2012 NLCA 7, 2012 NLCA 7

Date: 20120214 Docket: 07/42 Citation: Eco Zone Engineering v. Town of Grand Falls-Windsor et al. , 2012 NLCA 7 IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR COURT OF APPEAL BETWEEN : ECO ZONE ENGINEERING LIMITED APPELLANT AND : THE TOWN OF GRAND FALLS-WINDSOR and THE TOWN OF BISHOP FALLS, carrying on business under the name of EXPLOITS REGIONAL SERVICES BOARD FIRST RESPONDENT AND : NEWFOUNDLAND DESIGN ASSOCIATES LIMITED and WILLIAM NOSEWORTHY SECOND RESPONDENT Coram: Welsh, Rowe and Hoegg JJ.A.

Court Appealed From: Supreme Court of Newfoundland and Labrador Trial Division 1996010167 Appeal Heard: September 12 & 13, 2011 Judgment Rendered: February 14, 2012 Reasons for Judgment by Rowe J.A. Concurred in by Welsh and Hoegg JJ.A. Counsel for the Appellant: Ronald S. Noseworthy, Q.C. Counsel for the First Respondent: Alexander MacDonald, Q.C. and John Hogan Counsel for the Second Respondent: No appearance

Rowe J.A.: INTRODUCTION [ 1 ] This appeal relates to a contract for construction of a waste water treatment facility in Grand Falls-Windsor (the Town). The general contractor was Eco Zone Engineering Limited (Eco Zone). After the Town terminated the contract, Eco Zone claimed against several parties, only two of whom remain, the Town and Newfoundland Design Associates (the Engineer).

The Town counter-claimed against Eco Zone for expenses related to the completion of the contract work. [ 2 ] After a lengthy trial (200 days), the trial judge rendered a voluminous (180 page) decision ( 2005 NLTD 197 ), plus a further shorter decision ( 2006 NLTD 33 ), as well as a third decision regarding costs ( 2007 NLTD 182 ). Net of the Town’s counter-claim, Eco Zone was awarded $71,488.88, far less than it had claimed. Eco Zone appeals a wide range of findings by the trial judge. Costs are not dealt with in this decision.

FACTS [ 3 ] The key facts in this case are not complex. (I omit reference to matters no longer in issue.) In August 1992, the Town tendered construction of water treatment facilities. Eco Zone’s bid was the lowest. It was awarded the contract. The work was to be carried out between October 15, 1992 and June 15, 1994, a total of 20 months. [ 4 ] As general contractor, Eco Zone was responsible for completion of all work under the contract. It performed some of the work and sub-contracted other aspects. Little work was done during the fall of 1992.

Eco Zone stopped work shortly before Christmas 1992 and resumed in April 1993. [ 5 ] Various delays and disputes followed, as dealt with below. The Town provided a Notice of Default to Eco Zone on May 12, 1994, about a month before the completion date set out in the contract. Negotiations followed and resulted in withdrawal of the default notice and a new completion date of December 9, 1994. This agreement was set out in Change Order #11. [ 6 ] The Town gave notice of default on November 25, 1994, shortly before the new completion date.

Negotiations followed and work resumed. [ 7 ] On September 8, 1995, the Town issued a third and final notice of default. The Town terminated the contract. It engaged another contractor (Gryphon) to complete the work. This was done by April 1996. [ 8 ] Eco Zone sued the Town for amounts owed to it under the contract; the Town counter-claimed for expenses to have the work completed. [ 9 ] In large measure, the Town was successful at trial. The judge found that Eco Zone (with a few exceptions) was responsible for the delays in completion of the work.

Throughout this appeal, as at trial, Eco Zone argued that the delays were not its responsibility. ISSUES [ 10 ] The appellant states the issues as follows: Did the learned trial judge err in law by failing to give adequate reasons for his decisions and failing to fully address the arguments and submissions of the Appellant and are his decisions correct in law with respect to the: (a) [the Town’s] claim for “additional engineering costs” (

b) Appellant’s claim for interest (

c) Appellant’s claim for additional time and compensation arising from changes in the work – change orders 1, 2, 6, 7, 11, and 25 (

d) Appellant’s claim for additional time and compensation arising from the: (

i) filter tile inspection issue (ii) sheet membrane waterproofing issue (iii) filter media placement issue (

e) termination of Eco-Zone and the contract to complete (

f) costs [as noted in para. 2, costs are not dealt with in this decision]. ANALYSIS (

a) Failure to Consider Arguments [ 11 ] In its Factum, the appellant states at para. 17: The Appellant submits that the learned trial judge failed to consider the submissions of the Appellant and failed to provide reasons for the dismissal of most of its claim; he refused to hear arguments or consider case law submitted by the Appellant on the Owner’s claim for additional engineering supervision fees and the Appellant’s claim for interest; …the result is that the Appellant has a “justifiable sense of injustice in the trial process.”

[ 12 ] The foregoing is groundless. The trial judge’s reasons are extensive and thorough. As well, there is nothing to indicate that the trial judge “refused to hear arguments or consider case law submitted by the Appellant”. It is not necessary for a trial judge to refer in his or her reasons to all the evidence or all the cases placed before him or her. Rather, the judge is required to deal with the evidence and law necessary to properly decide the issues.

Based on a review of the trial judge’s decision and the submissions of the appellant and the respondent, I am persuaded that the trial judge did what he was required to do in this case. [ 13 ] The appellant at various points in its Factum makes allegations regarding the trial judge similar in nature to the foregoing. I will not state and reject each seriatim . Rather, I will say simply that in no instance has any such allegation been shown to be well founded. (

b) The Town’s Claim for Engineering Costs [ 14 ] The Town’s counterclaim against Eco Zone was made pursuant to General Condition 10.5 of the contract (GC 10.5), which reads in part: If the Owner terminates the Contract under the conditions set out above, he is entitled to: (

a) take possession of the premises … (

b) withhold any further payments to the Contractor until the work is finished ; (

c) upon total performance of the work, charge the Contractor the amount by which the full cost of finishing the work including compensation to the Engineer/Architect for his additional services … exceeds the unpaid balance of the Contract Price; or if such cost of finishing the work is less than the unpaid balance of the Contract Price, pay the Contractor the difference. (Emphasis added.) [ 15 ] If the Owner properly terminates the contract, it can stop payments to the Contractor, engage another contractor to complete the work and set off the expense of the second contractor plus the “additional services” of the Engineer/Architect against the amount that the Owner owes for the work the Contractor had completed before termination. [ 16 ] General Condition 10.2(

a) reads: The Owner may notify the Contractor in writing that he is in default of his contractual obligations, if the Contractor: (

a) fails to proceed regularly and diligently with the work [ 17 ] General Condition 10.4 reads, in part: If the Contractor fails to correct the default … the Owner may … terminate the contract. [ 18 ] The trial judge found that the Town terminated the contract because of repeated failures by Eco Zone to complete the work. He wrote: [315] On September, 1995, a third notice of default was issued. At the heart of that default was the continuing failure of Eco Zone to proceed regularly and diligently with the work and that there was very little activity on site.

Eco Zone denied the default and essentially said that the work had been substantially completed. It also raised the difficulties with the filter media and the problems with the anthracite specifications. [These are dealt with below.] [316] As was usual in the relationship there were arguments and counter arguments.

From the owner’s and engineer’s perspective the remaining work was not being done, in the words of a witness which I quoted earlier, "the job went dead". [317] I have heard no cogent explanation of why the work was not completed in the summer of 1995 except for the issue of the anthracite specifications in the tanks. Yet the work was not complete in October 1995 as we know from the work that Gryphon had to complete later.

I cannot explain why Eco Zone did not complete the work before mid-October 1995, but I am satisfied that it did not do so, i.e. in the words of GC 10[(2)](a) "it failed to proceed regularly and diligently with the work". . . . [321] I find that by mid-October 1995 the owner had concluded that the only way to resolve what had been an unsatisfactory contractual relationship from the start, was to end it by terminating Eco Zone.

I find that it was justified in doing so on the basis that Eco Zone had failed to proceed regularly and diligently with the work. [ 19 ] For findings of fact, the applicable standard of review is palpable and overriding error.

The appellant failed to demonstrate any such error in the foregoing findings; as well, the respondent directed the Court to evidence on which the judge’s findings were based. [ 20 ] The findings set out above and others that supported them (notably, that Eco Zone failed to put an adequate work force on site and that it failed properly to supervise the workers that it had on site) are pivotal to this case. [ 21 ] Regarding adequacy of Eco Zone supervisory staff, the trial judge wrote: [267] I have concluded that a major factor in the difficulties which dogged the work of contract No. 2, was Eco Zone’s failure to have on staff and on site, a full complement of supervising, coordinating and technical staff. [ 22 ] The trial judge then referred to an expert’s report prepared by Mr.

Heber Bowering, P.Eng., for the Town, he continued:

[268] Mr. Bowering in his supplementary report of February 2003 and in his oral evidence, noted this failure on Eco Zone’s part. On Mr. Pear’s own evidence the total management/technical complement of Eco Zone was two people, himself as directing mind and CEO and Mr. Joseph Lockyer as construction superintendent. The only other full time employee was a lady who was an in-house accountant and bookkeeper.

From time to time a young man was employed to assist in the office and attend to any general duties as may have been assigned. [ 23 ] Relying on the Bowering report, the trial judge then listed (in para. 273) the positions needed by a general contractor for a construction project of this nature: - project manager - superintendent - field engineer - job clerk/expediter - general foreman - rebar, labour and carpenter foremen. [ 24 ] The trial judge then concluded at para. 274: It is inconceivable that Mr.

Lockyer, being one individual, could perform more than a fraction of these required functions and in fact he could not do so. I do not believe that most of these functions were performed at all. The failure to employ an adequate number of skilled professionals on site was in my opinion a major factor in the slow progress of the work of the contract. [ 25 ] Regarding inadequate numbers of workers on site by Eco Zone, the trial judge wrote: [263] In fact one of the recurring themes in the evidence is that Eco Zone rarely if ever had enough workers on the job.

Subcontractors gave evidence that they were held up by Eco Zone and had to do their work on a piecemeal basis because of Eco Zone’s failure to perform its work in a timely manner. The evidence was that it is usual for the contractor to be pushing the subcontractors, but in this case it was the subcontractors who were pushing the contractor. [264] The delay claims in the decided cases usually show instances where the contractors’ workers were standing idle, or were underemployed while the owner’s decisions and other contractors’ actions prevented them from working.

Here, the problem seemed to be that the contractor too often had minimal workers on site, sometimes as few as one or two, and, as one witness put it "the job went dead". [ 26 ] As noted, these two findings by the trial judge, that Eco Zone did not have enough workers and it did not have enough supervisors for the workers that it did have, support his overall finding that “Eco Zone had failed to proceed regularly and diligently with the work”. With few exceptions, this undermines Eco Zone’s claims throughout.

Eco Zone was unsuccessful in persuading this Court that in the overall findings of fact set out above, the trial judge committed palpable and overriding errors; as well, the respondent directed the Court to evidence on which the judge’s findings were based. [ 27 ] Upon completion of the work by Gryphon, Eco Zone claimed against the Town for the value of the work it had completed before the contract was terminated. The Town counter-claimed for: (

a) the cost to have another contractor (Gryphon) complete the work; and (b) “additional engineering costs”. Eco Zone does not directly dispute the amount paid to Gryphon to complete the work; rather it seeks to have “the cost to complete … reviewed by a trial judge and all necessary adjustments made” (appellant’s Factum, para. 126). That is not an option. In the absence of a demonstrated basis to set aside an award of the amount paid by the Town to Gryphon to complete the work, that part of the trial judge’s decision is affirmed. [ 28 ] Eco Zone disputes the amount paid to the Engineer. Eco Zone makes two general points with respect to this amount: (

a) only on site expenses for the Engineer should be included; and (

b) the period during which the cost of “additional engineering” services could properly be claimed against Eco Zone should not be from the original completion date, as the trial judge had decided. [ 29 ] Eco Zone took the position that only the cost of the Engineer on site should be covered and not other expenses, notably work at its offices.

The Town took the position that, for the relevant period, all costs of the Engineer related to the project could properly be claimed. [ 30 ] Eco Zone said the applicable contractual provision was not GC 10.5(c) (which refers to “The full cost of finishing the work including compensation to the Engineer/Architect for his additional services”), but rather Supplementary General Condition 2.0 (SGC 2.0) which reads: Should the Contractor fail to meet his date of substantial performance of the Work as indicated in the Agreement Between Owner and Contractor, and is unable to provide justification acceptable to the Owner for the delay, then the Contractor shall be held liable for payment to the Owner for the additional costs for engineering supervision as occasioned by the Contractor’s delay, and as calculated by

the Engineer. The wording on which Eco Zone seeks to rely is “additional costs for engineering supervision”. [ 31 ] In my view, the trial judge was correct in applying GC 10.5(

c) rather than SGC 2.0, in that GC 10.5(

c) applies when there is a termination, as there was in this case. However, I am also of the view that even under the wording of SGC 2.0, for the relevant period, all the costs of the Engineer relating to supervising the project are covered and not simply the costs of having an engineer on site.

To narrow the costs of “engineering supervision” to the work of persons on-site, rather than the full range of work needed to supervise a construction project would be to give that wording an artificially narrow and unduly restrictive meaning. [ 32 ] As for the period for which engineering costs can be recovered, the trial judge held this should commence at the original completion date (June 15, 1994). I do not see how this can be correct.

The claim for “the full cost” of “additional [engineering] services” was made pursuant to GC 10.5; this provision becomes operative upon termination of the contract by the Owner (the Town). It follows that the “additional services” are those subsequent to the termination, rather than those subsequent to the (initial) agreed completion date.

In the circumstances of the case, the trial judge made an error of law in his application of GC 10.5. [ 33 ] Accordingly, the award for “additional [engineering] services” will be for the period from termination of the contract on September 8, 1995 to completion of the project in April 1996. The award to the Town for engineering costs should be reduced by subtracting from it engineering costs for the period June 15, 1994 to September 7, 1995. (

c) Interest [ 34 ] As noted above, pursuant to GC 10.5(b), where the Owner terminates the contract, it may “withhold any further payments to the Contractor until the work is finished.” The trial judge had to decide whether interest was payable (and, if so, at what rate) by the Town to Eco Zone for the amounts owed to Eco Zone under the contract. [ 35 ] The trial judge held that GC 21.13(

a) applied. It reads: Notwithstanding the provisions of 21.3 or any other provision of this Contract, the Owner may: (

a) in the event of a claim by the owner against the Contractor for damages arising out of the performance or non-performance of the Contract, withhold payment of any amount equal to the alleged damages until the liability for damages is established and no amount of interest will be paid on amounts held under this clause; [ 36 ] In his second decision the trial judge wrote: 8. If they fall under GC 21.13 all monies withheld by the owner bear no interest. … 9.

On a review of the materials and evidence before me, I am satisfied that the General Conditions do not provide for the payment of interest in the contract accounting issues which are before the court. Accordingly I find that the rate of interest to be applied to the final result of any set offs, is to be 0%. [ 37 ] Counsel for Eco Zone had unsuccessfully argued to the trial judge that GC 21.3 (and not GC 21.13) applied.

GC 21 reads in part: 21.1 The Engineer/Architect shall, within ten days (10) of receipt of application for payment from the Contractor submitted in accordance with GC 20 – Application for Payment, issue a certificate for payment in the amount applied for or such other amount as he shall determine to be properly due.

If the Engineer/Architect amends the application he shall promptly notify the Contractor in writing, giving his reasons for the amendment. 21.2 The Owner shall within twenty-one (21) days of the issuance of a certificate for payment by the Engineer/Architect, make payment to the Contractor on account, in accordance of the provisions of the Agreement. 21.3 If payment is not made within sixty (60) days of the issuance of a certificate for payment by the Engineer/Architect the Owner will be liable for interest on the amount owing at the rate of 9% per annum from the sixty-first (61st) day of the date of payment . (Emphasis added.) [ 38 ] The key to the trial judge’s decision that GC 21.13(

a) applied and GC 21.3 did not apply were certain findings of fact. [ 39 ] In his second decision, the trial judge wrote: 4. No instance has been brought to my attention of any failure on the part of the owner to pay Eco Zone after the engineer had issued a certificate. GC 21.3, I interpret as a clause which provides a penalty when an owner either neglects or refuses or is unable to pay, any amount which the engineer has found to be due to the contractor. 5. Issues of the foregoing kind were not the problem in this contractual relationship. The problems were caused by the GST dispute in which the engineer was required under his

interpretation to hold back monies for the protection of the owner. Later, this court and the court of appeal confirmed the engineer’s

interpretation. [That dispute is not before the court in this appeal.] 6. The disputed work issue was also a factor, but especially the constant and ongoing disputes between the contractor and the engineer. [This issue was dealt with by the trial judge and decided in favour of the Town; Eco Zone has not appealed that part of the trial judge’s decision.] The engineer had a contractual duty to protect the owner and to ensure that the monies paid were directly referable to work actually performed, subject of course to necessary hold backs. It is therefore my conclusion that the 9 % provision in GC 21.3 is inapplicable to the present situation.

[ 40 ] In short, the trial judge found there was no failure by the Town to pay to Eco Zone amounts that were (or should have been) certified for payment by the Engineer, as Eco Zone claims. [ 41 ] Eco Zone has failed to show that the trial judge made a palpable and overriding error in these findings of fact or that he made any error in law in his application of the contract, given these findings of fact. Accordingly, the trial judge’s decision regarding interest is affirmed. (

d) Change Orders 1, 2, 6, 7, 11 and 25 (

i) Change Orders #1 and 2: Excavate to Bedrock [ 42 ] In the spring of 1993, given soil conditions, the Engineers decided that it was necessary to excavate down to bedrock; this had not been contemplated in the contract.

The added work was provided for in Change Orders #1 and 2. [ 43 ] At trial and in this appeal, Eco Zone advanced the view that Change Orders #1 and 2 had a major impact on Eco Zone’s work, taking up “two months of prime construction time in the spring of 1993 … [and] resulting in Eco Zone having to work in outside conditions during the winter of 1993-94”. (appellant’s Factum para. 65) [ 44 ] In the view put forward by Eco Zone, the additional work occasioned by Change Orders #1 and 2 so disrupted Eco Zone’s

schedule that (along with other problems dealt with below), it was unable to complete the contract work on time and, as well, incurred substantial “impact costs”. The trial judge made findings of fact that do not accord with this view. [ 45 ] Concerning Change Orders #1 and 2, the trial judge wrote: [98] Within days of the recommencement of excavation in May 1993, Mr.

Noseworthy of NDAL [the Engineer] had concerns about the specifications regarding the depth required for the foundations underneath the chlorine contact chamber and the filter slab. [The Engineer] then issued change order No. 1, and followed it with change order No. 2, which involved taking the foundation under the chlorine contact chamber down to bedrock. [99] [The Engineer] says that change orders 1 and 2 would not have been necessary had Eco Zone advanced the work more promptly and expeditiously in the fall and winter of 1992/93.

As a result of minimal work during the fall of 1992 and a partial excavation which lay open to the elements all winter, the ground became waterlogged. Thus, in the spring, the water table was so high and the ground so saturated, that dewatering could not rectify the situation and therefore additional removal of soil and rock became necessary in order to achieve a solid foundation.

Thus, the view was advanced by the Engineer that excavating down to bedrock (as Change Orders #1 and 2 provided) was required because Eco Zone had not done what it should have in the fall of 1992. [ 46 ] The trial judge did not accept this view. He wrote at para. 102: Whether Eco Zone failed in some way to [properly] assess the soil conditions or whether the engineer had not realized in advance how bad spring soil conditions would be, I do not know.

Without ascribing fault, I therefore take the position for the purposes of dealing with change orders 1 and 2, that they were necessary and within the owner/engineer’s power to adopt. [ 47 ] The trial judge then considered how much time was taken up by this work and how much additional expense Eco Zone incurred as a result of Change Orders #1 and 2. He wrote: [283] I have found for the reasons already given that the delays occasioned to the project which were not within the control of Eco Zone were (

a) change orders 1 and 2 and (

b) the waterproofing [dealt with further below]. These delays were more than compensated for by the owner’s concession on the high roof [dealt with below] and the fact that Eco Zone’s forces could have worked elsewhere on the project under contract.

All other delays were delays directly occasioned by Eco Zone or its subcontractors and the ripple effects of these delays must be born by Eco Zone and or the subcontractors. [284] As to the delay caused by change orders 1 and 2, I have found that Eco Zone could have worked elsewhere on the job, nevertheless there was on a balance of probabilities some disruption during the one month which I have found was the delay caused by the two change orders. . . . [286] I cannot address compensation for these disruptions with any degree of mathematical precision, but I am of the opinion that the sum of $20,000 will amply compensate Eco Zone for the two foregoing "disruptions" [Change Orders #1 and 2, and the waterproofing issue] as well as any other minor disruptions which Eco Zone may have experienced as a result of the actions of the [Town] or [Engineer]. [ 48 ] The trial judge rejected Eco Zone’s claim for a much higher amount. [324] Eco Zone argues that the actual costs of the extended time arising from change orders 1 and 2 were the on site job costs and the head office overhead for that period.

The on site job costs were alleged to be $27,500 per month, and the head office overhead cost to be $492 per day or $14,760 per month. [325] The actual days worked on completing change orders 1 and 2 were 18, but I decided to allow in my previous calculations a period of one month. [326] Therefore, if Eco Zone’s methodology and figures were to be accepted, the cost of change orders No. 1 and 2 to the owner would become, instead of $68,000 as paid for the actual work including 10% for overhead and 10% for profit under GC 19, an additional

$25,500 plus $14,760, namely $40,260 per month.

If the delay was found to be three months as was argued by Eco Zone the additionalcost to the owner would be 3 x $40,260 being $126,780. [327] The effect of this approach would be to hold the owner liable for Eco Zone’s entire head office overhead, as well as all site costs,because a small number of workers operating earth moving equipment were required to deepen an excavation to bedrock. [328] On a reading of GC 8 and GC 19, I cannot conceive that their intention was to permit a relatively minor change order to imposesuch costs on the owner. [49] GC 8, 18 and 19 read, in part: GC 8 DELAY 8.1 If it can be clearly shown that the Contractor is delayed in the performance of the work by any act or fault of the Owner or otherContractor, then the contract time shall be extended for such reasonable time as the Engineer/Architect may decide in consultation withthe Contractor.

The Contractor shall be reimbursed for any costs incurred by him as a result of such a delay occasioned by the act orfault, provided that it can be clearly shown that the Contractor’s forces cannot work efficiently elsewhere on the project and that theincurred cost is limited to that which could not reasonably have been avoided. . . . GC 18 CHANGES IN THE WORK 18.1 The Owner may make changes by altering, adding to, or deducting from the Work, with the Contract Price and the Contract Timebeing adjusted accordingly. . . .

GC 19 VALUATION AND CERTIFICATION OF CHANGES IN THE WORK 19.1 The value of any change shall be determined in one or more of the following methods:

a) by estimate and acceptance in a lump sum

b) by unit prices subsequently agreed upon

c) by cost and a fixed or percentage fee… [50] Eco Zone says that the trial judge made an error in law when he dealt with Eco Zone’s claim regarding Change Orders #1 and2 under GC 8 (“Delay”), rather than GC 18 (“Changes in the Work”). [51] In my view, whether the correct provision is GC 8 or GC 18 does not matter in this case. I say this for two reasons. First, themain factors here are the factual findings by the trial judge that Change Orders #1 and 2 affected Eco Zone’s work only for a few weeksand to a relatively minor degree.

Regarding this, Eco Zone has failed to show that the trial judge made a palpable and overriding error. Second, from the passages quoted above, it is clear that the trial judge sought to assess Eco Zone’s incremental costs occasioned byChange Orders #1 and 2.

Under either GC 8 or GC 18, Eco Zone could hope to achieve no more than that. [52] The key difference between the result arrived at by the trial judge and that sought by Eco Zone relates to how disruptiveChange Orders #1 and 2 were to Eco Zone’s work schedule, rather than the exact wording of the applicable contract provision (thoughthat may matter in another case). [53] Counsel for Eco Zone urged on us the following propositions based on Corpex

(1977) Inc. v. Canada (1982) (SCC), 2 S.C.R. 643: Cost resulting from loss of efficiency of labour force during the winter due to delays should be treated like cost of work in addition tothat provided for in the plans and specifications. If changes ordered by the owner cause a disruption of the critical path and an increase in cost the Owner must bear them. [54] In the foregoing, counsel for Eco Zone may be correct. However, that does not assist Eco Zone, in that the trial judge’sfindings that the disruption to Eco Zone’s work

schedule occasioned by Change Orders #1 and 2 was brief and limited were not shown tohave been in error. [55] The appeal as regards Change Orders #1 and 2 is dismissed. (ii) Change Order #6: Steel Roof [56] In para. 52, the trial judge wrote: Despite the various problems, fair progress was made in the summer of 1993 but it was not sufficient to have what is called the "highroof", in place prior to the onset of the winter of 1993/94. The high roof which was the roof over the treatment tanks, was specified to beconstructed of concrete, which would be more difficult and expensive to build in winter conditions.

In order to expedite the work, whichhad fallen behind schedule, the engineer/owner agreed to Eco Zone’s request for the substitution of a steel roof for the specified concreteroof. The advantage for Eco Zone was the quicker and less complicated erection of steel instead of concrete. Steel could easily beerected in winter by a subcontractor, thus saving about three months in construction time. The use of steel in the high roof was suggested

by Eco Zone and agreed to by the owner and engineer as a means of accelerating the work. [ 57 ] Counsel for Eco Zone takes issue with the foregoing, saying that the decision to go with the steel roof was a result of Change Orders #1 and 2. The delay and expense to Eco Zone caused by Change Orders # 1 and 2 has been addressed above. (iii) Change Order #7: Foreign Exchange [ 58 ] The trial judge wrote: [129] Eco Zone was required by the contract to purchase "plate settler" equipment from the U.S. as it was preselected by the [Town]. The exchange rate when applied caused a shortfall of $39,508.12.

Various calculations were submitted by Eco Zone which included items of profit, GST, site inspection and legal fees. [130] I agree with [the Engineer’s] calculation of $39,508.12 which, if it was incurred by Eco Zone should be reimbursed by the [Town]. It is unclear to me from the evidence whether or not Eco Zone actually paid out that sum by reason of the exchange rate, on the purchase price.

Nevertheless, if Eco Zone can show that it did pay out $39,508.12 or other sum in respect of the exchange rate, it will be entitled to reimbursement by the owner in the appropriate amount even though the owner is now denying the claim. [ 59 ] In January 2007 (subsequent to the trial judge’s first and second decisions), Eco Zone filed an affidavit by its CEO, Mr. Pear, relating to this matter.

This Court is in the unusual position of considering the affidavit and making an original finding of fact. [ 60 ] In its key points, the affidavit states: - The American supplier of the plate sued Eco Zone and Zurich Insurance Company (Zurich), pursuant to a Labour and Material Payment Bond - The American supplier obtained a judgment in Florida; this was paid by Zurich - Subsequently, Zurich and Eco Zone settled all claims between them. Eco Zone’s “Concise Statement of Facts” at para. 13 says much the same. [ 61 ] Nowhere has Eco Zone said that it paid the exchange rate adjustment.

As it is in Eco Zone’s interests to say that they have paid this adjustment and they have not said so, I infer that they did not do so, either directly or indirectly (via Zurich). This aspect of the appeal is dismissed. (iv) Change Order #11: Extended Completion Date [ 62 ] The principal effect of Change Order #11 was to establish a new completion date of December 9, 1994 (instead of June 14, 1994). Change Order #11 was referred to above in the context of Engineering Costs and will be referred to as well below. (

v) Change Order #25: Removal of Waterproofing Material [ 63 ] Problems with the “Sheet Membrane Waterproofing” are dealt with below under that heading. Change Order # 25 provided for removal of these materials by Eco Zone. In paras. 154-156, the trial judge granted Eco Zone’s claim for this work. (

e) Eco Zone’s Claim for Additional Time and Compensation arising from (

i) filter tile (ii) sheet membrane waterproofing (iii) filter media placement [ 64 ] These matters relate to the tanks in which waste water is treated. (

i) Filter Tile [ 65 ] Eco Zone as general contractor was responsible for completion of all work under the contract. It engaged Boom Construction (Boom) to do certain mechanical work. In turn, Boom engaged a US firm, Roberts Filter (Roberts) to supply a filter system. The system was installed. Roberts was then supposed to inspect the system. However, Boom did not pay Roberts and so Roberts did not do the inspection. As well, Boom went into default.

Inaction, confusion and delay followed. [ 66 ] The trial judge wrote: [200] In early June 1994 Boom Construction acknowledged that it was in default in its subcontract to Eco Zone. No process mechanical work had been done since April 28 th , 1994, when Boom left the site because there were no areas where they could work productively. That reason was provided by George Chafe, [the Engineer’s] representative who was on site. [201] Eco Zone contracted with Gryphon Construction on August 4 th , 1994, to complete the process mechanical contract.

It appears therefore that the total delay in process mechanical work was almost exactly four months. Eco Zone, being the contractor must bear the responsibility for the delayed work, because it was the contractor. Boom was its subcontractor and it was solely Eco Zone’s responsibility to replace Boom and to do it as quickly as possible.

… [204] One of the saddest and most unnecessary episodes in the whole of the construction process occurred over the filter tile installation. It was part of the Roberts contract, that Roberts would return to the site to inspect the filter tile installation. If they passed it, all would be well and other work could begin. If deficiencies were found, repairs would become necessary as specified by Roberts. [205] The inspection problem arose because of the debt owed to Roberts for its previous work on the system.

Roberts had not been paid by Boom and understandably refused to return to the site to inspect and advise until it was paid what was already owing to it. [206] It appears from the evidence that Roberts’ account had been approved and paid to Eco Zone by the [Town] and Eco Zone’s evidence is that the money had been paid to Boom, though this was never documented.

Also, there is evidence that at the time of Boom’s default, Eco Zone still owed money to Boom and in addition there were holdback funds as is normal in construction. [207] Eco Zone as the contractor and Gryphon as [Eco Zone’s subcontractor at that time] had a responsibility to see that the inspection work was done, i.e. to bring Roberts back.

Furthermore, Gryphon had undertaken in its proposal to take over the process mechanical subcontract, as follows: "Gryphon will undertake to deal with obligations listed in appendix "A"." That list included Roberts. [208] In the end, neither Eco Zone nor Gryphon paid Roberts and brought them back to inspect as required.

Furthermore, Roberts was not paid by the bonding company because its claim in respect of non payment was apparently out of time. [209] Instead of Eco Zone or Gryphon providing $20,000 and solving the matter of whom should bear the expense after the work was done, they caused themselves, the [Town], [the Engineer] and Gore and Storrie [consulting engineers] to argue fruitlessly over the issue for many weeks and thus Roberts was never brought back to inspect. As a result, [the Engineer], the [Town], Gore and Storrie and Gryphon worked out an alternative plan whereby pull-out tests were conducted.

They ordered repairs to be done and an extended warranty by Gryphon to be agreed upon. Eco Zone refused to have anything to do with that process, nor will we ever know what the results of a Roberts’ inspection would have been or how much time and effort the dispute caused by reason of the non inspection. [210] Eventually after frustration and expenditure, the filter tile installation was accepted with a guarantee from Gryphon and Gryphon continued with the installation of the filter media, but the filter tile issue had caused major delay and significant costs.

In my opinion it also demonstrated that there was a complete lack of cooperation and trust between Eco Zone, Gryphon, [the Engineer], Gore & Storrie and the [Town]. That lack of trust and cooperation was present from the start and escalated because of delays, change order disagreements and complete frustration on everyone’s part. [211] Eco Zone alleges a conspiracy between Gryphon, the [Town] and [the Engineer] arising from the filter tile issue.

I do not accept the conspiracy theory and I am satisfied that the [Town] wanted its treatment plant completed and was trying its best along with [the Engineer] to facilitate its completion by finding some solution to the filter tile problem. They eventually found an acceptable resolution even though it was not part of the construction contract. [ 67 ] In addressing this issue, as with others, Eco Zone gave a detailed recital of evidence at trial.

Eco Zone then sought to have this Court make a finding different from that of the trial judge, that the four month delay relating to the filter tile was caused not by Eco Zone’s failure to act, but rather by the Town dealing with Gryphon over Eco Zone’s objections. This was entirely unpersuasive. Eco Zone failed to show a palpable and over-riding error in the judge’s findings; as well, the respondent directed the Court to evidence on which the judge’s findings of fact were based.

In this regard, the appeal is dismissed. (ii) Sheet Membrane Waterproofing [ 68 ] The Town wished the concrete water treatment tanks to be waterproof. The Engineer proposed use of a waterproof membrane to accomplish this. This proved unsuccessful. The trial judge found that the Engineer was responsible.

In the end, the waterproofing membrane was removed. (See Change Order # 25 above.) [ 69 ] The trial judge wrote at para. 195: North Shore [which installed the membrane] will therefore be awarded all sums due for work done, including extras, the removal of the membrane and other charges and Eco Zone will not be penalized in any way for the failure of the tank waterproofing system. Eco Zone is also entitled to the appropriate markups in respect of North Shore’s work. [ 70 ] Eco Zone claimed, as well, for “impact costs” arising from the delay relating to the Engineer’s error regarding waterproofing the tanks.

Counsel for Eco Zone urged on us this description of “impact costs”: Impact costs are the increased costs of one or several related construction activities in excess of what these costs would have been but for an incident, action or omission relating to a separate (discrete) item of work.

Impact costs are often referred to as the ripple effect, because they originate in one or more isolated problems and spread unabated through a project like ripples across a pond… As a general proposition, the foregoing appears sound. (See also above at para. 53 the reference to the Corpex decision.) [ 71 ] Eco Zone’s claim for impact costs arising from this delay has merit. However, the claim is limited by a factual finding by the trial judge, who wrote: [277] … The waterproofing delay did not prevent Eco Zone from carrying on other work under the contract, nor can I see that it involved extra costs for Eco Zone.

So far as I know, Mr. Lockyer and the Eco Zone workers were not involved in the waterproofing issue, nor delayed by it in respect of their own remaining work which was considerable. [278] As to the delay claim generally, Eco Zone did not in a period of 36 months complete the contract and Gryphon required another

5 months after taking it over to complete it.

In all of the instances of delay, I find that at most times Eco Zone could have worked efficiently elsewhere on the project, and thus to have completed it before being terminated on October 16 th , 1995. [279] It is very clear that the delays for which Eco Zone is responsible, far exceeded the delays for which the [Town] and [the Engineer] were responsible even before the owners’ three-month concession on the high roof is factored into the calculation. [280] Therefore, for the reasons given, I am unable to grant any portion of Eco Zone’s delay claims. [ 72 ] Eco Zone pressed upon this Court that it was not seeking to make a “delay” claim (under GC 8), but rather an “impact cost” claim (under GC 18 and 19).

The trial judge dealt with this as follows: [283] I have found for the reasons already given that the delays occasioned to the project which were not within the control of Eco Zone were (

a) change orders 1 and 2 and (

b) the waterproofing. These delays were more than compensated for by the owner’s concession on the high roof and the fact that Eco Zone’s forces could have worked elsewhere on the project under contract.

All other delays were delays directly occasioned by Eco Zone or its subcontractors and the ripple effects of these delays must be born by Eco Zone and or the subcontractors. [284] As to the delay caused by change orders 1 and 2, I have found that Eco Zone could have worked elsewhere on the job, nevertheless there was on a balance of probabilities some disruption during the one month which I have found was the delay caused by the two change orders. [285] Vis-à-vis the waterproofing issue there is no doubt in my mind that Eco Zone should have been pressing on with the completion of the building and the completion of the paving and landscaping in the spring and summer of 1995.

However, again on a balance of probabilities I am prepared to find that the waterproofing issue may have caused some degree of disruption and caused Eco Zone, through Mr.

Pear, to devote time and energy and some expense in the collective efforts to resolve the waterproofing issue. [286] I cannot address compensation for these disruptions with any degree of mathematical precision, but I am of the opinion that the sum of $20,000 will amply compensate Eco Zone for the two foregoing "disruptions" as well as any other minor disruptions which Eco Zone may have experienced as a result of the actions of the [Town] or [the Engineer]. … [289] In other respects impact costs have not been proven.

There is no evidence that Eco Zone’s workers were ever idle because of owner or engineering decisions. The evidence is that Eco Zone had too few workers on the job, particularly in 1994 and 1995. While Eco Zone was working on the contract Mr. Lockyer had to be on site and any ripple effects caused by others did not affect the numbers at head office which were only two persons, Mr.

Pear and the accountant, being the irreducible minimum required to continue in business. [ 73 ] Thus, in the case of the membrane waterproofing, as with Change Orders #1 and 2, the trial judge found that Eco Zone’s work was disrupted and its costs added to only to a modest degree. Accordingly, the amount awarded was relatively low.

Eco Zone sought to have this Court find that more delay was caused and more impact costs were incurred by Eco Zone, for which it should be compensated. [ 74 ] In this, as in most other issues in this appeal, to succeed Eco Zone had to persuade this Court that the trial judge made palpable and overriding errors in key findings of fact. Counsel for Eco Zone has not done so. In this regard, the appeal is dismissed. (iii) Filter Media Placement [ 75 ] Treatment of waste water included filtration through ground anthracite. Consulting engineers, Gore and Storrie, were responsible for specifications of the filter media.

The trial judge found they made an error, which resulted in delay; he also found that Eco Zone was not responsible. However, he did not make an award to Eco Zone relating to this delay. [ 76 ] The trial judge wrote at para. 232: Clearly there was a delay in respect of the installation of the filter media but that is not to say that the completion of contract No. 2, was delayed by the filter media issue.

I cannot find that Eco Zone suffered a significant loss, because the plant was in other respects unready for a certificate of substantial completion and the ongoing delay with the filter media in the tanks did not prevent Eco Zone from completing the building and doing the paving and landscaping as it had undertaken to do.

The delay aspect will be dealt with when delays are considered as a whole. [ 77 ] More generally, I would refer to what the trial judge wrote concerning delay and impact costs as set out in paras. 18, 21, 25 and 71-72 above. [ 78 ] Eco Zone having failed to demonstrate any palpable and overriding error in the findings in this regard, this aspect of the appeal is dismissed. (

g) Termination of the Contract; Cost to Complete [ 79 ] These issues were dealt with above. (

h) Costs [ 80 ] Should counsel wish to pursue the issue of costs, leave is given to file written submissions and proceed in the ordinary course. Conclusion [ 81 ] The appeal is dismissed save in one respect. The trial judge erred in law in setting the starting date for the period the Town is

to be compensated for its additional engineering costs at the original contract completion date of June 15, 1994; rather that period should start at termination of the contract on September 8, 1995. The award to the Town for engineering costs is reduced in the manner described in para. 33. M. H. Rowe J.A. I Concur: ___________________________ B. G. Welsh J.A. I Concur: ___________________________ L. R. Hoegg J.A.