COURT FILE NO.: CV-20-648871
DATE: September 6, 2022
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF the Construction Act, R.S.O. 1990, c.C.30
BETWEEN:
PRIESTLY DEMOLITION INC.
Plaintiff
Kenneth W. Movat and Albert Engel for the plaintiff,
Tel.: 416-864-9700,
Email: kmovat@foglers.com,
-and-
WALSH CONSTRUCTION COMPANY CANADA
Defendant
Faren Bogach and Paul Conrod for the defendant;
Tel.: 647-960-6120
Email: fbogach@constructlegal.ca;
HEARD: April 6, 7, 8, 11, 12, 13 and May 3 and 12, 2022.
Associate Justice C. Wiebe
REASONS FOR JUDGMENT
I. INTRODUCTION
[1] This lien action forms a stream within the reference that has the following action as the reference action: Spirac (USA) Inc. v. Gowing Contractors Ltd., et al., CV-19-628816. All of the claims for lien in the reference concern a project at the Ashbridges Bay Wastewater Treatment Plant in Toronto wherein Walsh Construction Company Canada (“Walsh”) was the general contractor.
[2] In this action, Priestly Demolition Inc. (“Priestly”), the demolition subcontractor, claims a lien in the amount of $351,207.98 (HST incl.). Walsh says that of this amount $292,436.40 (HST incl.) is not per se in dispute but is subject to the set-off claim described below. Of the difference between those numbers, $58,771.58, Walsh disputes $54,426.45 (HST incl.) claiming a credit in this amount for conduit removal work in Priestly’s scope Priestly was not required to do. Priestly admits that a credit is necessary, but disputes the Walsh calculation and claims that the correct calculation of the credit is offset by the value of the additional work Priestly was required to do saw-cutting the conduits that remained. Walsh also disputes the remainder of the difference, $4,345.13, claiming that there is no proof for this amount.
[3] The focus of this action, however, was on the large set-off and counterclaim raised by Walsh. This claim is in the amount of $853,376.97 (HST incl.). Walsh blames Priestly for an incident that occurred at the Odour Control Building (“OCB”) on the site on July 22, 2019 when Priestly damaged an old duct bank containing cables thereby causing the loss of power to the entire plant. Walsh claims that it incurred $853,376.97 (HST incl.) in cost to install temporary generators, repair the old duct bank and restore the permanent power to the site.
[4] The quantum of the Walsh damage is not in dispute. The cause of the damage to the old duct bank is not in issue, as it was the demolition work of Priestly. The liability is in issue.
II. BACKGROUND
[5] I begin with a summary of the undisputed facts of this case concerning the core issue of the old duct bank damage.
[6] The OCB was an L-shaped building with the protruding portion of the building on the north side facing west. The protruding portion was called the MCC Room. There was an old duct bank running south from an electrical substation located north of the OCB. The old duct bank connected to the north side of the MCC Room foundation near the western edge, and then ran through the foundation emerging on the south side of the MCC Room foundation near the western edge and running south to a duct bank tunnel carrying cables to several large, nearby digestion tanks. These digestion tanks produced methane gas by-product which was harnessed to power the entire plant. I will call this old duct bank, “the old duct bank.”
[7] On May 16, 2013 the owner, the City of Toronto, retained Walsh as general contractor for a project called, “Ashbridges Bay Wastewater Treatment Plant P Building Upgrades and Odour Control.” On September 12, 2013 Walsh retained Priestly as it demolition subcontractor. I will refer to the subcontract document as “the Subcontract.” Part of Priestly’s scope was the demolition of the OCB including the MCC Room.
[8] The following key drawings were referred to throughout the evidence:
a) Drawing 1001-2012-02-33, Sheet C002 (“Drawing C002”): This drawing was listed as one of the “Subcontract Documents” in the Subcontract. Dated November, 2010, it was a plan view showing the old duct bank going through or under the MCC Room. An arrow pointing to the OCB said, “REMOVE EXIST. BUILDING.” An arrow pointing to the old duct bank said, “EXIST. DUCT STRUCTURE.”
b) Drawing 1001-2012-02-249, Sheet 5 (“Drawing E005”): This drawing, dated March, 2011, was also listed as being one of the “Subcontract Documents” in the Subcontract. Part of Walsh’s overall scope was the construction of a new duct bank extending from the same substation and running parallel to the old duct bank on its west side but well outside the MCC Room. Drawing E005 was a plan view that showed this new duct bank. It also showed the old duct bank but erroneously showed it as being slightly outside the MCC Room. The new duct bank was constructed well before the events in question.
c) Drawing 1001-D-14064, Sheet 7 (“Drawing S7”): This was a record drawing dated March, 1991. It was listed as a record drawing in an addendum to the owner’s tender call for the subject project. A part of Drawing S7 was a plan view of the MCC Room that clearly showed the old duct bank running through the MCC Room. An arrow to the old duct bank referred the reader to “S8” for details including the exact location of the old duct bank in the MCC Room.
d) Drawing 1001-D-14065, Sheet 8 (“Drawing S8”): This was the drawing referred to by Drawing S7. It was a record drawing dated February, 1991. It was also listed as a record drawing in an addendum to the owner’s tender call for the subject project. This drawing included a cross-section view of the entire old duct bank starting at the substation at one end and ending in the tunnel leading to the digestion tanks on the other end. It included a cross-section view showing the old duct bank running through the foundation of the MCC Room on top of the footings. A part of this drawing contained an enhanced view of the two areas where the old duct bank entered and exited the MCC Room. Walsh asserts that this view showed three cables from the old duct bank flowing up into the MCC Room and several other cables remaining in the old duct bank for its entire length leading to the tunnel to the digestion tanks. Other parts of this drawing showed 10 holes for cables in the old duct bank.
e) Drawing 1001-D-14080, Sheet E1 (“Drawing E1”): This was a record drawing dated March, 1991. It was also listed as a record drawing in an addendum to the owner’s tender call for the subject project. It was a plan view similar to Drawing C002, and it showed the old duct bank going through or under the MCC Room.
f) Drawing 1001-2012-02-605, Sheet 8ED001 (“Drawing 8ED001”): This was an electrical/demolition drawing dated March, 2012 that was included in the “Subcontract Documents” of the Subcontract. It was a plan view similar to Drawing C002, but it showed the old duct bank slightly outside the MCC Room. In a red box it is stated that the exact location of the old duct bank needed to be verified by the contractor.
[9] In late May, 2019 Walsh and Priestly commenced the process of getting the OCB demolished. Walsh sent to the City of Toronto a Shutdown Request Notification form, SRN-0247 (“the SRN”), seeking notice that all services to the OCB were disconnected, or “isolated.”
[10] On June 28, 2019 Kevin Garcia, the Priestly project manager, sent a work order to the Priestly engineering department requiring them to prepare a demolition plan. Included in the package was Drawing C002 and record drawings from the 1970s and 1980s. Mr. Garcia knew of the existence of the old duct bank.
[11] By July 4, 2019 Priestly had prepared its demolition plan and marked it, “Issued for Demolition.” The Plan included no reference to or protection for the old duct bank. On July 5, 2019 two trainees from the Priestly engineering department conducted a site visit of the OCB. On July 6, 2019 Jericho Tumanguil, a Priestly engineer, stamped the demolition plan.
[12] The Priestly demolition plan had under the heading, “pre-demolition tasks,” a note saying that if at any time the “existing conditions” varied from what was described in the plan, the work should be halted and “THE PROJECT ENGINEERS WILL BE CONTACTED FOR FURTHER REVIEW AND ASSESSMENT.” Under the heading, “demolition notes,” there is a note saying that if “ELEMENTS” were found not as described, the work was to be halted and clarification was to be obtained from the demolition engineer.
[13] On July 8, 2019 Priestly forwarded the plan to Walsh. Walsh responded with questions unrelated to the old duct bank.
[14] On July 9, 2019 Ezzio DiVona, the Walsh senior project superintendent, sent Mr. Garcia an email stating, “You can proceed as instructed to complete the demo of the emissions building. All mechanical and electrical services have been isolated.” Attached was a copy of the SRN signed by the City confirming that the City had completed its task of “isolat[ing] all services to/from the Emissions Building.”
[15] The cables in the old duct bank that led into the MCC Room were in fact disconnected, but not the other cables that led to the duct bank that serviced the digestion tanks.
[16] On July 10, 2019 Walsh obtained private utility locates from Frontier Utility Locating Services Inc. (“Frontier”). These locates showed an electrical line running from the substation to the north periphery of the MCC Room and exiting the south periphery. These locates were given to Priestly prior to its demolition work. Priestly did not obtain its own locates.
[17] On an unspecified date thereafter and before demolition, Dave Luis, the Priestly site superintendent, walked the site with Mr. DiVona and Umakaram Navaratnam, the Walsh project superintendent who was assisting Mr. DiVona. Mr. Luis stated that he was told that “everything in the footprint of the building was dead and to be removed.” Mr. DiVona denied making that statement.
[18] On Tuesday, July 16, 2019 Priestly began demolishing the OCB. Much of the building was demolished by the end of that week, July 19, 2019.
[19] On Monday, July 22, 2019 Priestly began demolishing the below-grade components of the MCC Room. Artur Rocha was the operator. He used an excavator with a hammer attachment to demolish the concrete. His superior was Mr. Luis. That morning, after logging in, Mr. Luis went to another project site with a different contractor, Kenaidan. The Kenaidan site was just a ten minute walk away.
[20] Mr. Rocha encountered the old duct bank when he was demolishing the foundation. He did not anticipate this. He stopped and called Mr. Luis. Mr. Luis stayed where he was and instructed Mr. Rocha to continue the demolition, including the duct bank. He said he did this because he believed everything in the footprint of the OCB had to be demolished.
[21] After Mr. Rocha penetrated the old duct bank casing, he encountered cables. Not anticipating this, he stopped and called Mr Luis a second time. Mr. Luis again stayed where he was and instructed Mr. Rocha to continue demolition. Mr. Luis said he did this thinking the cables were dead.
[22] Mr. Rocha pulled the cables using an attachment called a “processor,” a claw-like object. He removed two cables without difficulty. With the third cable he encountered resistance. It refused to move. He stopped and called Mr. Luis a third time. Mr. Luis then walked over to the MCC Room.
[23] When he arrived, Mr. Luis received a call from the Kenaidan site stating that they had lost power there. Indeed, the digestion tanks were now down, and power was out for the entire plant. Mr. Luis called Mr. Navaratnam, who attended immediately and instructed Priestly to stop working.
[24] Walsh then undertook immediate remediation measures which included the installation of a temporary generator and repairs to the old duct bank. This work took several months.
[25] Later in the day of July 22, 2019 Mr. Luis filled out a “Near Miss & Incident Report” for Priestly. In this report, Mr. Luis made no mention of Mr. Rocha’s calls, and said that work stopped when the cables were first encountered.
[26] On July 23, 2019, the next day, Mr. Luis filled out a field log stating that Priestly started pulling the cables and when the cables started “coming out from the north side,” work was stopped by Priestly, and Mr. Navaratnam was called. The Rocha calls were not mentioned.
[27] On August 8, 2019 Walsh sent an email notifying Priestly that Walsh was looking to Priestly for the costs of the repair arising from the old duct bank damage.
[28] On October 24, 2019 Walsh also made a written claim to the City of Toronto for the recovery of damages due to the old duct bank damage. The amount claimed was stated to be $866,680.72.
[29] Based on a report from MGAC Canada ULC dated February 26, 2020, the City rejected the claim. This report indicated that the contractor should have been aware of the old duct bank due to the locates and the drawings, and should have at least sought clarification as to what was there and taken preventive measures. The report also indicated that the demolition should have stopped immediately when the old duct bank was encountered, as this was an unanticipated condition. Had that been done, according to the report, the damage would only have been about $50,000.
[30] Priestly continued to work, but was not paid for all rendered invoices due primarily to the old duct bank damage issue. On August 28, 2020 it registered a claim for lien in the amount of $390,953.95. Walsh vacated the claim for lien by posting lien bond security and obtaining a vacating order from me on September 23, 2020. Priestly purported to perfect this lien by commencing this action on October 6, 2020. Walsh defended and counterclaimed on December 24, 2020.
[31] Other claims for lien concerning the subject project were registered. Another trade lien claimant, Spirac (USA) Inc., obtained a judgment of reference from Justice Papageorgiou on July 13, 2020 and an order for trial from me on August 18, 2020. Notices of trial were served on all required parties, including on Priestly and Walsh.
[32] I became seized of the reference at the first trial management conference on October 19, 2020. I made a streaming order and made this action, the Priestly action, its own stream. At the second trial management conference in this stream on December 1, 2020 I made several orders for necessary interlocutory steps such as production and discovery. At the third trial management conference on April 19, 2021 I made other orders. At the fourth trial management conference on September 20, 2021 I scheduled the trial.
[33] The trial hearing took place before me by videoconference on April 6, 7, 8, 12, 13 and May 3 and 12, 2022. Priestly called as witnesses Mr. Garcia, Mr. Luis, Mr. Rocha, Michael Norris, Mr. Tumanguil and the expert, James Wilkinson. Walsh called as witnesses Mr. Navaratnam, Joshua Little, Mr. DiVona, Christopher Lautenbach and the expert, Denis Gagnon.
III. ISSUES
[34] Based on the evidence and submissions, I find that the following are the issues to be determined:
a) Did Priestly breach the Subcontract in damaging the old duct bank?
b) Was Priestly negligent in damaging the old duct bank?
c) Was there any contributory negligence by Walsh?
d) Is Walsh entitled to the claimed credit on the conduit removal?
e) Is Priestly entitled to the remaining $4,345.13?
IV. WITNESSES
[35] Before I analyze the issues, I will make a brief comment on the credibility of the witnesses.
[36] This is an unusual case as it does not turn on the credibility of witnesses, other than perhaps the experts. This case turns primarily on contract interpretation, the determination of the standard of care and apportionment of liability.
[37] In any event, I found the factual witnesses of both sides credible. The Priestly fact witnesses were frank in their admissions against interest. Mr. Garcia admitted, for instance, that Mr. Luis was responsible for checking the air-gapping of the wires and that he, Mr. Garcia, knew about the old duct bank before the demolition. Mr. Luis admitted in cross-examination that his post-incident reports were inaccurate, that he did not check the air-gapping in advance, that he was not aware of the old duct bank before the demolition, and that he told Mr. Rocha to continue the demolition after the old duct bank was encountered without checking with anyone else first. Mr. Roche gave a careful description of the demolition work he did and the calls he made to Mr. Luis, and admitted as well that he did not know of the old duct bank before he started working. Mr. Norris, the Priestly estimator who prepared the quotation, admitted looking only at the architectural and structural demolition drawings in preparing the estimate, and not at the electrical and mechanical demolition drawings. He admitted also that Drawing C002 showed the old duct bank and specified it was not to be demolished. Mr. Tumanguil admitted that he was concerned about “a lack of information” and that he did not recall raising this concern with Mr. Garcia.
[38] The Walsh fact witnesses were also credible. They were also frank in their admissions. Mr. Navaratnam admitted that he was not aware of the old duct bank, that he had not reviewed the drawings of the OCB, and that he focused on the new duct bank in his discussions with Mr. Luis. Mr. Little, a Walsh senior project manager on the project, reviewed the relevant drawings and gave detail about the Walsh damage claim. He admitted that the drawings did not show the old duct bank powering the digester tanks, that he was unaware of the old duct bank powering the digesters, and that the footings and foundation formed a part of the OCB “footprint.” Mr. DiVona admitted to not being aware of the old duct bank, and to relying entirely on the SRN in making the statement to Priestly in his email of July 9, 2019 that all mechanical and electrical services had been isolated. Mr. Lautenbach, the Walsh project manager on the project, went into accounting issues in his affidavit, particularly the calculation of the conduit credit. In cross-examination, he admitted that he, unlike his Walsh colleagues, was aware of the old duct bank, but that he did not raise questions with Priestly about that issue when the old duct bank did not appear in the Priestly demolition plan.
[39] The two expert witnesses, on the other hand, had credibility issues. They seemed somewhat bias in favour of the parties who called them. This may have been a byproduct of the instructions they received as well as their inclination. James Wilkinson, the expert called by Priestly, was accepted as an expert in the area of procedures and best practices for the safe demolition of structures. He is a forensic engineer with many years of experience working in this area for the Ontario Ministry of Labour and as a consultant. He focused on the duties of others, not Priestly. His reports concerned the communication or non-communication from the City to Walsh and Priestly about the existence of the old duct bank, the need to preserve it, and the danger of live cables in the old duct during demolition. However, he did not examine the Subcontract requirements on Priestly to check for and protect utilities. He also did not examine the relevant drawings to determine whether they contained sufficient information to put Priestly on notice of the old duct bank, the need to preserve it, and the danger of live cables. As a result, Mr. Wilkinson’s opinion seemed to have an incomplete evidentiary foundation. It was limited in scope and tailored to suite Priestly’s case.
[40] Mr. Gagnon was proffered by Walsh as an expert on drawing review and site procedures and practices for construction sites plus the assessment of applicable legislation and standards for construction safety. He is a forensic engineer who was retained to give his opinion on the cause of the damage to the old duct bank. Mr. Movat disputed Mr. Gagnon’s qualification to give this opinion in this case. He argued that Mr. Gagnon’s experience was in the area of material failure, not on practice and procedures on construction sites, particularly demolition. I did not accept the objection as I ruled that Mr. Gagnon may have obtained the necessary knowledge of construction practice and procedure from his over forty years of experience on construction sites.
[41] Mr. Gagnon’s report, which was his evidence in chief, focused on Priestly’s duties. He examined the drawings Priestly had been given and the information in those drawings concerning the old duct bank. He reviewed the Subcontract. He reviewed governing legislation. He focused interestingly at some length on the standards and laws that applied to excavation around utilities as he concluded that these were relevant. I was impressed with this foundation.
[42] However, Mr. Gagnon did not deal with the SRN or Walsh’s notice email of July 9, 2019. In cross-examination, this was dwelt on. Mr. Gagnon wavered, admitting initially that the City was wrong in failing to identify the live cables in the old duct bank, and then retracting that statement arguing that Priestly should have been aware of the live cables due to its contract obligations and the drawings. He admitted that the drawings did not explicitly specify that the old duct bank was to be protected. He also admitted that the old duct bank was embedded in the MCC foundation and that the foundation was a part of the building. He nevertheless maintained that the old duct bank was not a part of the building “footprint,” and that the SRN was entirely accurate and accorded with Priestly’s obligation to demolish the “footprint.” This evidence left me wondering whether Mr. Gagnon’s opinion was also somewhat tailored to suite Walsh’s case.
[43] In the end, I decided to give Mr. Gagnon’s opinion greater weight than Mr. Wilkinson’s whenever the two conflicted, given the broader foundation to Mr. Gagnon’s opinion. The fact witnesses, on the other hand, did not present significant credibility issues. I assessed credibility for these witnesses as it arose on an issue-by-issue basis.
V. ANALYSIS
a) Did Priestly breach the Subcontract in damaging the old duct bank?
[44] There are several areas of the Subcontract that required that Priestly locate utilities, protect those that remained and ensure that those being removed were properly disconnected. I call this Priestly’se “contractual protection obligation.” Here are the Subcontract clauses that required these operations:
a) Subcontract clause SCC 9.1.1 required that Priestly “protect the Subcontract Work and . . . take all reasonable precautions to protect the Work and property of others during the performance of the Subcontract Work.” “Subcontract Work” included Priestly’s demolition work and “Work” was the entire construction project.
b) Subcontract clause SCC 9.1.2 required that Priestly “determine the location of all underground utilities and structures indicated in the Subcontract Documents or that are reasonably apparent in an inspection of the Place of the Work.”
c) Subcontract, Exhibit B, “Scope, Clarifications, Alternates, & Unit Prices,” Part II, “Inclusions,” paragraph 9 required that Priestly “verify that utilities have been properly disconnected and capped.”
d) Subcontract, Exhibit B, “Scope, Clarifications, Alternates, & Unit Prices,” Part II, paragraph 20 required that Priestly “protect all utilities that are shown to remain during construction.”
e) Subcontract, Exhibit E, “Standard Operating Procedures,” paragraph 17 required that Priestly not damage utilities by its operations, and that it contact a utility locator to locate and mark underground utilities.
f) Subcontract, Exhibit G, “Subcontractor Safety Requirements,” paragraph 7 required that Priestly provide Walsh with locates of the underground utilities, that these locates be on site, and that equipment operators and worker working around utilities review and sign off on these locates.
[45] Other parts of the Subcontract are relevant as well. The Subcontract required that Priestly’s demolition plan incorporate the above noted obligations. Subcontract clause SCC 3.5.7.2 required that Priestly review all its “shop drawings” before presenting them to Walsh in order to ensure that they conform with the requirements of the Subcontract documents. “Shop drawings” are defined to be drawings, diagrams, illustrations, schedules, performance charts, brochures, product data and other data to illustrate details of portions of Priestly’s work. Clearly, the Priestly demolition plan was a “shop drawing” as thus defined as it illustrated to Walsh how Priestly would carry out its demolition.
[46] The Priestly demolition plan expressly refers to the contract drawings and documents for a full description of its scope of work. The notes in the plan specify that the stamping engineer was to review the “EXISTING STRUCTURAL DRAWINGS.” Then there is the following note: “IF ANY ELEMENTS OF THE PROCEDURE ARE NOT CLEAR OR ELEMENTS ARE FOUND NOT TO BE AS DESCRIBED, THE WORK IS TO BE HALTED AND CLARIFICATION TO BE OBTAINED FROM THE DEMOLITION ENGINEER.” Under pre-demolition tasks is the following: “IF AT ANY TIME THE EXISTING CONDITIONS VARY FROM THE DESCRIBED IN THIS PLAN, WORKS SHALL HALT AND THE PROJECT ENGINEERS WILL BE CONTACTED FOR FURTHER REVIEW AND ASSESSMENT.”
[47] There is also Subcontract clause SCC 3.3.1, as replaced by Exhibit A, “Supplementary Conditions,” Condition 35. It specified that “the Subcontractor shall provide all necessary supervision and appoint a competent representative in writing who shall be in attendance at the Place of Work while work is being performed.”
[48] Governing Priestly’s contractual obligations was the standard of care stipulated by the Subcontract. Subcontract, Exhibit A, “Supplementary Conditions,” Condition 47 says the following: “In performing its services and obligations under the Subcontract, the Subcontractor shall exercise a standard of care, skill and diligence that would normally be provided by an experienced and prudent Subcontractor supplying similar services for similar projects.”
[49] The evidence suggests that Priestly did not comply with these contractual obligations. First, it appears it failed to identify the location of the underground utilities, the old duct bank, as shown in the Subcontract drawings, and protect those utilities.
[50] Drawing C002, which was given to the Priestly engineering department when it prepared the demolition plan, showed the old duct bank and stated that it was an “EXIST. DUCT STRUCTURE.” Even Mr. Wilkinson, who criticized the owner heavily for not identifying on drawings that the old duct bank had to be protected, admitted in cross-examination that this description on Drawing C002 was to be interpreted as requiring that the old duct bank not be demolished.
[51] The exact location of the old duct bank was also evident from a review of the Subcontract drawings. There were several plan drawings that formed a part of the Subcontract documents and that showed the existence of the old duct bank. These included Drawing C002, Drawing E005, Drawing S7, Drawing E1 and Drawing 8ED001. All of these drawings were plan views that included the MCC Room and showed the old duct bank running either under, through or near the MCC Room. The most important drawing was Drawing S8, as this drawing contained cross-section detailed views of the old duct bank. It showed that the old duct back was embedded in the foundation under the floor slab of the MCC Room. This drawing showed that the old duct bank was directly in the pathway of the Priestly demolition work.
[52] The evidence was clear that, with the exception of Drawing C002, Priestly found and examined none of these drawings, and that Priestly took no steps to identify and protect the old duct bank in its demolition plan. This appears to be a breach of the Subcontract.
[53] Mr. Tumanguil stated in cross-examination that it was not Priestly’s practice to review all the drawings that might bear on its work. Whether this practice met the Subcontract standard of care as it pertained to the demolition plan will be discussed later. Suffice it to say here that the Subcontract otherwise did not expressly allow for individual practices like this. I note incidentally that Mr. Tumanguil himself admitted having questions about the information he had been given by Mr. Garcia to prepare the demolition plan. He did not pursue these questions.
[54] There is a second way in which it appears Priesty breached its contractual protection obligation. It failed to confirm that the utilities leading to the MCC Room had been disconnected. I note that Mr. Garcia stated in cross-examination that he thought Mr. Luis had taken care of this obligation. Mr. Luis admitted that he had not done so. This appears to be a Subcontract breach.
[55] Priestly’s retort to this criticism was the fact that, pursuant to Subcontract Exhibit B, Part III, “Specific Exclusions,” the task of disconnecting the mechanical and electrical systems, namely the job of “isolating” the OCB, was expressly excluded from Priestly’s scope of work. It is undisputed that the isolating party was the owner. The argument appeared to be that with this limitation to its scope, Priestly could rely on the owner to isolate completely all electrical cabling leading to the MCC Room and that Priestly did not have to double-check whether that was done. In my view, this retort does not address the question of whether Priestly met its independent positive obligation to confirm the disconnection.
[56] In addition, I note that the above Subcontract drawings have features which should have put Priestly on notice not to rely upon the isolating obligation of the owner in any event. First, as noted earlier, the relevant drawings did not specify the demolition of the old duct bank. Second, none of the above noted Subcontract drawings show the old duct bank terminating in the MCC Room. They all show the old duct bank extending beyond the MCC Room. The reasonable inference to be drawn from that fact is that there was a real risk the old duct bank had cables that did not service the MCC Room, that extended to other services, and that would, therefore, remain live after the cables to the MCC Room were isolated. Third, in my view, the fact that there were cables in the old duct bank that did not service the MCC Room was explicitly shown on Drawing S8. In one section of that drawing there is a diagram of some cables flowing into the MCC Room and other cables remaining and flowing through to the tunnel leading to the digestion tanks. There is an argument that these facts should have put Priestly on notice that the owner’s obligation to isolate would not have ensured that the old duct bank was without live cables at the time of demolition.
[57] There is a third way in which it appears Priestly breached its contractual protection obligation. It failed to obtain its own locates. Priestly argued that it did not have to do this because it was not excavating outside the building footprint at the time of the accident. The Subcontract draws no such a distinction. This appears to be another Subcontract breach by Priestly. Incidentally, Walsh did obtain its own locates and provided them to Priestly, locates which again showed the old duct bank going through or under the MCC Room.
[58] The fourth way in which it appears Priestly breached its contractual protection obligation was in failing to abide by its own demolition plan. As noted above, the Priestly demolition plan required that if Priestly personnel encountered elements not as described in the demolition plan, they were to stop the demolition and seek clarification from the demolition engineer, Mr. Tumanguil. The plan also said that if “existing conditions” varied from what was described in the plan, work was to stop and Priestly was consult the project engineers for further review and assessment. The demolition plan made no reference to the old duct bank, and the evidence is clear that none of the Priestly witnesses other than Mr. Garcia were aware of the old duct bank prior to the incident.
[59] The evidence shows that Mr. Rocha was surprised when he struck the old duct bank. He did not expect it. He called Mr. Luis three times. Therefore, there is a strong argument that he and Mr. Luis should have, in accordance with the demolition plan, stopped and obtained clarification from Mr. Tumanguil and the project consultant. They did not. This failure happened not only once, but twice. Only after Mr. Rocha’s third call, when he could not pull cables, did Mr. Luis come to the site and contact the Walsh supervisor. This appears to a clear violation of the Priestly demolition plan. I note that Mr. Luis appeared to have understood this breach of the demolition plan when he completed his “Near Miss & Incident Report” on July 22, 2019 and his field log on July 23, 2019. In neither report are the Rocha calls mentioned.
[60] I agree with Ms. Bogach that this last apparent breach was similar to what happened in Sub-Terrain Directional Drilling Ltd. v. Carnello Civil Construction Limited et al., 2014 ONSC 4877. In that case a subcontractor was retained to drill a long hole and pull a cable through the hole. It had a drilling plan which specified that, if the subcontractor got stuck while drilling, drilling and pulling the cable should stop. The subcontractor hit a rock and got stuck. After a pause, and with a bigger drill and a new crew, it continued on. Half the pipe was scored by the rock. I found the subcontractor liable for the damage in part because the subcontractor’s plan contemplated this risk, and the subcontractor did not follow the plan. Similarly, in this case, the Priestly demolition plan contemplated the situation in question, namely Mr. Rocha’s unexpected encounter with the old duct bank, and Messrs. Rocha and Luis did not follow the plan.
[61] There is a fifth way in which it appears Priestly breached the Subcontract in relation to this matter. It did not have a supervisor on site when Mr. Rocha was doing his demolition work at, around and on the old duct bank on July 22, 2019. Mr. Luis clocked in at around 7 a.m. that morning and went to the neighboring Kenaidan site only a few minutes away. This is important because it took three phone calls from Mr. Rocha to get Mr. Luis to come to the MCC Room site and bring a stop to the demolition.
[62] Whether Priestly is to be found actually in breach of the Subcontract requires an analysis of the Subcontract standard of care as described above. Because of its similarity with the negligence standard of care, I have deferred my discussion of that issue to the topic of negligence.
b) Was Priestly negligent in damaging the old duct bank?
[63] Subcontractors can be found to be negligent in their work. Generally, to find negligence, the court must be satisfied of the following factors: (1) there is a duty of care; (2) there is a breach of the applicable standard of care; (3) the claimant sustained damages; and (4) the damages were caused by the breach; see 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35 at paragraph 18.
[64] Both parties accept that Priestly owed Walsh a duty of care. The issue between them is what was the standard of care and was it breached by Priestly.
[65] Concerning the standard of care, generally, as stated by the Supreme Court of Canada in Nelson (City) v. Marchi, 2021 SCC 41 at paragraph 91, to avoid liability, a defendant must “exercise the standard of care expected . . . of an ordinary, reasonable and prudent person in the same circumstances.” I agree with Ms. Bogach that, as applied to construction subcontractors, this general standard of care is similar to the Subcontract standard of care: “In performing its services and obligations under the Subcontract, the Subcontractor shall exercise a standard of care, skill and diligence that would normally be provided by an experienced and prudent Subcontractor supplying similar services for similar projects.” That is what I find.
[66] In fleshing out this standard of care, the court can consider several factors, including likelihood of a known or foreseeable harm, the gravity of the damage, and the availability and cost of preventative measures. The court may look at external indicators of reasonable conduct, such as custom, industry practice and statutory and regulatory standards; see Zsoldos v. Canadian Pacific Railway Company, 2009 ONCA 55 at paragraph 41. Contract duties may modify the standard of care; see Mabe Canada Inc. v. United Floor Ltd., 2017 ONCA 879 at paragraph 4.
[67] There is one glaring and undisputed reality about the Priestly work. It was happening on the site of a large and functioning water treatment plant, Ashbridges Bay, that was to remain working at all times. This would have been obvious to Priestly from just attending at the site. In addition, Subcontract, Exhibit B, Part I, “General,” paragraph 16 specified that, “Subcontractor recognizes that work will occur in and around an operating facility and will take measures necessary to ensure the facility’s operations are not affected.”
[68] In this context, the existence of the old duct bank that is shown in the Subcontract drawings not to be terminated in the MCC Room would, in my view, attract a high standard of care for the subcontractor demolishing the MCC Room. This high standard of care is a function of the gravity that damage to the utility could cause to the overall facility and the relatively low cost of avoidance, such as the low cost of a detailed drawing review, locating and marking off the old duct bank, double-checking the isolation process, obtaining and studying locates, site supervising while working close to the utility, and halting the work when the utility was unexpectedly encountered. I take judicial note of the fact that any duct bank that is not isolated when demolished, could also cause very serious injury to the demolition crew itself.
[69] Mr. Gagnon was the expert who went into a detailed review of Priestly’s standard of care. He reviewed the Subcontract, the Subcontract drawings, the Ontario Building Code, and the Occupational Health and Safety Act. He also reviewed the Best Practices guide of the Canadian Common Ground Alliance (“CCGA”), a non-profit organization dedicated to securing, maintaining and enhancing the integrity of Canada’s underground utility infrastructure. Mr. Gagnon concluded at the end of his second report that Priestly failed to proceed with reasonable care in many respects as follows:
• Preistly failed to obtain and provide their own utility locates appropriate to this excavation;
• It failed to ensure that all underground services were accurately located and marked;
• It failed to review all supplied drawings, as required by the demolition plan;
• It failed to seek clarification about the supplied drawings and locates, as required by the demolition plan;
• It failed to review the location of the underground utility with company personnel prior to commencing excavation;
• It failed to have the locations marked again so that the equipment operator knew where the utility was located;
• It failed to dig by hand to locate the utility before excavating with the machine equipment;
• It failed to have an observer assist the equipment operator when operating excavation equipment around a known underground utility;
• The machine operator failed to limit damages to the old duct bank by halting the excavation immediately upon striking the old duct bank;
• It failed to abide by the excavation procedures outlined in Ontario Building Code, subsection 9.12.1.4, Regulation 213/91, subsection 228 under the Occupational Health and Safety Act, and the CCGA Best Practices;
• It failed to exercise reasonable care to avoid damaging the old duct bank as specified in the Subcontract.
[70] Mr. Wilkinson, the Priestly expert witness, did not delve into the Priestly standard of care. As instructed and as he said he was inclined, he focused on the communication or non-communication by the City and Walsh to Priestly about the existence of live cables in the old duct bank during the demolition. He did not examine the documents Mr. Gagnon examined. In his responding report dated December 31, 2021 Mr. Wilkinson curiously went so far as to say that he found Mr. Gagnon’s efforts at determining the overall cause of the incident irrelevant. In my view, Mr. Wilkinson predetermined that Priestly had no duty of care to find and protect the old duct bank, and that the whole issue was what was communicated or not communicated to Priestly about the live cables.
[71] Mr. Wilkinson’s blinkered view was highlighted by the issue he raised concerning Mr. Gagnon’s comments about excavation and the CCGA Best Practices guide. He again found Mr. Gagnon’s comments irrelevant. First, he quibbled about whether Priestly’s work on July 22, 2019 was an “excavation,” an opinion that was uncorroborated and that Mr. Garcia himself contradicted at discovery by admitting that Priestly was excavating. Second, and most importantly, Mr. Wilkinson asserted that hand digging and the other excavation methods concerning utilities identified by Mr. Gagnon would not apply where the demolition subcontractor was notified that all utilities were isolated and was instructed to demolish the entire “footprint” of the building.
[72] This last comment was repeated by Mr. Wilkinson time and again throughout his evidence. In my view, it stemmed from his restricted view of Priestly’s duties, and I do not accept it. Concerning his notification point, as I commented earlier, the drawings that were given to Priestly or made available to Priestly (and that Mr. Wilkinson did not review) contained information that should have put Priestly on notice that the isolating obligation of the owner would not necessarily extend to all the cables in the old duct bank. None of the drawings showed the old duct bank terminating in the MCC Room, but instead showed the old duct bank extending either through, around or under the MCC Room and on to another area. I note that Mr. Garcia himself admitted knowing prior to the demolition that the old duct bank was present and either went through the MCC Room or under it. He never gave his crew or engineering department this information. Furthermore, Drawing S8 showed the location of the old duct bank in detail in the foundation and showed only some cables (three in number) flowing into the MCC Room and the other cables remaining in the old duct bank for its entire length. Any prudent demolition subcontractor, in my view, should have concluded from this that the SRN may not extend to all the cables in the old duct bank.
[73] Concerning Mr. Wilkinson’s demolition point, based on this information in the drawings, I have come to the view that Mr. Gagnon was correct in characterizing the old duct bank as not forming a part of the “footprint” of the building. This despite the fact that that the old duct bank was embedded in the building foundation. Because the old duct bank was shown in the drawings as containing cables that did not service the MCC Room, it could not be considered as being part of the OCB building “footprint” for demolition purposes. Therefore, as indicated in the drawings, the old duct bank was a functioning utility that needed to be located, marked off and protected in accordance with the standards identified by Mr. Gagnon, which included the excavation methods he identified.
[74] Furthermore, there was the point made by Ms. Bogach that the CCGA Best Practices themselves counselled against relying on another party’s isolating obligation. She pointed out that the CCGA recommended that the excavator working with utilities always have and apply its own method of verifying isolation and disconnection. This obligation was amplified in this case by Priestly’s expressed Subcontract requirement to double-check the isolation process.
[75] Mr. Movat argued that requiring Priestly to examine all the drawings made available to it, as argued by Walsh, was the “standard of perfection” and unreasonable. While I accept this proposition as a general comment about the standard of care, I do not find that it assists Priestly. There was no expert opinion as to what would have been a reasonable level of drawing review by Priestly in this case. Without such evidence, I have reached the conclusion that a review of all the drawings concerning the MCC Room made available to Priestly would have been reasonable both at the tendering stage and at the time of demolition plan preparation. The drawings Priestly admitted to reading, such as Drawing C002, showed the old duct bank running through or under the MCC Room. As a result, in my view, all available drawings concerning the MCC Room and the old duct bank would be required examination for a demolition subcontractor charged with demolishing the MCC Room, particularly given the gravity of the potential damage to the overall plant and to the demolition crew itself if that utility was functional and damaged. Furthermore, as Ms. Bogach pointed out, Mr. Garcia at discovery openly admitted that Priestly reviewed “everything.” Why did Priestly itself follow this standard if it was unreasonable?
[76] I, therefore, find that Priestly had a standard of care concerning the old duct bank, and that it was a high one. Given the scope of what he reviewed and his over 40 years of experience on construction sites, Mr. Gagnon’s opinion on Priestly’s standard of care was persuasive, and I accept it. It accords with the high standard of care I find should apply to Priestly’s work concerning the old duct bank. I will have more to say about Mr. Wilkinson later.
[77] Priestly relies upon the summary judgment decision of Justice Perell in 1041590 Ontario Ltd. v. Camley Investments Inc., 2010 ONSC 6471. In this case, a clothing store in leased premises sued a demolition subcontractor in negligence. The subcontractor had demolished the next-door structure and caused a flood when it severed a waterline. It had been told by the general contractor wrongly that the city had cut off the water. The subcontractor moved for summary judgment dismissing the action as against the subcontractor. It succeeded.
[78] This case is distinguishable. The general contractor gave evidence that the subcontractor did nothing wrong. Furthermore, and most importantly, the plaintiff adduced no evidence on the motion as to the subcontractor’s standard of care and how it was breached. This was determinative. In the case before me, a trial, Walsh, the general contractor, blames Priestly for the damage and has adduced considerable evidence showing the Priestly standard of care and how it was breached.
[79] Priestly also relies upon the trial decision of Justice Mew in Mabe Canada Inc. v United Floor Ltd., 2016 ONSC 1060. In this case an owner of an appliance warehouse experienced a flood caused by a punctured waterpipe located in the material below the concrete floor. The evidence showed that the pipe was too shallow at the point of the puncture and that years earlier when the warehouse was built the concrete flooring subcontractor punctured the pipe when it installed the forms for the concrete using lengthy stakes. The flooring subcontractor knew of the existence of the piping but not of the shallowness in the subject area. The owner sued the flooring subcontractor in negligence. At trial, the owner failed.
[80] I also distinguish this case. Justice Mew accepted the expert evidence that the flooring subcontractor acted in accordance with industry practice and standards. He blamed the general contractor for not informing the subcontractor of the shallowness of the pipe. He also said, most importantly, that there was no other factor present that should have caused the flooring subcontractor to alter its method. In the case before me, there were such other factors, such as the drawings and the locates, that should have alerted Priestly to the need to protect the old duct bank.
[81] I, therefore, find that Priestly did not meet the high standard of care of an experienced and prudent subcontractor doing similar work on other projects. It was negligent and in breach of the Subcontract in damaging the old duct bank as follows:
• Priestly failed to examine the provided Subcontract drawings and locates properly in relation to the old duct bank, failed to locate the functioning old duct bank as indicated in those documents, failed to mark it off and failed to protect it;
• It failed to confirm which cables leading to the OCB had been disconnected and which ones had not been disconnected;
• It failed to obtain its own locates for the utilities concerning the OCB;
• It failed to follow its own demolition plan and stop when the old duct bank was unexpectedly encountered by its crew to get clarification from the demolition engineer and project consultant;
• It failed to have a supervisor present when the old duct bank was worked on.
[82] I also find that Priestly was just negligent in the many ways identified by Mr. Gagnon such as failing to hand dig to locate and protect the old duct bank, and failing to abide by the excavation procedures outlined in Ontario Building Code, subsection 9.12.1.4, Regulation 213/91, subsection 228 under the Occupational Health and Safety Act, and the CCGA Best Practices. I add that Priestly was negligent in not getting its knowledge of the old duct bank disseminated to its engineering department and site crew.
[83] The next step in the analysis is determining whether the Walsh sustained the damages it claims, namely $853,376.97 (HST incl.). This point was not challenged by Priestly. I, therefore, find that this was indeed Walsh’s damages.
[84] The last step is determining whether the Priestly contract breaches and negligence caused this damage. The test for causation is twofold: first the plaintiff must prove factual causation, namely whether, on a balance of probabilities, the damage would not have occurred but for the Priestly breaches; and second the plaintiff must prove legal causation, namely whether the damages were a reasonably foreseeable result of the defendant’s negligence; see Marchi, op. cit., paragraphs 96 and 97.
[85] Priestly did not seriously contest either of these points. I have no difficulty finding that Walsh has proven them. Had Priestly located the old duct bank on the Subcontract drawings and instituted protection for it, had Priestly double-checked the utility disconnection, had Priestly stopped and made inquiries when the old duct bank was first encountered by the demolition crew, and had Priestly had site supervision during the demolition of the MCC Room foundation, I am satisfied that the damage to the old duct bank would have been avoided, or at worse minimized to no more than about $50,000. Mr. Garcia, Luis and Norris all confirmed that this would have happened, and I believe them.
[86] I am also satisfied that the measures taken by Walsh to mitigate the damage – securing the site, installing the temporary generators and repairing the old duct bank – all were reasonably foreseeable consequences of the damage inflicted by Priestly on the old duct bank. They form a recognized category of recoverable economic loss, namely the category of negligent performance of a service; see Maple Leaf Foods Inc., op. cit., paragraphs 20 and 21.
[87] I, therefore, find that Priestly negligently and in breach of the Subcontract damaged the old duct bank.
c) Was there any contributory negligence by Walsh?
[88] The question of apportionment of liability was not broached by the parties at the closing argument on May 3, 2022. I called the parties back on May 11, 2022 to deal with this issue.
[89] Mr. Wilkinson’s opinion laid the foundation for a case of potential and significant shared liability on the part of the owner, the City of Toronto. He stated emphatically that the owner violated industry practice and standards by failing to specify clearly in the drawings and specifications for the project that the old duct bank was to remain functional and was to be protected. He stated emphatically that, despite its extensive historical knowledge of the entire site including the MCC Room, the owner violated industry practice and standards by failing to warn Walsh and Priestly of the existence of live cables in the old duct bank when it signed the SRN. But the City has not been joined to this action. Therefore, I cannot make findings of the City’s shared liability. The existing wrongdoer must shoulder the liability for the damage and seek contribution from the absent one, if it has such liability, in other proceedings; see Endean v. St. Joseph's General Hospital, 2019 ONCA 181 at paragraph 49.
[90] However, there is, in my view, an issue of contributory negligence. Under the Negligence Act, R.S.O. 1990, c. N.1, section 3, if the court finds that the plaintiff contributed to the damage by its own “fault or negligence,” the court can apportion the damages as between the plaintiff and defendant in proportion to the degree of fault it finds in relation to each. In apportioning in this way, the court should be guided by the degree of “blameworthiness” it finds in relation to each party, not the degrees of causation of the damage; see Rizzi v. Marvos, 2008 ONCA 172 at paragraph 49.
[91] I find that Walsh contributed to the damage by its own fault or negligence. Just as there was a duty of care on the subcontractor, Priestly, concerning the performance of the Subcontract work, there was, in my view, a duty of care on Walsh in performing the contractor’s duties of management and coordination of the project. The Subcontract reflected those duties. In Subcontract SCC 3.1.2.1 Walsh had the contractual duty to Priestly to provide overall project coordination. No doubt this coordination duty included keeping the entire Ashbridges Bay plant functioning during demolition work. In SCC 3.1.2.2 Walsh was responsible for ensuring compliance with applicable health and safety legislation. No doubt this duty included protecting workers from the risk of electrocution during demolition.
[92] The Walsh standard of care should be no different from the Priestly standard of care, namely the standard of care, skill and diligence that would normally be provided by an experienced and prudent contractor supplying similar services for similar projects. Concerning the old duct bank, this standard of care should also be a high one given the gravity of the potential damage and the relatively low cost of avoidance, as previously discussed.
[93] One of Walsh’s contractual obligations was to check the Priestly shop drawings, such as the demolition plan. That review was required by SCC 3.5.2. and SCC 3. 5.11. Mr. Lautenberg, the Walsh project manager, gave evidence that he, like Mr. Garcia, was aware of the old duct bank and the need to protect it prior to the demolition. He said he was not sure of the exact route of the old duct bank. He was one of the Walsh employees who examined the Priestly demolition plan. He said in his affidavit that he noted that the plan did not refer to the old duct bank. He stated that this absence to him meant that Priestly had examined the Subcontract drawings and documents and had decided not to demolish the old duct bank. He made no effort to confirm this belief with Priestly. It was mistaken belief.
[94] I find that this conduct did not meet the contractor’s standard of care. Just as Priestly was obligated to double-check the owner’s isolation obligation, I find that Walsh, by virtue of its knowledge of the old duct bank and the need to protect it, was here obligated to double-check closely Priestly’s obligation to locate and protect the old duct bank in the demolition plan. After all, what was the point of this demolition plan review by Walsh if not to have such a double-check done? Concerning the old duct bank, Walsh did not do the double-check properly or at all.
[95] There is the question of SCC 3.5.9 which specifies that “the Contractor’s review shall not relieve the Subcontractor of responsibility for errors and omissions in the Shop Drawings or for all requirements of the Subcontract Documents.” In my view, giving this clause its plain and ordinary meaning, it does not absolve Walsh of liability of contributory negligence due to poor demolition plan review. The clause just says that Walsh’s review will not relieve Priestly of its responsibility for errors and omissions in the demolition plan. I have not relieved Priestly of that responsibility.
[96] Walsh’s conduct during its walkthrough before the demolition was also, I find, a breach of the standard of care. This walkthrough was conducted by Mr. Luis for Priestly and Messrs. DiVona and Navaratnam for Walsh. The purpose was to give last minute instructions to Priestly on the demolition. Mr. Lautenbach obviously did not communicate his knowledge of the old duct bank to the two Walsh’s representatives. This was admitted by both Messrs. DiVona and Navaratnam.
[97] Mr. Luis stated that at this walkthrough the two Walsh representatives assured him that everything in the footprint of the building was to be demolished. Mr. DiVona denied making this statement. But given the admitted ignorance of the old duct bank of the two Walsh representatives, I believe Mr. Luis. This ignorance would have caused the Walsh representatives to give the confident instruction about footprint demolition Mr. Luis described. Such clear instructions were after all the whole point of the meeting. That Walsh did not impart to Priestly at this meeting the knowledge Mr. Lautenbach had about the old duct bank and the need to protect it was, in my view, a breach of the standard of care. I note that everyone at the walkthrough agreed that the Walsh representatives emphasized the need to locate and protect the new duct bank that had been built by Walsh beside and at some distance from the MCC Room. Walsh was not similarly careful in relation to the old duct bank that was embedded in the foundation of the MCC Room.
[98] There was criticism of Walsh’s conduct in relation to the SNR. I do not agree with it. It was the owner who had the isolation obligation. There was no evidence that Walsh had any contractual or other responsibility to double-check the owner’s isolation procedure in the way that Priestly was obligated to do.
[99] That these breaches of the standard of care contributed to the Priestly damage is clear. Had Walsh imparted its knowledge of the old duct bank to Priestly during the demolition plan review and at the site walkthrough, I am certain Priestly would have taken steps to locate and protect the old duct bank. Messrs. Tumanguil, Norris and Luis all emphasized that point, and I believe them. At minimum this knowledge would have triggered the necessary investigation.
[100] Also, the Priestly engineer, Mr. Tumanguil, made it clear that the Priestly engineering department relied on the site walkthrough to finalize its demolition plan and deal with his concerns about the material he had been given. This evidence was not contradicted. Mr. Luis was also clear in his evidence that he relied on the assurances he got on the site walkthrough about demolishing the entire footprint of the building to instruct Mr. Rocha to continue demolishing the old duct bank when it was first encountered. Again, I believe him as I find that he did receive those instructions.
[101] But I am not prepared to assign a large degree of fault to Walsh. The party with primary responsibility for locating and protecting the old duct bank was Priestly. It was the demolition subcontractor charged with demolishing the MCC Room. It had contractual and duty of care obligations to study the relevant Subcontract drawings. These drawings had enough information in them to put Priestly on notice of the location of the old duct, the fact of its continuing functioning and the need to protect it. Priestly had contractual and duty of care obligations to double-check the owner’s isolation work. It had contractual and duty of care obligations to obtain its own locates. It had contractual and duty of care obligations to have site supervision present when there was work involving the old duct bank.
[102] But most importantly, in my view, was the fact that Priestly had contractual and duty of care obligations to abide by its own demolition plan when its site crew unexpectedly encountered the old duct bank. In accordance with that plan, Priestly should have stopped and obtained clarification from Priestly’s engineering department and the project consultant.
[103] Mr. Movat argued that Priestly abided by its own demolition plan because the old duct bank formed a part of the building footprint which was to be demolished. It was not, he argued, an “unexpected” feature. As stated earlier, I do not agree. The old duct bank was a utility, not a part of the foundation. Only a fraction of the old duct bank was embedded in the foundation of the MCC Room. The remainder ran from the substation to the MCC Room and from the MCC Room to the tunnel leading to the digestion tanks. It formed a separate structure and was to remain functional.
[104] The conduct of Priestly’s site crew was, in my view, critical proof that the encounter was unexpected. Neither Messrs. Rocha nor Luis knew about the old duct bank prior to the incident. In cross-examination, Mr. Rocha said he reviewed the demolition plan and the locates prior his demolition work. An experienced operator, he clearly was surprised when he encountered the old duct bank. He called Mr. Luis three times to get instructions. This is not the conduct of an operator who expected to encounter and demolish the old duct bank based on his review of the demolition plan. Mr. Luis himself did not attend the site to examine the old duct bank when he gave Mr. Rocha instructions to continue. Significantly, Mr. Rocha described the object to Mr. Luis over the phone as a “concrete, box-like structure.” He did not say that it was an electrical duct bank running through the foundation. I infer from this that, had Mr. Luis been at the site and examined the object in detail, he would have been surprised and taken different measures. It is significant that Mr. Luis did not mention the Rocha calls in the two reports he authored about the incident on July 22 and 23, 2019. I find that he was concerned about his conduct in not attending at the site sooner and taking proactive measures to protect the old duct bank. In short, the actions of Priestly’s site crew confirmed that this incident was a surprise to them and that they should have, according to the Priestly demolition plan, stopped when they first encountered the old duct bank.
[105] Priestly relied upon the decision of the Court of Appeal in Jelco Construction Limited v. Vasco (Euca Welding), 2010 ONCA 444. In this case, a subcontractor caused a fire by torch-cutting angle irons with acetylene torches near tar-papered walls. The subcontractor was concerned about this work before doing it, but the contractor instructed him to proceed and assured the subcontractor as follows: “don’t worry about it, if anything happens it will be my responsibility.” The trial judge assigned 50% responsibility to each of the subcontractor and the contractor. The Court of Appeal increased the contractor’s liability to 75% stating that the trial judge had not appreciated the relative positions of the parties and the fact that contractor had pressured contractor into doing the risky work.
[106] This case is not comparable to the one before me. Walsh’s assurance at the site walkthrough about demolishing the footprint of the building did not detract from Priestly’s independent obligations to find and protect the old duct bank. In Jelco the contractor’s assurances caused the subcontractor to deviate from its own safety measures. Also, Walsh never gave any assurance to Priestly about demolishing the MCC Room and taking on the responsibility if something went awry.
[107] As a result, I have decided to assign 15% of the fault for the damage to Walsh, and 85% of the fault for the damage to Priestly. The damage will be apportioned accordingly.
d) Is Walsh entitled to its claimed credit for the conduit removal?
[108] Walsh claims a credit of $48,165 plus HST ($54,426.45) for conduit removal work that was in Priestly’s scope and that Priestly was not required to do. This work predated the old duct bank damage. The entitlement to the credit per se is not in issue.
[109] Priestly has two responses. First, it says that Walsh’s valuation of the credit is excessive. Priestly calculated the credit at $21,970 without taking account the scrap value of the rebar. Second, Priestly says that this credit was off-set by the additional costs incurred by Priestly in saw-cutting to protect the conduits that remained, a cost that was in the amount of $28,175 plus HST ($31,837.75). Priestly says that Walsh agreed to this off-set. Concerning this second point, Walsh denies the agreement and says that the saw-cutting was a requirement of the Subcontract..
[110] Concerning the valuation of the credit point, the issue in the end turned on a disagreement between the parties as to the resources that were assumed would have been used for the conduit removal. This disagreement was between Mr. Garcia for Priestly and Mr. Lautenbach for Walsh. Mr. Lautenbach asserted that Priestly could have done the conduit removal with only a 20 ton machine as the larger equipment was too big for the space in question. His calculations showed time in excess of 16 days. There was no corroboration for this opinion. Mr. Garcia asserted that Priestly could have done the work with a larger, 50 ton machine, over only 12 days at much less expense. He did not agree with Mr. Lautenbach’s point about the congestion.
[111] Ms. Bogach argued in her written submissions that I should prefer the evidence of Mr. Lautenbach as, according the Priestly estimator, Mr. Norris, Priestly estimated using a crew for demolition work, not just the demolition machine and operator. But in examining Mr. Lautenbach’s calculations, it appears that he also assumed the use of only the machine and operator. Therefore, I do not accept this point.
[112] I prefer the evidence of Mr. Garcia. As project manager, Mr. Garcia had direct experience coordinating resources for Priestly’s demolition work. It also was undisputed that Priestly used its 490 Komatsu, a 50 ton machine, throughout the demolition work on this project. Why would it have stopped doing so at the conduits? As for the congestion alleged by Walsh, there was insufficient evidence for me independently to determine that issue.
[113] Concerning the set off point, the conduit saw-cutting was done in April and May, 2019. Mr. Garcia sent an email to Mr. Lautenbach on May 12, 2019 entitled “Conduit Sawcutting – Associated Costs.” In this email, Mr. Garcia advised of the additional saw-cutting Priestly was doing on the conduits in an area that would not have required that work under the original scope. On July 15, 2019, just a few days before the old duct bank event, Priestly submitted a quotation for the conduit saw-cutting. The quote was in the amount of $28,175. That figure was not disputed.
[114] Mr. Garcia’s evidence was that he then discussed the matter verbally with Mr. Lautenbach shortly thereafter and came to an agreement setting off the conduit saw-cutting extra against the conduit removal credit since the two figures were similar in size. Priestly never billed Walsh for the saw-cutting extra and it does not appear as part of its present claim. This, in my view, is circumstantial evidence of the agreement alleged by Mr. Garcia.
[115] Two years later, on July 13, 2021, namely well after it incurred all of the costs of the repair of the old duct bank and during the litigation with all of the tension between the parties associated with it, Walsh delivered a change order applying its $54,426.45 credit for the conduit removal but without any set-off for Priestly’s conduit saw-cutting. In his affidavit, Mr. Lautenbach asserted that Walsh had not agreed to the conduit saw-cutting extra because this work was a part of Priestly’s contractual obligation to “protect structural components of the Plant.”
[116] I do not accept this evidence and explanation from Walsh. Mr Lautenbach’s evidence here seems self-serving and unreasonable. It only makes sense that where conduits that were originally scheduled to be demolished are ordered to remain, there will be extra work for the demolition subcontractor protecting those remaining conduits through saw-cutting. This is work that would not have been originally contemplated. Also, that Walsh waited two years to take this position only further undermines its credibility.
[117] I find, therefore, that there was the verbal set-off agreement alleged by Priestly, and deny the Walsh credit.
e) Is Priestly entitled to the remaining $4,345.13?
[118] As stated earlier, Walsh accepts $292,436.40 (HST incl.) of the Priestly lien claim of $351,207.98 (HST incl.). Adding back the Walsh conduit credit of $54,426.45, as I have done, to the Walsh total of $292,436.40 (HST incl.) products a total of $346,862.85 (HST incl.). This total is $4,345.13 less than the Priestly lien claim. Is Priestly entitled to this $4,345.13?
[119] Priestly identified three Priestly invoices that together totaled almost $4,345.13. These three invoices did not appear on Priestly’s subcontract subledger and, therefore, have not been accounted for. They are the following: invoice 61 ($8,109.00 plus HST), invoice 64 ($4,000 plus HST) and invoice 68 (-$8,263.80 plus HST). These total $4,345.08, namely five cents less than the above noted $4,345.15. I find that these invoices represent the difference between the Priestly claim and the adjusted Walsh total.
[120] Mr. Garcia identified these invoices in his affidavit. Invoice 61 was an extra for flow meter protection concrete cutting. Invoice 64 was an extra for remobilization for service tunnel demolition at conduit#3. Invoice 68 was a credit for the deletion from the scope of the removal of the gallery 7 wall column tile. There was no evidence from Priestly supporting these claims. In cross-examination Mr. Lautenbach recalled invoice 61, but could not state the reason it had not been approved. He did not recall and could not comment on invoice 64. He did recall and confirmed the credit in invoice 68 as he said Priestly gave this credit because paint was not adhering to the substrate.
[121] The onus to prove entitlement to these charges rests on Priestly. It has not provided evidence in support of the claims. It has failed to meet that onus. I deny this claim as a result.
VI. CONCLUSION
[122] In conclusion, I find that the Priestly claim is reduced to $346,862.85 and is off-set by its obligation to pay Walsh 85% of Walsh’s damages due to the old duct bank repair, namely $853,376.97 x 0.85 = $725,370.42, producing a result of $378,507.57 that Priestly must pay Walsh plus prejudgment and post-judgment interest. Priestly lien claim is discharged, and any security posted for it is to be returned.
[123] I directed that the parties file costs outlines concerning this reference. On May 4, 2022 Priestly filed a bill of costs that showed a total of $249,881.51 in partial indemnity costs, $345,449.40 in substantial indemnity costs and $402,453.15 in actual costs. On May 4, 2022, Walsh filed a bill of costs that showed $218,020.98 in partial indemnity costs, $270,964.87 in substantial indemnity costs and what appears to be $323,908.76 in actual costs.
[124] If the parties cannot agree on a costs award, all those seeking costs must serve and file written submissions on costs of no more than four pages on or before September 20, 2022. All those responding to these costs submissions must deliver responding written submissions on costs of no more than four pages on or before October 4, 2022. Any reply written submissions of no more than two pages must be served on or before October 11, 2022.
[125] These written submissions must address the prejudgment and post-judgment interest to be calculated and paid on the judgment amount.
Released: September 6, 2022 _____________________________
ASSOCIATE JUSTICE C. WIEBE
COURT FILE NO.: CV-20-648871
DATE: September 6, 2022
ONTARIO
SUPERIOR COURT OF JUSTICE
In the matter of the Construction Act, R.S.O. 1990, c. C.30
BETWEEN:
Priestly Demolition Inc.
Plaintiff
- and -
Walsh Construction Company Canada
Defendant
REASONS FOR JUDGMENT
Associate Justice C. Wiebe
Released: September 6, 2022