- Document everything.
- Anticipate the critical evidence the Court will require, both if everything goes according to plan and if the Court favours the arguments presented by opposing counsel.
- Walk away from a fixed-price contract with the job half-done only after very careful consideration, and ideally consultation with counsel.
In 2005, Campus Contracting Inc. entered into a contract to provide material and labour for the installation of four concrete watermain pipes at the Maple Pumping Station in Vaughan, Ontario, for the amount of $1.4 million. The pipes were intended to receive and transport potable water under high pressure throughout the York region.
The contract required that the work be completed in accordance with the prime contract between the general contractor, Torbear, and the owner, the Regional Municipality of York. Campus was inter alia required to excavate the site to a certain depth, compact the bedding for the pipes to a certain density, and then connect and install the pipes to the pumping station, which Torbear would be constructing itself.
Campus’s role in the construction actually commenced in 2017. After the pipes were installed, a process that appeared to go smoothly, procedure called for them to be pressure-tested.
It did not go smoothly.
All four pipes failed their pressure tests multiple times, indicating leaks, with most of the failures occurring at the couplings and joints. The cause was not obvious, or at least not agreed-upon, and tension rose quickly between Campus and Torbear.
When Torbear declined to pay a Campus invoice presented in the course of Campus’s investigation and remediation of the faulty pipes, Campus downed tools.
The dispute proceeded to litigation, with each side blaming the other and seeking the costs of the remediation of the pipes, some of which had been performed by Campus and some by Torbear, along with related damages.
The trial proceeded in a bifurcated manner in which the first half would assess factual and legal liability, and the second half would assess damages. This decision represents the results of the first half.
Much of the analysis turned on the proper role, qualifications, and assessment of the evidence of expert witnesses. The Court noted that expert evidence is presumptively inadmissible, and is only allowed where impartial advice on factual matters not within the court’s general experience will play a role in the analysis.
The Court also delineated the difference between litigation experts, who are hired guns brought to the trial by the parties to provide favourable evidence – a dynamic that routinely tests the imperative that experts be neutral and objective – and participation experts, who played a personal role in the facts underlying the proceeding and possess special knowledge as a result.
Participation experts are exempt, the Court explained, from the Rule 53 provisions for evidence given at trial, although the court’s gatekeeping function still applies to ensure experts retain their proper role, e.g. in the case of participation experts, not proffering an opinion that exceeds the nature of their observation of and participation in the events in question.
Solving the mystery of the leaking pipes
The two experts in this case, one provided by each party, agreed that the supporting soil under the pipes had settled at different rates, resulting in movement of the pipes that caused strain at the joints and couplings, especially at points where casing made the attachment point rigid.
The experts disagreed, however, on the reason for the unacceptable soil settlement rate, and on whose work was responsible.
The expert for Torbear claimed that the soil under the pipe wasn’t compacted, and that there was mud at the bottom of the trench prior to the laying of gravel bedding. In support of this view, no evidence was given at trial stating or showing that mechanical compaction had occurred, which would have been necessary to bring the soil to an adequate degree of compaction.
Without evidence that a compaction test had ever been performed, the Court concluded that there was no evidence Campus had adequately compacted the soil under the pipes, and that its failure to do so was the most likely reason for the shifting of the pipes and their consequent leaks.
Was Campus owed payment on its final invoice?
On the subject of the breach of contract, Campus provided no accounting evidence regarding the amounts owed and received from Torbear, which substantially weakened Campus’s position in the context of a highly technical and sophisticated payment process in which it had a contractual obligation to comply with certain steps in order to be legally entitled to payment, including submission of invoices to a payment certifier.
It proved especially difficult for Campus that the unpaid invoice which caused it to down tools did not comply with the contractual payment process: inter alia, Campus downed tools before payment of the invoice was properly due (the 30th day of the following month), and there is no evidence that Torbear was itself paid by the owner for the amount claimed by the invoice, which was required for Campus to be entitled to remuneration for that invoice (a “pay when paid” clause).
The Court concluded that Campus had failed to prove that it was owed money at the time it downed tools.
Abandonment or unlawful termination?
The Court recited black-letter law on the subject of abandonment: a contractor walks away from an unfinished job at their own peril, especially when the contract is fixed-price. The Court explained that lien legislation is designed to protect the interests of the contractor while also ensuring that construction projects stay on track. A major construction project has a complex schedule involving multiple dependent inputs, and a single contractor failing or refusing to complete their work can bring the entire project to a standstill:
The contractor or subcontractor must be certain that the payment is due and owing pursuant to the payment terms of the contract and that non-payment goes to the root of the contract to support the decision to not continue with the work. For if that certainty is not present, the contractor or subcontractor puts itself at peril to be liable for breach of the contract in not performing the work as mandated by the contract and be responsible for any damages flowing from the breach to perform the work mandated.
Given the Court’s finding that neither Campus’s work nor Campus’s invoice complied with the terms of the contract, there was no breach by Torbear, fundamental or otherwise. The Court had no trouble concluding that Campus, finding itself in a losing proposition where it couldn’t find the source of the leaks, and was throwing good money after bad in trying, “just wanted out of the ordeal”.
In this, they succeeded, but the bill has not yet come due. The second half of the trial will determine what Campus owes for its breach of the contract via abandonment.