Distinguishes Ron Engineering

Distinguishes Ron Engineering.

FOR EDUCATIONAL USE ONLY
1998 CarswellOnt 557
37 C.L.R. (2d) 38, [1998] O.J. No. 504

Robert McAlpine Ltd. v. Woodbine Place Inc.

McAlpine [sic], Plaintiff and Woodbine Place Inc. et al., Defendant

Robert McAlpine Ltd., Plaintiff and Byrne Glass Enterprises Limited and The

Guarantee Company of North America and PPG Canada Inc., Defendants

Ontario Court of Justice, General Division

Wein J.

Heard: October 21, 1996, January 17, May 3, and December 8, 1997

Judgment: February 11, 1998

Docket: 60275/90Q, 59403/90Q, 47527/90

Proceedings: additional reasons at (June 2, 1998), Doc. 60275/90Q, 59403/90Q, 47527/90 (Ont. Gen. Div.)
Counsel: Grant H. Doak , for the Plaintiff.
John C.L. Ritchie , Mary Grosso , for the Defendant.
Howard Borlack , for the Defendants.
Subject: Contracts; Corporate and Commercial
Construction law --- Breach of terms of contract -- Breach by contractor -- Delay -- Time specified for completion
Amount paid by owner for letter of credit for additional building mortgage was reasonably foreseeable cost incurred by owner as result of delay and thus payable by contractor.
Construction law --- Breach of terms of contract -- Breach by contractor -- Defective workmanship
Damages were assessed at $1,700,000.
Construction law --- Payment of contractors and subcontractors -- Extras -- General principles
Contractor was responsible for consultant fees as they were reasonable expense aimed at mitigation of damages arising from delay caused by contractor.
Construction law --- Building contract -- Execution of formal contract -- General
Claim against subcontractor was dismissed.
Cases considered by Wein J. :

Bahamaconsult Ltd. v. Kellogg Salada Canada Ltd. (1976), 15 O.R. (2d) 276, 75 D.L.R. (3d) 522 (Ont. C.A.) -- referred to

Bahamaconsult Ltd. v. Kellogg Salada Canada Ltd. (1976), 15 O.R. (2d) 276 (note), 75 D.L.R. (3d) 522 (note) (S.C.C.) -- referred to

Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 79 D.L.R. (4th) 97,53 O.A.C. 314 (Ont. C.A.) -- referred to

Lake Ontario Cement Co. v. Golden Eagle Oil Co. (1974), 3 O.R. (2d) 739, 46 D.L.R. (3d) 659 (Ont. H.C.) -- distinguished

Marathon Realty Co. v. Toulon Construction Corp. (1987), 45 R.P.R. 233, 80 N.S.R. (2d) 390, 200 A.P.R. 390 (N.S. T.D.) -- referred to

Marchand (Litigation Guardian of) v. Public General Hospital Society of Chatham (October 3, 1996), Doc. 91-GD-16866 (Ont. Gen. Div.) -- applied

National Trust Co. v. Mead, 12 R.P.R. (2d) 165, [1990] 2 S.C.R. 410, 71 D.L.R. (4th) 488, 112 N.R. 1, [1990] 5 W.W.R. 459, 87 Sask. R. 161 (S.C.C.) -- referred to

R. v. Ron Engineering & Construction (Eastern) Ltd., 13 B.L.R. 72, (sub nom.Ron Engineering & Construction (Eastern) Ltd. v. Ontario) 35 N.R. 40, 119 D.L.R. (3d) 267, [1981] 1 S.C.R. 111 (S.C.C.) -- distinguished

Rules considered:
Rules of Civil Procedure, R.R.O. 1990, Reg. 194

R. 26.01 -- referred to

ACTION by owner of building for damages arising out of delay in substantial completion of contract and for damages for deficient construction; ACTION by contractor against owner for completion of payment and reimbursement for extras, and against subcontractor for breach of contract.
Wein J. :
Reasons for Judgment
Introduction
1Woodbine Place appears to the passer-by as a modern, aesthetically beautiful office building. But underneath the elegant glass cladding lie a host of contractual and legal problems.
2While many of these legal issues were solved before the trial began, this action has involved the trial of several remaining issues arising out of three separate actions filed relating to the construction of Woodbine Place.
3The builder, McAlpine, sued the owner of Woodbine Place for completion of payments relating to the construction. McAlpine also sued Byrne Glass and PPG Canada for damages for breach of contract as a result of the delay in the substantial completion of the building following the failure of Byrne Glass to complete the glass exterior. Hardrock, a cement contractor, sued McAlpine and Woodbine Place for payment on its subcontract. Various other parties, including lending institutions and guarantors, were also sued. Parts of the actions involving some parties have been resolved; some parties, such as Byrne, are bankrupt, and one action involving personal guarantors remains outstanding, separate and apart from this case.
4In addition, Hardrock and McAlpine have settled the issue as between them, and counsel for McAlpine now co-represents Hardrock's remaining interest against the owner of the building. Suffice it to say that what was a very complex set of claims has diminished, somewhat, to the point where the issues discussed below remain outstanding.
5The primary dispute is centred on the dispute between the owner and the general contractor, that is between Woodbine Place and McAlpine. There are three main issues in that dispute.

First, is the question of whether the general contractor, and as an ancillary matter the subcontractors Byrne and PPG, is liable for damages as a result of delay in substantial completion of the building. It has been agreed that the building was not complete until March 31 of 1990. The original contract completion date was October 31, 1989. Woodbine claims damages for delay in the completion from September 30, 1989 to March 31, 1990. The allegation is that in excess of $2 million in damages has been caused by the delay of the contractor.

The second series of issues arise out of the alleged deficiencies in the concrete floor slabs installed by the subcontractor Hardrock. McAlpine claims for completion of payment from Woodbine. Woodbine cross claims for approximately $5 million in damages in relation to the deficient construction of the floors.

Third, minor issues relating to damages in the amount of $83,000 remain for assessment of the trial judge.

Preliminary Issues
6At the outset of trial, counsel for PPG applied to bring a motion for summary judgment in relation to PPG's liability. PPG has only been involved in the issue relating to delay and damages as a result of that delay. At the outset of the trial, I ruled that it was not appropriate in this case to hear the summary judgment application as part of the trial, in part because of the timing of that application. The issue of the liability of PPG has been assessed in a separate part of the decision.
General Overview of the Facts
7Woodbine Inc. was incorporated for the express purpose of building Woodbine Place. Principals are Jim Dennis, who is an experienced developer, Mr. Levy, an investor, and several partners in a law firm. The decision to build Woodbine Place originated when the senior partners in the law firm decided to build a suitable building in the area to house their expanding law firm. They were aware that another firm in the building in which they were then resident, Price-Waterhouse, would also be looking for new space at about the same time. Accordingly, they felt assured that a fairly significant portion of the building would be occupied, and determined, following an economic feasibility study, that a six-storey building would be profitable. In mid 1988, an agreement was entered into with McAlpine to build the building. A permit was issued in late September of 1988 and construction began. October 31, 1989, thirteen months from the starting date, was to be the completion date for the project.
8Problems arose from the outset. The original glass curtain-wall contractor, PPG, declined to enter into the project and the general contractor, McAlpine, substituted Byrne Glass even before the project began. The owners acquiesced in this decision, having no real alternative.
9The concrete work was initially scheduled to be completed by February 15, 1989, and the glass curtain-wall work, even on the extended date upon which Byrne Glass entered the project, was to be completed by May 31, 1989. This would have allowed elevators to be installed by September and tenants to occupy the building in October 1989.
10Major problems developed. The first of these related to the level and evenness of the floor slabs. Problems arose on all floors. These were rectified on the ground floor but the other floors remain out of level in varying degrees. These problems have not been corrected, other than some localized levelling to accommodate individual tenants. While it is not suggested that the structure is in any sense unsafe, there is at least technical non-compliance with the building code. In addition, the concrete shell of the building was not finished until May 1989, contributing to delay in completing the building overall. The problem with respect to the floor levels was not discovered until the fall of 1989 when it was virtually too late to correct the problem without difficulty, or at least without potentially undermining the live load levels that could be permitted. By early 1990 the problem with the floor levels was clearly identified by the owners and negotiations were entered into to resolve the problems. The contractor and subcontractor maintain the view that the problems are as a result of a structural deflection, that is that the concrete was poured in accordance with specifications, but the specifications were inadequate particularly with respect to camber. The owner believes that the problem is one of improper pouring and finishing of the concrete, and other construction related factors and is therefore the responsibility of the contractor.
11Accordingly, the issues with respect to the floor slabs are questions of both liability and damages. Is the contractor or the engineer liable, that is, is this a construction problem or a design problem? If the contractor is liable, what is the proper quantification of damages?
12The second major problem relates to the length of time that it took to complete the building. There is no dispute that the building was delayed before it was substantially completed. There is a dispute with respect to the length of delay and the quantification of damages. The owners claim the delay should be calculated from the end of September 1989 to the end of March 1990: six months. The contractors say that the delay was from the end of October of 1989 to February 1 of 1990: three months. Some of the delay was said to be caused by the delay in the structural concrete finishing but a significant part of the delay was a result of Byrne Glass' inability to complete the project on time. It was not until March of 1990 that another contractor, brought in to complete the project, was able to complete the curtainwall, and even now deficiencies may remain. In this regard, quantification of damages turns on the fact that the delay in the building meant that there were actual losses as a result of the late moves by the known tenants, and additional losses because the property could not be rented until later than anticipated, by which time the recession had made it even more difficult to lease office space. The building was not deemed "full" in real estate marketing terms until late 1993.
13In addition, some issues relating to "extras" claimed by McAlpine remain in dispute. Many items in the original list of disputed issues were resolved before and during the trial but a relatively small number are still unresolved. These relate to hydro bills, the balance of the temporary heat costs, the ground floor topping repair, lobby vinyl and glass removal.
The Questions to be Determined by the Court
14The issues were structured for the written and oral argument according to the following list of topics and questions:

I Floor Slabs

1. Did McAlpine breach its contract with Woodbine Place by failing to construct the floor slabs in accordance with requirements of the contract?

(a) Nature and Extent of Unlevelness and Unevenness

(b) Extent on Each Floor

(d) Determination of Which Tolerances Apply

(e) Requirements of OntarioBuilding Code

2. Rectification Issues

(a) Cost of Complete Rectification if Feasible

(b) Obligations of McAlpine to Carry Out Rectification in 1990

(d) Damages on the Basis of Complete Rectification, Partial Rectification and Diminution of Value, and No Rectification and Diminution of Value Only

(e) Woodbine's Responsibility to Mitigate Damages

II Delay

3. Time Period of the Delay

4. Amount of Damages

III Extras

IV Other Costs and Losses

V Calculation of Damages: Impact of Construction Lien

VI Liability of PPG

Part I: Floor Slab Issues
1. The Floor Slab Deficiency Issues
Summary of the Evidence:
15The basic structure of Woodbine Place is cast-in-place reinforced concrete. Hardrock, as McAlpine's subcontractor, built all the form work and handled the concrete pouring and was responsible for subcontracting the concrete finishing. Hardrock had the responsibility of "flying" the forms after the concrete had hardened and for reshoring all floors until final hardening had occurred. The reinforcing steel in the concrete was the responsibility of another subcontractor of Hardrock: no issue has been brought forward relating to this steel placement. Because the floors were poured between December 1988 and May 1989, cold weather was a factor in the curing of the concrete and dealing with this was clearly the responsibility of McAlpine and its subcontractors.
16A great deal of time was devoted to evidence relating to the actual construction of the floor slabs. The weather conditions and construction notes have been made available. Although the required review of the site work was done and approvals were given, there were difficulties as a result of the weather conditions and other issues. A great deal of evidence was also called with respect to the issue of alleged design deficiencies.
17It is quite obvious that there are now variations in level and flatness of the floor slab. These did not become apparent to the owners or architects until well after the pouring was completed, when visual variations were noted. Shortly after the dispute arose with respect to the floor slab deficiencies, the building was occupied. Because the parties have maintained their positions with respect to the responsibility for the problem from the outset, little remedial work was done at the time. This has aggravated the problem of assessing the best manner of fixing the deficiencies, since the costs associated with remedial work in an occupied building are obviously much higher.
18The Court must now determine on a balance of probabilities whether the cause of the floor slab deficiencies is a result of deficient workmanship, engineering design error, or a combination of these two. The preponderance of evidence points to deficient workmanship as the cause of the problems. It is clear from the contract that since workmanship is part of the "construction means, methods, techniques, sequences or procedures" used in construction of the floor slabs, McAlpine is responsible for deficient workmanship, if the cause is found to be deficient workmanship.
19The expert evidence led on behalf of Woodbine, from both the project engineer, John Stephenson and through Mr. Halsall, a highly qualified structural engineering expert, asserted that deficient workmanship was the sole cause of the floor slab deficiencies. Witnesses called by McAlpine, Roland Bergmann and David Stevenson stated that there were nine "possible" contributing causes of the floor slab deficiencies, most of which related to issues of deficient workmanship. Possible design causes examined in their report, the Yolles report, related to the possibility of inadequate camber specified in contract documents and the possibility of the effect of the concrete mix design on strength characteristics of the concrete.
20Since the report itself and the evidence of Mr. Bergmann at trial clarified that the concrete mix was not a cause of the floor slab deficiencies, the only possible design problem related to the adequacy of the camber specified. However, the evidence called by McAlpine on this issue did not satisfy me that this feature of the design was inadequate. I accept Woodbine's submissions that a careful review of the evidence, particularly that relating to the ADOSS computer runs as refined by hand calculations, would have produced floor levels within the contract requirements. I also accept the submission that the various floor profiles done by the architect (Mr. Goad) and by Stephenson and Halsall, as well as the computer graphics presented, clearly demonstrate that lack of specified camber cannot logically be a cause of the extensive variations from the specified level and flatness requirements. Because of the great variations in the profiles, workmanship errors rather than design problems are indicated.
21I am fully satisfied, on a balance of probabilities, that the cause of the floor slab deficiencies had to be one or more workmanship deficiencies for which McAlpine is responsible. Such potential deficiencies include levelling of the form work, settlement of the form work during pouring, stripping of the form work before adequate on site concrete strength was attained, inadequate reshoring and loading of the slab immediately after stripping and poor workmanship in the placing and finishing of the concrete slabs. The precise combination of these factors need not be proved by Woodbine, since all are workmanship issues that are the responsibility of the Contractor. Woodbine has proven on a balance of probabilities that engineering design is not a cause, and all of the other possible causes fall under workmanship for which McAlpine is responsible.
22In assessing the extensive evidence with respect to the cause of the floor slab problems, I accept, in the final analysis, the evidence of Mr. Halsall with respect to the causes of the floor slab deficiencies.
23In summary, his opinion was as follows: