2017 ONSC 6903

COURT FILE NO.: CV-12-109305-A2

DATE: 20171121

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

PARKHILL EXCAVATING LIMITED, ARTHUR THOMAS BARKER and RANDY ARTHUR BARKER

Third Party Plaintiffs

– and –

ROBERT E. YOUNG CONSTRUCTION LIMITED

Third Party Defendant

COUNSEL:

Lawrence G. Theall and Shaun Hashim for the Third Party Plaintiffs

Jeffrey D. Ayotte and Michael Gunsolus for the Third Party Defendant

HEARD: May 16, 17, 19, 20, 23-27 and 31, 2016, May 18, 19, 29, 30 and 31, 2017, June 29 and July 20 and 21, 2017.

REASONS FOR JUDGMENT IN THE THIRD PARTY ACTION

BOSWELL J.

I. INTRODUCTION

[1] No one is happy when a septic system fails.

[2] This case involves thirty-five failed systems and a lot of unhappy people.

[3] The failed systems are connected to homes built in a single subdivision in Janetville, Ontario by BGS Homes Inc. All of the systems were installed by Parkhill Excavating Limited.

[4] BGS was required to replace and/or remediate all of the septic systems. They spent something in the order of $1.5 million to do so. They sued Parkhill, as well as the local health unit and municipality, seeking to recover their losses. In turn, Parkhill commenced a third party claim against Robert E. Young Construction Limited (“RYC”). RYC supplied the filter sand used in the installed systems. Parkhill says the sand was deficient and the principal reason that thirty-five septic systems had to be replaced.

[5] The main action came on for trial in the spring of 2016. It settled after a little more than two weeks of trial. BGS received a total of $750,000, inclusive of claim, interest and costs. Parkhill contributed the sum of $420,000 to the settlement. In addition, Parkhill incurred litigation costs associated with the main action totalling $675,033.25.

[6] In this third party claim, Parkhill seeks to recover all of its losses – some $1.1 million – from RYC.

[7] The claim against RYC is framed in both contract and tort. The pleadings and the submissions of counsel raise a significant number of issues for determination:

Contract Issues

(i) Was there an implied warranty that the filter sand sold by RYC to Parkhill was fit for use as septic system filter sand?

(ii) Was the filter sand sold by description within the meaning of the Sale of Goods Act?

(iii) If there was an implied warranty of fitness for use, was it breached?

(iv) How are Parkhill’s damages measured?

(v) Are the legal fees incurred by Parkhill in relation to the main action subject to assessment as costs or otherwise subject to limitation by a reasonableness standard?

(vi) Should Parkhill’s contractual damages be subject to reduction for contributory fault or any other limiting factors?

Tort Issues

(vii) Did RYC owe Parkhill a duty of care?

(viii) Assuming a duty of care was owed, what was the standard of care?

(ix) Did Parkhill breach the standard of care?

(x) What are Parkhill’s damages in tort?

(xi) Should Parkhill’s damages in tort be reduced due to its own contributory negligence?

[8] The factual context of the case is critically important to its resolution. That said, the facts are not particularly controversial.

II. THE FACTS

The Evidentiary Record

[9] The main action commenced in the spring of 2016. Ten days’ of evidence was heard prior to its resolution. The parties to the third party claim agree that the evidence from the main action forms part of the evidentiary record of the third party claim.

[10] In the course of the trial of the main action, the court heard evidence from twelve witnesses, all called by the plaintiff, BGS Homes. Those witnesses included Mark Van Voorst, an engineer with significant experience in septic systems and design; three site supervisors – Jim Barchard, Roy Fearnley and Javier Sanchez; and Anne Elmhurst, a certified public health inspector employed by the Kawartha Lakes Health Unit.

[11] When the third party action continued, the court heard from a further six witnesses, including: Randy, Arthur and Barbara Barker from Parkhill; Eric Gunnell, an engineer who was qualified as an expert in the design, installation, remediation and replacement of septic systems under part 8 of the Ontario Building Code (“OBC”); Carl Young from RYC; and Geoff Lay, a geotechnical engineer who was qualified as an expert in the permeability and hydraulic performance of soils and sands.

[12] Over the course of the trial, some 266 exhibits were created, comprising many hundreds of documents, which the parties helpfully presented in an electronic joint documents book.

The Septic Systems

[13] In late 2003 BGS Homes Inc. acquired 47 lots in a subdivision in Janetville, near Lake Scugog. The lots were approximately 1 acre in size. BGS built and sold single family homes on most of the lots between 2004 and 2010.

[14] The lots do not have municipal services, so each is serviced by its own drilled well and private septic system. Parkhill installed the septic systems, most of which it designed. The principals of Parkhill are Randy Barker and his father, Arthur Barker, though Arthur took no part in the installation work on this project. Most of the installation work at the Janetville site was done by Randy and his son, Kyle Barker.

[15] The systems installed by Parkhill are known as raised filter bed systems. Their basic structure is pretty simple. Household effluent flows into a buried septic tank. Solids settle in the tank while liquids flow into a pump chamber. The liquids are pumped out and distributed over a filter bed through a series of distribution pipes.

[16] The raised filter beds were the focus of most of the evidence at trial. Their descriptive name reflects the fact that they are built up above grade. To construct a filter bed, Parkhill generally started by excavating out a “loading area” down about 25 cm to native clay. A filter bed area would be constructed within the loading area. It involved building up a bed about 750 mm deep, using filter sand supplied by RYC. Distribution pipes (drilled 3” PVC), connected to the pump chamber, were laid out on top of the filter bed on about 1.2 metre centres. They were covered with septic stone and a layer of filter paper[^1], then backfilled over. The balance of the loading area was filled in with sand supplied by BGS. The extended sand area beyond the filter bed is generally referred to as the “mantle”.

[17] The design and size of a septic system, including the size of the loading and filter bed areas, are functions of the size of the residence being serviced, the number of plumbing fixtures in the residence and the percolation rate of the underlying, native soil.

[18] Parkhill installed a total of 35 systems for BGS in the Janetville subdivision. The properties they worked on are listed in Appendix “A”.

The Application Process

[19] Janetville is part of the Kawartha Lakes Region. At the material time, design and installation of septic systems in Kawartha Lakes could only proceed after an installation permit from the local Health Unit was obtained. The process of obtaining a permit required the filing of a number of forms, including:

• An Application;

• A Building Code Application to Construct or Demolish a Septic System;

• A Designer Information Form;

• An Installer Information Form;

• A Proposed Design Form; and,

• A Calculation Sheet.

[20] The Application form included information about the location of the property; the type of structure; the total floor area; the number of bedrooms; and the number of plumbing fixtures.

[21] The Application to Construct or Demolish contained details about the applicant, the owner and the builder.

[22] The Designer Information Form contained particulars about the person who was responsible for the design of the system, including name; address; and a declaration of responsibility. The designer was required to have a Building Code Identification Number (“BCIN”) under the OBC. A BCIN is a measure of quality assurance. To obtain a registered BCIN, one must pass a qualifying examination.

[23] Randy Barker has been installing septic systems since about 1980. He testified that prior to 1996, septic installers did not need to be licensed. That changed, so he attended a one-week course in Peterborough in 1996, run by the Ministry of Housing. He obtained his license and has a BCIN.

[24] The Installer Information Form identified the licensed installer.

[25] The Proposed Design Form included a summary of the calculated daily sewage flow[^2]; the native soil percolation rate[^3]; the septic tank size; and the bed design, including the size of the filter bed and loading rate area.

[26] The Calculation Sheet reflected the applicant’s actual calculations, as summarized in the Proposed Design Form. Its general purpose was to size the system. It included information about the number of bedrooms; the total living area of the home; the number of plumbing fixtures; and calculations for the size of the septic tank and filter bed, based on formulas prescribed by the OBC.

[27] After an application was received, the local Health Unit typically conducted two site inspections. An initial site inspection was done before any works were started, in order to assess the overall conditions of the site and to determine the percolation rate of the native soils. When an application was approved, the Health Unit issued a “Site Inspection Report for a Sewage Septic Permit”. In effect, this document was the permit to construct the system in accordance with the approved plan.

[28] When permits were issued, they were generally given on conditions, including, routinely, that Part 8 of the OBC be complied with. In addition, Parkhill was required to provide to the Health Unit all of its weigh tickets for filter sand delivered to the site. This requirement provided a mechanism by which the Health Unit could ensure that sufficient filter medium was being delivered and installed at any given site.

[29] When an installation was complete, save for backfilling, the Health Unit returned to conduct a final inspection. They took measurements of the loading area, checked the depth of the filter bed and the size of the tank, reviewed the distribution pipes and checked set-backs. If and when satisfied, a final approval was given.

[30] Final approvals were given by the Health Unit with respect to each of the 35 systems that ultimately failed.[^4]

[31] Randy Barker testified that he did not submit any of the necessary approval forms to the Health Unit. Someone from BGS did that. He did, however, design most of the systems and he did complete many of the forms for submission. He said that designs and calculation sheets went hand-in-hand. The size of a system depended on the square footage of the house, the number of bedrooms and the number of plumbing fixtures. He said he got the necessary information to complete the forms from BGS.

[32] Under cross-examination Mr. Barker agreed that the best practice in his industry is to use the building plans when calculating fixtures. But at Janetville he frequently did not have building plans. He based his calculations on information provided from the builder. It was agreed between the parties that there were building plans available for at least eleven homes that could have been, but were not, provided to Mr. Barker before he designed and installed septic systems for those homes.

Filter Sand

[33] The construction and installation of septic systems in Ontario is governed by Part 8 of the Ontario Building Code. The OBC is a regulation (Reg. 332/12) of the Building Code Act, 1992, S.O. 1992, c. 30.

[34] Filter sand is a manufactured product.

[35] Section 8.7.5.3(3) of the OBC prescribes minimum specifications of filter sand, which it refers to as “filter medium”. It provides as follows:

(3) The filter medium shall have a minimum depth of 750 mm below the stone layer and shall be clean sand comprised of particles ranging in size between the limits of,

(a) an effective size of 0.25 mm with a uniformity coefficient not less than 3.5,

(b) an effective size of 2.5 mm with a uniformity coefficient not greater than 1.5, and

(c) having a uniformity coefficient not greater than 4.5.

[36] Carl Young has been the president of RYC since 2007. RYC is an aggregate supplier and custom crushing company. Their biggest selling product is granular A material, but they do sell a range of other products. Between 2004 and 2010 they manufactured and sold a product labelled as filter sand.

[37] Mr. Young testified that he was not familiar with the requirements of the OBC and was not familiar with the term “uniformity coefficient”. He was aware that filter sand had to have superior filtration qualities. From his point of view there were a number of possible uses for filter sand. He said the City of Kawartha Lakes used it for winter sand. They also used it in landfills to create leaching beds. Other customers used it for indoor and outdoor horse-riding venues.

[38] Mr. Young said that filter sand was usually manufactured in their Omemee pit. The frequency of manufacturing depended on demand. Typically they had to manufacture a batch about every two years. Whenever a batch of filter sand was manufactured, RYC had it tested by a soils engineering firm, usually Geo-Logic Inc. Normally the tests were conducted during production.

[39] Mr. Young said that the reason RYC had the sand tested was to ensure that it complied with Part 8 of the OBC, though he was not familiar with what the OBC required specifically. In cross-examination he agreed with the suggestion that RYC needed to test to make sure the specifications were met because their clients were going to be using the product and needed it to meet certain specifications. Some of their customers asked them to produce their testing certificates. Others, including Parkhill, did not.

[40] There were no signs at the Omemee pit suggesting that the filter sand met any particular requirements. Parkhill never did any testing of the filter sand obtained from RYC pits to determine if it met the standards of the OBC. In fact, Randy Barker did not know what those requirements were.

[41] Randy Barker testified that all of the filter sand they used at the Janetville subdivision came from RYC pits. Mr. Barker has known Carl Young for more than twenty years. In that time he has never asked Carl Young whether his filter sand complied with the OBC; he said he just figured it was their business and it would be done to OBC specifications. In other words, he relied on RYC to ensure that the product they sold as filter sand met the requirements of the OBC, even though he could not say specifically what those requirements were.

[42] Randy Barker further testified that in their business there is nothing that filter sand would be used for apart from the installation of septic systems, though one time he used it in a sand/salt mixture for winter maintenance. He conceded in cross-examination, however, that no one from Parkhill ever told anyone at RYC that they were using filter sand purchased from RYC in connection with the installation of septic systems; and certainly not in relation to any particular type of system. He agreed that Parkhill’s purpose for using the sand was not known by RYC.

[43] Carl Young testified that he was never told that the Barkers were installing septic systems, but he would have assumed that they were, given the nature of their work as excavators and the rural areas in which they worked. He knew that, between 2004 and 2010, a number of excavators were using his filter sand in septic systems.

[44] Mr. Barker and Mr. Young generally agreed on the process by which Parkhill acquired filter sand. They essentially attended at the pit with a dump truck and picked it up. They knew where it was on the site. Their trucks were weighed going in and going out and Parkhill was invoiced on the basis of the weight they took out.

Uniformity Coefficient

[45] Despite the testing regime employed by RYC, it is conceded that none of the filter sand sold by RYC to Parkhill and used in the installation of the Janetville septic systems met the specifications of s. 8.7.5.3(3) of the OBC. The problem with the RYC sand is that it exceeded the maximum uniformity coefficient allowed by the OBC. In the result, it arguably had a lower hydraulic conductivity. In other words, it would take liquids longer to permeate the RYC sand than OBC-compliant sand.

[46] Geoff Lay is a geotechnical engineer whom I qualified, at the request of RYC, as an expert on the permeability and hydraulic performance of soils and sands.

[47] The founding of the science of geology is generally attributed to a Scotsman named James Hutton (1726-1797). For a time, in the mid to late 19th century, it was arguably the most gripping field of scientific study known to humankind. The dating of rock and fossil formations and the very age of the earth itself were fascinating and controversial areas of interest to scientists and theologians alike.

[48] Geology’s day in the sun has passed. But I must confess that I found Mr. Lay’s evidence to be surprisingly engaging.

[49] Mr. Lay explained the concept of uniformity coefficient to the court. He said, and I accept, that it relates to the size of the soil particles in the sample and the distribution of those particles.

[50] Uniformity coefficient (“Cu”) is the product of a simple formula: D60/D10. The symbol, “D”, is used to reflect effective grain size. A value of “D10”, for instance, refers to a grain size in which 10% of the sample is that size or smaller. “D60” refers to a grain size at which 60% of the soil sample is finer than that grain size.

[51] A soil’s Cu value has a significant effect on permeability. Where a Cu value is low, the grains in the sand will all be of a similar size. There will be fewer fine grains to fit between larger grains. Permeability will be high. Conversely, where a Cu value is higher, there will be a greater range in particles, meaning more small particles to squeeze between larger particulars. Permeability reduces as the Cu value increases.

[52] The filter sand sold by RYC to Parkhill generally failed to meet the OBC’s requirement for a Cu value of not more than 4.5 (see s. 8.7.5.3(3)(c)). But according to Mr. Lay, the results were very close. He described available formulas used by geotechnical experts to calculate the hydraulic conductivity of soil samples. Fortunately, it is not necessary to attempt to explain them here. Suffice it to say that in Mr. Lay’s opinion, even though the soil samples taken from lots at the Janetville site did not meet the OBC requirement of a Cu value no greater than 4.5, the hydraulic conductivity of the filter sand used did not materially differ from the hydraulic conductivity one would expect in a soil sample that did meet the OBC requirements.

[53] Under cross-examination, Mr. Lay indicated that a Cu value of 4.5 would be roughly equal to a hydraulic conductivity value (K value) of 9.5 x 10-². He was taken through the calculations for a number of different properties. He agreed that the filter sand installed at 6 Songbird Crescent had a K value of 3.22 x 10-². This reflects a flow rate about one-third as quick as the OBC requirement. At 7 Meadow the filter sand had a K value of 1.19 x 10-². This means that water would take seven times as long to flow through this sand as it would if it met the OBC specification for a maximum Cu value of 4.5.

[54] That said, there were other lots where the difference in hydraulic conductivity between what the OBC requires and what was installed was negligible.

Problems with the Installed Systems

[55] In the Spring of 2011 Mark Van Voorst received a call from a septic system installer to come out to have a look at a system in the Janetville subdivision – specifically 10 Meadow Drive. When he attended, he found that there was effluent leaking out the northeast corner of the filter bed. While he was looking at this first system, a neighbour came by and asked that he look at theirs. Two other neighbours quickly contacted him. Eventually he looked at 35 systems in the neighbourhood.

[56] By the time Mr. Van Voorst became involved in the subdivision, some of the homes had been occupied for six or seven years. Some had experienced no performance issues with their systems.

[57] Mr. Van Voorst is a professional engineer with 15 years’ experience in the field of septic system design. He was not, however, qualified to give expert opinion evidence about the cause of system failures. His evidence was offered as part of the narrative relating to system failures and the remediation steps taken to address those failures.

[58] He indicated that test pits were dug at all but one of the 35 residences in issue. He observed issues with respect to each system. “Issues” means deficiencies in OBC compliance, not necessarily with performance. The most commonly observed issues were with filter bed size; tank size; and the constitution of the filter sand used. Most homes had a higher daily design flow than that indicated in the forms initially filed with the Health Unit.

[59] Anne Elmhurst was a certified health inspector employed by the Health Unit between 2005 and 2014. In April 2010 she was tasked with conducting a pool inspection at 235 McGill Drive. While on site the homeowner, Mrs. Bertucci, advised her that she did not think that her septic system was properly sized. Ms. Elmhurst checked the number of fixtures in the home, as built, and compared them to the number of fixtures reflected in BGS Homes’ initial application. She found that the BGS application indicated that the house was a three bedroom. It was built, however, as a four bedroom. Moreover, the size of the home was bigger than as reflected in the application.

[60] Ms. Elmhurst spoke to a neighbour, Mr. Page, at 10 Meadow. He advised her that he was having issues with sewage break-out. The Hronis family, at 12 Meadow, approached her and advised that they were having break-out problems too. Two other families – the Bells and the Amoses, also approached her with concerns. Her investigations into these properties reflected that there were discrepancies between what the Health Unit was told about square footage and fixture quantities at the time of the original applications and what was actually built, leading to systems that were undersized.

[61] Under cross-examination by counsel to Parkhill, Ms. Elmhurst testified that she was aware that there were issues with groundwater affecting some of the installed septic systems. She identified properties at 7, 8, 10 and 16 Meadow and 235 McGill as ones where there were grading issues that were causing saturation of the installed systems.

[62] Ms. Elmhurst eventually inspected thirty-six properties, along with Mr. Van Voorst. She prepared a survey form for each property, comparing the as-built residence with the information received by the Health Unit at the time septic installation permits were applied for. The parties agree that the surveys are business records and they were admitted into evidence for the proof of their contents.

[63] Ms. Elmhurst testified that the Health Unit ultimately issued Orders to Comply with respect to all thirty-six properties she inspected. An Order to Comply is a formal order issued by the Health Unit which documents deficiencies and requires remedial works to be completed by specified dates. Failure to comply could result in a fine, or a Stop Work order.

[64] Attached as Appendix “B” is a schedule summarizing the deficiencies noted in the thirty-five Orders to Comply issued by the Health Unit with respect to impugned septic systems. Almost all of them identify non-compliant filter sand as a deficiency requiring remediation.

[65] Unfortunately, the remediation of non-compliant filter sand is not an easy fix. It essentially requires the removal of the affected system; the disposal of the non-compliant sand in a facility equipped to handle contaminated soils; and the construction of a new system. The work is extensive and expensive.

III. THE PARTIES’ POSITIONS

Parkhill

[66] Through Parkhill’s lens, the world looks as follows.

[67] RYC knew its product was being used as septic filter sand. It knew its customers relied on it to meet the specifications of the OBC for filter medium. But the filter sand manufactured by RYC did not meet the OBC’s specifications and in the result it was not fit for purpose.

[68] The failure of the sand resulted in Orders to Comply being issued by the Health Unit. The Orders necessitated substantial remediation. The costs of remediation were initially born by BGS and they led directly to a lawsuit against Parkhill (and others).

[69] Parkhill reasonably settled the litigation with BGS and incurred reasonable costs in doing so. RYC is liable for the amount of the settlement and costs.

[70] Liability is grounded in both contract and tort, though Parkhill prefers to take its damages in contract.

[71] In terms of the contracts-based claim, RYC breached an implied warranty of fitness for use, as provided for in s. 15 of the Sale of Goods Act, R.S.O. 1990 c. S.1 (the “SGA”). They also breach s. 14 of the SGA which implies a condition into contracts for the sale of goods by description, that the goods will, in fact, correspond with the description.

[72] In Parkhill’s submissions, a breach of the OBC’s minimum specifications for filter sand is sufficient, on its own, to establish a breach of the implied warranty of fitness.

[73] The damages payable as a result of the breach are to be calculated according to the well-established rule in Hadley v. Baxendale, (1854) 9 Exch 341. Specifically, the measure of damages is the amount required to put the non-breaching party in the position it would have been in had the contract been performed as agreed: see also BG Checo International Ltd. v. British Columbia Hydro & Power Authority, 1993 CanLII 145 (SCC), [1993] 1 S.C.R. 12, at para. 12.

[74] Parkhill submits that it is concurrently entitled to damages in tort as a result of RYC’s negligence. They assert that the presence of a defect in the filter sand and the risk of harm created by that defect permits the court to draw an irresistible inference of negligence.

[75] The damages payable as a result of RYC’s negligence are measured by the amount necessary to put Parkhill in the position it would have been in had the negligence not occurred.

[76] Whether arising in contract or tort, the damages include all of Parkhill’s settlement costs and legal fees.

RYC

[77] RYC views the world through a much different lens than Parkhill.

[78] RYC denies that there was an implied warranty of fitness. They assert that the warranty does not arise where the product in issue has many possible uses, unless the purchaser expressly advises the seller of the specific intended use.

[79] In this case, the filter sand had numerous possible uses. It is common ground that Parkhill did not expressly advise RYC what its intended use for the product was. At best, its use was known only by implication, which is not sufficient.

[80] The warranty also does not arise unless the buyer has relied on the seller’s skill or judgment. In this case, Randy Barker testified that he had not read Part 8 of the OBC and was not familiar with the specific minimum requirements of filter sand. It is axiomatic that he could not have relied on RYC to meet standards he was not familiar with. Moreover, he was a licensed septic installer and is the person – in the context of this lawsuit – with the most expertise in terms of the requirements of the OBC relating to septics. Section 15 of the SGA requires reliance, but in the context of this case, it is not reasonable to conclude that Mr. Barker relied on RYC.

[81] In any event, the test is not one of perfection; it is whether the product is reasonably fit for purpose. As such, even if the court finds that there was an implied warranty of fitness for use, in this instance the filter sand supplied to Parkhill was reasonably fit. The hydraulic conductivity of the sand supplied by RYC was roughly the same as it would have been if OBC compliant. The fact that it did not comply with the minimum specifications of the OBC is not determinative because the OBC does not inform product liability.

[82] RYC denies that there was an implied warranty that its product met a particular description. They further assert that s. 14 of the SGA was not pleaded and that Parkhill should be precluded from relying on that provision.

[83] RYC denies that it has any liability in tort. Parkhill’s claim is one of pure economic loss. A prerequisite to recovery in cases of pure economic loss is the establishment that the product was dangerous to property or to the public. Parkhill has failed to establish that prerequisite. The notion of dangerousness is linked to the prospect of effluent leakage, but only two of the thirty-five impugned systems experienced effluent breakout. Even then, Parkhill has failed to prove that the breakouts were caused by inadequacies with the filter sand.

[84] In any event, there is no evidence as to what the appropriate standard of care is in terms of the manufacture of filter sand. A breach of a statutory specification is not the equivalent of breach of a standard of care.

[85] In this case, RYC manufactured a sand not materially different than sand that would meet the OBC minimum specifications. Furthermore they had it tested by an engineer to confirm that it was OBC compliant.

[86] RYC denies liability to Parkhill for damages arising in either contract or tort.

[87] In the event that the court finds liability on the part of RYC, it should be reduced on account of Randy Barker’s contributory fault, regardless of whether the damages sound in contract or tort.

IV. DISCUSSION

[88] Earlier I identified the live issues raised by the pleadings and positions taken by the parties. I delineated those issues between ones sounding in contract and others sounding in tort. I intend to work through those issues, one at a time, in the same order listed above.

Contract Issues

(1) Was there an implied warranty that the filter sand sold by RYC to Parkhill was fit for use as septic system filter sand?

[89] Parkhill purchased filter sand from RYC for thirty-five different installations in the Janetville subdivision. Technically, those purchases represent thirty-five distinct contracts.

[90] Parkhill argues that each of those contracts contained an implied warranty that the filter sand manufactured and sold by RYC would be reasonably fit for purpose. The warranty arises as a result of s. 15 of the SGA, which provides as follows:

15. Subject to this Act and any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:

16. Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description that it is in the course of the seller’s business to supply (whether the seller is the manufacturer or not), there is an implied condition that the goods will be reasonably fit for such purpose, but in the case of a contract for the sale of a specified article under its patent or other trade name there is no implied condition as to its fitness for any particular purpose.

[91] The language of the section identifies three preconditions. Before the court will imply a warranty of fitness for purpose, Parkhill must establish that:

(a) It made known to RYC, expressly or by implication, the particular purpose for which it was using the filter sand;

(b) It relied on RYC’s skill or judgment that the filter sand was fit for use as septic filter medium; and,

(c) The filter sand was a product that RYC sold in the course of its business.

[92] There is no dispute that filter sand was a product that RYC manufactured and sold in the usual course of its business operations. The third condition is easily made out. The remaining two conditions are contentious.

[93] Randy Barker testified that he never told anyone at RYC that he was using their filter sand as septic filter medium. In the result, Parkhill must establish that RYC knew, by implication, that Parkhill was using its filter sand as septic filter medium.

[94] I am satisfied that RYC did know as much.

[95] Carl Young testified that RYC manufactured filter sand as a product between 2004 and 2010. He estimated that they sold about 20,000 tonnes of the product annually. Their total aggregate sales, across all products, on an annual basis, was in the four to five million tonne range.

[96] Mr. Young described the manufacturing process and noted that RYC hired an engineering firm, Geo-Logic, to test the product during the manufacturing process. They would take samples of the product and ask Geo-Logic to test it for “septic sand specs”. Geo-Logic would provide a certificate of analysis back, which RYC would keep on file for a time. Some customers asked to see their certificates. No one from Parkhill asked. That said, he agreed under cross-examination that even if a contractor did not ask to see a certificate, they were expecting that RYC knew what it was doing.

[97] According to Mr. Young, when he looked at the certificates provided by Geo-Logic, he was interested to see that their product fell between two identified grain sizes. Provided it did, it was, in his view, “on spec”. Having said this, Mr. Young testified that he was not familiar with Part 8 of the OBC and did not know what the term “uniformity coefficient” meant. He did not know that the OBC governed septic systems.

[98] Mr. Young did know that filter sand has superior filtration qualities. In the result, it has a number of uses. If he were using it himself, he said, it would be for winter sand. The City of Kawartha Lakes bought it for winter sand. It could also be used for horse riding enclosures, or for leaching beds in landfills.

[99] Under cross-examination, Mr. Young agreed that RYC had eight to ten excavators as regular customers between 2004 and 2010. He said he knew that excavators were using his filter sand in that period to construct septic systems.

[100] He was asked about the need for filter sand to meet certain specifications. He confirmed that he knew it had to do so and accepted that it was part of his business to know that. He guessed that the minimum specifications came from the OBC. He confirmed that the reason RYC had their filter sand tested by an engineering firm was to ensure it met those specifications.

[101] Mr. Young agreed that he knew Randy Barker and his father, Arthur. He knew they were involved in residential excavation: basements, driveways, backfilling houses. He assumed they did septic systems, but no one from Parkhill ever told him they were using RYC’s filter sand in the course of installing septic beds.

[102] He said, however, that if he knew Parkhill was working in a subdivision, he would know that they were putting in septic systems. Though RYC rented an excavator and float to Parkhill and invoiced them with a reference to “Janetville”, he denied that he knew they were working in a subdivision. To him, “Janetville” meant a town.

[103] He also agreed that if an excavator purchased filter sand and septic stone (another of their products) together, he would think it very likely that the excavator was using the filter sand in the installation of a septic system. When shown an invoice dated January 31, 2004 to Parkhill for both septic stone and filter sand, however, he said that he could not tell from the invoice whether the products went together.

[104] After this lawsuit began, RYC was paid a visit by an insurance adjuster. Mr. Young gave a statement to the adjuster during which he indicated that Parkhill would order sand and specify that they wanted it for a septic system. At trial he resiled from that statement. He indicated that he does not know why he said it; it’s not true. Obviously it is a significant prior inconsistent statement. That said, I place little weight on it in reaching my conclusion about implicit knowledge.

[105] In my view, the evidentiary record strongly supports an inference that RYC knew that excavators used their filter sand for septic systems. That knowledge is the sole explanation for why they had the sand tested for OBC compliance. It may well be that Mr. Young never read the OBC, or at least Part 8 of it. But he knew that the OBC provided for minimum specifications for filter sand and that is the reason RYC sent samples of their product to Geo-Logic for testing. It is also the reason he kept their certificates of analysis on file: he wanted to be able to demonstrate to diligent excavators that their product “met spec”. I have no evidence that there were any specifications that needed to be met in relation to filter sand apart from the minimum specifications provided for in the OBC.

[106] RYC held out their product as filter sand. They knew that filter sand had to meet particular specifications under the OBC. They had it tested to ensure that it did. They knew that it was being purchased by excavators for use in the construction of septic systems. They knew Parkhill was one of those excavators. It was not necessary, in my view, for Parkhill to advise RYC, with respect to each purchase, that the acquisition of filter sand was for use in a septic system.

[107] It matters little that there is more than one potential use for filter sand. It is enough that RYC knew that excavators were using their product for septic filter sand: see Satara Farms Inc. v. Parrish & Heimbecker Ltd., 2006 SKQB 229 at para. 39.

[108] In my view, this is a situation, like that described by Lord Wilberforce in Ashington Piggeries Ltd. v. Christopher Hill Ltd., [1971] All E.R. 847 (H.L.) at page 877, where the “making known so as to show reliance…is easily deduced from the nature and circumstances of the sale…There is no need for a buyer to formally make known that which is already known.”

[109] I am satisfied that RYC implicitly knew the use that Parkhill and other excavators were making of its filter sand.

[110] I am similarly satisfied that Parkhill relied on RYC’s skill or judgment that the filter sand was fit for use as septic filter medium.

[111] It has been held that the key to the application of s. 15(1) of the SGA is the determination of the question of reliance. In Venus Electric Ltd. v. Brevel Products Ltd., 1978 CarswellOnt 727 (C.A.), Dubin J.A., as he then was, described the issue of reliance as follows (at para. 31):

The key to both subsections (our s. 15(1)(2)) is reliance - the reasonable reliance of the buyer on the seller's ability to make or select goods which are reasonably fit for the buyer's purpose coupled with the seller's acceptance of responsibility to do so. The seller has a choice whether or not to accept that responsibility. To enable him to exercise it he must be supplied by the buyer with sufficient information to acquaint him with what he is being relied on to do and to enable him to appreciate what exercise of skill or judgment is called for in order to make or select goods which will be fit for the purpose for which the buyer requires them.

[112] In this case, RYC made the choice to manufacture and sell a product known as filter sand. RYC was aware that “filter sand” is a product that must meet particular specifications. They were also aware that a significant number of their customers would purchase their product for use in the construction of septic systems. In my view, they accepted the responsibility to make goods which were reasonably fit for the purpose of septic system construction.

[113] The manufacturing process for filter sand is somewhat involved. It is an expensive process. The OBC requires that grain sizes fall within a particular spectrum. To achieve the appropriate grain sizes and distribution, the product is put through a number of stages of crushing and washing. Mr. Young testified, as I indicated, that RYC had the product tested by an engineering firm during production, which only makes sense. It is not commercially reasonable, nor practical, for individual purchasers to send samples out for testing by engineers at the time of each purchase. Moreover, it is impossible to determine, simply by looking at the sand, whether it meets the OBC specifications.

[114] There is no doubt that any purchaser of filter sand from RYC relied on their judgment that the sand was fit for purpose. Mr. Young acknowledged as much when he testified that he knew that excavators were relying on RYC to “know what they were doing”.

[115] Randy Barker specifically testified that he relied on RYC because in his mind it was their business to ensure that the filter sand they manufactured met the applicable specifications. Though Mr. Barker did not know specifically what the OBC required, he certainly knew that the OBC governed septic system construction. I accept his evidence, which accords with common sense and commercial reasonableness, that he expected RYC knew what they were doing.

[116] In the result, I am satisfied that Parkhill has established the existence of an implied warranty that the filter sand it purchased from RYC was fit for use as septic filter medium.

(2) Was the filter sand sold by description within the meaning of the Sale of Goods Act?

[117] Parkhill argues that RYC sold sand under the description, “filter sand”, which it submits is known in the industry as sand that complies with the specifications of Part 8 of the OBC. Parkhill argues further that s. 14 of the SGA implies a condition in contracts for the sale of goods by description that the goods sold will correspond with the description. Parkhill says the goods it purchased did not correspond with “filter sand” as that term is understood in the aggregates industry.

[118] RYC responded in argument by taking issue with the fact that Parkhill did not allege a breach of s. 14 of the SGA in its pleadings.

[119] I agree that Parkhill’s Fresh as Amended Third Party Claim does not allege a breach of an implied sale by description. Apart from its negligence-based claim, Parkhill asserted only a breach of an implied warranty of fitness for use.

[120] As a matter of procedural fairness, parties are entitled to insist that cases be disposed of on the basis of issues raised in the pleadings. As the Court of Appeal held in 460635 Ontario Ltd. v. 1002953 Ontario Inc., 1999 CanLII 789 (ON CA), 1999 CarswellOnt 3428 at para. 9, “A finding of liability and resulting damages against a defendant on a basis that was not pleaded in the statement of claim cannot stand. It deprives the defendant of an opportunity to address that issue in the evidence at trial.”

[121] It is generally appropriate to give pleadings a generous and liberal interpretation, provided that no unfairness results to the defendant. Here, it may be argued that Parkhill implicitly engaged the sale by description argument at paragraph 31 of the Fresh as Amended Statement of Claim when it alleged that RYC had an obligation to ensure that the filter medium it sold as “filter sand” complied with the requirements of the OBC.

[122] That said, I accept counsel’s submission that RYC did not address the issue in evidence given that it was not pleaded. Moreover, the outcome of this case is not in any way dependent on a conclusion about whether there was a sale by description here, or whether the goods complied with the description. In the circumstances, fairness dictates that I not consider the sale by description assertion further.

(3) If there was an implied warranty of fitness for use, was it breached?

[123] I have found that there was an implied warranty of fitness for use. The issue of whether that implied warranty was breached is one of the more controversial ones between the parties.

[124] Parkhill’s position is that the failure of the filter sand to meet OBC specifications is, on its own, sufficient to establish a breach. In Parkhill’s view, the failure of the sand to comply with the OBC’s specifications led directly to the Health Unit requiring that all thirty-five systems in issue be essentially completely replaced. From that perspective they argue that it could not be clearer that the filter sand was not fit for purpose.

[125] Parkhill relies heavily on the decision of the Court of Appeal in G. Ford Homes Ltd. v. Draft Masonry (York) Co., 1983 CarswellOnt 732 to support its assertion that non-compliance with the OBC is sufficient to ground a breach of the implied warranty of fitness.

[126] Ford Homes was a case involving a contract for goods and services in the context of a home construction. The plaintiff agreed to supply and install circular staircases in two homes being built by the defendant. The plaintiff was offered an opportunity to review the architectural plans for the homes but declined. The staircases installed were not in compliance with the OBC because they did not have enough headroom clearance at the top of the stairs. They had to be replaced. When the plaintiff sued for payment, the defendant asserted a breach of the implied warranty under s. 15(1) of the SGA.

[127] The Court of Appeal held that the contract of supply and installation must include an implied provision that the stairs would comply with the OBC. Otherwise, the builder could be compelled to have the stairs removed and the value of the goods and services would be nil – a result not commercially reasonable. Cory, J.A., as he then was, held as follows, at para. 17:

The supply of defective goods often involves the plaintiff in liability to sub-buyers, and it has been frequently held that the plaintiff is entitled to recover compensation for such losses, and for the costs of reasonably defending legal proceedings. (Emphasis mine).

[128] It is impossible not to see the parallel between the Ford Homes case and the situation Parkhill found itself in here. Parkhill purchased a product that RYC concedes did not meet the specifications of the OBC. Non-compliant filter material was cited in almost all of the Orders to Comply issued by the local Health Unit in relation to the impugned septic systems. Its use resulted in the need to rip up and replace, almost from scratch, the overwhelming majority of those systems.

[129] RYC’s position, however, is that the warranty implied by the SGA is only that the goods sold are “reasonably fit” for their intended use. This is not a “gold standard” warranty that guarantees compliance with building code legislation. Such a specific warranty must be expressly contracted for in RYC’s submission, and it was not contracted for in this case.

[130] RYC asserts that the failure to meet a minimum specification established by the OBC does not immediately or inevitably lead to the conclusion that the filter sand was not reasonably fit for use.

[131] RYC’s counsel described Parkhill’s action as a product liability case. He cited a decision of the Alberta Court of Appeal to support the position that provincial building code legislation does not inform product liability cases.

[132] Holtslag v. Alberta, 2006 ABCA 51 was a case where a number of homeowners sued the Director of Building Standards for damages based in negligence. The Alberta Building Code permitted the Director to issue product listings authorizing the use of materials that, in the opinion of the Director, met the requirements of the Code.

[133] The Director issued a product listing with respect to untreated pine shakes as suitable roofing material. The test of time proved that the shakes were not suitable. The plaintiffs purchased and installed untreated pine shakes, purportedly relying on the Directors’ product listing. They sued for damages, arguing that the Director breached a duty of care owed to them. The trial judge granted a motion for non-suit at the end of the plaintiffs’ case, finding that no such duty of care was owed to them.

[134] The plaintiffs appealed. The appeal was dismissed. The Alberta Court of Appeal held, as the trial judge did, that there wasn’t a sufficiently proximate relationship between the plaintiffs and the Director to establish a duty of care. In the course of writing a unanimous opinion, Sulyma J. (sitting ad hoc) described the regulatory nature of the Building Code as follows (at para. 35):

In this case, there is nothing in the statute that can be said to give rise to a private duty, as opposed to a general public duty. The provisions of the Code are technical requirements relating to minimal health and safety standards and the use of safe and adequate building materials…As the respondent submitted, the Code cannot be said to be a textbook on building design. There are no provisions within it which address or provide for warranty of fitness or durability. The statute establishes a regulatory scheme for building products and is intended only as a set of minimum standards for the benefit of the public at large. The statute cannot be construed to impose a duty of care on the Director to consumers of building products.

[135] Counsel to RYC submitted that Holtslag supports his assertion that the OBC does not inform or relate to product liability. He noted that nothing in the OBC provides a warranty of fitness or durability for any product; whether Code-compliant or otherwise.

[136] If I understand counsel’s submission correctly, the argument is that because the OBC does not directly provide for any particular assurance of quality or fitness, its breach cannot, on its own, constitute a breach of an implied warranty of fitness. Something more is required.

[137] Moreover, counsel highlighted the fact that the SGA, which may imply a warranty of fitness, requires only reasonable fitness for use. Essentially he submitted that, in the context of this case, what must be required to establish a breach of the implied warranty is not slavish observance of the OBC, but rather evidence that the hydraulic conductivity (i.e. permeability) of RYC’s filter sand was not suitable for raised filter bed septic systems.

[138] RYC, as I have noted, tendered evidence from a geotechnical engineer – Geoff Lay – to the effect that the difference in hydraulic conductivity between the sand supplied and sand that would meet the OBC’s specifications was minimal. On this basis, RYC argues that its filter sand was, in fact, reasonably fit for purpose.

[139] Despite the engaging nature of Mr. Lay’s testimony, in the final analysis I find his evidence unfortunately unhelpful to RYC. There are two reasons for this.

[140] First, I do not agree with his opinion that the permeability of RYC’s filter sand is roughly the same as OBC-compliant sand would be. But more importantly, even if Mr. Lay is right, the Janetville septic systems had to be replaced because the filter sand used in their construction was not OBC-compliant. It was within the mandate of the Health Unit to insist on compliance with the OBC. They did. The actual permeability of the filter sand made no difference. I will elaborate on both reasons.

[141] Recall that the OBC sets the maximum Cu value for filter sand at 4.5.

[142] Of the 35 systems in issue here, all but nine were tested[^5] for the Cu value of the filter sand after performance of the systems at Janetville became an issue. All tested sands exceeded the maximum Cu value of 4.5. Values ranged from a low of 5.6 at 30 Songbird Crescent to 12.5 at 7 Meadow Drive. Cu values are associated with permeability. It follows that none of the filter sand, as tested, was as permeable as the OBC requires it to be.

[143] Mr. Lay prepared a chart in which he set out his calculations of the hydraulic conductivity values (K values) of the filter sands as tested. Recall that a Cu value of 4.5 reflects a K value of roughly 9.5 x 10-².

[144] The K values in the filter sands as tested from the Janetville septic systems range from a low of 1.19 x 10-² at 7 Meadow Drive to 9.94 x 10-² at 31 Songbird Crescent. A K value of 1.19 x 10-² indicates that the filter sand used at 7 Meadow Drive was about one seventh as permeable as it should be, according to the specifications of the OBC.

[145] There were two properties that met or exceeded the K value that OBC-compliant filter sand would demonstrate. Another three were negligibly different. But most were materially different in my view.

[146] Mr. Lay testified that the filter sands tested at Janetville were not significantly less permeable than OBC-compliant filter sand would be. But his concept of significance is important to keep in mind. He essentially opined that in the grand scheme of all aggregates, the permeability of the tested filter sand was not that different from OBC-compliant filter sand. But on my view of the evidence, in the overwhelming majority of cases the filter sand supplied by RYC not only exceeded the maximum Cu value permitted by the OBC, but it was also materially less permeable.

[147] Having said all of that, the real difficulty with the filter sand here was, because it exceeded the maximum Cu value provided for in the OBC, the local Health Unit could – and did – require its removal and replacement.

[148] In my view, this case is on solid footing with the Ford Homes case. I would echo what Justice Cory said there. The filter sand produced and sold by RYC could not be reasonably fit for purpose where, by requirements of the law, its removal could be compelled for failure to comply with the OBC.

(4) How are Parkhill’s damages measured?

The Pleadings

[149] Before I engage in a discussion about the appropriate measure of contractual damages, I need to address an argument raised by RYC about Parkhill’s pleading.

[150] Each of the parties filed comprehensive written submissions. In addition, each made comprehensive oral submissions. In its written submissions – but not in its oral submissions – RYC took issue with the manner in which the Fresh as Amended Third Party Claim (the “Claim”) was framed.

[151] Parkhill’s prayer for relief, at para. 1 of the Claim, provides that Parkhill seeks:

(a) contribution and indemnity and relief over for the amounts the Parkhill Defendants agreed to pay to the plaintiffs in the main action, pursuant to a settlement of the main action;

(b) the costs of defending the main action on a full indemnity basis;

(c) the costs of this third party action; and,

(d) such further and other relief as this Honourable Court deems just.

[152] RYC devoted significant space in its written submissions to the nature and substance of claims for contribution and indemnity. In terms of the claim as framed in contract, RYC submitted that Parkhill is not entitled to indemnity from RYC for any amounts claimed because (1) there is no contractual right of indemnity between them; (2) the right to indemnity under the Negligence Act does not apply to breaches of contract; and (3) there is no enforceable implied right to indemnity because such a right is restricted to cases where Parkhill has been without fault, which is not the case here.

[153] With respect to the effort put into the argument by RYC, I do not intend to spend much time on it. This is a claim for damages based in contract and tort. The Claim arguably may have been better without the use of the phrase “contribution and indemnity”. But it is clear from a careful reading of the claim that Parkhill is seeking damages from RYC for, amongst other things, its breach of the implied warranty of fitness under s. 15 of the SGA.

[154] The Claim, in any event, seeks “relief over” against RYC. I understand that phrase to mean essentially that Parkhill is seeking damages against RYC equal to any amounts it is required to pay as a consequence of the claim of BGS in the main action. The Claim goes on to outline the bases upon which RYC is allegedly liable for those damages, in both contract and tort.

[155] There is absolutely no unfairness to RYC to treat the Claim as one for breach of contract and negligence. Indeed, it would be unfair to Parkhill, at the end of seven weeks of trial, to say, “too bad, you didn’t frame your prayer for relief correctly”.

The Expectation Interest

[156] The general measure of damages for contractual breach is not otherwise a matter of significant contention. Parkhill is entitled to its expectation damages as a consequence of RYC’s breach of the implied warranty of fitness.

[157] Expectation damages were described by the majority in BG Checo, as above, at para. 12, as follows:

The plaintiff suing for breach of contract is to be put in the position it would have been in had the contract been performed as agreed.

[158] The limits on the damages sought are more controversial.

Causation and Remoteness

[159] Generally speaking, damages in contract are limited by two factors: causation and remoteness (foreseeability).

[160] As a condition of recovery, a plaintiff is required to prove that the defendant’s breach caused the damages sought. In other words, that it was the defendant’s breach and not some other, intervening factor, that caused the plaintiff’s loss: G.H.L. Fridman QC, The Law of Contract in Canada, 6th ed. (Toronto: Carswell, 2011) at page 683.

[161] It is not necessary that Parkhill establish that RYC’s breach of the implied warranty of fitness was the only cause of its losses. It is sufficient that the breach be a cause: Ipex Inc. v. AT Plastics Inc., 2016 ONSC 1859 at para. 23.

[162] The causation requirement is also embedded in the foreseeability requirement. The test from Hadley v. Baxendale, as above, remains good law. The damages sought must have either:

(a) Arisen naturally, according to the usual course of things; or

(b) Been in the contemplation of both parties at the time they made the contract.

[163] The first part of the test – the “normal rule” – is objective. It has been explicitly incorporated in s. 51(2) of the SGA which provides as follows:

The measure of damages for breach of warranty is the estimated loss directly and naturally resulting in the ordinary course of events from the breach of warranty.

[164] The second part of the test is subjective. In exceptional cases, damages may be extended to losses not ordinarily foreseeable, provided there are special circumstances - present and known to both parties - that make the exceptional losses foreseeable. This is not such an exceptional case. The usual, objective rule of foreseeability applies.

[165] In the result, to recover damages from RYC, Parkhill must establish, on a balance of probabilities, that its losses were caused by RYC and that they were foreseeable consequences of RYC’s breach.

[166] I have no hesitation in finding that RYC’s failure to ensure that its product met the specifications of the OBC for filter sand caused Parkhill significant losses. These losses include the cost of settling the litigation initiated by BGS and the legal fees and disbursements incurred in the course of that litigation.

[167] I am also satisfied that both the settlement costs and the legal fees were foreseeable losses.

[168] As Professor Waddams observed in The Law of Damages, Looseleaf Ed. (November 2016 rel.) (Toronto: Thomson Reuters., 2016) at ¶1.2720:

The supply of defective goods often involves the plaintiff in liability to sub-buyers, and it has been frequently held that the plaintiff is entitled to recover compensation for such losses, and for the costs of reasonably defending legal proceedings. (Emphasis mine).

[169] RYC manufactured and sold a product labelled as filter sand. They knew, as I have found, that it was being used as septic filter medium and that it was necessary that it comply with the specifications of the OBC. They ought reasonably to have known that if the filter sand was not fit for purpose, that the end user(s) would be displeased and would look to the installer for compensation. The installer would be left in a difficult spot. RYC ought reasonably to have expected that the installer – Parkhill – would want to do its best to resolve any claims made against it and that they would, in all likelihood, incur costs to do so. Those costs – settlement and legal fees – are recoverable as damages: Biggin v. Permanite, [1951] 2 K.B. 314 (C.A.); Burrard Drydock Company Limited v. Canadian Union Line Ltd., 1954 CanLII 39 (SCC), [1954] S.C.R. 307.

[170] RYC, in fact, concedes that, assuming the court has found liability against it for breach of an implied warranty, Parkhill is entitled to recover its reasonable settlement costs and legal fees associated with litigating the main action. There remain, however, two live issues.

[171] First, RYC disputes the amount of Parkhill’s claimed legal fees. Second, RYC asserts that Parkhill’s damages should be reduced to reflect Parkhill’s contribution to its own losses. I will address these issues in turn.

(5) Are the legal fees incurred by Parkhill in relation to the main action subject to assessment as costs and/or the application of a reasonableness standard?

Proof of the Costs Incurred

[172] As a preliminary matter, RYC asserts that the Parkhill’s legal expenses have not been proven in evidence. Or at least that Parkhill has failed to prove it paid for the expenses.

[173] I need not spend a great deal of time on this line of attack.

[174] Mrs. Barbara Barker is the secretary-treasurer of Parkhill. She was essentially the bookkeeper and was in charge of, amongst other things, accounts payable.

[175] Mrs. Barker testified that when Parkhill was served with the statement of claim of BGS, they initially retained a lawyer by the name of Robert Becker. Subsequently, and for reasons not made clear in the evidence, Parkhill retained Theall Group LLP. Mr. Becker assisted Parkhill through the pleadings and discovery stages, through the judicial pre-trial conference and ultimately to the commencement of the trial.

[176] There was some overlap in legal services commencing at about the time of the pre-trial conference and continuing up until the beginning of the trial.

[177] Mrs. Barker testified that Parkhill received the following invoices for legal services, all of which have been paid other than the final bill from Theall Group LLP which remains outstanding:

Robert Becker Accounts

December 24, 2013 $ 32,541.55

August 24, 2015 $ 40,495.28

September 22, 2016 $ 30,486.59

Subtotal $103,523.42

Theall Group Accounts

May 5, 2016 $ 5,357.45[^6]

May 30, 2016 $ 59,828.82

June 2, 2016 $ 1,506.66

June 30, 2016 $ 33,515.11

December 14, 2016 $423,261.34

May 12, 2017 $130,137.02

Subtotal $653,606.40

[178] The total legal fees invoiced to Parkhill, inclusive of fees, disbursements and HST is $757,129.82. Parkhill is not claiming recovery of HST against RYC. The net claim for fees and disbursements is, therefore, $675,033.25.

[179] Mrs. Barker testified that Parkhill directly paid Mr. Becker’s first two accounts. His third account was paid in full from the trust account of Theall Group LLP. All of the accounts of Theall Group LLP, save the last, were paid from the Theall Group LLP trust account. Cancelled cheques were entered in evidence to support the payments. The court heard no evidence as to who deposited funds into Theall Group’s trust account to cover Parkhill’s legal expenses.

[180] RYC takes the position that Parkhill is not able to recover legal fees and disbursements that they did not pay directly themselves. In other words, RYC contends that Parkhill should be limited to, at most, recovery of the first two accounts paid to Mr. Becker.

[181] Mrs. Barker was not able to say how the balance of the accounts were paid, or whether Parkhill will ultimately be responsible to repay anyone for monies paid to Theall Group LLP on Parkhill’s behalf.

[182] The elephant in the room, of course, is that Parkhill had insurance coverage for its defence costs. This is a matter of public record. The Court of Appeal ruled on November 8, 2016 that three insurers had a duty to defend Parkhill, Randy Barker and Arthur Barker against the BGS action: see Parkhill Excavating Ltd. v. Royal & Sunalliance Insurance Co. of Canada, 2016 ONCA 832.

[183] As a matter of law, the insurers who responded to the claim, with a gentle prod from the Court of Appeal, have subrogated rights to recover the legal fees and disbursements paid on behalf of Parkhill, Randy Barker and Arthur Barker. The fact that an insurer may have covered all or part of Parkhill’s legal fees does not relieve RYC of its liability for those fees.

Parkhill’s Legal Fees are Damages

[184] The more difficult issue raised by RYC in relation to Parkhill’s claimed legal expenses is the assertion that their legal fees should be treated as costs assessed on a partial indemnity basis. More generally, that a reasonableness standard should be applied to the amount assessed.

[185] Counsel to Parkhill demurred. He submitted that he and counsel to RYC had an understanding that Parkhill’s legal fees would be assessed as damages and not as costs. It is apparent from the submissions of RYC’s counsel that he did not have the same understanding. In the absence of an evidentiary foundation to support an admission on the issue, I am unable to enforce it.

[186] That said, I am satisfied that the legal fees and disbursements incurred by Parkhill to defend and ultimately settle the BGS claim are recoverable as damages and are not subject to the court’s general discretion to fix costs and the principles that apply to the assessment of costs.

[187] Again, I have found that Parkhill’s settlement costs and legal fees were foreseeable damages. I have cited a number of authorities above that support the conclusion that settlement costs and legal fees are recoverable as damages. The legal fees are, accordingly, recoverable on a full indemnity basis unless otherwise limited by principles relating to the assessment of damages. They are not limited by the principles applicable to the assessment of costs.

A Reasonable Standard Does Not Apply to Legal Fees

[188] I have concluded that a reasonableness standard applies to the assessment of Parkhill’s settlement costs, but the same standard does not apply to the assessment of the legal fees and disbursements incurred by Parkhill. My conclusion has to do with the reason why a reasonableness standard is applied to the settlement costs.

[189] Parkhill’s contribution towards the settlement with BGS was $420,000 inclusive of claim, interest and costs. Because the action of BGS was resolved, however, it is not known whether the amount paid is an accurate reflection of what Parkhill’s actual liability was. Rather, the amount paid is a reflection of the amount in issue in the litigation subjected to a valuation of the litigation risks of each of the parties to the main action.

[190] The law recognizes that for Parkhill to establish that its actual loss would have been $420,000 or more, a lengthy and costly inquiry would be required. Accordingly, it is sufficient, to establish its damages, that Parkhill prove only that its settlement was within the range of what was reasonable: Supershield Ltd. v Siemens Building Technologies FE Ltd [2010] EWCA Civ 7 at para. 28; Biggin v. Permanite, as above. The reasonableness standard is, therefore, a mechanism utilized by the court to avoid the necessity of a third party plaintiff strictly proving its losses.

[191] RYC concedes that Parkhill’s settlement was within the range of what was reasonable. As such, the first prong of its damages claim is established, subject to reduction on the basis of other principles of damage assessment, which I will come to shortly.

[192] Unlike settlement costs, the legal expenses incurred by Parkhill in connection with the main action do not require a lengthy and expensive process to establish. They are easily established. No mechanism – like the reasonable range standard – is required as an evidentiary shortcut.

[193] Parkhill has established, on evidence, the amount of costs that it actually incurred, by way of fees and disbursements, to litigate and settle the BGS claim. These losses have been strictly proven, subject, again, to reduction on the basis of any other applicable principles relating to the assessment of damages. A general standard of reasonableness is not one of those principles.

[194] It is commonly held that it is sufficient for a plaintiff to establish that a particular type of damage was foreseeable, not the extent of the loss: see for instance H. Parsons (Livestock) Ltd. v. Uttley Ingham & Co. Ltd., [1978] 1 Q.B. 791; S.M. Waddams, The Law of Contracts, 7th ed. (Toronto: Thomson Reuters, 2017), at ¶741.

[195] Factors that may operate to limit the quantum of a party’s damages, apart from causation and foreseeability, include mitigation, considerations of loss distribution and the price of the contract (i.e. whether it would be anomalous to impose extensive liability for a contract where the price was minimal). None of these factors was asserted by RYC in this case.

[196] The only argument advanced in an effort to reduce the amount of costs claimed by Parkhill was the notion that they should be assessed as though party and party costs or otherwise reduced on the basis that they are patently unreasonable. But the legal fees are not party and party costs. They are damages. I have also found that a reasonableness standard does not apply to the assessment of the fees as damages.

[197] I further find that it would be unfair to the parties were I to embark on any analysis based on limiting factors not raised or argued by the parties. In the result, I make no reduction to Parkhill’s claim for costs associated with the main action on the basis of reasonableness.

[198] I will proceed to the final contracts-related issue.

(6) Should Parkhill’s contractual damages be subject to reduction for fault-based contribution or otherwise?

[199] The evidence adduced at trial makes it clear that the deficient filter sand was not the sole cause of septic system failures in Janetville.

[200] BGS made some errors. They failed, for instance, to provide fulsome or accurate information to Parkhill with respect to the square footage, number of bedrooms and number of plumbing fixtures in a number of homes. In the result, some systems – or components of systems – were undersized.

[201] Parkhill’s counsel argued, and I agree, that any liability that BGS may have for its own errors has already been factored into the settlement reached with BGS.

[202] Randy Barker also made some errors. He failed to follow his own so-called “gold standard”: to prepare a septic design based on a review of the building plans for the home. He was cavalier about reviewing the information put onto forms by BGS employees when creating designs. He also failed to count rough-ins as fixture units, which is required under the OBC.

[203] Randy Barker was the certified designer of all but seven of the 35 impugned septic systems. According to the records of the Health Unit, which were admitted for the truth of their contents, 13 systems had undersized septic tanks. Twelve of those systems were designed by Mr. Barker. Nineteen properties had undersized loading rate areas, all but two of which were designed by Mr. Barker.

[204] At the outset of his oral submissions, Mr. Theall made note of the fact that Parkhill’s claim was framed in both contract and tort. He indicated that should the court find liability under both headings, his client would prefer to take its damages in contract. He did not say why.

[205] I my experience, people generally act in their own self-interests. This is particularly so, of course, with parties to litigation. I inferred, therefore, that behind Mr. Theall’s submission lay the expectation that Parkhill’s damages in contract would exceed its damages in tort. This seems to me a peculiar result. Parkhill is out of pocket roughly $1.1 million. They say RYC is to blame for those losses. Why should Parkhill’s recovery differ depending on whether RYC is at fault due to a breach of warranty as opposed to a breach of a duty of care?

[206] The answer of course is that Mr. Theall knows that Parkhill is not without fault in the circumstances of this case. Damages in tort are likely, in the result, to be reduced on the basis of contributory negligence, as provided for at section 3 of the Negligence Act, R.S.O. c. N.1. But the Negligence Act does not apply to claims for breach of contract: Dominion Chain Co. v. Eastern Construction Co. (1976), 1976 CanLII 698 (ON CA), 12 O.R. (2d) 201 (Ont. C.A.); affirmed 1978 CanLII 39 (SCC), [1978] 2 S.C.R. 1346 (S.C.C.). It is considerably less clear whether contractual damages may be reduced by way of a fault-based apportionment.

[207] It appears to me, however, that Canadian authorities now firmly support the conclusion that there should generally be no difference in the measure of damages payable on a particular set of facts regardless of whether the claim is framed in contract or tort. As the majority held in B.G. Checo, as above, at para. 47:

In situations of concurrent liability in tort and contract, however, it would seem anomalous to award a different level of damages for what is essentially the same wrong on the sole basis of the form of action chosen, though, of course, particular circumstances or policy may dictate such a course.

See also Tompkins Hardware Ltd. v. North Western Flying Services Ltd. (1982), 1982 CanLII 3160 (ON SC), 139 D.L.R.(3d) 329 (Ont. H.C.);

[208] It is of significance, however, that while the Negligence Act, provides a mechanism for apportioning damages in cases of concurrent or shared fault in tort cases, there is no ready-made mechanism to do the same in contracts cases.

[209] Courts have, nevertheless, found a number of means of apportioning fault, where it is fair and appropriate to do so in contracts cases. In some cases, the mechanism used is causation: Bensuro Holdings Inc. v. Avenor Inc., [2004] O.J. No. 4875 (Ont. C.A.). In other cases, it is foreseeability. In other words that it was within the reasonable contemplation of the parties that they would be liable for damages in accordance with their respective degrees of fault: Doiron v. Caisse populaire d'Inkerman Ltée (1985), 1985 CanLII 95 (NB CA), 61 N.B.R. (2d) 123 (N.B. C.A.).

[210] Professor E.J. Weinrib suggested, as long ago as 1976, that restitution was an appropriate mechanism of apportionment, as the concept of unjust enrichment should prevent a partially at-fault plaintiff from recovering damages that he or she contributed to. See E.J. Weinrib, Contribution in a Contracts Setting, 54 Can. Bar Review 338 (1976). This mechanism is supported by Professor Waddams: The Law of Contracts, as above, at ¶777.

[211] A thorough review of the Canadian jurisprudence on the issue of fault-based apportionment of damages in contracts cases was provided by Ducharme J. in Treaty Group Inc. v. Drake International Inc., 2005 CarswellOnt 7057 (S.C.J.), aff’d 2007 ONCA 450. He concluded as follows, at paras. 69-70:

My review of the foregoing jurisprudence persuades me that, while I cannot rely on the provisions of the Negligence Act, R.S.O. 1990, Ch. N.1, I can apportion damages in a contract action to recognize conduct on the part of the plaintiff that has increased his or her damages…

I agree with the view expressed by Saunders J. in Tompkins Hardware Ltd. that there is no principled reason not to consider contributory fault in a contracts case…Indeed, to refuse to consider contributory fault would be reminiscent of the technical strictures of the old system of common law pleadings and elevate the niceties of pleadings above the substantive requirements of achieving the fair and just result in any particular case.

[212] A common theme uniting the authorities is that fault-based apportionment of damages in contracts cases is often required as a matter of fairness and justice. The concept is quite simple: where a plaintiff has contributed to his or her own losses, he or she ought to be responsible for those losses, to the extent that he or she caused them, whether a claim is framed in contract or tort. Regardless of the mechanism for achieving it – whether it be causation, foreseeability or restitution – the time has come where courts have both the will and the means to impose fault-based apportionment of damages in contracts cases.

[213] The question now is what is an appropriate fault-based apportionment in this case?

[214] I have come to the conclusion that Parkhill’s contractual damages must be reduced according to five fault-based factors:

(a) The claim against RYC is based on the assertion that septic systems had to be gutted and replaced in Janetville because the local Health Unit issued Orders to Comply requiring the replacement of the filter sand used in their construction. But there are a number of properties where the Orders to Comply did not mention non-compliant filter sand;

(b) All of the Orders to Comply reference multiple deficiencies. Where there are issues with insufficient loading rate areas combined with non-compliant filter sand, I find that the process and cost involved to replace the filter sand is so significant that it subsumes any deficiencies in the size of the loading rate areas. In other words, where systems had to be completely rebuilt the fact that the original loading rate area was too small is a de minimus issue;

(c) There were a number of residences where septic tanks were undersized and had to be increased. The undersized tanks were the direct result of a failure to properly calculate daily design sewage flow. In cases where Randy Barker was the system designer, I find he was at fault for failing to ensure that daily design sewage flow was properly calculated. I find that Mr. Barker had a cavalier attitude towards design specifications, expecting instead that his significant experience in septic installations was enough to permit him to accurately gauge what was required in any particular case.

Parkhill argued that Mr. Barker reasonably relied on the information provided to him by BGS. I disagree. He failed to insist on building plans, knowing that they were the most reliable source of information. He further failed to make inquiries to satisfy himself about the accuracy of information being provided, even though in some instances forms were clearly filled out improperly;

(d) There are eight properties where repairs were required to pump chambers. All were installed by Parkhill and Parkhill must be responsible for them. None of them have anything to do with the sand provided by RYC; and,

(e) There were grading issues noted with respect to twenty-five properties. Grading was the responsibility of Parkhill and has nothing to do with the sand provided by RYC.

[215] I will address these factors in turn. All of them, in my view, are issues of causation. If it is strictly necessary for me to identify the specific mechanisms by which I am apportioning contractual liability, they are causation and restitution.

Non-Compliant Filter Sand

[216] Parkhill’s claim is based on the assertion that the filter sand supplied by RYC was non-compliant with the OBC and, in the result, had to be replaced. The replacement of filter sand necessitated the destruction and reconstruction of the septic systems in issue. Parkhill asserts that while there may have been other defects that required correction, they were minor in the grand scheme of things.

[217] As I noted earlier, RYC produced an expert that opined that the hydraulic conductivity of RYC’s filter sand was not all that different from what OBC-compliant sand would be. Parkhill’s response – which I accepted – is that it doesn’t matter. The problem is that the Health Unit insisted on OBC-compliant sand, which meant replacement of the systems.

[218] But there are five properties where the Orders to Comply issued by the Health Unit do not raise non-compliant filter sand as an issue: 247 McGill, 26 Meadow, 26 Songbird, 29 Songbird and 7 Songbird.

[219] To be fair, the Orders to Comply do reflect that the filter sand at 247 McGill, 26 Meadow and 7 Songbird was saturated. Section 8.7.5.3(4) of the OBC provides that “the filter medium shall be unsaturated for its entire length.” Saturated filter sand is non-compliant, but the reason for the saturation is not clear from the Orders to Comply.

[220] The directions required in the Health Unit’s Orders to Comply were, for the most part, based on the recommendations of the engineer Mark Van Voorst, whose testimony I described above. Mr. Van Voorst did not issue reports for 26 or 29 Songbird. In turn, the Health Unit’s Orders with respect to these properties did not mention non-compliant filter sand, nor did they require the replacement of the entire septic systems on those properties. The Orders to Comply on both 26 and 29 Songbird required only larger septic tanks and additions to the loading rate areas. Neither of these two issues engages RYC.

[221] Parkhill’s settlement with BGS worked out to $12,000 per property. I am not satisfied that RYC’s filter sand caused a loss in relation to either 26 or 29 Songbird Crescent, so Parkhill’s claim must be reduced for this reason by $24,000.

[222] Moreover, with respect to the properties at 247 McGill, 26 Meadow and 7 Songbird, where non-compliance was based on saturation of the filter sand, I am not satisfied that a deficiency in the Cu value of the filter sand was the only, or even the main cause of such saturation. I find, by inference, that it was certainly a cause.

[223] The Cu value of the filter sand supplied by RYC varied from lot to lot. It was not tested at any of 247 McGill, 26 Meadow or 7 Songbird. But it was tested at twenty-eight other lots and it failed whenever tested. I am prepared to infer that the Cu value of the filter sand at each of these three impugned lots would have been non-compliant. RYC admits as much. I am also prepared to infer that the deficient Cu values would mean the filter sand was less permeable than it should be. It is likely therefore that the non-compliant filter sand contributed to the saturated condition of the filter beds at these three impugned lots.

[224] There are, however, other factors that likely contributed to the saturation of the filter sand at these three lots. These other factors have nothing to do with RYC. For instance, Mr. Van Voorst concluded, with respect to all three properties, that:

(a) Permeable geotextile fabric was not installed, as required by the OBC;

(b) The base of the septic stone did not meet the OBC requirements;

(c) The depth of the filter sand was inadequate (save with respect to 26 Meadow); and,

(d) The loading rate areas were too small.

[225] It is not possible for me to determine, with precision, how much of a factor the non-compliant filter sand was in terms of the saturated condition of the filter beds at these three impugned locations. I think it was likely a significant factor, but in the absence of further evidence, I will reduce Parkhill’s damages claim by 50% with respect to each of these three lots, for a total of $18,000.

Undersized Tanks

[226] The Health Unit identified 13 properties where the installed septic tanks were too small. Randy Barker designed 12 of those systems. He also testified that the cost to put in the smallest tank (3600 litres) was about $2,000.

[227] Parkhill’s counsel prepared some detailed charts and schedules which they offered in submissions, providing formulas for calculating what percentage of damages Parkhill should be liable for depending on a number of variables. Though I reviewed it carefully, I have not utilized that material in apportioning damages.

[228] In my view, Parkhill is responsible for the cost of 12 larger septic tanks. The only evidence I have about the cost of the tanks is Randy Barker’s estimate of $2,000 per tank. Utilizing that estimate, I deduct a further $24,000 from Parkhill’s damage claim for undersized tanks.

Pump Chambers

[229] The Health Unit identified eight properties that required repairs to pump chambers. These repairs are the responsibility of the installer, Parkhill. There is, however, a dearth of evidence about what these repairs would cost. According to the testimony of Randy Barker, the most likely reason that repairs are required to a pump chamber is due to cracks in the concrete. Excavation and cement repairs would be required. He testified that the initial cost to install a chamber was $750. In the absence of any better evidence, I fix the repair cost at an estimated $375 per chamber (half the installation cost), for a total of $3,000 which will be deducted from Parkhill’s damage claim.

Grading

[230] Grading was identified by the Health Unit as an issue requiring correction on 25 properties. Unfortunately, I have no evidence about how extensive the grading issues were, or what it would cost by way of remediation. In many, if not most, cases, the grading issues were likely inextricably intertwined with the removal and replacement of the systems. On the whole, I am unable to attribute any value to grading and find that it would have been, in all likelihood, subsumed in the cost to replace systems due to non-compliant filter sand.

Conclusion

[231] In summary, I make the following reductions in Parkhill’s damages:

(a) $24,000 for the failure to establish that non-compliant filter sand caused any losses with respect to 26 and 29 Songbird;

(b) $18,000 for the apportionment of fault with respect to the saturation of filter sand at 247 McGill, 26 Meadow and 7 Songbird;

(c) $24,000 for replacement of undersized septic tanks; and,

(d) $3,000 for repairs to pump chambers.

[232] The deductions total $69,000. This amount is to be deducted from the $420,000 in settlement costs, leaving a net of $351,000. Described in terms of apportionment, I find that RYC is liable for 83.5% of the settlement costs and Parkhill 16.5%.

[233] The same apportionment is appropriate with respect to legal fees and disbursements incurred. Those costs are $673,033.25. RYC’s share is $561,982.76.

[234] Total contractual damages assessed against RYC are, accordingly, $912,982.76.

Tort Issues

[235] Apart from, or in addition to, the claim that RYC breached a warranty of fitness for use, Parkhill alleges that RYC was negligent in the manner in which it manufactured its filter sand. Its negligence allegedly led to substantial problems with septic systems in Janetville which I have detailed above.

[236] Authors and jurists sometimes refer to the constituent elements of a negligence claim in different terms. A useful description is provided by Allen M. Linden J.A. and Bruce Feldhusen in Canadian Tort Law, (LexisNexis Butterworths: Markham, 2006) at pp. 108-09. These authors enumerate six essential elements:

(a) The plaintiffs must suffer some damage;

(b) The damage suffered must be caused by the conduct of the defendant;

(c) The defendant’s conduct must be negligent. In other words, it must fall short of the standard of care established by law;

(d) The defendant must owe a duty of care to the plaintiffs;

(e) The conduct of the defendant must be a proximate cause of the plaintiffs’ loss; and

(f) The plaintiffs’ own conduct should not be such as to bar or reduce recovery.

[237] In this case, most of these elements are straightforward. Parkhill clearly suffered damage and that damage was caused, at least in part, by the actions of RYC.

[238] Where the claim falters, however, is in terms of the issue of standard of care.

[239] I will accept for the sake of argument that RYC owed Parkhill a duty of care. I think it pretty clear that they did.

[240] The real contentious issues are what standard of care was applicable to the manufacturing process and was it breached? I will focus on those issues.

(7) Assuming a duty of care was owed, what was the applicable standard of care?

[241] The general standard of care applicable to manufacturers is a legal question. It does not vary from case to case. As a matter of law, RYC was required to exercise the standard of care that would be expected of a reasonable and prudent manufacturer in the same circumstances. How that particular legal standard translates to any particular factual situation is, however, a question of fact: Krawchuk v. Scherbak, 2011 ONCA 352 at para 125.

[242] In Krawchuk, which was a professional negligence case, the Court of Appeal held that in general it is inappropriate, in such cases, for a trial judge to determine a standard of care in the absence of expert evidence. Two exceptions were identified:

(a) Where the standard of care may reliably be determined in the absence of expert evidence, such as where the case is about non-technical matters that an ordinary person may be expected to have knowledge about; and,

(b) Where the conduct of the defendant is so egregious that it obviously falls below the standard of care.

[243] In my view, though this was not strictly speaking a professional negligence case, the same reasoning applies. The manufacture of a specialty aggregate product that must meet standards for grain-size distribution and uniformity coefficient is not a non-technical matter that an ordinary person is likely to have knowledge about. In the absence of expert evidence, I find that I am unable to determine what standard of care ought to apply specifically to the manufacture of filter sand.

[244] Moreover, I accept Mr. Young’s testimony that RYC had its product tested by an engineer each time it was manufactured. The testing was done during the manufacturing process. Certificates were provided to RYC by its engineers confirming that the grain sizes fell within the ranges specified by the OBC. In a number of instances, the engineers specifically noted that the samples tested “met the OBC grading requirements for filter sand”, or were “within the OBC grading envelope for filter sand”.

[245] I am not an expert in aggregates, or the manufacture of specialty aggregates. I have no evidence before me that suggests there were deficiencies in the manufacturing process; that it was misguided or improper. I have a manufacturer who sent samples of its product to an engineering firm for testing during the manufacturing process. They relied, ultimately, on those certificates when they marketed the product as filter sand.

[246] I am not only unclear as to what particular standard of care is required, but there is certainly evidence available that suggests RYC took reasonable steps to ensure its product met OBC specifications.

[247] In all the circumstances, I am not satisfied that Parkhill has made out a claim against RYC in negligence.

[248] In the result, it is not necessary for me to address other issues relating to the claim framed in negligence.

Boswell J.

Released: November 21, 2017.

Appendix “A”

Properties with Defective Septic Systems

10 Meadow Drive 10 Songbird Crescent 11 Songbird Crescent 12 Meadow Drive 16 Songbird Crescent 18 Meadow Drive 197 McGill Drive 2 Honeyfield Lane 20 Meadow Drive 211 McGill Drive 22 Meadow Drive 223 McGill Drive 235 McGill Drive 24 Meadow Drive 247 McGill Drive 25 Songbird Crescent 26 Meadow Drive 26 Songbird Crescent 28 Songbird Crescent 281 McGill Drive 29 Songbird Crescent 30 Songbird Crescent 31 Songbird Crescent 33 Songbird Crescent 35 Songbird Crescent 37 Songbird Crescent 38 Songbird Crescent 39 Songbird Crescent 5 Songbird Crescent 6 Songbird Crescent 7 Meadow Drive 7 Songbird Crescent 9 Meadow Drive 8 Meadow Drive 9 Songbird Crescent

Appendix “B”

Orders to Comply

Address	Order to Comply – Deficiencies Identified
10 Meadow	Tank Undersized; extended loading rate area (mantle) too small; non-compliant filter medium
10 Songbird	Tank undersized; non-compliant filter medium; mantle inadequate; repair pump chamber; grading
11 Songbird	mantle too small; non-compliant filter medium; grading issues
12 Meadow	mantle needs to be increased; non-compliant filter medium
16 Songbird	Inadequate mantle; non-compliant filter medium; repair pump chamber; grading
18 Meadow	Mantle too small; non-compliant filter medium; grading
197 McGill	Mantle inadequate; non-compliant filter medium; repair pump chamber; grading
2 Honeyfield	Mantle inadequate; non-compliant filter medium; repair pump chamber; grading
20 Meadow	Mantle too small; non-compliant filter medium; grading
211 McGill	Mantle too small; non-compliant filter medium; grading
22 Meadow	Tank was 200 L too small; Mantle too small; non-compliant filter medium; grading
223 McGill	Tank was 200 L too small; non-compliant filter medium; bottom .6 m of filter medium was saturated
235 McGill	Tank was 1300 L too small; Mantle too small; filter medium was saturated; grading
24 Meadow	Tank was 350 L too small; Mantle too small; non-compliant filter medium; grading
247 McGill	Tank was undersized; filter medium was saturated; mantle was too small; grading issues
25 Songbird	Tank was 200 L undersized; Mantle too small; non-compliant filter medium; grading
26 Meadow	Loading area inadequate; filter medium saturated; grading
26 Songbird	Tank undersized; mantle too small
28 Songbird	Tank undersized; Mantle too small; non-compliant filter medium; repair pump chamber; grading
281 McGill	Tank undersized; Mantle too small; non-compliant filter medium; repair pump chamber; grading
29 Songbird	Tank undersized; mantle too small
30 Songbird	Mantle too small; non-compliant filter medium; grading
31 Songbird	Tank 1300 L undersized; Mantle too small; non-compliant filter medium; repair pump chamber; grading
33 Songbird	Mantle too small; non-compliant filter medium; grading
35 Songbird	Mantle too small; non-compliant filter medium; grading
37 Songbird	Tank undersized by 1100 L; Mantle too small; non-compliant filter medium; grading
38 Songbird	Mantle too small; non-compliant filter medium; repair pump chamber; grading
39 Songbird	Mantle too small; non-compliant filter medium; grading
5 Songbird	Mantle too small; non-compliant filter medium; grading
6 Songbird	Mantle too small; non-compliant filter medium; repair pump chamber; grading
7 Meadow	Tank undersized by 1100 L; Mantle too small; non-compliant filter medium; grading
7 Songbird	Mantle too small; filter medium saturated; grading
8 Meadow	Mantle too small; non-compliant filter medium; repair pump chamber; grading
9 Meadow	Mantle too small; non-compliant filter medium; grading
9 Songbird	Tank was 200 L undersized; Mantle too small; non-compliant filter medium; grading

Endnotes

[^1]: There is a live dispute about whether filter paper was actually installed. It appears to be absent in a number of systems that were deconstructed. That said, nothing turns on the presence or absence of filter paper in the ultimate disposition of the action. [^2]: Daily sewage flow, sometimes called “daily design flow”, is the result of a calculation based on a formula provided by the OBC. It is dependent on the size of the home and the number of fixture units in the home. [^3]: Native soil percolation rate is a calculation obtained by the Health Unit. They came to the site and took pit samples and calculated the percolation rate in this subdivision to be 50 minutes per cm. [^4]: By “failed” I do not mean that all of the systems necessarily failed to function properly. Some did and leached effluent. Others did not demonstrate any obvious signs of failure. All were inspected by Mr. Van Voorst and re-inspected by the Health Unit. All were found to have deficiencies in terms of compliance with the OBC requiring remediation in the opinion of the Health Unit. I am accordingly using the term “failed” in a broad sense to mean failing to comply with the OBC. [^5]: Some of the nine systems I have noted as not tested may in fact have been tested, but if they were, no report was generated or saved. In the result, I have treated them as if they were not tested. [^6]: The May 5, 2016 account is a disbursements account in the amount of $21,429.80 rendered by Theall Group LLP to Parkhill, RYC, the City of Kawartha Lakes and the Health Unit. It appears to relate to the digital coding of relevant documentation for the benefit of all parties. There is evidence that Parkhill paid the full account, but I have no evidence that would suggest that other parties did not contribute their shares and accordingly, for the purpose of the calculation of legal fees, I am crediting the sum of $5,357.45 to Parkhill.