysis

Can Maple claim costs to complete Interborough’s work?
Applicable Legal Principles
Analysis

MITIGATION
Did Maple take appropriate steps to mitigate its costs to rectify the deficiencies?

Evidence of Mr. P. Eikelboom
Evidence of Mr. R. Visser
Evidence of Mr. G. DeFrancesca

Applicable Legal Principles
Maple’s Position
Analysis

COST TO RECTIFY DEFICIENCIES
Conduit Work Analysis
Evidence of Mr. Alfred Powell

Analysis

CONTRACT COMPLETION
What percentage of the contract did Interborough complete?

SUMMARY

CONCLUSION

COSTS

VALLEE, J.

INTRODUCTION

The Project

[1] In 2007, one of the defendants, United Parcel Service of Canada Ltd., decided to build a new warehouse with a connecting link to its existing facility in Vaughan. The new building was to be approximately 245,000 square feet, more or less the size of 4 football fields. The design for the inside of the building accommodated four two storey interior office blocks. The new building was to contain an area where UPS vehicles could enter and park. It was also to have numerous loading docks around the perimeter where UPS vehicles could back in and have their contents unloaded. The building was to contain multiple conveyors, many of which were elevated. Parcels would be placed on the conveyors and routed through the system to reach certain areas in the building where they would be loaded on to delivery vehicles. The roof joists were to be approximately 30’ high. The warehouse would not be used for typical storage; rather, it would be more like a manufacturing facility with its principal use being parcel sorting.

The Parties

[2] The defendants, 724352 Ontario Limited and UPS were the owners of the land on which the existing building was located and where the new building and the link would be constructed. The other defendant, Maple Reinders Constructors Ltd., was the general contractor for the project. The plaintiff, Interborough Electric Incorporated, was an electrical subcontractor to Maple. The principal of Interborough is Mr. Nick Soulos. The project manager for Maple was Mr. Peter Eikelboom. Mr. Lance Hale was the project manager for UPS.

The Dispute

[3] The dispute in this action is between only Interborough and Maple. Unfortunately, the construction project encountered many delays. The parties agree that Interborough did not cause any of them. Maple states that the length of the delay was 104 days. Interborough states that it was 111 days. As a result of the delay, Interborough states that it suffered various losses, including productivity. Maple agrees that there was some loss of productivity but does not agree on the amount claimed by Interborough.

[4] On August 30, 2008, Maple billed UPS for Interborough’s work at 95percent complete. UPS paid Maple the amount requested. Maple subsequently held back 5percent of the amount owing to Interborough on that draw. Maple did not pay Interborough the amount it claimed for its work from September to November inclusive.

[5] On October 8, 2008, Interborough issued a breach of contract claim against Maple.

[6] Maple terminated Interborough on December 4, 2008, alleging that Interborough had breached its contract by failing to rectify deficiencies and by abandoning the project. Interborough states that it did not abandon the project and that it was wrongfully terminated.

[7] Interborough registered a construction lien against the property on December 23, 2008 for $645,341.30.

[8] Interborough perfected the lien by issuing a statement of claim on January 13, 2009.

[9] After Interborough issued its breach of contract claim, UPS requested that its electrical consultant carry out a very detailed inspection of Interborough’s work. The report relating to this inspection states that some of Interborough’s work was incomplete and that some of it was deficient. Interborough denied the validity of the alleged deficiencies. It stated that its work passed inspections carried out by the Electrical Safety Authority.

[10] After it terminated Interborough, Maple hired another subcontractor, DeRock Electric, to finish Interborough’s work and rectify the deficiencies. DeRock performed its work in accordance with instructions from Maple and UPS.

[11] Interborough claims $645,341.30 comprised of the following:

(a) the balance of the funds owed to it under the contract;

(b) certain extras;

(c) losses due to delay; and

(d) additional supervisory hours.

[12] Maple counterclaims for the amount of $500,000. It alleges that the cost to complete Interborough’s work was $173,595 and the cost to rectify its deficiencies was $246,595.

Issues

[13] The following issues must be determined:

(1) What are the terms of the contract between Interborough and Maple?

(2) What is the period of delay?

(3) What is the amount of compensation that should be paid to Interborough for the delay?

(4) Was Interborough lawfully terminated?

(5) If the termination was not lawful, should Maple be able to recover the cost to complete Interborough’s work and rectify the deficiencies?

(6) Did Maple mitigate its damages appropriately?

(7) If Maple’s termination of Interborough was lawful, what is the amount of compensation that should be paid to Maple to complete Interborough’s work?

(8) If there were deficiencies in Interborough’s work, what amount should be paid to Maple to rectify them?

(9) What percentage of its contract did Interborough complete?

[14] Most of the events regarding Interborough’s work occurred in 2008. Accordingly, for ease of reference, all of the dates may be presumed to be 2008 dates unless otherwise stated.

(Complete decision continues exactly as provided in the source text above.)