COURT FILE NO.: CV-13-471940, CV-13-472439
DATE: 20211029
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CANADA-WIDE REINFORCING STEEL CO. (1987) LTD.
Plaintiff
– and –
ABCO ONE CORPORATION, CITY OF TORONTO and TORONTO TRANSIT COMMISSION
Defendants
-and-
ABCO ONE CORPORATION
Plaintiff
– and –
CITY OF TORONTO, TORONTO TRANSIT COMMISSION and POMERLEAU INC.
Defendants
Christian R. Riveros, counsel to Canada-Wide Reinforcing Steel Co. (1987) Ltd. (Respondent)
Angela Assuras, counsel to ABCO One Corporation (Moving Party)
Karen Groulx and Dragana Bukejlovic, counsel to Pomerleau Inc. (Respondent)
No one appearing for the City of Toronto or the Toronto Transit Commission
HEARD: July 20-22, 2021
MATHESON J.
REASONS FOR DECISION
[1] ABCO One Corporation brings this motion to oppose the confirmation of the report of Associate Justice C. Wiebe dated January 14, 2020 (the “Report”), and to seek other relief, arising from a 24-day consolidated construction lien trial.
[2] The backdrop to this case is a construction project for the Toronto Transit Commission (TTC) at Ashbridges Bay. Pomerleau Inc. was the general contractor for the project, and subcontracted the concrete formwork to the moving party ABCO. ABCO obtained the rebar for the work from the other party to this motion, Canada-Wide Reinforcing Steel Co. (1987) Ltd.
[3] Pomerleau is the main responding party to this motion. Canada-Wide responds to focused issues raised by ABCO regarding the Associate Justice’s costs order. Both Pomerleau and Canada-Wide seek an order dismissing ABCO’s motion, with costs, and seek an order confirming the Report.
[4] On this motion, ABCO has essentially attempted to begin again and reargue the evidence, despite extensive findings of fact made by the Associate Justice after a lengthy trial. ABCO has also sought to expand the issues, raising matters that it did not raise below. Many of the matters raised go well beyond the role of this court on a motion of this type. I have addressed what I conclude are the core issues. It is not the role of this court to re-try the case.
[5] For the reasons set out below, this motion to oppose confirmation is denied and the Report is confirmed.
Background to the motion
[6] In 2012, Pomerleau awarded ABCO a subcontract in the fixed amount of $9.3 million, in relation to the caisson, forming and rebar work on the TTC project. The contract letter was executed on June 5, 2012.
[7] ABCO acknowledged at trial that its fixed price was low, omitting a number of costs. Further, ABCO, in an effort to explain its low pricing, argued that it expected that its work would begin in May so it omitted costs for winter work. However, ABCO did not establish the May start date.
[8] Pomerleau provided schedules for the project with ABCO’s work, including an approved baseline schedule. In July 2012, Pomerleau instructed ABCO to get ready to mobilize for the caisson drilling on the site, with a start date of July 30, 2012.
[9] There were problems in August. On August 23, 2012, Pomerleau met with ABCO and expressed disappointment with ABCO’s performance.
[10] During the project, Pomerleau issued deficiency notices and default notices to ABCO. Four caissons had been installed in the retaining wall at the wrong depth, and ABCO’s proposed solution was unacceptable. The staircase footing and foundation wall were installed at the wrong elevation. There were other problems. For example, ABCO had not obtained the required TTC approval of the joints in the caissons. The drawings had not indicated that the concrete for certain caissons had construction joints. TTC approval was therefore required and, despite notices, ABCO did not obtain it.
[11] These problems were not resolved, although other problems were.
[12] Pomerleau continued to express dissatisfaction with ABCO’s performance.
[13] As found by the Associate Justice, ABCO consistently and grossly overbilled in its monthly progress billings. Under the contract, ABCO was entitled to make monthly billings based on the amount of work done. ABCO rendered billing certificates. Pomerleau then reviewed the claimed amounts and reduced them. For the first two billing certificates, ABCO issued invoices in the amount determined by Pomerleau. Pomerleau then paid those invoices. After that, ABCO did not render invoices in the amounts determined by Pomerleau. Pomerleau did not pay for various reasons. One of the main issues at trial, raised again now, was whether Pomerleau paid as required under the contract.
[14] ABCO submits that Pomerleau knew from the outset that it had financial problems, but failed to prove this fact. The Associate Justice found that this disclosure was made at a September 17, 2012 meeting. At that meeting, Pomerleau expressed deep dissatisfaction with ABCO’s performance. ABCO disclosed that it was under financial stress and was facing bankruptcy in one month. ABCO asked Pomerleau to take over the ABCO formwork.
[15] Although not required to do so, Pomerleau agreed to take over the formwork, with the costs of doing that work to be deducted from ABCO’s contract price. Pomerleau also helped ABCO by paying two of ABCO’s suppliers.
[16] Although the contract did not require that Pomerleau send formal default notices, Pomerleau sent a default notice on October 4, 2012 and another on October 19, 2012 about, respectively, ironworkers not being part of the required union local and ABCO’s failure to pay union remittances (which Pomerleau ultimately paid).
[17] At another meeting, on October 23, 2012, Pomerleau expressed deep disappointment with ABCO’s performance. ABCO raised further issues arising from its financial stress and complained about Pomerleau’s reductions to its progress billings. After this meeting, ABCO began to send demand letters to Pomerleau. Pomerleau made timely written responses to ABCO’s demands.
[18] On October 29, 2012, Pomerleau advised ABCO of its failure to provide submittals as required and the absence of rebar drawings for the oil and grit separators.
[19] On October 30, 2012, ABCO’s foreman took rebar tie wire, needed for the project from the site to be used in other projects.
[20] In late October 2012, ABCO wrote about its financial instability dating from the start of the project and demanded more payments. The Associate Justice found that the correspondence from ABCO was essentially a threat, by ABCO, that it would not perform its contract as required if it were not paid as it demanded.
[21] ABCO’s excessive payment demands and financial stress put greater significance on the other issues related to its performance. Those issues included at least the failure to respect the overall project schedule, the failure to pay workers, the failure to pay subcontractors and suppliers and the failure to provide proper project management. The Associate Justice found that ABCO was not only desperate but also duplicitous, as shown by ABCO’s transfer of equipment without the supplier’s authority. Correspondence also showed that ABCO was looking for a way to withdraw from its work obligations.
[22] There had been ongoing issues with ABCO’s workforce on site. There were no ABCO workers on site on October 24, 25, or 26, 2012, despite work having been planned for them.
[23] Pomerleau demanded that the ABCO crew resume work on November 1, failing which ABCO would be in default and liable for contract termination.
[24] By letter dated November 2, 2012, Pomerleau terminated ABCO’s contract. That letter listed several failures by ABCO, including the failure to pay workers and suppliers, the failure to maintain safety and quality, the failure to provide adequate project management, the failure to deliver submittals in a timely way and delay. At trial, Pomerleau relied on those alleged failures and other problems in support of its termination of the contract. The termination of the contract and related issues about repudiation were issues at trial and are issues on this motion.
[25] Pomerleau then went ahead to complete or redo the ABCO work, as needed.
[26] On November 7, 2012, ABCO registered a claim for lien for $1,581,508.
[27] On November 16, 2012, Canada-Wide registered a claim for lien of $304,905.98, for rebar that it had delivered to the site for which it had not been paid.
[28] On December 14, 2012, Pomerleau obtained an order vacating the ABCO and Canada-Wide claims for lien by posting lien bond security.
[29] On January 22, 2013, ABCO commenced its action to perfect its lien and added a claim for $1,695,000 in damages against Pomerleau. Pomerleau defended the ABCO action and asserted a counterclaim of $5,620,008.86.
[30] Other lien actions were started, including the Canada-Wide lien action. The Canada-Wide action resulted in a default judgment against ABCO for $304,905.98 (plus interest and costs), granted by Associate Justice Albert on December 15, 2015.
[31] After it obtained its default judgment, Canada-Wide continued to take part in the litigation in a limited way to address focused issues that affected it. To the extent that those issues arise on this motion, I have dealt with them in a separate section below.
Trial resulting in the Report
[32] After the trial, the Associate Justice released lengthy reasons for decision followed by amended reasons (2019 ONSC 4852). The amendments are not challenged on this motion. When I refer to the reasons for decision, I am referring to the amended reasons for decision.
[33] The Associate Justice’s extensive reasons for decision included a detailed discussion of the many witnesses and his findings with respect to the credibility of the witnesses. His reasons show that he carefully considered the evidence of each witness and the weight that ought to be given to the evidence where the facts were in dispute. He made adverse credibility findings against key ABCO witnesses and, overall, found Pomerleau’s witnesses were more credible.
[34] The Associate Justice considered each of the grounds set out in the termination letter dated November 2, 2012, concluding that some of the issues did not themselves justify contract termination. However, he concluded that many of the issues did. He found significant deficiency issues, including the above caisson joint issue. He found that ABCO was consistently slow and deficient in its submittals and resubmittals, among other difficulties.
[35] Among other findings, the Associate Justice found as follows:
(i) that ABCO consistently and grossly overbilled;
(ii) that ABCO failed to have a project manager; failed to attend construction coordination meetings; failed to pay workers, subcontractors and suppliers; failed to provide input for look-ahead schedules; failed to provide enough workers; and failed to provide required drawings;
(iii) that Pomerleau had met its onus to show that its termination of the contract was justified;
(iv) that Pomerleau did not breach the payment terms of the contract;
(v) that Pomerleau agreed to assist ABCO when not required to do so;
(vi) that Pomerleau did not breach the duty of good faith;
(vii) that ABCO wrongfully repudiated the contract and therefore could not recover for lost profit in any event; and,
(viii) that ABCO would not have made a profit in any event due to its underestimating of its costs.
[36] After hearing submissions on interest and costs, the Associate Justice issued his Report, dated January 14, 2020, as well as reasons for decision on the cost and interest issues, dated January 14, 2020, with an addendum dated January 15, 2020.
[37] ABCO then brought this motion, opposing confirmation of the Associate Justice’s Report and seeking related relief.
Onus and standard of review
[38] ABCO accepts that it has the onus to show that the Report should not be confirmed.
[39] Further, the parties agree that this motion is a “true appeal” and not a “hearing de novo”: International Wall Systems Ltd. v. English Lane Residential Developments Limited and HSBC Bank Canada, 2011 ONSC 6920, at para. 39.
[40] The decision “should not be interfered with unless there has been some error in principle demonstrated by the [Associate Justice’s] reasons, some absence or excess of jurisdiction, or some patent misapprehension of the evidence”: International Wall Systems Ltd., at para. 39.
[41] There is also no issue that the Associate Justice’s findings of facts and of mixed fact and law (except where there is an extricable legal error) should not be disturbed unless there is a palpable and overriding error, which is a very high standard to meet. For legal errors, the standard of review is correctness: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 8 and 10. Further, it is presumed that the Associate Justice considered and reviewed all the evidence: Housen, at para. 46. Although ABCO suggests that the Associate Justice ignored significant relevant evidence, ABCO has not established that he did so.
Issues
[42] ABCO submits that the Associate Justice erred on three key issues with respect to liability, as follows:
(i) in failing to find that Pomerleau breached the payment terms under the contract and by implying terms into the contract;
(ii) in finding that Pomerleau’s termination of ABCO was justified; and,
(iii) in failing to find that Pomerleau breached the duty of good faith in contract.
[43] ABCO has also raised issues about the Associate Justice’s damages figures and his costs decision.
[44] In response, Pomerleau submits that ABCO is attempting to retry the whole lengthy trial, even though the Associate Justice considered and addressed extensive trial evidence. Pomerleau submits that the Associate Justice made no errors of law and no palpable and overriding errors of fact or mixed fact and law. Similarly, Canada-Wide submits that there was no reviewable error in the costs decision.
[45] I have addressed these issues below.
Pomerleau’s alleged breach of the payment terms
[46] The parties entered into a fixed-price contract by letter executed on June 5, 2012. The contract included terms about what could be billed for in the monthly progress billings, and related payment terms. The question of whether Pomerleau breached the payment terms in the contract was a core issue at trial.
[47] Under the contract, ABCO was obliged to provide its monthly progressive billing invoices according to the TTC cost breakdown and Pomerleau needs. ABCO was not entitled to bill for any amount it chose in the monthly progress billings. The contract provided that the monthly billing had to be based on the work projected to be completed at the end of the month.
[48] The contract further set out payment terms of 90% to be paid within 45 days after the progressive billing date. The Associate Justice found that Pomerleau’s payments were timely.
[49] ABCO submits that the Associate Justice erred in his interpretation of the contract by finding that Pomerleau had the right to review and change ABCO’s billing certificates and by finding that it was ABCO’s final invoices that triggered the 45-day payment period.
[50] The Associate Justice interpreted the contract terms, concluding that Pomerleau had the right to review and change the amount in the ABCO billing certificates. This interpretation, as well as the above finding on over-billing, was in keeping with ABCO’s own conduct with respect to the first two monthly progress billings:
(1) Billing Certificate #1 was in the amount of $184,522.65. Pomerleau reviewed and reduced it to $65,835.64. The Associate Justice found that ABCO accepted the revised amount. ABCO rendered a revised invoice in accordance with the reduced amount, which Pomerleau paid within 45 days.
(2) Billing Certificate #2 was in the amount of $351,847.22. Pomerleau reviewed and reduced it to $108,734.96. The Associate Justice found that ABCO accepted the revised amount. ABCO rendered an invoice in accordance with the reduced amount, which Pomerleau paid within 45 days.
[51] At trial, ABCO alleged that it did not accept the above Pomerleau changes, submitting that it was under duress. The Associate Justice expressly found that there was no illegitimate pressure. ABCO challenges that finding but has not put forward a basis for interfering with it. The Associate Justice did not make an extricable error in law and there was no palpable and overriding error of fact or mixed fact and law.
[52] The Associate Justice described Pomerleau’s right to review and change the ABCO billing certificates as “implicit if not explicit” in the contract. He also concluded that the review had to be done within a reasonable amount of time because there was no express time period set out in the contract. The Associate Justice found that there was no evidence of any delay in Pomerleau’s review of the billing certificates.
[53] There was then ABCO Billing Certificate #3 in the amount of $828,045.08. As noted by the Associate Justice, ABCO’s estimator admitted at trial that this billing certificate contained errors and that even he could not explain the related invoice. Pomerleau reduced it to $176,698.44. This time, ABCO did not render a revised invoice. The Associate Justice accepted Pomerleau’s explanation for not paying the revised amount, specifically that Pomerleau’s costs for doing ABCO’s formwork had already been approaching $300,000.
[54] The Associate Justice found that the problem with caisson joints also justified Pomerleau’s withholding payment of the third billing amount. The contract required that ABCO get TTC advance approval if joints were going to be inserted where none were shown on the drawings. As found by the Associate Justice, ABCO, despite discussions on this issue, did not get the required TTC approval.
[55] ABCO sent Billing Certificate #4, but it was dated after termination of the contract. The Associate Justice found that it was not received until after the commencement of this litigation. It was in the amount of $1,061,387.01. ABCO also rendered an invoice for $233,341.94. These amounts were not paid. The Associate Justice found that the fourth billing certificate had many of the same problems as the earlier certificates.
[56] The Associate Justice found that Pomerleau made timely payments of the first two amounts due under the contract and had proper reasons for not making any further payments. He therefore concluded that Pomerleau did not breach the payment terms of the contract.
[57] On this motion, ABCO submits that the Associate Justice erred in implying that Pomerleau had the right to review and change ABCO’s billing certificates within a reasonable period of time. ABCO submits that the Associate Justice did not apply the test for implying terms into a contract and that there was no evidence before the Associate Justice to satisfy that test. In oral argument, ABCO also submitted that the pleadings were inadequate to imply these terms into the contract.
[58] ABCO’s position focuses narrowly on the term about payment within 45 days and essentially ignores the term regarding what ABCO could include in its monthly billings. The Associate Justice considered both terms in interpreting the contract. The contract expressly limited what ABCO could bill for. ABCO was overbilling. The conclusion that Pomerleau could review and reduce the billings is in keeping with the interpretation and application of that contract term.
[59] ABCO submits that this term – that Pomerleau could review and revise the billing amount – would mean that Pomerleau could delay payment and possibly never pay. ABCO submits that term could not be implied because its difficult financial position meant it would never agree to that situation. However, the Associate Justice did not reach that conclusion. The Associate Justice concluded that the review had to be (and was) done within a reasonable amount of time.
[60] Further, ABCO’s position would mean that it could bill for any amount at all and still expect payment within 45 days. On the contrary, under the contract ABCO could only bill for work already performed or work projected to be completed by the end of that month. ABCO’s billing certificates consistently billed for more than the permitted amounts.
[61] The Associate Justice interpreted the contract having regard for both terms and related evidence, including ABCO’s acceptance of the revisions to the first two billing certificates.
[62] ABCO also submits that the findings that the first two payments were made within 45 days is a palpable error of fact. This ignores the Associate Justice’s interpretation of the contact, under which the 45 days ran from the final billing, not the gross overbilling.
[63] In reply and oral submissions, ABCO focused on the pleadings, submitting that Pomerleau had not pleaded that the above terms were implied terms. It does not appear that ABCO raised this issue before the Associate Justice despite the payment terms being a focus of the trial. By way of explanation, ABCO submits that it did not know that the Associate Justice would consider implying terms. This is difficult to accept given the issues at trial.
[64] In any event, a review of the pleadings shows that the payment terms were placed at issue at the pleadings stage. Breach of the payment terms was alleged and disputed. The issue of approval and adjustment of invoices was expressly raised in the pleadings. Although the words “implied term” do not appear in this regard, the pleadings provide an adequate foundation for the trial issues and for the Associate Justice’s interpretation of the contract.
[65] The test for implying a term is set out in M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., 1999 CanLII 677 (SCC), [1999] 1 S.C.R. 619, at para. 27. ABCO accepts that the court will imply a term when it is necessary to give business efficacy to the contract. This is what the Associate Justice did – he interpreted the contract to give business efficacy to the related terms about the permitted amounts of the monthly progress billings and the payment terms for those billings. Otherwise the clause about permitted amounts would have no role in the payment terms, undermining the rationale for the contract.
[66] In written reply, ABCO raised, for the first time, the argument that the progress payments under the contract were to be made based on “milestones”, relying on Homewood Development Inc. v. 2010999 Ontario Inc., 2013 ONSC 4441, at para. 66, aff’d, 2014 ONSC 4437, aff’d, 2015 ONSC 2103 (Div. Ct.). This argument ought to have been raised at trial. In any event, it is contrary to the express words of the contract, which address how the monthly progress billings were to be done. In contrast, the contract in Homewood did contemplate milestones. The trial judge, in that case, expressly noted, at para. 55, that the contract structure at issue was different from a fixed price contract where the installment payments were in the form of progress payments tied to the amount of work completed.
[67] I conclude that ABCO has not shown either an error of principle or a palpable and overriding error of fact or mixed fact and law with respect to the Associate Justice’s conclusion that Pomerleau did not breach the payment terms under the contract or to the other issues now raised.
Contract termination and repudiation
[68] ABCO submits that the Associate Justice erred in finding that Pomerleau had met its onus to show that its termination of the ABCO contract was justified. ABCO submits that the grounds set out in the termination letter that were substantiated were minor or were waived, that the Associate Justice made errors of law, and that he failed to find waiver of some of the conduct relied upon. All of this is disputed by Pomerleau.
[69] The Associate Justice’s conclusions about the contract termination were based on his findings in several areas, including ABCO’s excessive payment demands, ABCO’s threats of non-performance and the production slow down. He found that other issues, including ABCO’s failure to address deficiency issues and submittals, provided added justification. He concluded that the cumulative effect of ABCO breaches showed that ABCO was not prepared to perform its contract work and had repudiated the contract. The Associate Justice’s findings were based on the appropriate legal principles and his findings of fact after a lengthy trial.
[70] Beginning with the legal principles, the Associate Justice correctly stated that Pomerleau had the onus to prove justification. He went on to set out the applicable legal principles to find repudiation, including the factors to be considered, leading to a justified termination. He relied on two cases that are also relied upon by ABCO on this motion: Rand General Contractors Inc. v. Taskforce Engineering Inc., 2009 CanLII 9428 (Ont. S.C.) and 968703 Ontario Ltd. v. Vernon (2002), 2002 CanLII 35158 (ON CA), 58 O.R. (3d) 215 (C.A.).
[71] ABCO takes issue with the Associate Justice’s reliance on another case, Shield Metal Manufacturers Ltd. v. Canadian Pacific Forest Products Ltd., [1993] B.C.J. No. 1521 (S.C.). The Associate Justice relied on that case for the observation that it is often not one or two things that justify a contract termination, and it may be the totality of several factors (also described as the cumulative effect of all of the breaches): Shield, at para. 40. ABCO submits that the Associate Justice ought not to have relied on this British Columbia case. However, the court in Rand also finds that there may be a series of breaches that give rise to a substantial failure of performance: at para. 18. I am not persuaded that the Associate Justice erred in relying on Shield.
[72] ABCO further submits that the Associate Justice erred in not expressly addressing each of the five factors noted in Vernon, for each of the grounds for termination, in his reasons for decision. However, the Associate Justice correctly set out the five factors and then discussed the various problems relied upon by Pomerleau. While he did not expressly address each individual factor for each individual performance issue, those factors are not a rigid list. They provide guidance for the court’s determinations of whether or not a breach is substantial, constituting repudiation: Place Concorde East Limited Partnership v. Shelter Corporation of Canada (2006), 2006 CanLII 16346 (ON CA), 270 D.L.R. (4th) 181, at para. 53. The Associate Justice’s reasons sufficiently address the relevant issues and support his decision.
[73] The Associate Justice grouped the problems into three categories: excessive payment demands, production slowdown, and other issues.
[74] With respect to excessive payments demands, ABCO submits that the Associate Justice erred in describing the ABCO correspondence about non-payment as a “threat” that it would not perform its contract as required if it were not paid as it demanded. On this motion, ABCO went through a detailed review of the correspondence and related evidence to submit that calling the dialogue a “threat” was an unfair characterization of the dialogue. However ABCO wishes to characterize that dialogue, the Associate Justice had a basis for his finding and did not make a reviewable error.
[75] ABCO further submits that the Associate Justice failed to appreciate that ABCO’s financial desperation may have been the result of Pomerleau’s failure to pay the requested amounts. However, ABCO has not shown that Pomerleau breached the payment terms of the contract, as discussed above.
[76] ABCO further submits that the Associate Justice erred in relying on Sanko S.S. Co. v. Eacom Timber Sales Ltd. (1986), 1986 CanLII 804 (BC SC), 8 B.C.L.R. (2d) 69 (S.C.), for the proposition that where time is of the essence in a contract, evidence of a party’s insolvency justifies termination of the contract. The Associate Justice acknowledged that Sanko had been distinguished in Standard Precast Ltd. v. Dywidag Fab Con Products Ltd. (1989), 1989 CanLII 2901 (BC CA), 56 D.L.R. (4th) 385 (B.C.C.A.). However, he considered the facts before him and found that given those facts, Sanko did support Pomerleau’s position that the threat of insolvency was a relevant consideration based on the facts. Given the facts before him, I do not find that this conclusion is an error of principle.
[77] Moving to production slowdown, the Associate Justice found that there was sufficient evidence to support four slowdown issues raised in the termination letter: the failure to respect the overall project schedule, the failure to pay workers, the failure to pay subcontractors and suppliers, and the failure to provide adequate project management.
[78] ABCO submits that the Associate Justice erred with respect to inadequate project management. ABCO submits that he wrongly implied a term that ABCO had to provide a proper “project manager” and erred in not accepting that ABCO’s “project co-ordinator” fulfilled ABCO’s obligations.
[79] The Associate Justice considered the ground in the termination letter regarding project management. He found that it was “implicit, if not explicit” that ABCO provide a “proper project manager” and that it failed to do so. In reaching this conclusion, he correctly noted that the contract required that ABCO coordinate its work with others in cooperation with Pomerleau’s management. Given the express contractual obligations to coordinate and cooperate, I am not persuaded that the Associate Justice went beyond interpreting the express terms to imply a term into the contract. Further, those contracts terms were expressly pleaded in the statement of defence, along with the allegation that ABCO failed to provide adequate project management.
[80] The Associate Justice also expressly addressed ABCO’s position that it had a project co-ordinator on site, finding that that person was appointed late and was ineffective, based on findings of credibility. The Associate Justice did not wrongly overlook the project co-ordinator by using a different “label”, specifically project manager.
[81] ABCO makes a similar argument about the Associate Justice’s discussion of meeting attendance. ABCO submits that the Associate Justice wrongly implied a term that ABCO had to attend all coordination meetings. ABCO further submits that no such term was pleaded, yet the Pomerleau statement of defence does allege that there was an obligation to attend coordination meetings. The Associate Justice noted the above coordination obligations in the contract. Further, the contract expressly provided that ABCO attend meetings when requested to do so by Pomerleau or the TTC, and the Associate Justice addressed the evidence of those requests. He also found that there were repeated absences, which is not disputed. ABCO raised a similar issue regarding schedules. The termination letter notes a failure to respect the overall project schedule requirements. This was also a contractual requirement.
[82] On these project management issues, the Associate Justice considered the contract, its requirements, and the evidence about what ABCO did and did not do, finding that ABCO breached its contractual obligations. No reviewable error has been shown on this motion.
[83] In reply, ABCO claimed that the Associate Justice erred in treating the deficiency issues as repudiating contract breaches rather than warranty breaches, where the latter would not justify termination. It is not clear that this argument was made at trial. ABCO relies on Cornelis Grey Construction Inc. v. Folz, 2018 ONSC 647, among other cases. In that case, at para. 53, the court notes that not every breach of contract justifies termination of the contract and some are only breaches of warranty. There is no doubt that the Associate Justice proceeded on the basis that not every breach of contract justifies contract termination. The Associate Justice considered each ground listed in the termination letter and decided that some of them did not justify termination. Others did. This is consistent with Cornelis and Standard Precast, which show that some breaches do justify termination, such as failing to complete work and a contractor showing itself incapable of carrying out its contractual obligations.
[84] ABCO further submits that the Associate Justice erred in rejecting its defence of waiver. At trial, this related to a non-compliance report, specifically NCR#3. ABCO submits, as it did at trial, that Pomerleau waived this issue because an October 2012 Status Overview showed it as “Closed” – ABCO submits that this is clear evidence of waiver and that the Associate Justice wrongly distinguished the cases that ABCO put forward. The Associate Justice did distinguish ABCO’s cases, specifically: Zanatta & Levac Bulldozing Ltd. v. British Columbia Hydro & Power Authority (1978), 1978 CanLII 4008 (BC SC), 2 W.W.R. 322 (B.C. S.C.); McKenzie Demolition Ltd. v. Tau Holdings Ltd. (1983), 2 C.L.R. 117 (B.C. Co. Ct.); and Northern Construction Co. v. R., 1925 CanLII 835 (AB KB), [1925] 2 D.L.R. 582 (Ab. S.C.). He made no legal error in doing so.
[85] In reply, ABCO sought to expand its argument for waiver to a number of other termination grounds. Leaving aside the question of whether this was raised before the trial judge, the evidence relied upon falls short of meeting the stringent test for waiver.
[86] On a related submission, ABCO argues that before Pomerleau could rely on any ground of termination, it first had to give a formal notice of default. In support of this submission, ABCO relies on Urbacon Building Groups Corp. v. Guelph (City), 2014 ONSC 3641, 32 C.L.R. (4th) 38, however, in that case there was a contract term requiring notices of default. Here, there is no such term. Further, notice may be given informally and here, ABCO was aware of the problems through meetings and other communications.
[87] ABCO further submits that the Associate Justice erred by relying on items not listed in the termination letter and suggests that different wording in the reasons for decision means that different grounds were relied upon. First, the argument based on different wording is not persuasive. The Associate Justice did use a descriptor of “production slowdown” that is not in the letter, but the grounds that support it were. More significantly, Pomerleau was not precluded from justifying termination on grounds not specified in its letter.
[88] ABCO further submits that the Associate Justice erred by not recognizing that Pomerleau had to show that ABCO was incapable of correcting the deficiencies and that to do so would have unduly delayed the project schedule. Again, ABCO has not shown a legal error. The Associate Justice correctly focused on whether ABCO was prepared to perform its contract.
[89] ABCO has challenged many of the factual findings of the Associate Justice giving rise to the above issues. ABCO is essentially asking for the evidence on many issues to be reweighed, without establishing any palpable and overriding errors of fact or mixed fact and law. That is not the role of the court on this motion. ABCO has not established that the Associate Justice made a reviewable error in concluding, as he did, that Pomerleau has met it onus to show that its termination was justified.
Duty of good faith
[90] ABCO submits that the Associate Justice erred in failing to find that Pomerleau breached the duty of good faith in contract performance, relying on Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494.
[91] The Associate Justice properly referred to Bhasin. He noted the duty to act honestly in contract performance. No error is alleged in that regard.
[92] The threshold to find bad faith is high. Bhasin does not impose a duty of loyalty or of disclosure and the principle of good faith must be applied consistently with the freedom of contracting parties to pursue their individual self-interest: Bhasin, at paras. 70 and 73. However, parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract: Bhasin, at para. 73.
[93] Beginning with the reasons given by the Associate Justice on this issue, he disagreed with ABCO’s submission that Pomerleau did not proceed honestly because it had always been Pomerleau’s intention to replace ABCO. He found as a fact that Pomerleau did not begin preparing a “Plan B” until after the August 23 meeting, when things were not going well. He found that preparing for the real risk that ABCO would not be able to complete its contract work was not a violation of the duty of good faith. The Associate Justice also noted that Pomerleau had assisted ABCO by taking over part of the ABCO scope of work and assisting with workforce issues. He also disagreed with the submissions that relied on Pomerleau’s reductions to the ABCO billings.
[94] On this motion, ABCO submits that there was considerable evidence, much of which was not referred to by the Associate Justice, which supported a conclusion that Pomerleau acted in bad faith. ABCO now lists eleven specific items, and seeks to draw inferences from the evidence. A number of these items relate to the theme of financial problems and payment terms. For example, ABCO complains that Pomerleau fast-tracked invoices for Metro (another of Pomerleau’s subcontractors) but not for ABCO. Yet, the issue should be whether Pomerleau fulfilled the payment terms of the contract with ABCO, which it did. Some of the items now raised wrongly suggest that the duty of good faith gave rise to additional disclosure obligations. Some relate to complaints about the termination letter and grounds for termination, addressed above. Some arise from facts that were not proved, such as the suggestion that Pomerleau intended to replace ABCO from the start.
[95] ABCO emphasized in its reply that the Associate Justice did not mention every item that ABCO regards as relevant to this issue in his reasons for decision. It is not necessary for a trial judge to refer to every piece of evidence that a party submits is relevant in the reasons for decision. This was a lengthy trial.
[96] Considering the points now raised by Pomerleau, I see that not every detail is mentioned in the reasons for decision. However, ABCO has not shown a reviewable error in relation to good faith contract performance.
Damages
[97] ABCO submits that the Associate Justice erred in his damages calculation with respect to ABCO’s lost profits, back-charges and the lien value. These challenges are mainly focused on the Associate Justice’s weighing of the evidence before him, and do not show that he made a palpable or overriding error of fact or mixed fact and law. ABCO has not shown a reviewable error regarding any of the following issues.
[98] With respect to lost profits, ABCO submits that the Associate Justice ought to have incorporated a 20% profit margin into his calculations. This was disputed at trial. The Associate Justice found that ABCO, having repudiated the contract, was not entitled to profits. However, he also went on to address the question of whether there would have been any profit. He found as a fact that Mr. Conge, ABCO’s estimator, admitted that no winter protection costs had been included in the price, when winter was clearly contemplated in the master schedule. ABCO attempted, unsuccessfully, to show that the project was intended to be completed before the winter. The Associate Justice considered the evidence, concluding that he could not see how ABCO would have recovered a profit in any event if it had completed its work. He denied the claim for lost profit.
[99] With respect to back-charges, ABCO seeks to undermine certain figures accepted by the Associate Justice because those figures had been prepared during the litigation. Two of those figures were not seriously challenged at trial and therefore should not be challenged now.
[100] ABCO focuses on three back-charges, specifically #78, #80 and #84.
[101] For #78, regarding the improperly built caissons, ABCO submits that the Associate Justice erred in not finding the matter closed and not requiring that Pomerleau gave a chance to remedy the problem. However, the Associate Justice addressed this issue, including ABCO’s unacceptable proposal to fix the issue. The issue of waiver was also raised, on the basis that the matter was closed. The Associate Justice found that it was ABCO’s deficiency and that it was not corrected before the contract was terminated. Pomerleau did the corrections afterward. Further, there was no serious attack on the quantum of the back-charge at trial.
[102] For #80, the caisson joint issue, ABCO submits that the drawing issue was not a serious issue and denies the findings about notice. However, the Associate Justice dealt with this issue, finding that ABCO was at fault for failing to supply the required drawing and obtain the required TTC approval. Ultimately, it was Pomerleau that took the initiative to propose a solution to the TTC, and the approval process concluded after ABCO’s contract was terminated. At trial, there was no significant dispute about the quantum, which was substantial.
[103] For #84, the formwork issue, ABCO submits that the Associate Justice erred in his calculation by treating Pomerleau as a sub-subcontractor for the work it agreed to do for ABCO, instead of removing that work from ABCO’s scope of work. The Associate Justice said that the agreement to do that work was “in the nature of a sub-subcontract.” The Associate Justice considered the actual terms of the agreement made to assume the formwork, finding that the agreement did not limit Pomerleau’s costs to ABCO’s budget (which had been underbid). He expressly rejected the submission that the formwork was taken out of ABCO’s scope of work, based on his interpretation of the agreement based on certain evidence including the testimony of Mr. Faustini, who he found was a measured and careful witness.
[104] ABCO also submits that the Associate Justice erred in deducting the back-charges from the quantification of ABCO’s completed work. As set out in detail in the reasons for decision, the Associate Justice determined ABCO’s entitlement as follows: (1) he determined the base amount based on ABCO’s state of completion in proportion to its contract price; (2) he added the amount due for extras; and, (3) he subtracted the back-charges. ABCO submits that the back-charges should have been deducted from the fixed contract price instead, but ABCO has not shown a basis for this argument in law or fact.
[105] ABCO also generally raises the issue of whether Pomerleau mitigated its damages, even though this issue was not raised at trial. This is an indirect challenge to the above back-charges. This issue also seeks a re-evaluation of damages evidence without showing a reviewable error.
[106] ABCO has therefore not shown a reviewable error with respect to the damages calculations.
Costs
[107] ABCO raises these issues about the Associate Justice’s costs order:
(i) that the Associate Justice erred in finding that Pomerleau was the successful party, erred in not ordering that Pomerleau pay costs to ABCO because ABCO proved part of its claim and erred in his order of substantial indemnity costs; and
(ii) that the Associate Justice erred in not ordering that Canada-Wide pay carriage costs to ABCO.
Costs in favour of Pomerleau
[108] ABCO has not shown an error in principle in the Associate Justice’s costs decision in favour of Pomerleau. The Associate Justice correctly set out the relevant principles from the Construction Act , R.S.O. 1990, c. C.30 and the Rules of Civil Procedure, R.R.O 1990, Reg. 194. The Associate Justice correctly observed that costs are discretionary. He then went ahead to consider many factors that were relevant to his ultimate decision.
[109] The Associate Justice concluded that Pomerleau was the successful party as against ABCO, and made no error in doing so. ABCO’s claims were dismissed, its claim for lien was discharged and ABCO was ordered to pay substantial damages to Pomerleau for breach of contract.
[110] The Associate Justice analyzed the offers to settle, concluding that Pomerleau should have partial indemnity costs beginning after its first offer and then substantial indemnity costs after its second offer. ABCO submits that the conduct issues did not rise to the level needed for substantial indemnity costs. Yet the Associate Justice awarded substantial indemnity due to the offers to settle, not the conduct issues. He found that he was “confirmed” in that decision by the conduct issues.
[111] The Associate Justice quantified the costs for the partial and substantial indemnity periods, totaling $538,545.83. In the exercise of his discretion, he considered the other factors as well, reducing the costs award to $500,000. This compares very favourably to ABCO’s costs claim of $857,530.93 (partial indemnity) or $1,268,206.80 (full indemnity), another relevant factor that the Associate Justice considered.
[112] ABCO submits that it should have been awarded part of its costs for proving part of its claim, plus interest, without putting forward any authority in support of such an order. However, no error of law or palpable and overriding error of fact has been established by ABCO.
Canada-Wide carriage costs
[113] Moving to Canada-Wide, ABCO challenges the Associate Justice’s decision to refuse ABCO’s request for carriage costs.
[114] Canada-Wide was a subcontractor to ABCO. Canada-Wide did not have a direct claim against Pomerleau but had a claim to the holdback required to be retained by Pomerleau. The quantum of that claim is determined by the price or value of the services and materials that ABCO supplied to Pomerleau.
[115] Pomerleau was not bound by the default judgment that Canada-Wide obtained in its lien action. Pomerleau therefore insisted that the quantum of the Canada-Wide lien claim be proved again in the trial before Associate Justice Wiebe.
[116] The value of Canada-Wide lien was determined at trial as a component of ABCO’s claim for lien against Pomerleau. As with the default proceedings, Associate Justice Wiebe accepted Canada-Wide’s quantum in its entirety, namely $304,905.98. Associate Justice Wiebe found that the proper value of ABCO’s work as of the date of its contract termination was $840,029.23. The Associate Justice found that the basic holdback was therefore $84,002.92, to be paid by Pomerleau.
[117] Counsel to Canada-Wide attended the trial for the necessary part of the openings and closings, for the Canada-Wide witness and for the costs submissions, as well as case conferences before the trial. During costs submissions after the outcome of the trial, ABCO sought, for the first time, carriage costs against Canada-Wide. ABCO submitted that its counsel was “de facto” carriage counsel for Canada-Wide and Canada-Wide should therefore pay its costs.
[118] As noted by the Associate Justice, there was no doubt that carriage was not expressly given by Canada-Wide, or by the court, at ABCO’s request. I need not consider whether a court order was required, because the Associate Justice did not ground his ruling on that point. The Associate Justice considered the request and found that there was no evidence of any added work done by ABCO’s counsel beyond what was needed for ABCO’s claim.
[119] The Associate Justice considered other relevant matters, finding that ABCO had not been granted “agency” by Canada-Wide in its opening statement at trial, as suggested by ABCO. Canada-Wide’s own counsel took part in the trial in an efficient way, attending as needed to address the issues affecting Canada-Wide.
[120] As noted by the Associate Justice, ABCO did not even put forward an amount for the carriage costs that it sought.
[121] The Associate Justice did not err in principle in denying this claim for carriage costs. Similarly, there was no error in principle in granting the costs order against ABCO.
Disposition of the motion
[122] This motion to oppose confirmation of the Report is denied and the Report is confirmed.
[123] If the parties are unable to agree on costs, they shall make brief written submissions on the following schedule: Pomerleau and Canada-Wide (4 pages each plus costs outlines) by Nov. 12, 2021, and ABCO (8 pages in total plus any cost outline) by Nov. 25, 2021. The written submissions shall be double-spaced and shall be sent to my assistant via email.
Matheson J.
Released: October 29, 2021