Architectural Millwork & Door Installations Inc v Provincial Store Fixtures Ltd, 2017 ABQB 390

Court of Queen’s Bench of Alberta Citation: Architectural Millwork & Door Installations Inc v Provincial Store Fixtures Ltd, 2017 ABQB 390 Date: 20170616 Docket: 1301 05030, 1301 05514 Registry: Calgary Action no. 1301 05030 Between: Architectural Millwork & Door Installations Inc. Plaintiff - and - Provincial Store Fixtures Ltd., 1286889 Alberta Ltd., Centre Street Trust by its Sole Trustee, Centre Street Trustee Inc. Defendants Action no. 1301 05514 And between: Provincial Store Fixtures Ltd. Plaintiff/Defendant by Counterclaim - and - 1286889 Alberta Ltd. and Centre Street Trustee Inc. as Trustee for Centre Street Trust Defendants/Plaintiffs by Counterclaim

_______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice J. T. Eamon _______________________________________________________ Table of Contents I. Introduction . 3 II. Facts . 4 (

a) Background, witnesses and basic evidentiary considerations . 4 (

b) Contract award . 8 (

c) Contract terms . 11 (

d) Construction

schedule . 19 (

e) Site conditions and impact on

schedule . 20 (

f) Scope of work deletion . 25

(1) Introduction . 25

(2) PSF’s calculation . 26

(3) Owner’s calculation . 34

(4) Assessment of the estimates . 36 (

g) Delay claim .. 38 (

h) Drawings changes . 40 (

i) Veneer procurement 43 (

j) COR and CO claims . 46 III. Claims assessment 52 (

a) Scope of work deletion . 52

(1) Introduction . 52

(2) All or part of a floor deleted . 53

(3) Whether a Start Notice was provided . 53

(4) Contract

interpretation . 53

(5) Assessment of the net cost 56 (

b) Drawings changes . 60 (

c) Veneer procurement 62 (

d) COR and CO claims . 64 (

e) Delay Claim .. 66

(1) Cause of delay . 66

(2) Was the delay of critical path work? . 67

(3) Workarounds/mitigation . 68

(4) Notice . 69

(5) Costs assessment 70 (

f) AMDI’s claim .. 73 (

g) Other matters . 74 IV.

Summary . 74 I. Introduction [ 1 ] This dispute arises from a stipulated price contract dated April 13, 2010 between the plaintiff Provincial Store Fixtures Ltd. (“ PSF ”), as Trade Contractor, and the defendant Centre Street Trustee Inc as trustee for Centre Street Trust (“ CST ”), as Owner, relating to millwork for tenant’s improvements in the project known as The Bow North Block Tower - Tenant Improvement. [ 2 ] The Bow is a 58 storey office tower in downtown Calgary, Alberta that was under construction. The size of the project and its construction

schedule were such that PSF was one of many trades trying to work at the same time. The resulting confusion and challenges are part of the context in which the claims arise. [ 3 ] The plaintiff Architectural Millwork & Door Installations Inc. (“ AMDI ”) was subcontracted by PSF to provide various installation, sanding and filling services in relation to the millwork. It advances a builders lien claim. [ 4 ] The defendant 1286889 Alberta Ltd. is the registered owner of the lands on which the Bow was built. Its sole voting shareholder is CST.

No distinction was drawn between this corporation and CST at the trial. [ 5 ] Numerous disputes arose between PSF and CST (or its agents Ledcor Construction Limited who acted as the construction manager or Matthews Development (Alberta) Ltd. (“ MDA ”), who acted as developer). The ones in issue in this action are:

a) The calculation of the credit to the contract price for deletion of part of the scope of PSF’s work. PSF claims the credit is $735,836.43. The Owner responds that the credit is $2,550,951.23. The parties dispute how to calculate the costs of the deleted work, and whether PSF correctly deducted contract price discounts negotiated during the contract tendering process, overhead, profit, and a claim for delay.

b) The costs of a PSF subcontractor (Hardline Corporation) for redrawing shop drawings provided to the Owner by PSF, in the amount of $262,648. PSF claims these are extras under the contract arising from significant changes requested by the Owner to shop drawings provided by PSF in accordance with the contract requirements. The Owner admits $63,610.35 is owed. It says any additional amount represents the cost of base work, and in any event PSF has not proved the amount.

c) The costs arising from the Owner’s orders of walnut veneer skins for the project. PSF says that the Owner, who had assumed responsibility for procuring certain walnut veneers, ordered 395 veneers for lobby elevator panels that were too small and therefore useless, and 287 veneers for meeting rooms that were too expensive. The Owner responds that PSF is responsible for the veneer sizing problem because it provided the wrong measurements to the Owner, and to pay for veneers that the Owner (through MDA) sourced.

d) Disputes over unpaid change order requests (“ COR ”). PSF claims it issued CORs reflecting the Owner’s requested changes in the work, which PSF made. The Owner says PSF has not proved that extra work was done. The Owner issued a Change Order (“ CO ”) for the services of supplementary installation crews to assist AMDI. PSF says this CO was not reasonably documented, and PSF had more than enough installers on site to do the work.

e) Compensation for site delay from July, 2012 until January, 2013. PSF says the Owner caused delays for which PSF should be compensated. The Owner disputes the cause of delay, that contractually required notice was given, and that PSF has proved any loss. It further says the type of loss is excluded by the contract.

f) Adjustments for amounts claimed by AMDI. AMDI says it did about $1.8 million of work as requested by either the Owner or PSF and is entitled to payment from the lien fund. PSF says its accounting shows AMDI is owed $1.5 million, so the remaining amounts must be extras for the Owner’s account. PSF seeks judgment against the Owner for the difference, plus a 5% markup. The Owner does not take a position on AMDI’s claim provided it does not exceed the settlement cap negotiated with AMDI. The Owner disputes it is liable to PSF for alleged extras. AMDI sought immediate judgment following oral argument. That was not granted. II. Facts (

a) Background, witnesses and basic evidentiary considerations [ 6 ] PSF is a millwork and architectural millwork supplier. PSF sourced, manufactured and supplied millwork for the Bow. PSF subcontracted AMDI to provide millwork installation and site work at the Bow. [ 7 ] No material distinction was drawn between 128 and CST at the trial. Both admitted they are the owners of the Bow at all relevant times. CST was the Owner under the contract and is referred to as the Owner in these Reasons.

[8] MDA was the developer and an agent for CST. The construction manager, Ledcor, reported to MDA and had certain agencyauthority from CST so it could execute purchase orders and the like. Effectively, Ledcor needed approval from MDA to execute changeorders, purchase orders or contracts. No issue was raised in this action that either MDA or Ledcor did not have actual or ostensibleauthority to issue any of their instructions to PSF.

Where an agent acted on behalf of the Owner, these reasons sometimes attribute theaction to the Owner without specifically identifying the agent involved. [9] Encana Corporation was the tenant of the Bow. It retained Zeidler Partnership Architects as architect for the relevantportions of the project. Zeidler was also the Consultant under the contract. [10] The Court heard testimony from the following individuals:

a) Edward Joubran. PSF’s President.

b) Henry Joubran. PSF’s Executive Vice President and acting Chief Financial Officer.

c) Regina Dee. PSF’s Projects Director, and PSF’s project manager on the Bow project.

d) Kelly Hoko. One of PSF’s project supervisors on the Bow project.

e) Noel Corrigan. AMDI’s president.

f) David Schoojans. A cost consultant for Encana or, according to read-in evidence, MDA. The distinction is not material to the issuesin this case. [11] The following individuals or companies are included in the narrative that follows:

a) Paul Allen. Mr. Allen was introduced to PSF in the spring 2012 as a millwork consultant. He was to assist PSF by clearing a pathfor PSF so that it could access the site and install the millwork. The Owner advised that PSF was to take instructions only from Mr.Allen.

b) Mantei Woodcraft Ltd. According to read-in evidence, Mantei was a millwork company retained by MDA as the millworkconsultant to consult with respect to PSF’s work. Mantei was a competing (and unsuccessful) bidder on some of the Bow packages,though PSF was not aware of that at the time. Mr. Allen was an employee of Mantei.

c) Nathen Nagie. A Ledcor employee liaising with PSF. [12] In assessing the evidence the Court was mindful of the manner in which some records were adduced in evidence and thelimitations thereon as agreed by counsel. The Court was provided a volume of records (Exhibit 1) on the agreement that the records wereauthentic and if purported to have been sent, were sent and received on or about the date thereof. A second set, Exhibit 2, containedrecords to be identified as the evidence progressed. Those records in Exhibit 2 not identified by a witness have not been considered by theCourt.

Where identified, the Court was satisfied the record was authentic and if purported to have been sent, was sent and received on orabout the date thereof. [13] In accordance with numerous discussions with counsel during the trial, the Court has proceeded generally with respect torecords on the basis that unless a witness has testified to the assertions in a record or the assertions are proved by other admissibleevidence or conceded, the truth of the contents remains unproved. [14] Much of the evidence related to proof of costs.

The parties did not make specific submissions on the applicable standard thatshould apply, though inherent in their submissions is that losses or costs must be proved on the balance of probabilities standard. [15] Much of the evidence concerning quantification is fragmented or convoluted. Neither of PSF and the Owner adducedevidence from an expert quantity assessor. [16] The Court has applied those basic and well-known damages assessment principles which are commonly applied inconstruction disputes. Losses which are uncertain, contingent and speculative in their nature cannot be made a basis of recovery.

Wherethe issue is the extent or measure of loss, the damages need not be proved with mathematical accuracy. In some cases, including wherethe evidence is not as helpful or specific as might be expected, damages cannot be estimated by precise means and must be based onestimates. In these cases the Court must do the best it can on the evidence it received. Counsel did not cite authority for these basicpropositions.

If authority is required, see the following cases not cited by counsel: Webb & Knapp (Canada) Limited et al. v City ofEdmonton, (SCC), [1970] SCR 588; Penvidic Contracting Co. v International Nickel Co. of Canada, (SCC), [1976] 1 SCR 267, pp 279 - 80 [cited by PSF on liability issue]; Foundation Co. of Canada v Prince Albert Pulp Co., (SCC), [1977] 1 SCR 200, pp 207 - 209; Dilcon Constructors Ltd. v ANC Developments Inc., (AB KB),[1996] A.J. No. 574, 42 Alta LR (3d) 32 (QB), para 308, var. 2000 ABCA 223, 84 Alta LR (3d) 235; Golden Hill Ventures Ltd. vKemess Mines Inc., 2002 BCSC 1460, para 931 - 940.

A recent decision of the Alberta Court of Appeal issued after the parties arguedthe present case is consistent with these principles: proof of damages is based on probability, not reasonable certainty. Difficulty indetermining quantum of damages is not a justification for awarding no damages at all: IFP Technologies (Canada) v EncanaMidstream and Marketing, 2017 ABCA 157, para 208. [17] In Penvidic, a case reproduced in PSF’s materials, the dispute arose from a contract for laying a railway track. The ownerbreached the contract by failing to provide certain site work.

The trial judge found "the evidence was not as helpful as one would haveexpected and more records giving more particulars of when and where different types of work were being done would have been veryuseful" (p 277 of [1976] 1 SCR). The Supreme Court of Canada upheld the trial judge's assessment of the damages based on theevidence that was before him, even though they were "fragmentary and probably mere estimations".

[18] Where the evidence is fragmented but sufficient to permit the Court to come to a rational estimate that is based in theevidence, the Court has estimated the loss. [19] Where the evidence left the Court to speculate or guess about quantum and it is apparent that PSF could have easily led moreconcrete evidence of any loss, the Court has declined to make an estimate. [20] On some occasions, PSF led evidence that contained underlying hearsay or unproved assumptions and the Owner took theposition that the costs were not proved.

Some of the Owner’s evidence concerning cost suffers from the same issue. [21] In instances where there was an objection, the Court considered the threshold admissibility of the evidence and, if admitted,the weight, in accordance with the modern exception to the hearsay rule or the earlier business records exception to the hearsay rule.Where there was no objection, the Court has nevertheless been mindful of the facts and circumstances in assessing weight. [22] The common law business records exception in Ares v Venner, (SCC), [1970] SCR 608 was described in R vO’Neil, 2012 ABCA 162, para 44, adopting R v Monkhouse (1987), 1987 ABCA 227 , 83 AR 62, [1988] 1 WWR 725 at paras23 - 25: 23.

In his useful book, Documentary Evidence in Canada (Carswell Co., 1984), Mr. J.D. Ewart summarizes the common law rule afterthe decision in Ares v. Venner, [ (SCC), [1970] SCR 608] as follows at p. 54: ... the modern rule can be said to make admissible a record containing (

i) an original entry (ii) made contemporaneously (iii) in theroutine (iv) of business (

v) by a recorder with personal knowledge of the thing recorded as a result of having done or observed orformulated it (vi) who had a duty to make the record and (vii) who had no motive to misrepresent. Read in this way, the rule after Aresdoes reflect a more modern, realistic approach for the common law to take towards business duty records. 24. To this

summary, I would respectfully make one modification. The "original entry" need not have been made personally by arecorder with knowledge of the thing recorded. On the authority of Omand [v Alberta Milling Co, (AB CA), [1922] 3WWR 412 (Alta CA)], Ashdown [Hardware Co Ltd v Senger, (AB CA), [1952] 1 DLR 33 (Alta CA)], and [CanadianAtlantic Railway Co v ] Moxley [(1889), 1888 CanLII 2 (SCC), 15 SCR 145], it is sufficient if the recorder is functioning in the usualand ordinary course of a system in effect for the preparation of business records.

In Ashdown, for example, the ledger account,introduced in evidence, was said in the judgment to run for 40 pages. It is unlikely that the same person who sent the goods from ashipping dock and sent a memorandum of that to the business office also made the ledger entry which was sought to admit. Neither theshipping clerk nor the original ledger keeper was before the court. In Omand, clearly the original entries had been made by a number ofdifferent persons. In Moxley, the person with the duty had "caused" the entry to be made.

Modern business records are customarily acompilation of original documents such as sales slips or other memoranda and rarely would that compilation be made by the person whoprepared the original document. Yet those records are accepted as valid daily by all those affected by them. 25. These hearsay records are not to be accepted in evidence merely to avoid the inconvenience of identifying a witness or because manywitnesses would be involved, or even because otherwise no evidence would be available.

Rather, they can be admitted only if they havecome into existence under circumstances which make them inherently trustworthy. Where an established system in a business or otherorganization produces records which are regarded as reliable and customarily accepted by those affected by them, they should beadmitted as prima facie evidence. [underlining added] [23] Subjective impressions and judgment are admissible under Ares v Venner.

See Sopinka and Lederman, The Law of Evidencein Canada, 4th ed. (Toronto: Lexis Nexis, 2014), para 6.199. [24] Under the modern hearsay exception the Court has discretion to admit hearsay when the twin requirements of necessity andreliability are met, consistent with the principles articulated in the well-known jurisprudence of the Supreme Court of Canada includingR v Khan, (SCC), [1990] 2 SCR 531 and R v KGB, (SCC), [1993] 1 SCR 740, para 785 - 799.

As theAlberta Court of Appeal has said, and as reflected by the authorities cited by counsel in their admissibility submissions during the trial,there is no list or pigeonholed description of the type of situation that must exist to establish either necessity or reliability, thoughreliability factors generally fall into two categories: (

a) those relating to the circumstances of the coming into existence of the hearsaystatement sought to be admitted, and (

b) those relating to the present ability of the trier of fact to properly evaluate the hearsay, includingcross-examination and corroboration. See the helpful

summary in R v Napope, 2015 ABCA 27, para 26 - 32 (not cited by counsel). [25] The absolute unavailability of the evidence in a non-hearsay form is not a requirement for the admissibility of hearsay underthe principled approach (as KGB holds).

In Ares v Venner, where nurses' records were admitted as evidence at a medical negligencetrial, the nurses were present in court through the trial but were not called as witnesses (KGB at 797). [26] These factors are assessed on the specific facts and circumstances of each particular case, both with respect to thresholdadmissibility and weight. [27] Some of the records in the present case comprised estimates of work performed by sub-contractors or time records of sub-contractors.

Proof that a third party invoice was received during the events in question, without proof of the requisite necessity andreliability factors, has been held insufficient in some cases where the details and reason for the work are disputed. 606346 Alberta Ltd. vAbougov, 2000 ABQB 122, para 151 - 153, 160. Again, the admissibility of these records depends on all the facts and circumstances.See, for example, Pillar Resource Services Inc. v.

PrimeWest Energy Inc., 2014 ABQB 317, para 149 - 162 (not cited by counsel). [28] Where proof has been provided to satisfy the Monkhouse factors or the necessity and reliability requirements, the recordshave been admitted and relied on. [29] The Court has weighed admissible hearsay evidence in the context of the entire record, always mindful of the Owner’s

submissions that some PSF representatives allegedly inflated costs or some PSF and AMDI representatives were involved in an arrangement to artificially over-state costs to fund a settlement on an unrelated hotel project [1] . (

b) Contract award [ 30 ] The millwork tender was divided into nine packages (also called items) for various types or locations of millwork. Eventually one package was cancelled, leaving eight remaining. Each bidder could choose the packages on which to bid. [ 31 ] PSF submitted a bid on all packages on January 25, 2010 for $18,965,836. It offered an incentive discount of 4% if awarded all packages. Its submission letter stated: Incentive pricing if awarded all Packages ... percentage of savings will be 4%. [ 32 ] A number of pre and post-tender bulletins were issued.

One is important to the narrative, post-tender bulletin 1017012M-001 issued January 29, 2010 (“ Post-Tender Bulletin 1 ”). This post-tender bulletin was issued to three short listed bidders including PSF, inviting voluntary value engineering pricing. [ 33 ] On February 3, 2010 PSF responded to Post-Tender Bulletin 1 by providing revised pricing. PSF told the Owner that the revisions included reductions to its costs, by finding efficiencies and addressing oversights and miscalculations in its original bid, while maintaining proposed plans and specifications.

It also offered various finish options that would reduce the price. PSF further stated it applied a 4% discount for award of all packages and that the pricing was for a full project award and not individual package awards. [ 34 ] The efficiencies included savings in shop costs from mass production by tranche or package of the large amounts of fabricated product that would be supplied if PSF were awarded all the millwork packages.

PSF did not provide the Owner with any information about the amount of the discount. [ 35 ] The downward revision to the pricing pursuant to Post-Tender Bulletin 1 was $2,109,678 on a contract price of about $19 million, or about 11.1%. PSF claimed at trial, based on the evidence of Mr. Henry Joubran (PSF’s Executive Vice-President Finance and Acting Chief Financial Officer), that this amount was comprised of backing out GST, the pricing incentive, and the efficiency discount.

No mention was made in his evidence of the further discount achieved by addressing oversights or miscalculations in the original bid, as mentioned by PSF in its February 3, 2010 correspondence. [ 36 ] One of the accounting issues in the trial is the amount of the efficiency discount. [ 37 ] The efficiency discount figure does not appear in records exhibited at the trial. Mr. Henry Joubran testified that the efficiency discount was approximately 4.1% on the pricing of the manufactured items. He also said the discount allowed was “approximately 400 and some odd thousand” or “415,000 or $430,000”.

He said the discount was only allowed on manufactured items, and not installation, fabric or the like. [ 38 ] In its written brief following trial evidence, PSF submitted that the GST that was backed out of the $2.1 million price revision was $903,136. The remainder, $1,206,542, would have to comprise the total of the incentive discount and the so-called efficiency discount.

After deducting 4% for the incentive pricing, the remaining amount would be about $447,000. [ 39 ] For its part, the Owner says the record does not support that the amount of GST backed out is $903,136, the discounts are not substantiated by evidence, and the evidence of Mr. Henry Joubran is inconsistent and not credible. [ 40 ] The Court finds that the total discount applied was $2,109,678.

This figure appears from the contract pricing analysis appended as Exhibit “E” to the contract and was known to and agreed by both contracting parties. [ 41 ] The Court finds that the discount consisted of deducting GST (this was needed to make the bid and pricing comparable to the other bids), an incentive pricing discount, and a so-called efficiency discount (including both efficiencies and other adjustments for oversights and miscalculations as described in PSF’s February 3, 2010 letter). The evidence that these are the components of the revised pricing was not persuasively challenged at the trial.

The existence of each of these components is corroborated by references to each in communications between the parties during the tender process. [ 42 ] The percentage discount for incentive pricing was specified in the correspondence accompanying both the bid and the Post- Tender Bulletin 1 response, and therefore was known to both contracting parties. There is no basis to doubt that it was 4%. [ 43 ] The quantum of the so-called efficiency discount was not mentioned in communications between the parties during the tender process.

Whether the GST backed out was the amount submitted by PSF in argument or 5% of the total contract price as the Owner inferentially suggests in its written argument, the efficiency discount is in the range of $403,000 to $447,000. PSF did not explain its GST calculation. Giving the Owner the benefit of the doubt by assuming GST was a full 5% and taking the low end of the range testified to by Mr. Henry Joubran, the Court finds the so-called efficiency discount is $403,000. [ 44 ] The Owner awarded all packages to PSF. The contract was made on April 13, 2010.

As awarded, the contract price of $17,537,800.96 consisted of (and was reflected in the contract documents as): Items Amount January 25, 2010 bid $18,965,836 Post-Tender Bulletin 1 issued January 29, 2010 ($2,109,678) Post-Tender Bulletin 2 issued February 16, 2010 [2] $198,642.96

Wood blocking $25,000 Clerestory wall structure [3] $198,000 Clerestory glazing $260,000 Total $17,537,800.96 [ 45 ] Following the award, PSF subcontracted AMDI for installation. The sub-contract carried a fixed price of $4,200,000. AMDI was listed as an approved sub-contractor during the tender process (Bid Form Appendix “K”), so the Owner knew at all times that AMDI was on site as PSF’s sub-contractor. (

c) Contract terms [ 46 ] The contract is based on the Canadian Construction Association Form CCA 17 - 1996. The contract consists of several documents.

Article A-3 of the Agreement provides that the Contract Documents are: the Agreement between Owner and Trade Contractor; the

Definitions; the General Conditions (the “ GC ”); and various Appendices including Appendix “A” - Supplementary Conditions (the “ SC ”, which made extensive modifications to the GCs), Appendix “D” - Construction Schedule, Appendix “E” - Contract Price Analysis, and Appendix “G” - Price and the Payment Provisions. [ 47 ] GC 1.1.9 provides an order of priority in the event of a conflict within the Contract Documents: If there is a conflict within Contract Documents : .1 the order of priority, from highest to lowest, shall be • the Agreement between the Owner and the Trade Contractor , • the

Definitions, • Supplementary Conditions, • the General Conditions, ... [ 48 ] The Agreement portion of the contract contains the following entire agreement clause: 2.1 The Contract supersedes all prior negotiations, representations or agreements, either written or oral, relating in any manner to the Work , including the bidding documents that are not expressly listed in

Article A-3 of the Agreement - CONTRACT DOCUMENTS. 2.2 The Contract may be amended only as provided in the Contract Documents . [ 49 ] Another form of entire agreement clause is found in the

Definitions,

section 1: “ 1. Contract . The Contract is the undertaking by the parties to perform their respective duties, responsibilities and obligations as prescribed in the Contract Documents and represents the entire agreement between the parties.” [ 50 ] Consistent with the entire agreement clauses, GC 1.3.2 provides that except as expressly provided, no action or failure to act is a waiver of any right or duty under the contract or approval of or acquiescence in any breach, except as may be specifically agreed in writing. [ 51 ] The contract documents provide for coordination of the work with other trades. These include:

a) GC 3.1.1 (as modified by the SC), which requires the trade contractor to cooperate with other contractors to maximize efficiencies in the sequencing and coordination of activities for the timely completion of the project;

b) GC 3.2, which governs the coordination of the work with work of other trade contractors or the construction manager;

c) GC 6.5.10 (added by SC 33), which contains an acknowledgment of the risks and challenges of this large, complex project: The Trade Contractor represents that the Trade Contractor has had full opportunity to make itself aware that the Project is complex and involves unique restrictions, logistical challenges and other circumstances that are significantly more onerous on the Trade Contractor than the range of circumstances typically found at other large-scale construction projects.

The Trade Contractor hereby acknowledges that it has (through site visitations prior to the execution of the Contract or otherwise) made itself fully aware and has fully assessed and accounted for all of the aforesaid circumstances, including without limitation: .1 the particular site conditions at the Place of the Project and the potential impacts on productivity; .2 the various noise restrictions relating to the Work and the potential impacts on productivity; .3 the various accessibility restrictions relating to the Work and the potential impacts on productivity; .4 the significantly increased likelihood of coordination issues with other trade contractors and the potential impacts on productivity;

.5 the significantly increased likelihood that the Work may proceed out of sequence, stop and restart, and require temporary demobilization from the Place of the Work from time to time and the potential impacts on productivity; and .6 the likelihood that the Work may be subject to change orders greater in number and scope than those normally experienced on other projects; and the Trade Contractor further acknowledges that it has taken the full extent of such circumstances and risks into account and provided for all contingencies related thereto in its Contract Price for the performance of the Work .

Without limiting the foregoing, the Trade Contractor acknowledges and agrees that the Owner shall not be liable for any: .7 costs or expenses the Trade Contractor may incur by reason of having to make minor temporary demobilizations and/or remobilization to the Place of the Work , should the Work proceed out of sequence or stop and restart from time to time;. Significant demobilization and or remobilization’s not caused by the Trade Contractor and not otherwise excused herein will be managed in accordance with

PART 6 – CHANGES IN THE WORK or .8 productivity losses the Trade Contractor may suffer or incur by reason of having to perform additional work under Change Orders or Change Directives . [ 52 ]

Part 6 of the GC as modified by the SC provides for change in the work and delay. [ 53 ] GC 6.3.1 provides that upon receipt of a Change Directive, the trade contractor must proceed promptly with a change in the work within the general scope of the contract documents prior to agreement on the contract time and price adjustments. [ 54 ] GC 6.3.2 provides that the adjustment in the price shall be “determined on the basis of the cost of expenditures and savings to perform the work attributable to the change.

If a change in the Work results in a net increase in the Contract Price , an allowance for overhead and profit shall be included (limited to and calculated in accordance with the provisions of GC 6.2.5 - Change Order).” [ 55 ] GC 6.2.5 provides: In the case of a change in the Work to be paid for under methods described in paragraphs 6.2.3 .1 or 6.2.3.3, Trade Contractor’s and Trade Subcontractor’s overhead and profit shall be limited to and calculated as follows: .1 Work carried out by the own forces of the Trade Contractor or Trade Subcontractor : 15% overhead and profit combined for changes valued up to $25,000 .00; 10% overhead and profit combined for changes valued over $25,000.00 up to $100,000.00; and 7.5% overhead and profit combined for changes valued over $100, 000 .00 .2 Trade Contractor’s overhead and profit on Trade Subcontractor’s work: 5% overhead and profit combined. .3 Credits to the Owner’s account: for changes involving deletions, Trade Contractor and Trade Subcontractor shall credit to Owner the costs of the deleted work only the not for the overhead and profit. .4 Trade Contractor’s and Trade Subcontractor’s overhead and profit in such change shall be calculated on net additional cost only, after all costs of deleted work have been deducted.

When both additions and deletions covering related work or substitutions are involved in a change in the Work , the allowance for overhead and profit shall be calculated on the basis of the net increase, if any, with respect to that change in the Work . .5 The principle to be applied is that the firm that actually performs the work by its own forces may add the percentages as indicated in paragraph 6.2.5.1 for overhead and profit combined, on the net increase in the cost of work done by it.

Other firms in that particular chain may each add five percent (5%) overhead and profit combined for processing and supervision of the change.

The term overhead shall mean all indirect costs relating to or in connection with the change in the Work which shall include but not be limited to bond and insurance premiums, head office and site office overhead, administration and supervision (above the level of working foreman), office supplies, office equipment, water, electricity, telephone and financing of the change. [ 56 ] GC 6.3.3 provides that where a change in the work results in a net decrease to the price, “the amount of the credit shall be the net cost, without deduction for overhead or profit.

When both additions and deletions covering related work or substitutions are involved in a change in the Work , the allowance for overhead and profit shall be calculated on the basis of the net increase, if any, with respect to that change in the Work .” [ 57 ] GC 6.3.4 permits the construction manager to require from the trade contractor an itemized accounting of the cost of expenditures and savings referred to in GC 6.3.2, and limits the cost to a list of specific items.

The Owner and PSF submitted that this paragraph technically does not apply, as it references GC 6.3.2 and therefore contemplates the cost of performing work rather than the cost of deletions. [ 58 ]

Section PP-03 of Appendix “G” - Price and Payment Provisions also pertains to the determination of cost of deletions. It provides: PP-03 Identified Prices No later than (60) days prior to the scheduled commencement of construction activities on an floor/level (herein the “Start Notice”), as

identified in the defined construction

schedule from Appendix D, for performance of the Work, the Owner will confirm in writing to the Trade Contractor to

a) maintain the agreed scope of work and

schedule for that floor; or

b) revise the

schedule including Product delivery dates, the installation

schedule or the scope of work and/or the floor layout; or if necessary,

c) delete the entire floor from the scope of work of the Contract. In the event the work of an entire floor is deleted from the Contract, the Contract Price will be reduced by the identified price for that entire floor, as itemized herein and likewise reduced the Contract Time in consultation with the Trade Contractor. In the event the scope of work or layout for a floor is changed the Contract Price will be revised (increased or reduced) using the applicable

schedule of unit prices as itemized in Price and Payment Provision

Schedule A Identified Prices – Price Sheet; hereof and amend the Contact Time in consultation with the Trade Contractor. It is expressly understood, acknowledged and agreed that should the sixty (60) day Start Notice result in the deletion of an entire floor or a net reduction in the scope of work that such notice affords the Trade Contractor sufficient lead time to mitigate the impact of such deletion or scope reduction to the extent that it will have no material effect on its cost or require a time extension in the performance of the Work.

For greater certainty and notwithstanding anything contained herein or elsewhere in the Contract Documents the Trade Contractor shall not be entitled to any compensation or claim for indirect or consequential losses or damages or costs of any kind including without limitation contingent or inferred costs, loss of profit, loss of opportunity, reduced opportunity, staff termination or redeployment costs. In addition, the Trade Contactor shall not be entitled to any additional compensation or claim for the cost of storage or restocking (if any) or any extension of Time.

Whenever the Start Notice is received less than sixty (60) days from the expected start of installation of the scope of work items for grouped Tranches 1&2, and grouped Tranches 3&4 [4] (see dates as per schedule); Tranche 1 Floors 3-14 April 29, 2011 Tranche 2 Floors 15-24 July 08, 2011 Tranche 3 Floors 25-42 September 01, 2011 Tranche 4 Floors 43-59 December 06, 2011 In the event the Floor is cancelled, the Lump Sum Stipulated Bid Price will be reduced by the excess of the costs for that Floor/Level, as identified in the Appendix G – Identified Prices, above an amount being the aggregate incurred direct cost for the scope of work, reasonably supported, completed for that Floor/Level by the selected Trade Contractor to the date of the receipt of the aforesaid Start Notice as well as reasonable costs relating to storage, disposal and demobilization plus an amount for indirect overhead and profit rates provided for in GC 6.2.5 of the Contract Documents; otherwise, the Lump Sum Stipulated Bid Price will be revised, increased or reduced using the Unit Prices, as provided for in the Tender Documents.

Under no circumstances will the Owner pay to the selected Trade Contractor, its subcontractors or its suppliers for consequential losses, restocking, loss of anticipated profit, loss of opportunity or damages of any kind or nature arising out of the cancellation of scope of work nor provide for an extension time. Identified Prices Item Dwg/Spec Reference Description Value See attached Appendix ‘G’ –

Schedule – A – PP-04 Identified Prices – Price Sheet 3 pages [ 59 ]

Schedule “A” to Appendix “G” is the

schedule of Identified Prices - Price Sheet pursuant to

section PP-03. It contains a chart of prices sorted by rows [5] and columns [6] . The prices total the contract price. The Identified Prices therefore include all sub-contracts including AMDI’s installation contract, and PSF’s overhead and profit, if any. [ 60 ] The terms “Unit Prices” and “Tender Documents” in

section PP-03 are not explicitly defined in the contract. [ 61 ] Appendix “E” - Contract Price Analysis contemplates that Cash Allowances, Owner Solicited Alternative Prices, Bidder’s Voluntary Alternative Prices, Separate Prices, Unit Prices and Labour Charge-Out Rates are contained in Appendix “G”. The reference to Unit Prices appearing in Appendix “E” is as follows: Items Amount Notes ●●● UNIT PRICES See

schedule of unit prices in Appendix G ●●● [ 62 ] There is no

schedule explicitly labelled as Unit Prices in Appendix “G”, only a

schedule of Identified Prices by floor and package. [ 63 ] Neither party made submissions concerning whether any Start Notices as referred to in

section PP-03 were issued, or when they were issued. [7] MS Dee’s email dated August 31, 2010 to Ledcor, which she identified in her evidence, includes the following

statement: I know that contractually we were asked to provide 60 days notice, so please accept this as same and advise that we are good to proceed on all 4 tranches for the standard casework items within these packages as it affects our material ordering times. [ 64 ] The parties did not discuss the possibility that this statement was the Start Notice. The Court is unable on the record to make a finding whether any Start Notices were given or whether that requirement of the contract was informally disregarded. [ 65 ] Neither party addressed the possibility that a Change Directive issued long after a Start Notice is not covered by the language of

section PP-03. Both the Owner and PSF agreed at the trial that if

section PP-03 does not apply, then the matter must be resolved on the basis of GC 6.3.3. [ 66 ] The Bid Form for the Lump Sum Stipulated Price Contract, executed by PSF and dated January 25, 2010, whereby PSF’s initial bid was submitted, contemplates that a series of appendices will be submitted with the bid form.

Section 4 provides: 4. BID FORM APPENDICES AND SUBMISSION OF DATA .1 The undersigned has attached to this bid form, the following appendices completed in full: .1 ... .2 Bid Form Appendix B - Breakdown of Bid Price .3 Bid Form Appendix C -

Schedule of Unit Prices ... .11 Bid Form Appendix “K - List of Proposed Trade Subcontractors ... .15 Bid Form Appendix O - Identified Prices [ 67 ] The pre-printed reference to “Bid Form Appendix C -

Schedule of Unit Prices” was manually struck out. The parties did not provide any evidence of any discussions or considerations leading up to that striking out of Appendix “C”. The Court was not provided the tender issued by the Owner. [ 68 ] Bid Form Appendix O - Identified Prices, following revisions in the post-tender bid process, became

Schedule “A” to contract Appendix “G”. [ 69 ] GC 5.2 (as amended by SC 23) provides for applications for progress payments. GC 5.2.2 provides the amount claimed shall be for the value of work performed and products delivered as of the last day of the month. GC 5.2.3 requires the trade contractor to submit to the construction manager, at least 14 days before the first application for payment, a

schedule of values for the parts of the work, aggregating the total contract price, broken down by material costs and installation labour costs, and floor by floor if applicable, “so as to facilitate evaluation of applications for payment.” [ 70 ] GC 5.2.4 provides: The

schedule of values shall be made out in such form and supported by such evidence as the Construction Manager may reasonably direct and when accepted by the Construction Manager , shall be used as the basis for applications for payment, unless it is found to be in error. [ 71 ] Additionally,

section PP-05 of the contract provides: PP-05 Basis of Payment Lump Sum Prices Where Fixed Lump Sum Prices for the work are identified in the contract price analysis such prices will be used for the purpose of assisting in the evaluation of changes and extra work required during the performance of the work No adjustment to the fixed lump sum components of the Contract price will be made as a result of any variation in the actual quantity of work performed from that shown in the Contract Documents. Lump sum prices are fixed for the duration of the work and are not subject to adjustment for escalation.

Payment for lump sum work will be made progressively as the work proceeds based on the measured quantity or percentage of work completed during the month in which application is made. [ 72 ]

Section PP-06 deals with application for payment and repeats some concepts in GC 5.2. [ 73 ] With respect to delay, GC 6.5.1 provides: If the Trade Contractor is delayed in the performance of critical path work by an action or omission of the Owner, Construction Manager, Consultant , or anyone employed or engaged directly by them, contrary to the provisions of the Contract Documents and for which a workaround is not feasible, then the Contract Time shall be extended for such reasonable time as the Construction Manager may recommend in consultation with the Trade Contractor and the Owner . The Trade Contractor shall be reimbursed by the owner for

reasonable direct out-of-pocket costs incurred by the Trade Contractor as a result of such delay.

Such reasonable direct out-of-pocket costs shall be submitted to the Owner, Construction Manager and Consultant for approval, and if approved by the Owner , a change order shall be issued in accordance with GC 6.2 – CHANGE ORDER. [ 74 ] GC 6.5.4 provides for notice of claim as follows: No extension or compensation shall be made or paid for delay unless notice in writing of claim is given to the Construction Manager not later than ten (10) days after the commencement of delay, providing however, that in the case of a continuing cause of delay only one notice of claim shall be necessary.

The claim shall include an estimate of the cost of the delay and its probable effect on the progress of the Work . [ 75 ] GC 6.5.6 provides that reimbursement of reasonable direct out-of-pocket costs shall only be made (1) if the trade contractor has taken all reasonable steps to mitigate the impact of such delays and (2) the trade contractor can establish with supporting documentation that the delays materially affected the trade contractor’s performance of work within the contract time and its costs in the performance of work to such an extent that no reasonable measures could be taken to avoid or prevent the additional time and increased costs incurred. [ 76 ] GC 6.5.9 provides exclusions from compensation for delay: The Trade Contractor shall not be entitled to any compensation claim for damages or costs of any kind for delay except as expressly permitted by the provisions of this GC 6.5 - DELAYS.

Without limiting the generality of the foregoing, the Trade Contractor shall not be entitled to any compensation or claim for indirect costs including but not limited to consequential loss, contingent or inferred costs, loss of profit, loss of opportunity, reduced opportunity for overhead recovery, staff termination costs, or redeployment costs.

Further, the Trade Contractor shall not be entitled to any compensation or claim for damages or costs of any kind for any delay caused in whole or in part by failure of the Trade Contractor , or anyone employed or engaged by the Trade Contractor directly or indirectly, to perform the obligations of the Trade Contractor under the Contract , or for any delay concurrently caused by the Trade Contractor and the Owner, Construction Manager, Consultant or others. [ 77 ] Other exclusions for losses appear in

section PP-03 quoted earlier. (

d) Construction

schedule [ 78 ] GC 3.5 provides for development of a construction schedule. [ 79 ] The contract provided a detailed construction

schedule for PSF’s work, level by level (floors 3 through 55), with each level having three passes of work. The floors, from level 3 through the roof, were divided into four tranches. PSF’s work was to commence June 1, 2010 and finish on December 6, 2011. The Bow project was to be complete in December 2011. [ 80 ] On August 16, 2011 the Owner issued a revised

schedule dated August 11, 2011 to PSF which identified remaining work, critical remaining work, and completion dates. The last completion date in the

schedule was June 28, 2012. The Construction Manager distributed this

schedule and invited comment, observing that the

schedule must be adhered to and no further extensions to the project

schedule would be made. [ 81 ] Among other things, the

schedule reclassified some of the floors into new Tranche 5. This tranche included specialty floors 52 through 55. The concept of three passes per floor by PSF was retained. [ 82 ] In response, PSF issued CORs (later revised) reflecting additional costs for the approximate six month extension of the project.

These included extension of management contracts by six months; additional site visits; additional management or supervisory personnel; additional shop hours due to delayed starts and additional production runs; shop time for additional fabrication on overtime basis due to shop being scheduled for other jobs; overtime to recover lost time from delays; accommodation rental; extended contracts for site supervision and management; and, fuel surcharges from trucking companies. [ 83 ] The Owner agreed on April 2, 2012 to a Change Order to compensate PSF for all costs associated with performing to the August 11, 2011

schedule and to meet all the required five tranche completion dates, including overtime costs, labour costs, shop costs and any bond extension costs. The Change Order states it is “full and final settlement of all costs and impacts related to this scope and issues”, other than for fuel surcharges which were to be dealt with in a separate change order. The amount agreed to (other than fuel surcharges) was $1,163,195. [ 84 ] PSF’s work and the Bow project were not substantially completed by June 28, 2012. [ 85 ] According to a default notice issued to PSF by Ledcor on August 10, 2012, a revised

schedule appears to have been issued to PSF in early June 2012 under Change Order 87. The Court was not provided a copy of the Change Order or the schedule, and there is no evidence whether the change order was accepted by PSF.

There is some evidence that PSF’s contract time was extended approximately 35 days into early August, 2012, whether formally or informally. [ 86 ] Whether the completion date was June 28 or early August, 2012, PSF’s work and the Bow project were not substantially completed by the completion date. [ 87 ] By late May/early June 2012 the Owner periodically issued a construction timetable on a three week look-ahead basis, detailing the tasks by the various trades working in the Bow. [ 88 ] One such look-ahead was provided to the Court, by way of example. It is dated in late May/early June 2012.

It contemplated completion of the Bow project in December 2012. PSF’s work was to be completed well before then. No others were provided, so the

Court has not got any schedules for the period over which PSF claims compensation for delay. [ 89 ] PSF eventually attained substantial completion in January 2013. (

e) Site conditions and impact on

schedule [ 90 ] PSF’s claims include delay of its work by circumstances which are the responsibility of the Owner under the contract. PSF claims the site conditions precluded access needed by PSF to permit it to meet its contractually required construction schedule. [ 91 ] The oral testimony was that PSF was almost the last trade coming in to do work - walls, painting, wallpaper, flooring, electrical, lighting, mechanical and plumbing should be mostly done before millwork.

Millwork installation is then followed by connection of sinks in the millwork, the addition of glass boards on the fabric panels provided by PSF, and the installation of equipment in the kitchens.

The reasons for this include that: physical conditions such as the actual site dimensions of walls, framing or features over or in which millwork is to be placed can affect the suitability of millwork that has been manufactured to certain dimensions; millwork covers other work such as framed walls, drywall, roughed in plumbing and electrical; millworkers need access to stage their materials and do their work; and millwork is prone to damage such as impacts or scratches during the work of others, or uneven uv exposure from not properly replacing packaging or coverings. The Court accepts this testimony. [ 92 ] Ms.

Dee and Ms. Hoko testified about the challenges in the installation work at the Bow including site conditions. [ 93 ] Ms. Hoko’s testimony was particularly persuasive as she was on site supervising the work on the upper floors from May 2011 until the contract was finished. She gave her evidence forthrightly and her recitation of the events was plausible. The Court accepts her evidence as objective and reliable, without hesitation. [ 94 ] Ms. Dee generally was a credible witness, as she testified in a forthright manner and the thrust of her evidence was plausible.

She occasionally had difficulty accepting any errors by PSF but did not stray into implausibility by denying any deficiencies by PSF in the work. Though she obviously holds strong views that PSF was poorly treated and wrongly accused of delay, she did not exhibit any material inconsistencies that indicated she was trying to defend her evidence. Much of her evidence was not challenged by the one witness called by the Owner. [ 95 ] However, the Court cannot accept all Ms. Dee’s evidence.

It was a mix of personal observations and hearsay including reports from her staff on site, email communication, and discussions with MDA or Ledcor personnel. This is not surprising because she was a management level supervisor of a large and complex project for PSF, and, during the events, received and acted on information from numerous sources. Therefore the Court does not take her tendency to provide such evidence as an adverse reflection on her integrity as a witness. [ 96 ] It is sometimes difficult to discern where personal knowledge ends and hearsay begins in her evidence. In many cases where Ms.

Dee testified to physical conditions or occurrences on site, she was not cross-examined on the source of her knowledge or to attempt to show it was not based on personal observation. The Court has assessed her evidence with the hearsay issue in mind and where it appears from the record that her evidence was based on hearsay sources the Court has disregarded it as proof of the truth of its contents. Where her evidence was based on personal observation, it was as persuasive as Ms.

Hoko’s in describing the challenges facing PSF in completing its work in a timely way. [ 97 ] PSF started work on the site early in October 2010. The

schedule was already showing signs of being behind. The site was delayed and other trades were not in accordance with the contract construction schedule. [ 98 ] By May 2011 the Bow was far behind schedule. All the trades were on site - even the iron workers were still working on the base structure of the building. It was very challenging for PSF to get personnel and materials to the site. Hundreds of trade workers were seeking physical access to the floors, and there were only two operational lifts serving the floors needing work. This created lengthy delays for crews needing to work on site.

In some cases the lifts were only available to stop at every fifth floor and trades personnel had to use the stairs to get themselves and their equipment to the required floor. [ 99 ] By May 2012 the site was still very much a construction site. Areas were incomplete, unfinished or being redone. There were areas where millwork was to be installed according to the schedule, but first the walls needed to be reframed, drywall had to be done, and electrical had to be done.

In some cases, hold to dimensions in PSF’s shop drawings on specialty floors were not being met by other trades, forcing PSF to fabricate custom meeting rooms rather than the planned production runs of meeting rooms per the shop drawings. [ 100 ] In June 2012 as PSF approached its contracted completion time, there was trade damage to PSF’s millwork resulting from the stack of trades that were being pushed onto one floor at a time.

Garbage containers were strewn into finished areas, items were pushed by others into the finished millwork, there was no room for AMDI to work and they would spend hours clearing the space so they could start work. There were safety hazards from excess materials left by other trades lying on the floors. The general contractor would move PSF product to other floors to make way for other trades, damaging product. [ 101 ] Ms. Hoko’s words are an apt description of the disorganization encountered by PSF on the site in June 2012: ...there was a disrespect for finish areas.

The general carpenter [sic] or other trades on site were throwing garbage, containers, skids, and putting them in finish areas that could damage the millwork. We’d show up in a certain area and wouldn’t be allowed to go up to work on anything because there was no room in the elevator, or they had to try to clear space – the carpenters had to try to clear space to do their work because there was so much schmutz in an area that they were to work in. Our materials/tools were being moved all the time. We’re supposed to move them into the area we were working on the next day.

That was done a half hour prior to shift end the day before, and then they’d arrive on-site, and their tools would be gone, and then we’d have to search for them in a 58-floor tower. [ 102 ] By the fall 2012, the site was becoming even more congested and confused. In mid-September 2012, the specialty floors within

Tranche 5 were still not ready for millwork, and the raw trades (flooring, electrical, mechanical, plumbing, framers and drywall) were still working on them. During the last week of October Ms. Dee walked all the floors and again observed every trade was still on site. Ms. Dee’s extensive reports of her site visits in the fall 2012 are ample evidence that the site obviously was not ready for millwork, causing PSF to incur delays and costs to repeatedly return to floors to do work and administrative and managerial time in managing the ongoing work in the site conditions that were encountered. [ 103 ] Ms. Dee described how the

schedule had become a moving target by the Fall 2012 due to the site not being ready for millwork and the disintegration of the three pass plan: Q. The next

section is called,

schedule compression. Explain

schedule compression. A. So we revised the

schedule in October 2011, knowing that we were going to finish in November 2011 and we agreed to take it to June 2012. This draft of these notes is September 24 th [2012], so that

schedule is already past and we still don’t have proper access to certain areas. So now they’ve issued – – we were issued a change order to accelerate our production, which is direct contrast to later scope deletions. So site schedules are a moving target. Areas are not being turned over to suit the scheduling, and who is going to cover the additional costs of the myriad passes per floor in excess of the contract obligations because the floors aren’t ready for us. So we are being asked to go to floors many, many times. Sometimes we were on a floor upwards of 10 to 15 times.

We would go to do the coffee room - the kitchen wasn’t ready. We’d go to do the baseboards, the trestle wasn’t ready. So we -- we found ourselves kind of pivoting all over the building to try to best help the project and help them with all the other site delays of the trades that go before us and it was just getting incredibly difficult. Their

schedule was still compressing, they still weren’t complete and they were still asking us to be the one to make up this time and we couldn’t do it. [ 104 ] The evidence is replete with other problems encountered by PSF. Caulking could not be done because the areas were under construction and there were particles in the air that would stick to the caulk finish. Specialty fabric installers from outside Calgary could not complete stretching fabric on seating because drywall, flooring and painting were not complete.

The tenant purchased appliances with different dimensions than previously provided to PSF, so PSF had to manufacture new pieces to accommodate them. Part of PSF’s work was to install aluminum frames and headers supplied by Ledcor, but there was a continual problem of late or incomplete delivery of the pieces to PSF creating one of the biggest delays of PSF’s installation work. Trespa panels could not be installed on

schedule because the walls were not yet built by others. In one instance plumbing and electrical for a fridge was installed in the wrong place, so millwork had to wait until the services were relocated. There were periodic shutdowns in September 2012 for building testing that precluded access and work on site. By the fall 2012, Ledcor was moving PSF’s materials off site because storage on level B2 of the Bow tower was no longer available, exacerbating the difficulties in finding product moved by others. [ 105 ] The disorganization extended beyond the physical conditions.

The general contractor managed a system to identify deficiencies in the work of the various trades. Ms. Hoko worked with Ledcor’s floor managers to ascertain whether deficiencies were a PSF/AMDI issue, trade damage, or some other problem. It took weeks for Ledcor to update the reports in the system. Ledcor’s system crashed in November 2012 and the reports were lost. Ms. Hoko described the result of the system crash as a mess.

The Ledcor generated deficiency reports were inaccurate, due to delays in entering data and, later, the system crash. [ 106 ] Also, site dimensions required by PSF to manufacture or supply product sometimes were not available because other trades were not completed.

For example, by May 2012 dimensions still were not available from the Owner to permit PSF to manufacture pieces for TIP seating (curved seating in a lounge setting, with wall panels) on the 24th and 25th floors in time for the Owner’s deadline. [ 107 ] By PSF’s substantial completion date in January 2013, framing, drywall, electrical and plumbing still were not completed on some floors. [ 108 ] The Owner does not dispute that the project was delayed.

It submitted evidence of deficiencies by PSF/AMDI, and read-ins from AMDI’s representative about organizational issues on PSF’s end [8] , and suggested these were a contributing cause of delay both before and after June 30, 2012. [ 109 ] Deficiencies are expected on any large job. There were deficiencies on this job. Ledcor’s system to track them was not current or reliable. The parties often disputed the cause of deficiencies. Many deficiencies were put to Ms. Dee in her cross-examination. She pointed to causes other than PSF for many deficiencies or delays.

There were many such examples in her cross-examination, such as damage by other trades or organizational issues originating on the Owner’s side. There was a major issue with Encana’s rejection of various veneers. In cross-examination, Ms.

Dee observed that the appearance of a particular veneer and its sequencing is subjective, that Encana was trying to make a natural product with naturally occurring imperfections to look like a man-made product such as a laminate, and that the veneers supplied by PSF complied with the contract specifications (no one from Encana or the Owners’ side testified that the veneers did not comply). [ 110 ] Ms. Dee accepted the existence of deficiencies caused by PSF, and characterized them as minor and corrected in a timely way.

She also testified to the many efforts of PSF to correct them, and generally to work around the other trades to help get the project finished on time. The Court prefers this evidence to the sometimes fragmented evidence from deficiency reports, particularly given Ms. Hoko’s evidence about reliability concerns in those reports.

Evidence questioning the reliability of those reports is plausible given the confused and congested conditions on site. [ 111 ] The AMDI read-ins are some evidence tending to show that PSF’s organizational approach to the project or errors were elements that delayed AMDI’s installation of the millwork. [ 112 ] For example, AMDI confirmed that PSF’s approach was to build the product vertically and install horizontally. If every floor required a certain product, PSF sought to fabricate and ship the products all at once, i.e., vertically.

On the receiving end, the installers worked floor by floor, i.e., horizontally. This created problems in storing large amounts of product until the installer was ready for it. The

read-ins also spoke to instances where PSF shipped incomplete products, or deficient products. Some of these points were put to Ms. Dee, who disputed them. [ 113 ] The read-ins are not particularly persuasive as they did not address how the project was impacted overall by these issues. They did not address whether the storage issue was PSF’s fault in failing to arrange storage or the Owner’s fault in failing to provide reasonable access, or a combination of both. They did not address whether missing items delayed completion or could not be corrected in the float in the schedule.

Also, AMDI described many of these issues as occurring in early to mid-2011, well prior to the contract extensions or delays that are in issue for the delay claim. [ 114 ] The Owner did not call any witnesses to speak to the deficiencies or errors, or to show that they actually did delay the project. [ 115 ] In these circumstances, the Court is left without evidence of how, if at all, deficiencies or errors by PSF/AMDI delayed the Bow or were not corrected within any float in the schedule. During her testimony of the dis-organization among the trades in the Bow project, Ms.

Dee observed that the work was not completed by June 28, 2012 due to continual site delays. The site was not ready for PSF’s work and continuing delays by other trades impacted PSF’s work. Her evidence on this point is amply supported. [ 116 ] The vast weight of the evidence indicates that the underlying cause of the delay that forced PSF beyond June 28, 2012 and the formal or informal extension to early August 2012 into the fall 2012 was a general contractor issue.

The evidence clearly indicates, and the Court finds, that the effective cause of the delays encountered by PSF/AMDI through the end of October 2012 was that the Owner’s side did not provide a reasonably accessible site for staging, conduct and completion of millwork - the

schedule was too tight, there were too many trades working in the same places so that they could not be effectively coordinated (and were not coordinated) for the millwork, there was not reasonably sufficient physical access for the trades to meet the schedule, some areas were not ready for millwork to permit PSF to finish, and the millwork was substantially pushed out of sequence by delays by other trades. [ 117 ] The record is much less definitive for the period following October 2012. Ms. Dee was excluded from the site by MDA in late October 2012 [9] and could not personally observe it. Ms.

Holko’s evidence was not particularly descriptive of the problems as the months progressed past the summer 2012. [ 118 ] The Court is unable on the evidentiary record to attribute a cause to the delays following October, 2012. (

f) Scope of work deletion

(1) Introduction [ 119 ] In June 2012, the Owner issued three Change Directives which deleted some of the scope of the contract and required PSF to submit a credit to the pricing arising from the changes. These directives deleted:

a) certain millwork components from levels 44, 54 and 55;

b) supply (but not the installation) of certain veneer panels for levels 24, 25, 42, 43, 48, 50, 51, 52 and 53; and

c) various work from levels 42, 43, 48, 50, 51, 52, 53, 54 and 55. [ 120 ] Ms. Dee testified that none of the Change Directives deleted an entire floor or an entire package. Ms. Hoko testified that PSF still had work on every floor after the changes.

The Court accepts this testimony. [ 121 ] The Owner issued a further Change Directive in September 2012 to clarify issues over paint-grade base and doors in the earlier change directives and requested revised pricing. [ 122 ] Both sides agree that a net deduction for scope deletion was due. [ 123 ] The manner of calculating, and the amount of, the credits were a matter of contention between the parties. First, there was dispute over the records from which the necessary data was to be taken to perform the calculation. [ 124 ] The contract required the parties to determine net cost of work not undertaken.

The only way to do so was by using estimates of the materials, fabrication time, cost of subcontractors, logistics and shipping, and installation. [ 125 ] Both sides proposed adjustments to the contract price derived to one extent or another from PSF’s historical cost estimates. This part of the reasons explains each side’s methods and estimates. The issue whether the contract requires or permits use of the Owner’s method or PSF’s method, or some other basis if neither of those options applies is addressed in

Part III(a). [ 126 ] Second, the parties disputed whether PSF could reduce the credit by deducting the incentive pricing discount, a portion of the so-called efficiencies discount, overhead and profit, and delay costs. The Owner disputes the deductions. [10] This part of the reasons outlines the factual considerations concerning the deductions. Whether the deductions should be permitted is addressed in

Part III(a). [ 127 ] Even if the Court agrees with the methodology of a party, the Court must nevertheless ascertain whether that party’s calculation is sufficiently reliable, including that it is based on admissible evidence and proved assumptions, that it should be preferred. If neither appears correct, the Court may estimate all or a part of the credit if there is a sufficient evidentiary basis to stay out of the realm of speculation.

(2) PSF’s calculation [ 128 ] PSF calculated its scope deletion credit in two tranches, known as Wave 1 and Wave 2, representing the physical work which

was deleted. Wave 1 referred to the two Change Directives dated June 1, 2012, while Wave 2 referred to the Change Directive dated June 21, 2012. The final version of the calculation was provided to the Owner in August 2012. [ 129 ] Ms. Dee calculated the credits. The supporting information included detailed change order requests. Mr. Henry Joubran assembled a combined

summary of all scope deletions, and deducted from the credits some of the original pricing discounts, the overhead and profit said to be attributable to the deleted items, and the cost of delay from late June 2012 to early August 2012. [ 130 ] Ms. Dee’s work was based on PSF’s internal estimating sheets, originally created by PSF personnel for the purpose of estimating the materials and fabrication costs in response to Post-Tender Bulletin 1. These sheets included a

summary of the cost of each package in the bid, plus detailed costs described in break-out sheets for some specific pieces of work. [ 131 ] These internal sheets were not provided to the Owner during the tender process. [ 132 ] PSF said it used these sheets because it was the only way to obtain the cost information required to assess the impact of the detailed deletions of scope (in some cases specific parts of a floor or specific rooms) directed by the Owner. Ms. Dee testified that PSF did not use the Identified Prices in

Schedule “A” to Appendix “G” because “there’s no accurate way to get a specific price for an item and they were only asking for specific items to be deleted.” [ 133 ] PSF takes the position that these sheets are “Tender Documents” contemplated in

Schedule “G”,

section PP-03, and are the base documents on which the scope deletion credits must be calculated. Alternatively, PSF says these calculations are proof of the actual costs of the deleted items. [ 134 ] PSF did not use the estimating sheets for installation costs. These costs were a significant component of the original contract price (almost 24%). The estimating sheets in evidence allocated these costs by package though not explicitly by product, item or floor. Instead, PSF incorporated a calculation obtained from AMDI. The installation costs of AMDI included in the calculation were said by Mr.

Henry Joubran to be $303,000, if (in his words) “I am not mistaken”. In contrast, other sheets prepared by Ms. Dee or her staff show installation and on site carpentry costs of about $345,000. The evidence does not explain this figure or reconcile this difference. [ 135 ] The source of the logistics and transportation costs in PSF’s scope deletion calculations is not clear. [ 136 ] As noted above, PSF made various deductions from the materials and installation credit.

PSF’s final calculation was as follows: Component Adjustment Waves 1 and 2 materials and installation credit (1,805,615.86) 4% discount at time of contract award [11] 614,625.42 4.1% reduction for “hourly rate and material mark-up” [12] 74, 030.25 15% overhead and profit on Waves 1 and 2 credit net of discount and reduction [13] 258,393.76 Recommendation for

schedule delays from PSF’s consultant [14] 122,710.00 Total credit (735,846.43) (

i) PSF’s estimating sheets [ 137 ] There are two alternative uses of PSF’s estimating sheets. First, the estimating sheets might be those contemplated by the contract for calculating the net cost of the Change Directives. If they are, then the truth of the sheets does not matter. [ 138 ] Alternatively, if they are tendered as proof of the actual net costs of deleted items, then they are hearsay [15] and it is necessary to deal with the ultimate reliability of the sheets [16] . This part of the reasons deals with this scenario. [ 139 ] The estimating sheets include elements of subjectivity and judgment.

They are primarily based on take offs from the contract specifications, quotations obtained from suppliers and contractors outside PSF, and internal estimates for internal work. They are therefore partly based on subjective impressions, opinions and external information on which PSF was prepared to rely in bidding the contract. [ 140 ] The Owner did not take issue with these aspects of the estimating function, notwithstanding it was hearsay evidence.

Rather, it emphasized that after this information was gathered, PSF exercised judgment to arrive at a price that it thought would win the bid. [ 141 ] The judgment was applied by PSF’s President, Mr. Edward Joubran, who testified at trial. He could not recall the details of the calculations and testified to the process generally, his participation in it, and the outcome of the calculations. The estimator who worked on the estimates under Mr. Joubran did not testify at the trial. [ 142 ] Mr. Edward Joubran was a designer by trade.

He started with the company in 1990 in sales and estimating, and worked his way up to become President of PSF. He had to review and approve all estimates of PSF. Mr. Joubran was closely involved with the estimate in the present case and revisions arising from Post-Tender Bulletin 1, and was the ultimate approver of the estimate. [ 143 ] Mr. Edward Joubran said the objective of the estimating process was to generate the best possible price for the most complete scope.

He identified the estimating sheets used to calculate the scope deletion credits as the final estimating sheets on the job. [ 144 ] PSF’s estimator was responsible to identify trades and suppliers, and estimate the manufacturing hours for PSF’s fabrication, packaging, logistics and shipping facilities required on the job. The resulting estimate was based on internal estimates of shop time required to fabricate millwork, the cost of raw materials based on quotations from suppliers or subcontractors, the cost of subcontracts

(such as installation, transportation, and drawings), and costs for administration, mobilization, demobilization, and bonding. [ 145 ] Mr. Edward Joubran then undertook an intensive review of the estimate, over a course of several days. The review included the proposed vendors, pricing quotes, the materials required, discussions about how pricing was obtained, the hours estimates for fabrication, engineering, logistics, and packaging, discussions by Mr. Joubran with staff such as the internal production crew, and input into overheads and profits.

The final estimate was the product of a consensus process between Mr. Joubran and the estimator, and Mr. Joubran approved the estimate before the bid was made. [ 146 ] The estimating summaries identified by Mr. Edward Joubran contain estimated amounts organized by bid package that aggregate the stipulated contract price in response to Post-Tender Bulletin 1.

They represent PSF’s costing of the total work (before final revisions for the specification change to finishes, the wood blocking, and additional work on clerestory structures and glazing) plus any overhead and profit contributions. [ 147 ] During the tender process, PSF submitted Bid Form Appendix “O” - Identified Prices. A final version of this document is appended to the contract as the Identified Prices (Appendix “G”,

Schedule “A”). These Identified Prices were to be used in some scenarios to compute the net cost associated with scope changes (see Appendix “G”,

section PP-03). [ 148 ] The total of every package in the Identified Prices form submitted with the response to Post-Tender Bulletin 1 equals the totals by package in the estimating sheets. The major difference between these documents is the way the prices were reported: the Identified Prices were organized by bid package and allocated to specific floors of the Bow tower, while the estimating sheets were organized by bid package and broken out by specific types of work or product. There is no evidence of any other costing effort underlying the Identified Prices for the materials and shop labour costs.

The Court concludes that the costing reflected in the estimating sheets for raw materials and shop labour costs is the same costing on which the Identified Prices in the contract was based (save only for the small pieces of work added after the price revisions of Post-Tender Bulletin 1). [ 149 ] Accepting PSF’s estimates as proof of actual materials and shop labour costs of the deleted items would require the Court to assume that PSF’s estimates were accurate, that it was able to contract materials and services as estimated, and that it would be able to meet its internal hours budget.

No one from PSF provided explicit evidence that would show that the estimated costs would probably equate to the actual costs of the deleted items; for example, the terms of actual supply contracts that had been placed for materials and other external services such as transportation.

However, this is clearly implied in their evidence. [ 150 ] Under the modern hearsay exception the Court has discretion to admit hearsay when the twin requirements of necessity and reliability are met, consistent with the necessity and reliability principles articulated in the well-known jurisprudence of the Supreme Court of Canada discussed in

Part II(

a) above. [ 151 ] The Owner cites Slimmon v Precision Fitting Ltd ., 2012 ABQB 771 , where the court rejected the admission of an estimate prepared by a third party to repair a structure which was the subject of the litigation between claimant and defendant.

The estimator was not under a duty to prepare the estimate, and the estimate was simply a statement of opinion made in an attempt to solicit work. [ 152 ] There are circumstantial guarantees of trustworthiness associated with PSF’s estimate of raw materials and fabrication costs, which were not present in Slimmon . [ 153 ] First, PSF’s costing work was accepted by the parties as the basis for the Identified Prices [17] , which are the basis of costing of deleted or changed scope in some cases described in Appendix “G”,

section PP-03. The parties therefore acknowledged that the estimates were sufficiently reliable to use in connection with determining the cost of deleted scope. [ 154 ] Second, the estimating sheets were prepared by persons under a duty to prepare them in PSF’s ordinary course of business. [ 155 ] Third, the estimating sheets were prepared contemporaneously with the bidding process. That process occurred over a short span from issuance of bid documents on December 8, 2009 through the submission date of the bid (January 25, 2010) and the Post- Tender Bulletin 1 revisions (February 3, 2010).

They were not prepared after the fact, or for the purpose of supporting a position in litigation. [ 156 ] Fourth, PSF would be highly motivated to accurately estimate its costs in the first instance. [ 157 ] This was a huge contractual undertaking for PSF - Ms. Dee described her understanding that it was one of the largest millwork jobs in Canada. It was also a stipulated price contract.

The bid submission form required PSF to represent: The undersigned certifies that it has examined and is fully familiar with all of the provisions of the bid documents and is satisfied that they are accurate; that it has carefully checked all of the words and

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