Complex construction projects often spawn complex disputes.
The Ontario Superior Court had one on its hands with Walsh Construction vs. Toronto Transit Commission. The case was massive, with the trial consuming 161 days of court time, including over 50 witnesses, 151 days of evidence and five days of closing arguments.
It was described as “a Herculean effort by the Court and counsel” by Bruce Reynolds and James Little, partners with Singleton Reynolds LLP, and associate Nicholas Reynolds.
Walsh was contracted to build a subway station for the TTC under a design-bid-build agreement initially valued at approximately $166 million. Substantial completion of the project was delayed 953 days beyond planned. During this time, the contract value increased to just under $250 million. Walsh had been paid for most of this when a number of disputes went to court.
Walsh and the TTC blamed each other for the delays and associated costs.
“Walsh’s claim was also partially comprised of a flow-through of claims made by its subcontractors on the project,” write the Singleton Reynolds lawyers. It included Walsh’s subcontractors’ delay costs and acceleration costs.
They also write these delays were the type often seen in large construction claims; delay and disruption damages; acceleration costs; overhead, currency fluctuation; unpaid or underfunded change orders and change directives; bonding costs; subcontractor claims; and an unpaid contract amount of $9.5 million.
Walsh claimed the TTC design was incomplete at the time the contract was signed and that they were denied full site access. This resulted in “acceleration efforts” and resultant change claims by Walsh totalling $193 million.
Not surprisingly, the TTC said Walsh was both aware of the delays and additional costs. It counterclaimed $22 million in liquidated damages associated with missed contractual milestones.
The manner that the issues of delay were laid out by each party is described by the Singleton Reynolds lawyers as “binary.”
Walsh’s detailed delay analysis provided by its expert witness put forward a delay of 1,047 days. The TTC claimed only 441 days. Walsh was prepared to settle for middle ground.
However, the Court observed that based on the evidence before it, it could only choose one of the two options put before it. That’s because the TTC did not offer any countering analysis of its own. Instead, it hired an expert witness to critique Walsh’s analysis technique, including alleged bias on the part of Walsh’s expert.
Walsh’s expert witness said the volume of changes throughout the project was excessively high. Delays were made worse for Walsh due to restricted site access, making it difficult and slow to proceed with the project.
The TTC’s own witness acknowledged the initial station design was not constructible. However, the TTC argued delays and cost overruns are to be expected on a project as complex and large as a subway station project, something for which both it and Walsh should bear responsibility.
Not helping the TTC’s arguments was testimony from a third-party consultant hired by the TTC, who reported the TTC’s response time to requests for information was very long.
The Court found Walsh’s expert credible. Given the hard-line binary choice presented, the Court chose Walsh’s calculation of 1,047 days, and ruled the TTC bore responsibility for all of the issues stemming from the design.
Assigning full responsibility to the TTC represents a departure from the usual practice of apportioning delay, write the Singleton Reynolds lawyers.
They observe that choosing not to submit a schedule analysis of their own represented a “high risk, high reward” approach, yet they conceded that behind the TTC’s strategy may have laid “good cause in the circumstances.”
Although the court awarded Walsh $52,160,563 (plus interest, bonding costs, and HST on certain items) and dismissed the TTC counterclaim entirely, Walsh was not successful in its flow through of subcontractors’ claims. That portion of the ruling was appealed by Walsh on July 15 and will be the subject of a future column.
John Bleasby is a freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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