COURT FILE AND PARTIES

Court File No.: CV-20-639030

Date: September 8, 2025

ONTARIO

SUPERIOR COURT OF JUSTICE

IN THE MATTER OF the Construction Act, R.S.O. 1990, c. C.30

BETWEEN:

DEPENDABLE MECHANICAL SYSTEMS INC. Plaintiff

Jonathan Frustaglio for the plaintiff Tel.: 905-695-5500 Email: jfrustaglio@sutherlaw.com

-and-

LEDCOR CONSTRUCTION LIMITED Defendant

Christopher M. Stanek for the defendant Tel.: 416-862-4369 Email: christopher.stanek@gowlingwlg.com

HEARD: January 7, 8, 9, 10, 14, 15, 16, 17, 21, 22, 23, 24 and February 6, 2025

Associate Justice Wiebe

REASONS FOR JUDGMENT

[1] Overview

This action concerns the claim for lien of the plaintiff, Dependable Mechanical Systems Inc. ("DMS"), in the amount of $1,615,014.07. DMS also claims $250,000 in punitive damages plus $469,739.94 in damages for breach of contract being the alleged unpaid balance of the subcontract price. The defendant, Ledcor Construction Limited ("Ledcor"), denies these claims and claims damages for breach of contract in the amount of $4,327,737.30, a discharge of the DMS claim for lien and a return of the Ledcor lien bond posted for DMS claim for lien.

a) BACKGROUND

[2] Undisputed Facts

The following facts were derived from the evidence and were not disputed.

[3] The Project

The underlying project was the construction of a 10-storey mixed use condominium building. The first level is retail space; the second level is office space; floors 3 to 10 are 74 residential units; and below ground are 3 levels for parking. The building is called, "the Plant - Queen West," and is located at 41 Dovercourt Road, Toronto. The project, which I will call "the Project," was owned and developed by 41 Dovercourt LP ("the Owner"). At the same time, this developer owned and developed a similar building across the street, a building called "the Cabin."

[4] Prime Contract

On October 2, 2017 the Owner contracted with Ledcor to have Ledcor act as the construction manager at risk, with Ledcor to be paid a fee plus its costs of construction. Applications for payment were to be submitted monthly. This will be called "the Prime Contract." The Project schedule required substantial performance by September 5, 2019. In a January 5, 2018 Ledcor schedule update, the mechanical scope was shown to start May 15, 2018 and be done by September 5, 2019.

[5] The Subcontract

Ledcor and DMS subsequently entered into a fixed price subcontract using a Ledcor standard form. This will be called "the Subcontract." It was dated May 5, 2018 but was signed in October, 2018. The Subcontract specified that DMS was to complete the specified mechanical scope for a fixed price of $3,751,500 (HST incl.) in accordance with the Project schedule. DMS also obtained the subcontract for the mechanical work under a different contractor for the Cabin.

[6] Project Delays

There were Project delays. There were delays due to soil contamination and the concrete forming. Ledcor circulated a schedule dated October 4, 2018 showing substantial performance on November 13, 2019 and delays in the mechanical and electrical distribution work.

[7] Permit Delays

There was also a significant delay with the plumbing and HVAC permits. They were scheduled to be issued by late September, 2018, but were not issued until March 4, 2019. This affected DMS's installation of risers and distribution on all floors. In a December 14, 2018 schedule update, Ledcor showed Project substantial performance as being February 11, 2020 and mechanical and electrical distribution completion on October 3, 2019.

[8] DMS Work Commencement

DMS proceeded with sleeving work and shop drawing submittals. There were issues concerning the timing and accuracy of these.

[9] July 2019 Schedule Update

On July 16, 2019 Ledcor circulated an updated schedule that showed Project substantial performance by March 13, 2020, and mechanical and electrical distribution completion by November 21, 2019.

[10] Suite Finishing Matrix

In July, 2019, to assist with trade coordination, Ledcor issued a Suite Finishing Matrix showing the sequencing and duration of trades on each of the 8 residential floors. The mechanical trade was shown as following the framing trade and having a duration on each floor of 5 days with end dates ranging from August 8, 2019 on the 3rd floor to September 27, 2019 on the 10th floor. A part of the work was the completion of a mock-up suite, Suite 302, that was to be the guide for the work in the suites.

[11] Work Not in Accordance with Matrix

The work was not done in accordance with the Suite Finishing Matrix. There was delay with the mock-up suite, the framing (ie. Midtown Drywall was the framing trade) and the mechanical work.

[12] September 12, 2019 Default Notice

On September 12, 2019 Ledcor issued a written notice of default to DMS under the Subcontract. The letter described three defaults by DMS: failing to supply a sufficient number of properly skilled workers, proper supervision and proper quantity and quality of materials; failing to work the hours required by the Subcontract schedule; and failing to properly and diligently perform its work.

[13] Particulars of Default

The letter then listed 20 particulars of these allegations, calling them failures or untimely completion: procurement of materials and equipment; supply of coordination, interference and sleeving drawings in advance of the work; installation of equipment in the Mechanical Room 204 and Generator Room 205; installation of mechanical equipment and services in the Mechanical Room P203; installation of mechanical equipment and services in Geothermal Equipment Room P303; installation of standpipes in stairwells; installation of sprinkler systems on ground and 2nd floors; installation of fire department connections; installation of temporary standpipes in accordance with the Ontario Health and Safety Act; completion of suite mechanical rough in; replacement of incorrect fire dampers at masonry and concrete partitions; installation of sump pumps and associated piping to manholes for discharge; installation of all exhaust fans and intake louvers in parking levels; installation of the CO detection system in the parking garage; installation of HVAC, plumbing and gas risers in the main mechanical shaft; installation of intake and exhaust boxes in suites to allow for boarding of exterior wall before bulkhead framing; untimely installation of gas and non-freeze hose bibs to terraces and balconies; installation of stair pressurization systems; and the reworking of ground floor services.

[14] Cure Period

The letter gave DMS 48 hours to deliver an acceptable schedule and plan to rectify the alleged defaults, failing which Ledcor would exercise its rights under article 10.4(a) of the Subcontract to do one of the following: furnish the labour, equipment and materials necessary to complete the work and deduct the cost thereof from monies owing; take possession of the DMS equipment and materials and complete the work using Ledcor's forces; or terminate the Subcontract.

[15] Insurance Claim

On September 12, 2019 Ledcor also gave notice of a claim on its AXA XL Specialty Insurance Company ("AXA XL") Subcontractor Default Insurance policy concerning DMS. This policy insured Ledcor against subcontractor default. It had a substantial deductible for each claimable loss of $750,000. AXA XL eventually paid Ledcor on this claim. Mr. Cooke admitted that Ledcor received full payment for its loss on this insurance claim less the deductible.

[16] DMS Response

DMS responded with a letter, signed by its president, Rajesh Ahuja, dated September 16, 2019 denying the alleged defaults. It maintained it had the necessary manpower, supervision, material and equipment on site. It went through each alleged item of default explaining the issue and providing a schedule for completion. It referred to unprocessed change order requests.

[17] DMS Manpower Commitment

On September 17, 2019 Marco Rizzo, the DMS project manager, emailed Tyler Cooke, the Ledcor project manager, advising as to DMS manpower commitments for plumbing, heating hydronic fitting, HVAC sheet metal, controls, sprinklers and standpipe in light of its responding letter of the day before.

[18] Ledcor Response

On September 19, 2019 Mr. Cooke sent a letter to Mr. Ahuja acknowledging the DMS response, promising a review and response, and stating that Ledcor may bring in a third party to review the DMS claims.

[19] Continued Dissatisfaction

DMS increased its manpower on site. However, Ledcor continued to be dissatisfied with DMS's performance. On September 27, 2019, Ledcor noted some 26 items of incomplete DMS work. Ledcor considered terminating the Subcontract but chose not to.

[20] Third Party Review

In October, 2019 Ledcor brought representatives of Zencorp Mechanical Inc. ("Zencorp") and Reel Mechanical Inc. to the site to examine the mechanical work. Both expressed concerns. On October 17, 2019 Mr. Rizzo emailed advising as to manpower increases.

[21] October 2019 Payment Application

On October 30, 2019 Ledcor approved DMS's application for progress payment number 13 showing the DMS contract work as 60% complete and change orders 57% complete. Ledcor was eventually paid for this draw but did not pay DMS.

[22] PlanGrid Deficiency Tracking

In September, 2019 Ledcor also began monitoring DMS's mechanical deficiencies internally using a digital program called PlanGrid. Starting on October 2, 2019 and on ten days in October, November and December, 2019 Ledcor delivered PlanGrid Task Reports to DMS.

[23] November 2019 Payment Application

On November 26, 2019 Ledcor approved DMS's application for progress payment number 14 showing DMS contract work as 66% complete and change orders 69% complete. Ledcor was eventually paid for this work but did not pay DMS.

[24] December 5, 2019 Continuing Default Notice

On December 5, 2019 Ledcor sent another letter to DMS advising that DMS remained in default for the reasons set out in the September 12, 2019 letter. The letter went through each of the 20 items listed in the September 12, 2019 letter and, with one exception, asserted DMS's continued failure to perform each of them. The letter asserted additional DMS defaults: late submission of sprinkler drawings; delays in pricing changes; and a failure to provide subcontractor schedules. The letter then provided six-day notice to complete six "critical" items of work: installation of temporary heat due to the delayed permanent gas supply; completion of deficiencies on the 3rd floor impacting the drywall installation there; completion of coring to allow risers and drains in suites up to level 7; removal and replacement of IPEX plumbing improperly installed; completion of storm water discharge system; and provision of quotations for all contemplated change notices ("CCNs") and site instructions ("SI's") not priced. The letter gave DMS until 5 p.m. on December 13, 2019 to complete these six items, failing which Ledcor "shall exercise" one of the default options in the Subcontract article 10.4(a).

[25] December 11, 2019 Site Meeting

DMS did not respond in writing. It set up the temporary heating. On December 11, 2019 there was a meeting on site between managers of the two companies. Mr. Ahuja walked the site with Ledcor personnel. Ledcor says it decided to end DMS's work after this meeting. Mr. Ahuja went on a trip to India, returning January 7, 2020.

[26] December 2019 Payment Application

Ledcor approved DMS's application for progress payment number 15 dated December 20, 2019 showing DMS contract work as 72% complete and change orders 78% complete. This application was reduced by the mechanical consultant, Smith + Anderson ("S+A"), in January, 2020 to 70% complete and change orders to 70% complete. Ledcor was eventually paid for this revised draw, but did not pay DMS.

[27] December 20, 2019 Email

On December 20, 2019 Mr. Cooke emailed Mr. Ahuja asking for a site meeting. He said it was to see whether Mr. Ahuja could change Ledcor's mind. The meeting did not happen as Mr. Ahuja was away in India.

[28] Termination Letter

On January 2, 2020 Ledcor sent a letter to DMS terminating its right to continue with the Subcontract work effective that day. The letter stated that DMS failed to cure the default as described in the December 5, 2019 letter. DMS was barred from the site, and Ledcor took over the work and materials and formally ceased payment.

[29] DMS Response and Quantity Surveyor

On January 3, 2020 Janice Quigg, in-house counsel at DMS, sent a letter to Ledcor demanding that Ledcor rescind its termination letter. In the alternative, she asked that a quantity surveyor be allowed on-site with someone from DMS and Ledcor to determine the quantity of completed DMS work. On January 6, 2020, Olly Jasen, in-house counsel at Ledcor, responded by letter maintaining the Ledcor position and allowing the quantity surveyor attendance, but only without a DMS representative. The quantity surveyor attendance did not happen. Ledcor allowed DMS to pick up its tools.

[30] Zencorp Contract

On January 6, 2020 Ledcor contracted with Zencorp to perform three scopes of work: Phase 1: investigation of the state of the mechanical work; Phase 2: rectification of the deficiencies in that work; Phase 3: completion of the mechanical scope. Zencorp was to be paid on a time and material basis for Phases 1 and 2, and on a lump sum basis for Phase 3, with the lump sum to be agreed upon. Zencorp began the Phase 1 work immediately by investigating the mechanical work.

[31] Lien Registration and Bond

On January 8, 2020 DMS registered a claim for lien in the amount of $2,851,878.14. On January 21, 2020 Ledcor obtained an order vacating that lien with a lien bond.

[32] Uponor Warranty Investigation

Joe DiGennaro, the Zencorp project manager, got Justin Van Noort of the plumbing supplier, Uponor Ltd., to attend the site to examine the plumbing installations. On January 30, 2020 Mr. Van Noort reported that Uponor would not warrant its products as installed.

[33] Deficiency Investigations

Zencorp brought in Bellwood Sheet Metal Ltd. ("Bellwood") to examine the HVAC installation, and Empire Controls Ltd. ("Empire") to examine the controls system. Zencorp reported to Ledcor that there were numerous deficiencies in DMS's work, such as deficient gas and water lines and risers, sanitary pump issues, vertical heat pump leaks, HVAC issues, and inadequate controls wiring. The phase 1 work was done by the end of January, 2020.

[34] Phase 2 Work

Zencorp started the phase 2 work at the same time as its phase 1 work, namely January 6, 2020. Mr. DiGennaro stated in his affidavit that in January and February, 2020 Ledcor issued nine field work orders instructing Zencorp to do remediation work. He said that this remediation work was then done at the same time as the phase 3 work of completing the mechanical scope.

[35] Phase 3 Work and Completion

There was confusing evidence about the phase 3 work. Mr. DiGennaro stated in his affidavit that on April 22, 2020 Ledcor issued a Subcontract Change Order in the amount of $313,600 "to reflect the lump sum payable to Zencorp for completion of the mechanical scope." He said that the $313,600 was "the lump sum payable under Phase 3 of the Subcontract." However, he then stated that Zencorp issued 12 invoices for the completion work, one invoice in each month starting in February, 2020 and ending in January, 2021, totaling $4,009,516.16, all of which he said were paid by Ledcor. These invoices described the "original contract amount" as $3,462,240.40. They showed that 93% of that "original contract amount" was done in the five months between March and July, 2020, the height of the pandemic. Mr. DiGennaro stated that the project was certified as substantially performed on January 31, 2021.

[36] Statement of Claim and Defence

On April 2, 2020 DMS served a statement of claim perfecting its lien. On January 22, 2021 Ledcor served it statement of defence and counterclaim.

[37] Reference and Trial Management

On July 16, 2021, DMS obtained a judgment of reference from Justice Ramsay. I made an order for trial on October 7, 2021 and assumed carriage of the reference at the first trial management conference held on November 22, 2021 and December 13, 2021. There was another lien claimant, Dominion Forming Inc. ("Dominion"), the forming contractor. I made an order separating the reference into the DMS and Dominion streams. I ordered interlocutory steps.

[38] Trial Management Conferences

In the DMS stream, I held another five trial management conferences on October 11, 2022, April 11, 2023, October 16, 2023, December 2, 2024 and December 16, 2024. At the trial management conference on October 16, 2023 I scheduled a 13-day trial to take place on January 7, 8, 9, 10, 14, 15, 16, 17, 21, 22, 23, 24 and February 6, 2025.

[39] Pre-Trial Witness Changes

At the prehearing trial management conference on December 2, 2024, DMS removed three fact witnesses from its witness list. Ledcor in turn wanted to have its witness, Mark Johnson, give his evidence viva voce and wanted to add two fact witnesses given the trial time DMS had just made available. I found this to be unfair to DMS. I adjourned the trial management conference to December 16, 2024 to allow DMS to respond. On December 16, 2025, Mr. Stanek advised that Ledcor would be calling Dan Larson of S+A rather than Mr. Johnson, and Mr. DiGennaro rather than Ledcor executive, Ryan Stan. As a result, Ledcor did not use any of the DMS freed trial time and allayed my fairness concern.

[40] Trial Witnesses

The trial proceeded on January 7, 2025. Mr. Frustaglio advised that DMS would not be calling Sachin Puri. This reduced the DMS fact witness list to just one, Mr. Ahuja, who testified entirely viva voce. DMS also called an opinion expert, Sandra Burnell of Revay. Ledcor called Tyler Cooke, who testified entirely viva voce. It also called Mr. Larson, Patrick Amorin (the Ledcor project coordinator), Mr. Van Noort, Mr. DiGennaro and opinion expert, John Pearson.

[41] Affidavit Challenges

The morning of the first trial day, January 7, 2025, was spent on a motion by DMS challenging aspects of the DiGennaro, Amorin and Van Noort affidavits for evidence-in-chief on the basis of hearsay and inappropriate lay opinion. I rendered oral decisions denying the challenges except for two paragraphs of the DiGennaro affidavit where he tried to use third party reports by Bellwood and Empire to prove two points. I excluded these as they were hearsay evidence.

[42] Expert Evidence Sequencing

After opening statements there was an unusual event. DMS purported to call Ms. Burnell first before any fact witnesses. Ledcor objected on the grounds that the foundation of factual evidence had not been established for opinion evidence. While this is primarily a summary trial, with evidence-in-chief by way of affidavits served and uploaded in advance of the trial hearing, there had been no cross-examinations on these affidavits. I adjourned the trial to consider the issue. On January 8, 2025 I ruled that both experts would give their evidence at the end of the fact evidence of both sides. Later in the trial I decided to have Ms. Burnell testify before Mr. Pearson.

b) ISSUES

[43] Issues to be Determined

Based on the evidence and submissions, I find that the following are the issues to be determined:

a) Did Ledcor wrongfully terminate DMS's right to continue working?

b) If not, what are the damages?

c) Is the Ledcor insurance recovery relevant to damages?

c) WITNESSES

[44] Credibility Assessment

Before I analyze the issues, I will comment on the credibility of the witnesses.

[45] DMS Witness - Rajesh Ahuja

DMS's only fact witness was Mr. Ahuja. He gave his evidence entirely viva voce. He impressed me as a well-spoken, knowledgeable, well-educated and experienced mechanical contractor. Yet he had significant credibility issues. They stemmed primarily from the fact that he was the principal of DMS and therefore naturally biased in its favour.

[46] Ahuja's Limited Site Knowledge

They also stemmed from the fact that Mr. Ahuja was not on site every day. He admitted attending the site only two to four times each month. Therefore, his firsthand knowledge was confined to the creation of the Subcontract, payment applications and important meetings with Ledcor. He said he "refreshed" his memory of site issues by reviewing documents such as the Ledcor daily reports. But then he admitted that this memory came from his "regular" conversations with DMS site staff. None of this site staff was called to testify. Therefore, this evidence was essentially hearsay and of dubious credibility.

[47] Ahuja's Argumentative Demeanor

In addition, and perhaps because he was the only DMS fact witness and the company president, Mr. Ahuja often became more argumentative than factual. He went out of his way to criticize Midtown, the framing trade, and others for delaying the project, such as the mock-up suite. He put great emphasis on the S+A Job Reports and the consultant approved DMS payment applications, when these were not definitive comments on the quality of DMS's work. He criticized Ledcor and the consultant for poor drawings and delays in change order approvals. He blamed Ledcor for having an "agenda" in its dealings with DMS. He arrogantly dismissed DMS's contract obligation to provide an equipment delivery schedule. He argued that tying hot and cold piping together should not void the Uponor warranty. His emotional investment in this case became particularly evident when he discussed the Ledcor default letters, which made him visibly angry. I had trouble accepting Mr. Ahuja's evidence unless it was corroborated.

[48] Ledcor Witness - Tyler Cooke

Ledcor's main fact witness was Tyler Cooke, the Ledcor project manager. He reviewed the project, the Subcontract, DMS's performance and replacement, and the completion work. Mr. Cooke also gave his evidence entirely viva voce. He remains in the employ of Ledcor and, therefore, exhibited a natural bias in Ledcor's favour.

[49] Cooke's Credibility

Yet, Mr. Cooke was in general a more credible witness. In chief, he provided much factual detail and corroboration of events. His almost daily presence on site gave credence to his observations. In cross-examination, he was not argumentative. Also, he openly admitted to potential weaknesses in Ledcor's case. For instance, he admitted that Midtown delayed DMS, particularly in relation to the mock-up suite and its work on levels 3 and 4. He even contradicted his discovery evidence in this regard at one point. He went on to admit that Ledcor did not serve Midtown with a default notice, thereby making it seem that Ledcor targeted DMS. He openly admitted not following the Subcontract in relation to the change orders and change directives. He openly admitted withholding payment to DMS on its October, November and December, 2019 invoices and not doing so with other trades who delayed. He openly admitted not updating drawings for the benefit of the subtrades, stating that Ledcor's main concern was the liability that such a management practice would bring to Ledcor. This frankness added credibility to his evidence. However, Mr. Cooke's evidence concerning damages was much less credible as there was less corroboration and detail here.

[50] Ledcor Witness - Dan Larsen

Ledcor called Dan Larsen, the team lead at S+A. As stated earlier, he replaced Mark Johnson on Ledcor's witness list. Mr. Larsen discussed the monthly S+A Job Reports, the S+A Survey Report of January 16, 2020 and the sprinkler permit issue. He was not a credible witness. He authored none of the S+A Job Reports and admitted seeing only "one or two" of them before his testimony. Yet, he insisted they reflected what he observed. Concerning the S+A Survey Report of January 16, 2020, Mr. Larsen admitted not attending the site with Mr. Johnson, not knowing what Mr. Johnson relied upon, and not knowing why the report was not signed. Indeed, in the end, he did not know whether the S+A Survey Report in the court record was in fact the one on S+A's file. Mr. Larsen was not a careful witness, and I gave his evidence little weight.

[51] Ledcor Witness - Patrick Amorin

Ledcor called Patrick Amorin, the Ledcor project coordinator. He became a project coordinator at Ledcor in April, 2019. He is no longer with Ledcor. This was his first project. In his affidavit, Mr. Amorin discussed the absence of a DMS mechanical schedule, DMS's shop drawing submittals, the Ledcor default notices, the PlanGrid Reports on deficiencies (for which he created photographs), the DMS manpower issues and the Uponor investigation. He added little, as he relied on documents created by others. What little he added was credible enough. In cross-examination, he even conceded that Midtown delayed the mock-up suite and its own deficiency work.

[52] Ledcor Witness - Justin Van Noort

Ledcor also called Justin Van Noort, a sales representative at Uponor Ltd., the IPEX tubing supplier. At Zencorp's request, he attended at the site on January 21, 2020 to determine whether DMS's installation of the IPEX tubing voided the 25-year Uponor warranty. In his affidavit, Mr. Van Noort said he relied upon a Uponor Pocket Guide and a Uponor Plumbing Design Assistance Manual. He said that he noticed instances where the DMS installation was inconsistent with Uponor's requirements, and that the Uponor warranty would not apply as a result. He produced a report.

[53] Van Noort's Limited Credibility

I found Mr. Van Noort's evidence of limited probative value and with credibility issues. He was a salesperson with one year of experience at Uponor; namely, he was not a plumber. He also admitted that Zencorp was a large Uponor client, thereby introducing the issue of bias. He admitted in cross-examination that others at Uponor determined whether the warranty applied, not him. He admitted that several of DMS's installations did not in fact void the warranty, and that he did not determine the actual prevalence of the issues he observed.

[54] Ledcor Witness - Giuseppe DiGennaro

Ledcor's final fact witness was Giuseppe (Joe) DiGennaro, the project manager at Zencorp who implemented the Zencorp completion contract. In his affidavit, Mr. DiGennaro explained the three phases of the Zencorp contract. He described the phase 1 investigation work which he led including the evidence he garnered from third parties. He described the phase 2 work by identifying the work orders Ledcor issued to have Zencorp complete various items of repair. He described the phase 3 work by identifying a Ledcor phase 3 work order and the 12 monthly invoices he said Zencorp rendered to Ledcor and were paid.

[55] DiGennaro's Troublesome Evidence

I found Mr. DiGennero's evidence troublesome. It was confusing, sloppy, at times hearsay, and at times manipulated. First, in cross-examination, Mr. DiGennero admitted for the first time that completion work (as opposed to deficiency correction) was included in the phase 2 Ledcor work orders. For instance, he admitted that what he had described as phase 2 work done by Brunco Insulation was in fact completion work. Second, Mr. DiGennero admitted in cross-examination to being influenced by Ledcor as to his determination as to what was deficient. He said that Ledcor instructed him to include the extra work of temporary gas and heater connections for P3, sprinkler room and ground floor as a phase 2 deficiency item. Third, Mr. DiGennero liberally used hearsay evidence. He referred to the opinion of an Enbridge inspector about DMS's work when that inspector was not called to give evidence. He referred to and adopted assessments given by Bellwood and Empire, neither of whom gave evidence. This was inadmissible hearsay, which Mr. DiGennero should not have used.

[56] DiGennaro's Accounting Evidence

Mr. DiGennero's accounting evidence was the most troubling. He admitted in cross-examination that the amounts he referred to in his affidavit for the phase 2 work orders was misleading as the numbers were cumulative, not discrete. Most importantly, he created great confusion in his affidavit by describing Ledcor's work order 1913 as the phase 3 lump sum amount of $313,600. He then went on to describe and attach 12 invoices he said Zencorp rendered to Ledcor over twelve months totaling $4,009,516.16. There was no support for the Zencorp invoices, such as proofs of payment, certifications, purchase orders and time sheets. In cross-examination, he did not clarify this obvious contradiction. Furthermore, when asked in cross-examination to explain how Zencorp was able to do 85% of its alleged phase 3 work before July, 2020, as shown in the Zencorp invoices, namely during the height of the pandemic, Mr. DiGennero simply said, "I don't know." This fact cried out for an explanation, but none was given. I came away from all this wondering whether I could give Mr. DiGennero's evidence any credence.

[57] DMS Expert - Sandra Burnell

DMS's opinion expert was Sandra Burnell of Revay. She was admitted to give opinion evidence on the issues of industry standard of care and best practices, delay, contract termination and cost claim evaluation. Ledcor objected to her admission to speak on the issues of standard of care (stating that her report did not deal with that issue) and contract termination (stating that this usurped the court's function). I overruled the objection as I found that Ms. Burnell dealt with the standard of care in her report and that her opinion on contract termination, while troubling, was sufficiently removed from the court's jurisdiction as it was not based on trial evidence.

[58] Burnell's Reports and Analysis

Ms. Burnell authored two reports, one dated January 31, 2023 ("the First Burnell Report") and the other dated January 26, 2024 ("the Second Burnell Report"). In the First Burnell Report, Ms. Burnell assessed the merit of the DMS claim by criticizing Ledcor's management and embarking on a delay analysis using the "impacted-as-planned" method. She concluded that Ledcor acted unreasonably in terminating the Subcontract work as DMS's work was impacted by others. In her delay analysis Ms. Burnell created seven time frames covering the period of delay from DMS's original completion date of September 27, 2018 to the actual project substantial performance date of January 31, 2021. She concluded that DMS was entitled to a time extension for the entire first 10.5 months and compensation for 112 working days of that period, and that DMS was entitled to an extension but no compensation for the next four months. She found that DMS was liable for 10 working days delay in the last month before Subcontract work termination. She assessed the DMS claim as between $1,214,463 and $1,617,477. In the Second Burnell Report, Ms. Burnell reviewed Mr. Pearson's opinion about "dominant delays" and found it wanting as being insufficiently appreciative of external impacts on DMS's work.

[59] Burnell's Credibility Issues

In my view, Ms. Burnell's evidence had credibility issues. First, she conceded relying on the numerous documents she listed and then on Mr. Ahuja, and only Mr. Ahuja, to fill in knowledge gaps. She did not examine the discovery transcripts. She did not review the affidavits for evidence-in-chief. She did not attend the trial other than to give her oral evidence. This gave her evidence a flavour of bias in favour of DMS. Second, she focused on the activities of parties other than DMS obviously for the purpose of showing that DMS was not at fault for the issues leading to the Subcontract work termination. However, she did not pay attention to the critical terms of the Subcontract, a fact that was exposed vividly in cross-examination. As a result, she ended up in cross-examination conceding many points of deficiency in DMS's work, such as the absence of a schedule from DMS, the absence of DMS written notices of delay, the absence of DMS's requests for information concerning design issues, and DMS's responsibility for sprinkler permit acquisition. This seriously detracted from the weight to be given to her opinion. Third, in his report dated April 6, 2023 Mr. Pearson criticized Ms. Burnell for using a method of delay analysis (ie. the "impacted-as-planned method") that is now frowned upon as it does not recognize the dynamic, multi-party nature of construction projects and delay. He also criticized her for misapplying that method by using various schedule updates and as-built dates (such as the completion of L3 mechanical rough-in) to attempt to measure the delay rather a single marker, such as the original schedule. Nowhere does Ms. Burnell address these criticisms or defend her method. This left me wondering whether Mr. Pearson had a point and whether the Burnell opinion should be discounted accordingly.

[60] Ledcor Expert - John Pearson

Ledcor's opinion expert was Mr. Pearson. Despite minor objection, he was admitted to give opinion evidence in the areas of delay, project and construction management, construction contracting process and cost accounting. Mr Pearson authored essentially two reports, one dated April 6, 2023 ("the First Pearson Report") and the other dated December 1, 2023 ("the Second Pearson Report"). As discussed above, the First Pearson Report was a criticism of the method and work of Ms. Burnell. I will not repeat my discussion of that report here.

[61] Pearson's Delay Analysis

The Second Pearson Report presented Mr. Pearson's own analysis of the DMS delay. He stated that the "dominant delays" to the DMS work in the second half of 2019 were those of DMS not others. He described the following five "dominant delays": DMS's failure to provide sufficient labour resources; DMS's delay in getting the L3 mechanical work done for boarding; DMS's delay in installing gas for temporary winter heating in 2019/2020; DMS's failure to provide sleeving for concrete slabs and walls; and DMS's delay in dealing with deficiencies. He said that these five failures stretched over months and showed DMS's overall failure to provide adequate resources for its work.

[62] Pearson's Credibility

Mr. Pearson was, in my view, the more credible expert. First, he anchored his opinion in the terms and conditions of the Subcontract. This is the document that governed the DMS work. Second, Mr. Pearson anchored his opinion in detailed site records and schedules. He relied heavily on the Ledcor superintendent daily reports. These were accepted as admissible business records and treated accordingly. They tracked in detail the number of labourers on site and the activities of the trades. He also relied heavily on Ledcor updated project schedules and suite finishing matrices. These schedules provided Ledcor's contemporaneous view of the progress of all the work. Fourth, he anchored his opinion on the detailed Ledcor default notices. Fifth, Mr. Pearson provided a compelling rejoinder to the criticism that his approach gave insufficient weight to the effect Ledcor problems had on DMS, problems such as the admitted delays of Midtown and Dominion. Mr. Pearson stated that the email dated September 17, 2019 from Mr. Rizzo, DMS's project manager, amounted to a commitment by DMS to provide the stated manpower levels in the face of the many challenges DMS faced. He then pointed out that DMS never abided by these manpower commitments, a conclusion that was not challenged. Mr. Pearson stated that it was this failure by DMS to meet its manpower commitments that was the single most "dominant delay," not the delays of other trades. Mr. Rizzo was not produced as a witness by DMS, thereby laying the grounds for an adverse inference to be drawn against DMS on this point. The credibility of Mr. Pearson's opinion was bolstered as a result.

[63] Summary of Credibility Findings

Therefore, in summary, I found Mr. Cooke more credible than Mr. Ahuja, and Mr. Pearson more credible than Ms. Burnell. The weight given the evidence of the other Ledcor fact witnesses was determined on an issue-by-issue bases.

d) ANALYSIS

d.1) Did Ledcor Wrongfully Terminate DMS's Right to Continue Working?

[64] Contract Interpretation Principles

This question requires a review of the Subcontract. There was no issue as to the enforceability of the Subcontract. Concerning contract interpretation, the following principles should be born in mind: the interpretation must be grounded in the text and read in light of the entire contract; the words must be given their ordinary and grammatical meaning consistent with the surrounding circumstances known to the parties at the time; the purpose is to determine the intention of the parties and scope of their understanding; see Sattva Capital Corp. v. Creston Molly Corp, 2014 SCC 53 at paragraphs 47, 48 and 57. There is also the doctrine of contra preferentum, namely the doctrine which specifies that any ambiguity in the contract should be interpreted against the interests of the drafter; see Smith v. Shernofsky, 2011 ONSC 3389 at paragraph 26.

[65] Ledcor-Friendly Subcontract

The Subcontract was a Ledcor created document. Generally, it was friendly to Ledcor. It shifted many risks of construction (such as coordination) to the subcontractor. Nevertheless, it was signed by DMS. Therefore, the Subcontract should be read as narrowly as possible.

[66] Article 10.4(a) - Default Provisions

Ledcor purported to follow article 10.4(a) of the Subcontract when it terminated DMS's right to continue working. Article 10.4(a) of the Subcontract specifies what recourse Ledcor has if DMS commits specified events of default. The clause is not ambiguous. The specified events of default include, amongst other things, a failure to supply a sufficient number of properly skilled workers, a failure to supply a sufficient quantity and quality of materials, a failure to work the hours required to perform the work in accordance with the governing schedule, a failure "to properly and diligently perform the Subcontract Work," and, generally, a failure "to perform fully any of the agreements herein contained." Article 10.4(a) allowed Ledcor to give a written notice of default and, if the default was not "cured" in 48 hours, the right, amongst other things, to "take possession" of the DMS equipment, tools and materials for the purpose of completing the work and the right to employ others to finish the work.

[67] September 12, 2019 Notice

In its September 12, 2019 notice of default letter Ledcor referred to these aspects of article 10.4(a): (i) insufficient number of properly skilled workers, lack of proper site supervision and lack of quantity and quality of materials; (ii) refusal or neglect to work the hours required by the governing schedule; and (iii) failure to properly and diligently perform the work. It then listed 20 examples of what Ledcor alleged were DMS's failure to complete work in a timely way. The letter gave the required 48 hours-notice to deliver a remedial plan and schedule acceptable to Ledcor.

[68] DMS Response and December 5 Letter

DMS's responding letter of September 16, 2019 stated either that DMS had properly and diligently performed its work, and was being interfered with by others, including Ledcor, or that it would complete outstanding work by specified dates. This response was consistent with article 10.4(a) although no remediation schedule was provided. In its December 5, 2019 continuing default letter, Ledcor essentially updated its default letter by assessing the status of each item of default, adding the six new critical items under a separate six day notice to complete. This letter stated that DMS had only cured one item of default, namely the installation of temporary standpipe, thereby laying the foundation for the January 2, 2020 Ledcor letter of work termination.

[69] Standard for Default

What is clear from reading article 10.4(a) is that it does not require that Ledcor prove that DMS fundamentally breached the Subcontract. It also does not require that Ledcor prove that DMS is liable to Ledcor for compensable delay of the project or of the Subcontract work. All that is required is that Ledcor prove, in the words of the catch-all sub-article, that DMS failed "to properly and diligently perform the Subcontract Work." In short, all Ledcor needed to prove, according to article 10.4(a), was that DMS delayed its work and that it did so in a not insignificant way. Minor and incidental delays obviously were not included in this standard, given the gravity of work termination, but delays beyond that were. That is the general standard set by article 10.4(a) in this Ledcor-friendly contract. I find that the other grounds are essentially subsets of this general standard.

[70] Crescent Hotels Precedent

In Crescent Hotels and Resorts Canada Company v. 2465855 Ontario Inc., 2019 ONCA 268 the Court of Appeal dealt with a contract termination clause in a hotel management contract. The clause specified an "event of default" by the manager as including a failure to "perform, keep or fulfill a covenant . . . in any material respect" and the continuance of that failure for 30 days. The owner terminated the contract relying on this clause. The manager argued in part that the owner needed to prove a breach that "goes to the root of the contract," namely a fundamental breach. The Court of Appeal disagreed stating in paragraph 13 that, based on the contract wording, the owner needed only prove that there was a default of a covenant. The Court held that such default could be "far less serious than a breach going to the root of the contract." Similarly, in the case before me, I find that, based on the wording of article 10.4(a), Ledcor needs to prove only that DMS failed "to properly and diligently perform the Subcontract Work." This is a standard that is far less than a fundamental contract breach.

[71] Procedural Propriety of Notice

There was also an issue as to whether these notice of default letters were procedurally proper, sufficient and clear. In Kingdom Construction Limited v. Regional Municipality of Niagara, 2018 ONSC 29 at paragraph 95 Justice Broad outlined the requirements for proper notice of contract termination: whether the breaches were clearly identified; whether the breaches constituted breaches of contract; whether the subcontractor remedied the contract breaches within the specified time period; and whether the subcontractor was given clear notice that the contract would be terminated if the breaches were not remedied. I have no difficulty finding that Ledcor met all four aspects of this test in its written notices of September 12, 2019 and December 5, 2019. They were clear, detailed and consistent as to what the DMS Subcontract breaches were, what the consequences would be if the breaches were not remedied, and how DMS failed to remedy these breaches within the contractual time period given. They were tied directly to the procedural requirements of article 10.4(a).

[72] Critical Question - Proper and Diligent Performance

This then leads to the following critical question: has Ledcor proven that DMS failed "to properly and diligently perform the Subcontract Work"? In considering the evidence on this point, I became persuaded by Mr. Pearson's opinion. As stated earlier, I found him to be the more credible expert witness. I will not reiterate the reasons I stated earlier for my preference. I have already described them.

[73] Five Dominant Delays

In his second report, Mr. Pearson stated that, in his opinion, there were five "dominant delays" that were caused only by DMS, that stretched over many months and that showed DMS's failure to adequately resource its work: its failure to provide sufficient labour resources; its delay in getting the third floor mechanical work done for boarding; its delay in installing gas for temporary winter heating in 2019/2020; its failure to provide sleeving for concrete slabs and walls; and its delay in dealing with deficiencies. I will deal with each one.

d.1.1) Manpower

[74] DMS Manpower Tracking

Mr. Pearson used the Ledcor superintendent daily reports to track the DMS manpower totals during the first five periods of delay identified by Ms. Burnell in her report stretching from September 27, 2018 to December 7, 2019. As stated earlier, these daily reports were accepted by the parties without challenge as business records. They recorded, amongst other things, the number of labourers on site each day the reports were generated. Using this source, Mr. Pearson showed that DMS was barely present from September, 2018 to March, 2019, that DMS's crew size rose barely above 5 from March to July, 2019, that the crew size increased somewhat to about 10 in July and August, 2019 after the issuance of the Ledcor Suite Finishing Matrix, and that the crew size shot up dramatically to 25 after the September 12, 2025 default letter and stayed there until December, 2019. This indicates that DMS increased its workforce only when confronted with the notice of default.

[75] September 17, 2019 Email

The most telling evidence, in my view, was the email that was sent by Marco Rizzo, DMS's project manager, to Mr. Cooke on September 17, 2019, the day after the DMS letter responding to the Ledcor September 12, 2019 letter of default. In his email, Mr. Rizzo describes the manpower commitments DMS was making in response to the default letter. Mr. Rizzo was not called as a witness to address this email. Nevertheless, neither side questioned the admission of this email. The email is clear on its face. The email refers to plumbing, heating hydronic fitting, HVAC, controls and sprinklers, and indicates a total DMS commitment of 34 workers going forward. In his report, Mr. Pearson pointed out that when this email was written, the DMS crew size was 15, and that DMS then increased its crew size but never reached the 34 total, reaching a maximum of only 29. Mr. Ahuja at one point admitted the inadequate manpower at this time, blaming it on poor morale caused by the presence of the third party mechanical contractors Ledcor brought to the site.

[76] Corroborating Evidence

Mr. Pearson substantiated his opinion by pointing to the considerable number of emails between Ledcor and DMS running from March, 2019 to November, 2019 concerning DMS's chronic manpower shortage. Many of these emails were separately introduced into evidence. Mr. Pearson also did an analysis of the payment certificates to show that DMS's labour cost recovery was minimal. Mr. Cooke bolstered this evidence by pointing out that he and other Ledcor staff observed DMS repeatedly moving personnel to the Cabin project.

[77] Framing Trade Delays

DMS's response to this manpower shortage point (both from Mr. Ahuja and Ms. Burnell) was not to deny the shortage but to assert that DMS could not maximize its manpower due to the lack of completion of prior work of other trades that needed to be done before DMS could do its work. This was particularly the case with the framing trade, Midtown. That Midtown was delayed, and that completion of framing was generally a necessary precondition to DMS's work was accepted by Mr. Cooke and Mr. Pearson. The proper sequencing of the framing and mechanical work was made evident by the July 16, 2019 Suite Finishing Matrix.

[78] Concurrent Work on Same Floors

However, Mr. Pearson pointed out in cross-examination that on-site work often did not get done in the logical sequence identified by the Suite Finishing Matrix, namely with the framer finishing one floor before the mechanical trade starts that floor. Very often, Mr. Pearson stated, the two sequential trades end up working on the same floor in different locations but without interference. He pointed that this happens particularly where there is pressure to finish the work, as there was in this case. Indeed, in re-examination Mr. Pearson was taken to several Ledcor superintendent daily reports in October and November, 2019 and pointed out that Midtown and DMS, while working on the same floors, were not interfering with each other. This point seemed reasonable to me given the time pressures the parties were under at that time.

[79] Manpower Commitment in Face of Challenges

Mr. Pearson's critical point in cross-examination was, however, that Mr. Rizzo wrote his email of September 17, 2019 in the face of the problems that had already unfolded with DMS, such as the Midtown delay, the Dominion delay, the issues with the mock-up suite, etc. It, therefore, is not unreasonable, Mr. Pearson said, to hold DMS to the commitment made in that email. I agree with him.

[80] Adverse Inference - Marco Rizzo

Also, Mr. Rizzo was not called as a witness on this critical issue. Therefore, he did not explain his September 17, 2019 email and the DMS manpower issues. An adverse inference can be drawn against a party who fails to call a material witness it could have called concerning a material point and does not explain why this was not done; see Lane v. Kock, 2015 ONSC 1972 at paragraph 3. DMS did not explain why Mr. Rizzo was not summonsed to give evidence on this issue. I recall being told that Mr. Rizzo was no longer in DMS's employ, but this does not explain why he was not summonsed to give evidence. Manpower was the major issue behind the Ledcor termination of DMS's work. I draw an adverse inference against DMS in this regard as a result, namely that Mr. Rizzo would not have given evidence favourable to DMS about meeting its manpower commitment. As a result, I fine that DMS failed in meeting that commitment.

[81] Manpower as Dominant Delay

Mr. Pearson described this failure by DMS to meet its own manpower commitments as the single most "dominant delay." I agree. The other DMS delays were linked directly or indirectly to this problem.

[82] Conclusion on Manpower

I, therefore, conclude that DMS failed to work properly and diligently in relation to the provision of the required manpower to do the work.

d.1.2) Readiness of Mechanical Work for Third Floor Boarding

[83] Schedule Comparison

Mr. Pearson compared Suite Finishing Matrices of July 16, 2019 and November 25, 2019 concerning the mechanical rough-in and finishing on each residential floor (ie. floors 3 to 10). The July 16, 2019 Matrix showed the first mechanical work starting on floor three on August 8, 2019 and progressing one floor per week up to the tenth floor which was to start on September 27, 2019. The November 25, 2019 schedule showed the third floor starting November 19, 2019 and the tenth floor on January 7, 2020. In short, this comparison confirmed a 3.5 month delay by DMS in finishing mechanical work for third floor boarding and the floors above.

[84] Delay Leading to Default Notice

Mr. Pearson then reviewed correspondence and concluded that the mechanical delay led directly to the September 12, 2019 Ledcor default letter, and that DMS failed to deliver the remedial schedule demanded by that letter resulting in the further DMS delay as confirmed by Ledcor site inspections. Mr. Cooke gave telling evidence in the form of the September 12, 2019 video he took of the 3rd floor mock-up suite, a video which showed the mechanical work falling well behind the other work in that critical unit.

[85] Burnell's Counterargument

Ms. Burnell asserted in her responding report that Mr. Pearson's view did not account for the many impacts on DMS's work that she said Ledcor was responsible for: the absence of Ledcor scheduling, coordination and completion of the mock-up suite; the absence of Ledcor scheduling and coordination of the Midtown framing work including framing deficiencies; the absence of the owner's fixture information; the delay in the sprinkler permit and wrong Ledcor instructions to the sprinkler trade; and the refusal by Ledcor to acknowledge a deficiency in the balcony non-freeze hose bibs ("NFHBs") as a deficiency.

[86] Burnell's Concessions

However, in cross-examination, Ms. Burnell conceded that DMS contravened key aspects of the Subcontract that impacted its work. Importantly, she conceded that DMS did not submit a comprehensive and detailed schedule of its scope of work as requested by Ledcor on several occasions and as required by article 4.1b of the Subcontract, and that this undermined Ledcor's ability to coordinate the work. This lack of scheduling by DMS was evident again when it failed to submit a detailed remedial schedule in response to the Ledcor default letter of September 12, 2019. She also conceded that DMS was responsible for permits necessary for its work under Appendix B1, item 5 of the Subcontract. This made the sprinkler "alternative solution" permit DMS's problem as much as it was Ledcor's. She conceded that the Subcontract Appendix B imposed many coordination responsibilities onto DMS, such as the coordination with the forming trade about sleeving and conduits, and with the drywall and masonry trades about fire dampers. She admitted this did not happen. Ms. Burnell admitted at one point that "DMS was not innocent."

[87] Failure to Serve Notice of Delay

Critically, Ms. Burnell also conceded that article 4.2b and 4.2c of the Subcontract required that DMS give Ledcor no later than five (5) working days-notice of any delay, which was defined as the following: "a party's performance has been delayed, disrupted, interfered with and/or otherwise materially and adversely impacted." This notice was required to include the party responsible for the delay, the impact on the schedule, and a plan that would mitigate or eliminate the delay. This notice was explicitly stated to be a "condition precedent" to any DMS right to receive a schedule extension. Ms. Burnell admitted that DMS never served such a notice of delay. That absence of DMS notice was confirmed in the factual evidence at trial.

[88] Significance of Absence of Notice

I view that absence of notice as essentially an admission by DMS that, while there may have been Ledcor impacts on the mechanical work as described by Ms. Burnell, DMS was primarily at fault for the delay. Mr. Ahuja asserted that DMS was trying to be cooperative and not adversarial by not serving a notice. I do not accept that explanation. The period after the Suite Finishing Matrix on July 16, 2019 was a period of mounting tension between the parties, particularly after the Ledcor September 12, 2019 notice of default. In such a period of rising tension, goodwill is gone, and parties fall back on their strict contractual rights. That DMS chose not to serve a notice of delay in these circumstances was most telling.

[89] Conclusion on Third Floor Boarding

As a result, I find that DMS failed to work properly and diligently in getting the third floor (and the floors above it) ready for boarding.

d.1.3) Failure to Install Gas for Winter Heating in 2019-2020

[90] Temporary Winter Heat Requirement

The Subcontract, Appendix B – Scope of Work, clause 1, Trade Specific Items, subclause 1/19 required that DMS provide temporary winter heat. The original schedule for the Project specified substantial performance for the Project as being in September, 2019. This made winter heating necessary for only one winter, the winter of 2018-19. That is what DMS assumed in its price. However, the delays to the Project pushed this schedule out. In the Ledcor December 14, 2018 Project schedule update substantial performance for the project is shown as being in February, 2020, thereby making it necessary for heating in two winters.

[91] July 2019 Schedule Requirement

Mr. Pearson pointed out, and I accept, that this should not have been a concern to DMS. The Ledcor Project schedule of July 16, 2019 called for the completion of the permanent gas risers and distribution throughout all floors by July 24, 2019. In short, the schedule called on DMS to complete a gas system capable of providing temporary heat by mid-summer of 2019. That this was critical to Ledcor and the Project goes without saying. It was accepted that if the outdoor temperature dropped close to freezing, work would become impossible as this was still a very exposed project.

[92] Actual Installation Delay

This schedule simply was not adhered to. DMS did not install the gas heating until mid-December, 2019, 4.5 months after it should have been installed, and only then because it was included as a "critical item" in the Ledcor December 5, 2019 letter. To demonstrate how important this issue was, Mr. Pearson pointed to a string of correspondence between Ledcor and DMS from October 18, 2019 to December 17, 2019 concerning the gas heating, much of which was in the evidence.

[93] DMS Position on Change Order

DMS's position, as articulated by Mr. Ahuja, was that a second winter of temporary heating was a change, that it therefore needed a Ledcor change order or change directive in this regard, and that this was not forthcoming, thereby justifying this delay. I do not accept that position given the Ledcor Project schedule of July 16, 2019. DMS had a responsibility to install the permanent gas system in the summer of 2019 to the point of providing the heat for the winter of 2019-20.

[94] Gas Riser Relocation Issue

Ms. Burnell went into some detail in her second report about the issue of the relocation of the gas riser that arose in mid-October, 2019. Ledcor informed DMS that the gas riser was in the wrong location as indicated on the drawings and needed to be changed. The gas riser was relocated in the end. I am satisfied that there were conflicts in the drawings as to the shaft location for the gas riser and that these conflicts confused the issue. However, in cross-examination Ms. Burnell admitted that DMS should have issued a timely request for information ("RFI") in accordance with the Subcontract to clarify this issue and did not do so. I agree with her.

[95] Conclusion on Gas Heating

As a result, I find that DMS failed to work properly and diligently in completing a gas system capable of providing winter heat by mid-summer, 2019, as required by the Ledcor schedule.

d.1.4) Failure to Provide Sleeving for Slabs and Walls

[96] Sleeving Requirements

The Subcontract required that DMS provide sleeving drawings to facilitate the passage of mechanical piping and HVAC ducting through concrete walls and slabs. The Subcontract, Appendix B – Scope of Work, paragraph 1, Trade Specific Items, subparagraph .77 required DMS to "supply, layout and install all embeds, sleeves and the like . . . prior to concrete pours." DMS was to coordinate this work prior to the closing of the forms. As with all "shop drawings," DMS was to submit sleeving drawings to the consultant for review prior to this work.

[97] Sleeving Deficiencies

Mr. Pearson pointed out, and in my view the evidence shows, that DMS failed to fulfil this obligation as follows. The DMS sleeving drawings were not done properly and were not done in advance of the concrete and masonry work leaving necessary sleeves missing. DMS did not incorporate the consultant's review of sleeving drawings leading to misplaced sleeves. This resulted in much coring work by DMS to create the proper sleeves. This coring had its own problems. In many instances, scanning was not done in advance of the coring, which resulted in damaged conduits. The creation of proper sleeves after the concrete pour left many unused holes that had to be filled.

[98] Pervasive and Persistent Problem

The evidence shows that this problem bedeviled DMS from the inception of its work in March, 2019 to its end. It was present throughout the structure. As Mr. Pearson pointed out, this sleeving issue frustrated the mechanical work incessantly as it constantly drew resources away from other, ongoing work. It also interrupted the electrical work. He described this issue as creating "dominant and critical delays throughout the Project." He reviewed the history of the correspondence on this issue that stretched from March 18, 2019 to the termination letter of January 2, 2020.

[99] DMS Acknowledgment

Ms. Burnell stated in her second report that DMS acknowledged that it could have submitted and followed up on its sleeving submittals in a timelier fashion and that it struggled with its coring subcontractor resulting in additional coring work. Mr. Ahuja indeed admitted that there were delays with the DMS sleeving drawings, that this led to the increased cutting and coring, and that conduits were wrongly cut in this process. I accept this acknowledgment and admission as they accord with the factual evidence.

[100] Ledcor Contributions

Ms. Burnell asserted, however, that there were Ledcor related issues that contributed to the sleeving problem: Ledcor delayed its processing of the DMS sleeving submittals for P1 and P2 causing the pour for P2 to post-date the processed submittals; there was an instance where rebar covered areas to be marked for sleeving causing interference; there was the late Ledcor communication of pour schedules; there was the lack of Ledcor leadership in the submittal review process with DMS being left to manage the timing on its own; the late responses from the consultant concerning sleeving locations; and the absence of reference to sleeving and pour schedules at coordination meetings. Mr. Ahuja complained about not being given timely access by Ledcor to the mechanical CADD files for the shop drawings. While this may all have been true, the Subcontract imposed on DMS the responsibility to make submittals prior to pours, and to coordinate this process with relevant trades. It failed to do so.

[101] Conclusion on Sleeving

I, therefore, find that DMS failed to work properly and diligently in making, following up on and coordinating the sleeving submittal process.

d.1.5) Deficiencies

[102] PlanGrid Deficiency Tracking

The evidence shows that in September, 2019 Ledcor began using a deficiency tracking system called "PlanGrid." This was a database that recorded Ledcor inspections of potentially completed work using words and photographs. Where the inspections noted work that was not in compliance with the Subcontract, this was noted and tracked until the work was completed. Starting in October, 2019 Ledcor sent PlanGrid reports periodically to DMS.

[103] Importance of Deficiency Completion

Mr. Pearson observed in his report, and the evidence showed, that completion of deficiencies was critical, particularly for the mechanical subcontractor, as this allowed subsequent trades to start their work. The subsequent trade to the mechanical trade in the suites was the "boarding" trade. Boarding was a key milestone for the suites as it allowed the suite finishing to commence in earnest.

[104] Deficiency Analysis

Using the PlanGrid records, Mr. Pearson did an analysis of the work DMS did to complete its deficiencies prior to termination. He noted that a total of 140 Ledcor inspections of the DMS scope were noted in PlanGrid prior to the DMS work termination on January 2, 2020. He noted a further 73 such inspections from January 2, 2020 to January 7, 2020. He said this totaled 215 DMS deficiencies. Mr. Pearson then tracked the deficiencies that were "closed," namely corrected. He found that only 32 DMS deficiencies were corrected prior to Subcontract work termination and that 106 DMS deficiencies were not corrected prior to January 7, 2020. Mr. Pearson also reviewed all the correspondence between the parties on this issue running from October 18, 2019 to January 8, 2020. He concluded that DMS failed to achieve a deficiency free level of completion in any of the areas in which it executed work. This chronic issue of DMS deficiencies was corroborated by Mr. Amorin and the numerous PlanGrid Reports he discussed, all of which pertained to DMS.

[105] Burnell's Concession

In her last report Ms. Burnell acknowledged that DMS was at fault for the identified repair, rework and clearing of deficient items. She, however, opined that Ledcor's "passive" approach to deficiency correction "contributed" to this delay. While acknowledging that Ledcor generated numerous task reports for DMS from PlanGrid, she criticized Ledcor for not giving DMS direct access to the PlanGrid database, arguing that such access would have allowed DMS to address its deficiencies in real time. She criticized Ledcor for not being clearer in its descriptions of deficiencies for DMS, for not identifying deficiencies to DMS in a timelier manner, and for not identifying the problems with DMS's installation of the IPEX piping sooner than early December, 2019. She went so far as to state that Ledcor misidentified the installation of the IPEX piping as a deficiency, a statement that proved embarrassing for her in cross-examination after she conceded not knowing the evidence of Justice Van Noort that the DMS installation of the piping breached the terms of the Uponor warranty.

[106] DMS Primary Obligation

In my view, whether Ledcor "contributed" to this delay does not detract from the fact that DMS had the primary and positive obligation under the Subcontract and under the common law to correct its own deficiencies. In this case, that obligation required that DMS correct its deficiencies in a timely manner to maintain the flow of the Project work. That meant getting clarification of identified deficiencies quickly and doing the identified deficiency repairs quickly. I am satisfied from the evidence, particularly the opinion of Mr. Pearson, that this did not happen.

[107] Conclusion on Deficiencies

I, therefore, find that DMS failed to work properly and diligently in correcting its own deficiencies.

d.1.6) Other Observations

[108] Concurrent Delay Finding

I note that in her first report dated January 31, 2023 Ms. Burnell gave credence to the issues raised by Ledcor in its September 12, 2019 default letter to the extent that she found there was concurrent delay between DMS and Ledcor concerning the mechanical work from August 8, 2019 to December 17, 2019. This meant that, in her opinion, DMS was entitled to a schedule extension, but no compensation for this delay. A finding of concurrent delay means that, in Ms. Burnell's view, DMS was responsible for causing delay that was offset by separate Ledcor actions causing DMS delay during the same period.

[109] DMS Responsibility for Final Period Delay

For the period from December 18, 2019 to the Subcontract work termination on January 2, 2020, Ms. Burnell went further and found in section 7.7.10 of her report that DMS was responsible for a 10 working day delay as "outside influences impacting DMS' performance appear to no longer exist following the activation of temporary heat." What this means is that Ms. Burnell conceded in this report, in my view, that DMS failed to work properly and diligently in completing its work thereby causing delay, albeit delay that was offset by Ledcor delay.

[110] Bad Faith Argument

In his written and oral closing arguments, Mr. Frustaglio made points that I now address. He argued that Ledcor acted in bad faith towards DMS by not paying it the certified draws for October, November and December, 2019 causing DMS financial distress. Subcontract article 5.6 specifies that progress payments were to be made at the later of "40 working days" from the date of the subcontractor's draw application (which itself was to be done no later than the 25th day of the subject month) or the receipt of payment from the owner for that draw.

[111] Payment Timing

DMS applied for payment in accordance with those terms. That meant that the earliest DMS may have been entitled to payment on the earliest of these three draws, namely the October, 2019 draw, was the mid- to latter part of December, 2019, and then only if the owner paid by that time. There was no evidence as to when the owner paid for these draws. With the termination of work letter of January 2, 2020, Subcontract article 10.4(b) was engaged. This article suspended Ledcor's obligation to pay DMS. Therefore, I am not prepared to find that Ledcor acted contrary to the Subcontract or in bad faith with regards to the nonpayment of these draws.

[112] S+A Job Reports

Mr. Frustaglio also argued that the S+A Job Reports and certification of draws were proof that DMS was not responsible for significant deficiencies. I do not accept that proposition. In one of the few areas I found Mr. Larson credible was his statement that S+A did not consider deficiencies relevant to these reports and draw certifications until the end of the project. The project was not at that point when DMS work was terminated.

[113] Conclusion on Wrongful Termination

In conclusion, for all these reasons, I find that Ledcor has proven that DMS failed to properly and diligently perform its work, thereby giving Ledcor the right to terminate the Subcontract work as it did under article 10.4(a) of the Subcontract.

d.2) What Are the Damages?

[114] Article 10.4(b) - Completion Costs

Subcontract article 10.4(b) specifies that where Ledcor terminates DMS's right to continue with the work and finishes the work itself, which I have found it did and did with justification, Ledcor may apply its "expenses incurred . . . in finishing the Subcontract Work" against "the unpaid balance of the amount to be paid under this Subcontract and actually received from the Owner." This article specifies that, if that balance exceeds Ledcor's expenses, that excess balance must be paid to DMS. But if the Ledcor expenses exceed the balance, that excess must be paid by DMS to Ledcor.

[115] Definition of Expenses

"Expenses" are defined by article 10.4(b) to include any expenses Ledcor incurs to complete the "Subcontract Work," including attorney's fees and damages due to the subcontractor's default. The clause specifies that a markup of 15% general overhead and 10% profit will be applied to all such expenses.

[116] Ledcor's Claimed Expenses

Based on its Scott Schedule, Ledcor's claimed "expenses" are the following, with each item including the 15% overhead and 10% profit markup specified by clause 10.4(b):

Item	Amount
1. Replacement costs	$2,036,980.00
2. Delay caused by DMS	$953,167.50
3. Self-performed deficiency correction	$75,975.00
4. Additional Ledcor staff	$113,882.50
5. Coring and patching work	$268,381.25
6. Drywall repair costs	$153,293.75
7. Electrical repairs	$42,862.50
8. Sprinkler pipe insulation	$11,415.00
9. Roofing repairs due to missed stacks	$18,191.25
10. Comms repairs due to missed sleeves	$8,697.50
11. Phasecorp delay claim	$361,576.65
12. Paid to DMS suppliers	$461,363.64
13. Sprinkler completion contract	$173,750.00
14. Dewatering delay	$85,526.25
15. Legal costs (bond costs)	$82,263.96
16. Professional services	$65,850.91
SUB-TOTAL	$4,913,177.66
HST	$638,713.10
TOTAL	$5,551,890.76

[117] Legal Principles on Construction Damages

The parties did not provide extensive authority on the law of construction contract damages as applied to this situation. However, Mr. Frustaglio provided a useful case that provides some guidance, namely Safe Step Building Treatments Inc. v. 1382680 Ontario Inc.. In this case, one of the issues was the damages to be awarded on account of the installation of a defective epoxy floor. Justice LaLonde reviewed the general law of construction contract damages. He stated that the analysis starts with the proposition that the wronged party must be put into the position monetarily he or she would have been in had the contract been performed. He then stated that the usual measure of damages in a construction contract is the costs of curing the breach (ie. the costs of performance) and not the diminution in value between what was contracted for and what was received (ie. the benefit of performance). However, he also stated that the courts put limits on the recovery of costs of performance, such as the requirement that the cost item be part of the main purpose of the contract and the requirement that the cost item be "reasonable," namely that the costs of performance not be disproportionately greater than the benefit of performance. Another requirement is that the wronged party not be compensated for "betterment," namely an improvement or change from what the contract required. Finally, His Honour specified that the wronged party not be compensated for damages incurred due to a failure to mitigate the damages.

[118] Onus of Proof

To this I would add a more elemental observation. If the wronged party is claiming actual costs of performance incurred (ie. as opposed to prospective costs), it has the onus to prove on a balance of probabilities that these costs were incurred. This proposition is almost presumed by the cases discussing construction contract damages.

[119] Application of Principles

Applying these principles to this case, I draw the following conclusions. Article 10.4(b) of the Subcontract specified that the measure of damages be the actual costs Ledcor incurred in completing the DMS scope plus the specified markup. However, Ledcor had the onus to prove that these costs were in fact incurred on a balance of probabilities, that they were reasonable, that they related to the DMS scope, that they did not include the costs incurred for changes made subsequent to the Subcontract work termination, and that they did not result from improper mitigation. I will apply these principles.

d.2.1) Replacement Costs: $2,036,980.00

[120] Largest Damage Claim

This item is the single largest Ledcor damage claim. It represents what Ledcor claims, in accordance with clause 10.4(b), it paid to Zencorp, $3,804,644 (HST excl.) less what it says is the balance left in the Subcontract price, $1,767,664. The amount claimed by Ledcor in its Scott Schedule, on which it relies, is $2,036,980.

[121] Zencorp Contract Structure

The evidence of Messrs. Cooke and DiGennaro was that Ledcor entered into a contract with Zencorp whereby Zencorp would complete the Subcontract work. A contract document was signed on January 6, 2020. As stated earlier, this contract specified that Zencorp was to do three phases of work: a phase 1 of exploratory and investigative work to be paid on a time and material basis at specified rates: a phase 2 of rectification, modification and replacement work correcting the noted deficiencies also to be paid on a time and material basis at specified rates; and a phase 3 of completion work completing the uncompleted scope on a lump sum basis with the lump sum to be agreed upon.

[122] DiGennaro's Evidence

Mr. DiGennaro provided the key evidence for this damage claim. As stated earlier, I found Mr. DiGennaro a troubling witness. He described in some detail the investigation that was done in January, 2020 and the corrective work that he said was done along with the completion work up to the application for substantial performance of the Project on January 1, 2021. He stated that Ledcor issued field work orders for the phase 2 work that were eventually paid by Ledcor through change orders.

[123] DiGennaro's Admissions

In cross-examination, however, Mr. DiGennaro admitted that Zencorp did not keep records consistent with the Zencorp contract and included completion work with the phase 2 change orders. He admitted that his affidavit was misleading when it described the change order totals, which described the totals as separate totals when they were in fact cumulative. He admitted that these change orders included "design changes." Furthermore, as there was no separate change order for the investigative work and as Mr. DiGennaro made no mention of such a separate charge order, I also conclude that Zencorp included the charges for investigation in the change orders Mr. DiGennaro listed.

[124] Phase 1 and 2 Costs

After going through the change orders in cross-examination, Mr. DiGennaro conceded that the total paid to Zencorp for phase 2 work appeared in the change order approved by Mr. Cooke on April 22, 2020 concerning Zencorp field order 1915. This total was $331,306. As stated earlier, there being no separate change order or charge for the investigative work, I conclude that the phase 1 charges were included in this $331,306 as well. I do not make any deduction for completion work because that work must in any event be included in the calculation of the damages pursuant to article 10.4(b). I find, therefore, that the total paid by Ledcor for phases 1 and 2 was $331,306.

[125] Phase 3 Confusion

There then was some profoundly confusing evidence from Mr. DiGennaro about the Ledcor cost of phase 3 work. In his affidavit, he stated that on April 13, 2020 Ledcor issued a change order "to reflect the lump sum payable to Zencorp for completion of the mechanical scope." This change order, stated to be for field work order 1913, was in the amount of $313,600. In his affidavit, Mr. DiGennaro called this amount "the lump sum payable under Phase 3 of the [Zencorp] Subcontract." Phase 3 was the phase wherein Zencorp was to complete the mechanical scope for an agreed upon fixed price.

[126] Contradictory Evidence

In his affidavit, Mr. DiGennaro then stated that Zencorp proceeded to bill Ledcor, and Ledcor paid, $4,009,516.16 to complete the mechanical scope, a number that is 13 times greater than $313,600. He listed 12 monthly Zencorp billings and attached them. These documents showed monthly billings from February, 2020 to January, 2021. This obviously contradicted what Mr. DiGennaro just stated in his affidavit, namely that Ledcor paid $313,600 to complete phase 3, namely the completion of the mechanical scope. When confronted with this contradiction in cross-examination, Mr. DiGennaro, after consideration, confirmed that the phase 3 cost was in fact the $331,306. Mr. Cooke, on the other hand, gave evidence that Ledcor paid the larger figure, but he explained neither the $313,600 Ledcor work order nor the DiGennaro evidence.

[127] Lack of Agreed Lump Sum

This unexplained contradiction undermines the credibility of this Ledcor damage claim. There was other evidence that added to this lack of credibility. First, there is no clear evidence that Ledcor and Zencorp agreed on a lump sum for the phase 3 work. While Mr. Cooke referred to a Zencorp quotation for the completion work dated February 12, 2020 that contained the figure $3,400,000 plus HST, that document was not signed, and Mr. Cooke said it included the time and material work. Therefore, this was not an accurate reflection of the phase 3 cost. The Zencorp contract required that Ledcor and Zencorp come to an agreement on a lump sum price for the phase 3 work. There was no clear evidence that that was done.

[128] Suspiciously High Amount

Second, this $3,400,000 plus HST figure is suspiciously very high. The amount included as the "original contract amount" in the Zencorp 12 monthly billings was similar to this figure, namely $3,462,240 plus HST or $3,912,331.20. This amount, $3,912,331.20, is 2.76 times the size of the unearned portion of the DMS Subcontract price as shown on the last certified DMS Subcontractor Application for Progress Payment, claim number 15, dated December 20, 2019, namely $1,415,303.98 (HST incl.). This amount, $3,912,331.20, is also almost the size of the entire original DMS Subcontract price of $3,751,500 plus HST or $4,29,195. This for allegedly doing only 30% of the Subcontract scope. Neither Mr. DiGennaro nor Mr. Cooke explained the gross size of this alleged completion price. For instance, there was no evidence that DMS underestimated the original Subcontract price, thereby justifying such an inflated completion price. The Zencorp alleged completion price cried out for an explanation and expert evidence, and there was none.

[129] No Proof of Actual Costs

Third, there was no evidence that the Zencorp invoices represented what Zencorp actually incurred in costs to complete. There were no time sheets, supplier and subcontractor invoices, no certifications, and no expert evidence on that subject.

[130] No Proof of Payment

Fourth, there was no evidence, other than the words of Mr. Cooke, that the monthly Zencorp billings represented what Ledcor actually paid Zencorp to complete – no proofs of payment such as cheques and no damage expert evidence. Given the evidence of Mr. DiGennaro about the change order concerning field work order 1913, the unsubstantiated statement of Mr. Cooke as to what Ledcor paid for phase 3 work was not credible.

[131] Insurance Recovery

All of these credibility issues were made that much more acute by the fact that Ledcor openly admitted to being made whole (except for the deductible amount of $750,000) on its damage claim concerning the DMS default by its AXA XL Subcontractor Default Insurance provider, AXA XL. There was no evidence as to when Ledcor received assurance from AXA XL that Ledcor would be paid, what was actually paid by AXA XL, and when. This creates nothing but questions as to the extent to which Ledcor exercised discipline on its costs to complete and as to what in fact it paid to complete. These questions were not answered.

[132] Rule 52.10(a) Motion

In his closing written submissions, Mr. Stanek referred to Rule 52.10(a), the rule concerning a "failure to prove a fact or document." This is the rule that specifies that, "where, through accident, mistake or other cause," a party fails to prove some fact or document material to a party's case, a judge may proceed with the trial subject to proof of the fact or document afterwards at such time and on such terms as the judge directs. Mr. Stanek then referred to missing Ledcor cheques issued to Zencorp for its work as being such missing documents. He said that these are in the Joint Document Book but were not referred to in the evidence. There was, and is, no Ledcor motion material for such a motion to introduce these documents as evidence.

[133] Rejection of Rule 52.10(a) Application

Despite the fact that there is no Ledcor motion under Rule 52.10(a), I will in fairness address this submission. The Court of Appeal has outlined the test to be followed under this rule. In Malkov v. Stovichek-Malkov, 2018 ONCA 620 at paragraph 14 the Court described factors to be considered: the stage of the trial when the motion is made; whether the party intentionally omitted the evidence or recently discovered it; the prejudice to the other side in letting the evidence in and whether that can be compensated in costs; whether the trial would be unduly lengthened; the importance of the evidence and whether it disputed from the beginning; whether the evidence is credible.

[134] Reasons for Rejection

I reject this Ledcor submission for the following reasons:

• If a motion is brought by Ledcor, it would be after the evidence of Messrs. DiGennaro and Cooke is concluded, after all the evidence is in and indeed after the judgment is rendered. Opening up the trial to benefit Ledcor at this late stage seems profoundly unfair to DMS.

• Mr. Stanek stated that the cheques he refers to have been a part of the record for some time. There was no evidence given by Ledcor as to why this apparently critical documentation was not proffered into evidence. Mr. Stanek suggests in his submission, but does not say, that it was due to inadvertence. The subject matter of this documentation is the largest part of the Ledcor damage claim, namely the Ledcor replacement cost. This critical item has been in issue from the outset. The DiGennaro affidavit was filed well in advance of the hearing. There needed to be a clear explanation for this alleged evidentiary "gap" concerning the replacement cost claim, and there was none.

• There would be profound prejudice to DMS in granting such a motion, prejudice that could not be compensated in costs. The sole purpose of such a motion would be to allow Ledcor to introduce evidence to try to rehabilitate the credibility of Ledcor's replacement cost claim. I have found Ledcor's claim discredited primarily by the DiGennaro evidence. To allow Ledcor to reopen the trial at this stage and put the subject documentation into evidence would expose DMS to the risk of millions of dollars in damages to which it is now not exposed. Also, I do not know, and Mr. Stanek did not explain, the entire history of production and discovery in this case. It is an open question to me, therefore, whether DMS would have called other evidence of its own in response, particularly expert evidence on damages given the extraordinarily huge size of the Ledcor replacement costs claim.

• The alleged new evidence would potentially significantly lengthen the trial. No doubt, DMS would want the opportunity to submit its own new evidence in response.

• Finally, given the DiGennaro evidence, it is an open question whether the cheques will indeed salvage the credibility of the Ledcor replacement costs claim and make the reopening of the trial worthwhile. Again, there was no evidence from Ledcor on this point.

[135] DMS Proposed Reduction

Mr. Frustaglio argued that Ledcor's completion costs claim should in fact be reduced even further for various reasons: Mr. DiGennaro admitted that some of the Zencorp work included new extras which should be excluded from the damage calculation; Ledcor's above noted failure to corroborate the claim with proofs of payment, certification, invoices and time sheets; Ledcor's use of excessively high labour rates (ie. foreman rates of $110/hour plus a 30% markup for overhead and profit); and Mr. DiGennaro's statement in cross-examination that the completion work was in fact done for $69,000. Mr. Frustaglio argued that, given all of these factors, the replacement costs claim should be no more than $189,284.80.

[136] Acceptance of DiGennaro's Final Position

I do not accept those submissions. Mr. DiGennaro indeed gave sloppy and confusing evidence. But he was in the end the Zencorp project manager in charge of the completion work. Furthermore, the evidence establishes clearly that Zencorp did most of the completion mechanical work. Mr. DiGennaro reaffirmed at the end of his cross-examination that the Zencorp costs were the $331,306 for phase 2 (which I have found includes phase 1 cost) and the $313,600 for phase 3 for a total of $644,906 (HST excl.). This figure is much closer to the amount shown in the certified DMS December, 2019 draw for the unearned portion of the Subcontract price, namely $1,415,303.98 (HST incl.), than Mr. Frustaglio's suggested damages total of $189,184.80. This is particularly the case when one bears in mind that Ledcor itself incurred completion costs for such items as sprinkling, as is evident from the discussion below. I, therefore, have decided, despite my reservations about Mr. DiGennaro's evidence in general, to accept this part of his evidence as it is the more reasonable damage amount established by the evidence.

[137] Replacement Costs Finding

For all these reasons, I find that Ledcor has failed to meet its onus of proving the full amount of its claimed replacement costs. Furthermore, I have decided to hold Ledcor to the evidence that was given by Mr. DiGennaro on this matter. As a result, I find that the Ledcor completion "expense" for the purpose of Subcontract article 10.4(b) is the cost of phases 1 and 2, $331,306, and the cost of phase 3, $313,600, for a total of $644,906 (HST excl.).

[138] Markup Application

In accordance with Subcontract article 10.4(b), this figure must be marked up by 25% to account for profit and overhead costs. The markup produces a figure of $644,906 x 1.25 = $806,132.50 (HST excl.).

d.2.2) Delay Caused by DMS: $953,167.50

[139] General Conditions Claim

As stated above, Subcontract article 10.4(b) allows Ledcor to apply "damages sustained by Contractor by reason of Subcontractor's default" against the balance. Ledcor claims the costs of its "general conditions" for the period running from September 1, 2019 to April 30, 2020, which Mr. Cooke described as the delay caused by DMS in getting the residential floors ready for boarding. The September 1, 2019 date was picked because, according to Mr. Cooke, it was close to the notice of default. No doubt, it was also close to the initial deadline in the July 16, 2019 Suite Finishing Matrix for the commencement of boarding. The claimed amount is $762,534 x 1.25 = $953,167.50.

[140] Ledcor Head Office Expenses

Mr. Cooke showed me a document he created showing the Ledcor head office expenses for the period from September 1, 2019 to April 30, 2020. Having reviewed this document I am satisfied that it relates to the costs of running Ledcor's head office for this period. It includes such items as insurance, office supplies, photographs and printing. The total is $1,145,829.71. Mr. Cooke then totaled all the days in this period, determined a daily overhead cost rate and applied that rate to the 162 working days during this period to come to the $762,534 total.

[141] Critical Path Analysis Required

I do not accept this claim. Master Robinson (as he then was) in Schindler Elevator Corporation v. Walsh Construction Company of Canada, 2021 ONSC 283 at paragraph 299 described what must be proven to establish a delay claim. The party seeking the delay claim must through the evidence isolate and define the delay, show that the delay affected the critical path of the project, and show that the other side was at fault for the delay as opposed to being excusably delayed.

[142] Lack of Critical Path Analysis

Here Ledcor seeks costs of the function of its head office as it pertains to the overall Project. There is simply no evidence from Ledcor showing that the DMS issues with its work as previously discussed solely impacted the critical path of the Project, certainly in the way Mr. Cooke assumed when he created this claim. Mr. Pearson made it clear several times that he did not do a critical path analysis of the Project delay. He simply reviewed the issues with DMS's work. Ms. Burnell also confirmed that she did not do a critical path analysis of the Project delay. She did, however, employ an "impacted-as-planned" method to attempt to show that DMS's delay was as much the result of forces beyond its control as it was the result of DMS's efforts. She identified delays in the relevant permits, the forming delay, the drywall delay, and many issues with Ledcor management.

[143] Rejection of Delay Claim

What all this means is that a detailed, critical path analysis of the project delay was necessary for Ledcor to succeed on such a claim as this. There was none. I, therefore, do not accept this claim.

d.2.3) Ledcor Self-Performed Labour and Equipment: $75,975

[144] Ledcor's Own Work

Ledcor makes a claim for the costs of its own labour and equipment as a result of the DMS default in the amount of $75,975. Mr. Cooke advised that these costs spanned the duration of the Project subsequent to the default. He said that the main focus of the additional Ledcor work was the coring that had to be done due to DMS's sleeving errors and delays, and the firestopping to secure the pipe passage through concrete. He said that one employee, Geoff Moore, was assigned to do nothing but DMS correction work. Mr. Cooke showed me several invoices for the scanning and coring that was done, and the cheques that Ledcor used to pay these costs. Mr. Cooke prepared documents that summarized the labour hours and costs and equipment costs.

[145] Acceptance of Claim

As stated earlier, the evidence showed that DMS had serious issues with its sleeving work that led to excessive scanning and coring. It does not surprise me that this work of scanning and coring continued after the Subcontract work termination as a result. Mr. Cooke, as project manager, marshalled the labour and equipment to do this work and tracked the costs. The costs total $60,780, which means that the claim is for $60,780 x 1.25 = $75,975 (HST excl.). I have decided to accept this claim.

d.2.4) Ledcor Management Costs: $113,882.50

[146] Management Time

Ledcor claims the management costs it says was associated with this additional work. Mr. Cooke's document tracking the labour hours and costs contained entries for project management time for Niranjan Thilayanathan, Alan Lloyd and David Rock and scheduling work by Gholamnabi Khademghaeiny. Mr. Cooke explained this item as including the management time spent managing the above-noted additional labour hours and equipment time to work on DMS corrections. However, importantly, he said that most of this time was spent by these men preparing the Ledcor claim on its AXA XL default insurance policy and its delay claim.

[147] Rejection of Claim

I do not accept this claim. I am not satisfied that the preparation of the Ledcor claim on its insurance policy is a "expense" that stems from DMS's default under Subcontract article 10.4(b). It is an additional cost Ledcor had to incur to gain the benefit of the insurance it took out to protect itself in the event of subcontractor default. Without the insurance, in my view, these costs would not have been incurred. As for the delay claim, I have not accepted that claim. As for the remainder of this claim, Ledcor is being compensated for its overhead on the labour and equipment by virtue of the 25% that was added to the above noted labour and equipment costs under Subtract clause 10.4(b). I, therefore, deny this back-charge.

d.2.5) Coring and Patching: $268,381.25

[148] Coring and Patching Costs

Ledcor claims the amount of $268,381.25 for the costs it says it incurred on account of hiring firms to cut the cores and patch the wrongly installed cores that resulted from DMS missing sleeves and wrongly installing sleeves for pipes. As previously stated in these reasons, I am satisfied that DMS was responsible for this issue as alleged by Ledcor.

[149] Invoices and Cheques

The quantum of this claim was not challenged. Mr. Cooke referred me to the invoices that were rendered to Ledcor by Concrete Scanning & Imaging Inc. and Corescan Ltd. concerning scanning and coring. He also referred me to the cheques Ledcor issued to those companies from January, 2020 to September, 2020.

[150] Acceptance of Claim

Ledcor claims the total cost here of $214,705 (HST excl.) which is less than the total of the cheques he referred me to. I, therefore, accept this back-charge as follows: $214,705 x 1.25 = $268,381.25 (HST excl.).

d.2.6) Drywall Repairs: $153,293.25

[151] Drywall Removal and Replacement

Ledcor claims the amount of $153,293.25 for the costs it says it incurred to have the drywall company, Midtown Drywall, remove and replace drywall on account of improper mechanical piping issues behind the drywall. Mr. Cooke referred me to numerous photographs of Midtown's work in this regard he said was taken by Midtown. This evidence was not at all clear as to whether this work was due to DMS piping. The evidence showed that Midtown was a troublesome trade that delayed its own work and interfered with DMS. The photographs show that Midtown may have been correcting its own mistakes.

[152] Cost Coding System

Mr. Cooke then referred me to the Ledcor accounting summary dated April 25, 020 concerning Midtown, a document he said he helped create and that showed that Ledcor is not claiming all of the Midtown remedial costs against DMS, only those DMS-related costs that he said Ledcor tracked in real time using cost code 950020. The use of this cost coding system, in my view, added credibility to the claim as it showed that Ledcor applied the back-charge close to or at the time of the work. The quantum of these identified costs in this cost code is not disputed, $122,635 (HST excl).

[153] Acceptance of Claim

This evidence assured me that this claim is meritorious and should be granted. $122,635 x 1.25 = $153,293.75 (HST excl.), the amount of the claim. I grant this back-charge.

d.2.7) Electrical Repairs: $42,862.50

[154] Electrical Rework

Ledcor claims the amount of $42,862.50 for costs it says it incurred to effect electrical repairs and re-work due to DMS's deficiencies. Phasecorp was the electrical trade. Mr. Cooke stated that Phasecorp had to replace electrical work due to mechanical issues. He showed me a summary of Phasecorp's account that he said he created. It showed again that Ledcor tracked the Phasecorp work that was to be back-charged to DMS in real time using cost codes 950011 and 950020. Again, this cost coding added credibility to the claim. These items tallied the amount being claimed, $34,290 (HST excl.). This work was billed by Phasecorp to Ledcor and was paid accordingly. Mr. Cooke showed the Ledcor cheques to Phasecorp in this regard.

[155] Acceptance of Claim

On the basis of this evidence, I am prepared to grant this back-charge in the full amount claimed: $34,290 x 1.25 = $42,862.50 (HST excl.).

d.2.8) Sprinkler Pipe Insulation: $11,415

[156] Firestopping and Insulation

Ledcor claims $11,415 on account of the firestopping and pipe insulation work done by Brunco Insulation Ltd. ("Brunco"). Mr. Cooke showed me the two invoices Brunco rendered to Ledcor in July and December, 2020 in this regard and a cheque that Ledcor issued to Brunco in January, 2021. It was not disputed that this formed part of DMS's scope that had to be completed. The total charge was $9,132 (HST excl.). Therefore, the back-charge is $9,312 x 1.25 = $11,415 (HST excl.). I grant this back-charge.

d.2.9) Roofing Repairs Due to Missed Stacks: $18,191.25

[157] Roof Coring

Ledcor claims $18,191.25 on account of having to core holes in the roof after the roofing was done, all due to DMS's missed stacks. The roofing trade was Flynn Canada Ltd. ("Flynn"). Mr. Cooke showed me a subcontract change order to the Flynn subcontract dated October 25, 2020 in the amount of $14,553 (HST excl.) for "roof rework." on account of "DMS Default – Other Costs." Mr. Cooke also showed me a Flynn subcontract account summary he prepared at that time wherein he described the item as "DMS Default – Other Costs" and assigned the DMS back-charge cost code of 950020. He described this work as coring holes in the finished roof due to stacks that DMS missed.

[158] Acceptance of Claim

I accept Mr. Cooke's evidence here. He would have known of this issue first-hand as he was the Ledcor project manager. I also note the DMS history of deficiencies concerning core holes and risers as previously described. I, therefore, accept this back-charge in the full amount claimed: $14,553 x 1.25 = $18,191.25 (HST excl.).

d.2.10) Comms Repairs Due to Coring: $8,697.50

[159] Communications Cabling Damage

Ledcor claims $8,697.50 for communication cabling repairs caused by coring damage, which coring was done to correct the DMS sleeving issues previously discussed. The communications systems trade was MicroGardia Engineered Systems (MicroGardia"). Mr. Cooke showed me an extra charge from MicroGardia for $6,957.95 (HST excl.) dated February 28, 2021. In a contract summary Mr. Cooke said he created he described this extra as concerning "cored wiring."

[160] Partial Acceptance

The evidence was not clear as to whether this damage was caused by the coring work done after the Subcontract work termination or before that event. Therefore, I have decided to accept only half of this claim: ($6,958.00 x 1.25)/2 = $4,348.75 (HST excl.).

d.2.11) Phasecorp Delay Claim: $361,576

[161] Phasecorp Delay Damages

Ledcor claims $361,576 on account of a Phasecorp claim for delay damages that Ledcor asserts relates entirely to the DMS Subcontract default.

[162] Phasecorp Notice and Change Order

Mr. Cooke referred me to a letter from Phasecorp to Ledcor dated January 30, 2020 wherein Phasecorp gave notice to Ledcor of a delay claim due to the DMS Subcontract default. The notice states that, "once the current ongoing Delay Event is known and fully definable together with Ledcor," Phasecorp will quantify the delay costs, will define the events that caused "and are still causing" delay, will identify the total portion of the Phasecorp subcontract work that was "damaged" by DMS, will estimate the impact on its subcontract schedule and price, and will provide a recovery plan. Mr. Cooke then referred me to a Ledcor change order dated June 17, 2021, 1 ½ years later, showing that Phasecorp was being paid extra in the amount of $289,261. Mr. Cooke showed me a release document signed by Phasecorp in this regard. He said that this claim was accepted and paid by AXA XL. $289,261 x 1.25 = $361,576.25, the amount of the Ledcor claim.

[163] Rejection of Claim

I do not accept this claim at all. There was no evidence at the trial as to the impact, if any, the DMS Subcontract default and delay had on the electrical work other than the mistaken coring of some conduits. Most importantly, there was no evidence from Phasecorp in this regard. The January 30, 2020 notice from Phasecorp proves nothing. It is simply a notice of a delay claim. Neither of the expert witnesses dealt with this issue. The delay analysis that Phasecorp promised in its delay notice was not even produced. Ledcor has the onus to prove this back-charge and it has utterly failed to do so.

d.2.12) Amounts Paid to DMS Trades: $461,363.64

[164] Payments to DMS Subtrades

Ledcor claims $461,363.64 on account of what it says it paid to DMS trades and suppliers on their outstanding accounts to DMS concerning the Project.

[165] Detailed Accounting

Mr. Cooke referred me to a chart he prepared showing payments made to eight DMS subtrades and suppliers. He stated that Ledcor paid the column showing the following non-tax payments: Johnson Controls Canada LP $71,829.59; Next Plumbing & Hydronics Supply Inc. $99,285.45; Noble Corporation $33,551.91; Multi-Glass Insulation Ltd. $9,663.02; Concrete Scanning & Imaging Inc $23,265.00; Canadian Cutting and Coring (Toronto) Inc. $18,744.25; Airex Inc. $15,034.00; Euro Fire Protection Inc. $96,903.00. These figures total $368,276.22. The chart identified in detail the invoices that were paid and attached the invoices. To this total Mr. Cooke added an invoice EFI Concepts rendered to DMS on December 4, 2019 in the amount of $815 (HST excl.) producing a grand total of $369,091.22 (HST excl.). Ledcor claims that $369,090.91 (HST excl.) was paid.

[166] Acceptance of Claim

In the Scott Schedule, DMS admitted that Ledcor paid $280,362.29 of what was owed to DMS's trades. DMS did not provide proof of its position. In the circumstances, given the detail and substantiation provided by Mr. Cooke, I accept the Ledcor claim in full: $369,090.91 x 1.25 = $461,363.64 (HST excl.).

d.2.13) Euro Fire Protection Inc. Completion Subcontract: $173,750

[167] Sprinkler Completion

Ledcor claims $173,750 on account of contracting with DMS's sprinkler subcontractor, Euro Fire Protection Inc., for the completion of its scope.

[168] Euro Fire Contract

Mr. Cooke produced a subcontract document executed by Ledcor and Euro Fire dated February 6, 2020 specifying that Euro Fire would complete the "fire protection system including accessories" for the fixed price of $139,675 (HST excl.). Mr. Cooke also referred me to the cheques Ledcor issued to Euro Fire for this work between June and August, 2020. There were also Ledcor claims summaries describing this as DMS completion work. DMS did not dispute this as proper completion work for the mechanical scope or the accuracy of the quantum of this claim.

[169] Acceptance of Claim

I, therefore, grant this claim. Ledcor claimed that the base cost was $139,000 (HST excl.). I will hold it to that position. Therefore, this back-charge is as follows: $139,000 x 1.25 = $173,750 (HST excl.).

d.2.14) Dewatering Delay: $85,526.25

[170] Temporary Dewatering Equipment

Ledcor claims the amount of $85,526.25 for the monthly rental of temporary dewatering equipment from Aquatech Dewatering Company Inc. for the alleged period of the DMS delay in completing the sump pit.

[171] Sump Pit Delay

Mr. Cooke said that Aquatech leased specialized dewatering equipment to Ledcor as the underground water needed to be filtered before it was discharged into the municipal service. In the Scott Schedule Ledcor stated that the dewatering was delayed on account of DMS's failure to complete the permanent dewatering system, namely the sump pit. There was trial evidence that the sump pit completion was delayed.

[172] Rental Period

Mr. Cooke said the claim spanned the period from August, 2019, when he said the sump pit should have been installed as indicated in the September 12, 2019 default letter, to the time when Zencorp connected the permanent system, which he said was "some time in early 2020, may be February or March, 2020." He showed me a monthly rental invoice from Aquatech in the amount of $5,558 (HST excl.).

[173] Partial Acceptance

Given the evidence from Mr. Pearson about DMS being the "dominant" source of delay in the mechanical scope during this period, but also the evidence of contribution from other sources as shown by Ms. Burnell, I am prepared recognize only half of this claim and for a period of six months only: [($5,558 x 6 months)/2] x 1.25 = $20,842.50 (HST excl.).

d.2.15) Legal Costs: $82,263.96

[174] Legal Costs Claim

Ledcor claims $82,263.96 for what it asserts are its legal costs it has incurred to date on account of the DMS default, namely the lien bonding costs and the litigation costs incurred in this action.

[175] Deferral of Legal Costs

I made it clear to Mr. Stanek that this issue should be determined as a part of the costs submissions in this action, as the result in this case and the conduct of the litigation will be factors to be considered in awarding these legal costs. I took that position because, in my view, Subcontract article 10.4(b) does not usurp the jurisdiction and discretion of the court under section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 to award "costs of or incidental to a proceeding . . ."

d.2.16) Professional Services: $65,850.91

[176] Professional Services Claim

Ledcor claims $65,85091 for the costs it says it incurred for hiring professional services on account of the DMS default.

[177] Smith + Anderson Services

The first of these professionals was S+A. Ledcor claims costs in the amount of $14,887.50 (HST excl.) concerning S+A. Mr. Cooke stated that S+A was hired by Ledcor in January, 2020 to review and comment on the state of DMS's work for the purpose of completing the mechanical scope.

[178] S+A Services Limitation

However, the documents Mr. Cooke referred me to as substantiation for this claim pertained more to services S+A provided subsequent to January, 2020. There was a quotation from S+A dated March 26, 2020 which described the services to be provided as "assisting the new mechanical contractor in getting him involved in the site . . ." There was then an invoice from S+A dated June 1, 2020 for $14,887.50 (HST excl.) for services starting in January, 2020 and ending in April, 2020. I tallied the services that were provided in January, 2020 and they totaled only $3,337.50 (HST excl.). The later services did not at all seem to pertain to a review of the DMS work. I will, therefore, limit this claim to $3,337.50 (HST excl.).

[179] Big Red Contracting Services

The second professional was Big Red Contracting ("Big Red"). Ledcor claims costs in the amount of $15,541.23 (HST excl.) concerning Big Red. Mr. Cooke stated that Big Red is a management firm that Ledcor uses from time to time to assist it in managing difficult projects. He said that in this case Ledcor used Brad Armstrong of Big Red to assist "in the process" starting prior to DMS's work termination. Mr. Cooke referred me to four invoices Mr. Armstrong rendered to Ledcor from December, 2019 to January, 2020. I noted that none of these invoices refer to the mechanical work. Mr. Cooke then referred me to three cheques Ledcor issued to Bid Red totaling more than the Ledcor claim.

[180] Big Red Partial Acceptance

I am not satisfied that all of Mr. Armstrong's work pertained to the mechanical scope. Mr. Armstron seems to have assisted in the general management of the project. The evidence showed that there were challenges other than the mechanical scope facing Ledcor at this time. I grant Ledcor half this claim: $15,541.23/2 = $7,770.61 (HST excl.).

[181] Multivista Services

The third professional was 1764129 Ontario Ltd. o/a Multivista Toronto ("Multivista"). Ledcor claims costs in the amount of $22,252 (HST excl) concerning Multivista. Mr. Cooke stated that Ledcor hired Multivista to provide a comprehensive photographic history of the project. He referred me to a Multivista quotation dated January 7, 2020. The scope described in this quotation concerned the entire project, not just the mechanical scope, although some mechanical work was mentioned. Mr. Cooke referred me to one cheque that Ledcor issued to Multivista on February 18, 2020 in the amount of $12,656.

[182] Multivista Rejection

This evidence does not support the Ledcor claim here at all. The best that can be said is that it shows that Ledcor hired Multivista in January, 2020 to provide photographs of the entire project going forward. I find that this is not a Ledcor "expense" linked to the DMS default. I deny this claim.

[183] Professional Services Total

Therefore, I find that Ledcor has a back-charge concerning these three professionals as follows: ($3,337 + $7,770.61) x 1.25 = $13,884.51(HST excl.).

d.2.17) Total Ledcor Back-Charges

[184] Summary of Accepted Back-Charges

The following is what I have accepted as proper Ledcor back-charges against the unpaid balance of the Subcontract, with the numbers for each claim being tax excluded:

Item	Amount
1. Replacement costs	$806,132.50
2. Self-performed deficiency correction	$75,975.00
3. Additional Ledcor staff	$113,882.50
4. Coring and patching work	$268,381.25
5. Drywall repair costs	$153,293.75
6. Electrical repairs	$42,862.50
7. Sprinkler pipe insulation	$11,415.00
8. Roofing repairs due to missed stacks	$18,191.25
9. Comms repairs due to missed sleeves	$4,348.75
10. Paid to DMS suppliers	$461,363.64
11. Sprinkler completion contract	$173,750.00
12. Dewatering delay	$20,842.50
13. Professional services	$13,884.51
SUB-TOTAL	$2,164,323.15
HST	$281,362.00
TOTAL	$2,445,685.15

d.2.17 Subcontract Balance

[185] Unpaid Balance Calculation

In accordance with Subcontract article 10.4(b), there now needs to be a determination of "the unpaid balance of the amount to be paid under this Subcontract and received from the Owner." The evidence establishes, in my view, the following unpaid balance in the Subcontract:

Item	Amount
1. October, 2019 draw incl. HST and holdback	$342,685.34
2. November, 2019 draw incl. HST and holdback	$288,465.56
3. December, 2019 draw incl. HST and holdback	$169,496.61
4. Holdback on paid payment applications incl. HST	$243,264.55
5. Outstanding changes incl. HST	$37,463.48
6. Unearned portion of the Subcontract price, incl. HST	$1,415,303.98
TOTAL	$2,496,679.52

[186] Undisputed Amounts

The above noted DMS draws for October, November and December, 2019 are certified. The October and November, 2019 draws are undisputed. The holdback on paid payment applications is also undisputed.

[187] Unearned Portion Inclusion

The "unpaid balance of the amount to be paid under this Subcontract" as stated in article 10.4(b) must include the unearned part of the Subcontract price adjusted to include approved change orders, namely that part of the Subcontract price that was not worked on by DMS and earned. If it is not included Ledcor would get compensation from DMS for what are not damages to Ledcor, namely for what Ledcor originally agreed to pay to DMS. Such a result would be an interpretation of the Subcontract article 10.4(b) that is not at all justified. Article 10.4(b) is intended to compensate Ledcor for its damages. What then is the unearned portion of the Subcontract price? It comes out of the final certified draw for December, 2019 as stated in my chart above.

[188] December 2019 Draw Challenge

DMS challenges the figure for the December, 2019 draw. DMS submitted Application for Progress Payment No. 15 dated December 20, 2019 showing the scope being 72% complete and change orders 78% complete. Relying on this draw, DMS submits that the amount in the above chart for the December, 2019 draw should be $293,554.79.

[189] S+A Revision

The evidence showed that Ledcor accepted this application and passed it to S+A for approval. In January, 2020, having examined the state of DMS deficiencies, S+A revised the application down to 70% completion for both scope and change orders, and that is the figure that appears in the above chart for the December, 2019 draw. The consultant has the right to revise the application for payment in this way, and I am not prepared to impute some improper motive to S+A in making this change. I accept the revised December, 2019 draw.

[190] Outstanding Changes

DMS asserts that there are $66,307.06 plus HST (or $74,926.98 with HST) worth of "outstanding changes." These are six unprocessed change applications in the following amounts that DMS says were done in part pursuant to the following Architectural Site Instructions ("ASIs"):

ASI	Description	Amount
ASI-031 MSI-06	Amenity EVR & Sanitary Update	$13,700.40
ASI-039 MSI-09	Terrace Lev Water Connection	$31,457.34
ASI-043 MSI-11	Unit 512 Move Home Module	$17,788.77
ASI-044 MSI-10	Update for Commercial/Retail Space	$52,984.85
ASI-050 MSI-13	Mech Updates in RFI Response	$14,946.98
ASI-054 MSI-15	L3 Amenity Washroom	$1,735.78
TOTAL		$132,614.12

[191] Burnell's Valuation

Ms. Burnell commented that, according to DMS (namely Mr. Ahuja), ASI-043 and ASI-054 were entirely completed by DMS, but not the others. She assumed that some of the remaining work was completed but stated that this was not substantiated. She assigned a value to these changes ranging from a "low estimate" of 25% of the total claimed, $33,153.53 (HST excl.), to a "high estimate" of 50% of the total claimed, $66,307 (HST excl.). DMS claims the high estimate.

[192] DMS Evidence

Mr. Ahuja gave evidence identifying these S+A issued ASIs. He indicated that work was done under them, although there was no substantiation for this assertion. Ledcor's evidence was that, while there may have been extra work that was done to some degree, DMS never applied for change orders. Mr. Cooke stated that these changes were not priced by DMS. This is why no doubt these changes did not appear on DMS draw applications.

[193] Quantum Meruit Application

Unpaid work on unpriced and uncertified but legitimate extras should, in my view, form an addition to the "unpaid balance" under the Subcontract. The law of quantum meruit applies here. Where a subcontractor performs services with the encouragement or acquiescence of the contractor and it would be unjust for the contractor to retain the benefit of those services, the subcontractor should be compensated for those services; see Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., 2007 ONCA 324 at paragraph 99.

[194] Waiver of Subcontract Requirement

Ledcor relies on Subcontract article 6 and the stated requirement therein that there be no adjustment in the Subcontract price or schedule due to changes without written authorization from Ledcor. Mr. Stanek argued that this requirement pre-empted the application of the doctrine of quantum meruit to this issue. I do not accept that proposition. The evidence was clear throughout the trial that Ledcor deviated significantly from this Subcontract requirement. It regularly expected DMS to perform extra work pursuant to such ASIs. It essentially waived this requirement by its conduct. It cannot fall back on the Subcontract procedural requirement concerning extras now that it suits Ledcor to do so.

[195] ASI Work Performed

The evidence indicates that DMS did work under these ASIs. I have reviewed these ASIs and am satisfied that they generated additional work for DMS. For instance, ASI-039 MSI-09 discussed in part adding water connections for certain units, re-routing gas connections and removing valves and switches. ASI-044 MSI-10 discussed the addition of numerous pipes to the commercial spaces. I note that Mr. Larson was not asked about these ASIs and whether they should be certified. I t would be unjust for Ledcor to benefit from this work without having to account for it, namely get a windfall. Therefore, I am prepared to give this claim some value.

[196] Quantum Meruit Valuation

As to quantum, given the lack of substantiation, I find that DMS should be allowed no more than Ms. Burnell's "low estimate" of the value of these extras, namely 25% of the claim of $33,153.53 (HST excl) or $37,463.48 (HST incl.). That is what I have done.

[197] Other DMS Claims

DMS also asserts that $262,452.45 (HST excl.) worth of materials was left on site at the time of termination, that $46,854.50 (HST excl.) worth of work was done by DMS subsequent to the December, 2019 draw, and that DMS incurred $20,000 (HST excl.) in demobilization costs. In my view, none of these claims form a part of the calculation of damages under Subcontract article 10.4(b). The materials left on site and the DMS work subsequent to the December, 2019 draw are all part of the unearned portion of the Subcontract price as indicated on the certified December, 2019 draw. There was no evidence that these costs formed extras under the Subcontract.

[198] Demobilization Costs

As for the demobilization costs, these are damages DMS would be entitled to if I found that Ledcor had wrongfully breached the Subcontract. I did not so find.

d.2.18) Balance Owing

[199] Net Balance Calculation

That means in the end that there is an unpaid balance of the amount to be paid under the Subcontract, as described under Subcontract article 10.4(b), in favour of DMS in the following amount: $2,496,679.52 (the unpaid balance) - $2,445,685.15 (the accepted Ledcor back-charges) = $50,994.37 (HST incl.).

[200] Owner Payment

There is then the question of whether this balance was "actually paid" to Ledcor by the Owner. I have no difficulty finding that this was paid by the Owner. It was undisputed that the certified DMS draws for October, November and December, 2019 were paid by the Owner to Ledcor but not to DMS. As these draws exceed the above balance, I find that the Owner has "actually paid" that balance to Ledcor. Ledcor must, therefore, pay it to DMS as the net unpaid balance pursuant to Subcontract article 10.4(b).

[201] Lien Value

As the October, November and December, 2019 draws exceed the above noted balance, I also find that this balance is the value of the DMS lien. If this amount is not paid, the Ledcor lien bond can be called upon to pay the lien amount.

[202] Punitive Damages

As DMS was the party I found to be in default of the Subcontract, I dismiss DMS's claim for punitive damages. Ledcor did not act in an unfair and abusive manner when it brought DMS's work under the Subcontract to an end. It acted in accordance with the Subcontract.

d.3) Is Ledcor's Insurance Recovery Relevant to Damages?

[203] Insurance Recovery Issue

As stated earlier, Mr. Cooke openly admitted that AXA XL paid the entirety of the Ledcor claim on its subcontractor default insurance claim concerning the DMS default other than the $750,000 deductible. DMS argues, therefore, that allowing Ledcor to recover damages for completing the Subcontract would, therefore, amount to unacceptable double recovery or a windfall that the law does and should not recognize. As indicated above, I have not found that Ledcor has suffered damages in this case. Nevertheless, I will address this point for future reference should it become relevant.

[204] Private Insurance Exception

Mr. Stanek pointed me to case authority that establishes the "private insurance exception" to the double recovery rule. In JDC Ltd. et al. v. CAW Ltd. et al., 2022 ONSC 1611, Justice Carole J. Brown stated in paragraph 95 that ". . . the law has recognized an exception to the rule against double recovery in the form of the private insurance exception: in general, benefits received by a plaintiff through private insurance are not deductible from the damage awards." This exception has been extended to include pension benefits. Quoting from the leading case on this point, a Supreme Court of Canada decision in Cunningham v. Wheeler, [1994] 1 S.C.R. 359 at pp. 369-370, Justice Brown said that the exception is based on fairness: ". . . a wrongdoer should not "benefit from the private act of forethought and sacrifice of the plaintiff" in obtaining private insurance."

[205] Subrogation

There was evidence that AXA XL did not exercise its right of subrogation in this case. Mr. Stanek made it clear he was appearing solely for Ledcor, not AXA XL. Subrogation is the right an insurer has after paying a loss covered by insurance to "step into the shoes" of the insured to recover the insurance payout as damages from the liable party. In Cunningham, supra, at paragraph 395, the Supreme Court of Canada stated at paragraphs 398-399 that, "subrogation has no relevance in a consideration of the deductibility of the disability benefits if they are found to be insurance. . . It does not matter whether the right of subrogation is exercised or not. The exercise of the right is a matter that rests solely between the plaintiff and the third party [insurer]. The failure to exercise the right cannot in any way affect the defendant's liability for damages."

[206] Formal Release of Subrogation

The Court did add in this paragraph the comment that there may be a different result if the insurer formally releases its subrogation right. There was no evidence in this case that AXA XL released its subrogation right.

[207] Conclusion on Insurance

Therefore, I find that the fact that AXA XL has made an insurance payout to Ledcor for the DMS default and has not pursued its subrogation rights are not relevant to damages. If Ledcor had suffered damages, there would be no "double recovery" due to the private insurance exception to that rule.

e) CONCLUSION

[208] Final Judgment

For the reasons stated above, I conclude that Ledcor owes DMS the amount of $50,994.37 (HST incl.) pursuant to Subcontract article 10.4(b), and that DMS has a lien in that amount. I dismiss the DMS claim for other contract damages and punitive damages. I dismiss the Ledcor counterclaim.

[209] Costs Submissions

Concerning costs, DMS uploaded a Bill of Costs showing partial indemnity costs totaling $1,050,601 (HST incl.), substantial indemnity costs totaling $1,191,005.67 (HST incl.) and actual costs totaling $1,291,718.03 (HST incl.). Ledcor uploaded a Bill of Costs showing partial indemnity costs totaling $1,014,453.69 (HST incl.) and actual costs totaling $1,451,084.33 (HST incl.).

[210] Costs Procedure

If the parties cannot resolve the issue of costs between them, those claiming costs must serve, file and upload written submissions on costs of no more than ten (10) pages on or before September 22, 2025. Any responding written submissions on costs cannot be longer than ten (10) pages and must be served, filed and uploaded on or before October 6, 2025. These submissions must address the issue of prejudgment interest as well.

Released: September 8, 2025

ASSOCIATE JUSTICE C. WIEBE

COURT FILE NO.: CV-20-639030

ONTARIO SUPERIOR COURT OF JUSTICE

In the matter of the Construction Act, R.S.O. 1990, c. C.30

BETWEEN:

Dependable Mechanical Systems Inc. Plaintiff

-and-

Ledcor Construction Limited Defendant

REASONS FOR JUDGMENT

Associate Justice C. Wiebe

Released: September 8, 2025