An Ontario court has ordered Ledcor Construction Limited to pay nearly $51,000 to a mechanical subcontractor it had removed from a Toronto condominium project1. The decision comes even as the court concluded that Ledcor was justified in terminating the subcontractor, Dependable Mechanical Systems Inc. (DMS), for significant performance failures and delays that plagued the development. The judgment provides a detailed account of a contractual relationship that deteriorated amidst project delays, leading to a multi-million dollar legal battle.
The dispute centered on the construction of “the Plant – Queen West,” a 10-storey mixed-use building at 41 Dovercourt Road in Toronto. In October 2017, the property owner hired Ledcor to act as the construction manager. Ledcor, in turn, entered into a fixed-price subcontract with DMS in May 2018 for the mechanical work, valued at approximately $3.75 million. The project, which also saw DMS working on a similar building across the street, was originally scheduled for substantial performance by September 2019. However, it soon encountered a series of delays, including issues with soil contamination, concrete forming, and a significant six-month delay in obtaining plumbing and HVAC permits, which pushed the projected completion date into 2020.
As the project progressed, tensions mounted between Ledcor and DMS. By mid-2019, Ledcor issued a detailed schedule, known as a Suite Finishing Matrix, to coordinate the trades on the residential floors. According to the matrix, the mechanical work was set to follow the framing trade with a five-day duration on each floor. However, work did not proceed as planned, with delays affecting a critical mock-up suite that was meant to guide the finishing work for all other units. On September 12, 2019, Ledcor issued a formal written notice of default to DMS, alleging that the subcontractor had failed to supply enough skilled workers, adhere to the project schedule, and diligently perform its work. The notice listed 20 specific examples of alleged failures, from procurement issues to incomplete installation of various systems like sprinklers, standpipes, and HVAC risers.
The default notice gave DMS 48 hours to provide an acceptable plan to remedy the issues. DMS responded four days later, denying the allegations and providing its own explanations and schedules for the outstanding items, while also pointing to unprocessed change order requests. In an email the next day, the DMS project manager, Marco Rizzo, outlined new manpower commitments totaling 34 workers for the site. Despite DMS increasing its on-site staff, Ledcor remained dissatisfied with the pace and quality of the work. Ledcor began tracking DMS’s deficiencies using a digital program called PlanGrid and brought in other mechanical contractors, including Zencorp Mechanical Inc., to inspect the site in October 2019.
The situation came to a head on December 5, 2019, when Ledcor sent a second letter to DMS, stating that it remained in default. The letter re-asserted most of the original 20 issues and added new ones, such as late submission of sprinkler drawings. More urgently, it gave DMS a six-day notice to complete six “critical” items, including the installation of temporary heat for the winter and the completion of deficiencies on the third floor that were holding up drywall installation. After an on-site meeting on December 11, which did not resolve the impasse, Ledcor made the decision to remove DMS from the project. On January 2, 2020, while the president of DMS was traveling abroad, Ledcor sent a formal letter terminating DMS’s right to continue its work, barring it from the site and ceasing payments.
The termination triggered immediate legal action. DMS registered a construction lien for over $2.8 million on January 8, 2020, and later filed a statement of claim seeking over $1.6 million for the lien, damages for breach of contract, and $250,000 in punitive damages. Ledcor countersued for over $4.3 million, arguing that it incurred substantial costs to correct DMS’s deficient work and complete the mechanical scope with a replacement contractor, Zencorp. The matter proceeded to a 13-day trial before Associate Justice C. Wiebe of the Ontario Superior Court of Justice in early 2025.
In his detailed reasons for judgment, Associate Justice Wiebe first addressed the central question of whether Ledcor had wrongfully terminated the subcontract. He found that it had not. The judge determined that the subcontract did not require Ledcor to prove a fundamental breach, but rather a lower standard: that DMS had failed “to properly and diligently perform the Subcontract Work.” After weighing the evidence, including the testimony of expert witnesses from both sides, the judge was persuaded that DMS was responsible for five “dominant delays.” These included a chronic failure to provide sufficient manpower, a 3.5-month delay in getting the third-floor mechanical work ready for drywall, a 4.5-month delay in installing gas for temporary winter heating, persistent failures in providing proper sleeving for pipes through concrete slabs, and a chronic delay in correcting its own deficiencies. The judge noted that DMS never provided a contractually required written notice of delay to Ledcor, a failure that significantly weakened its argument that other trades or Ledcor’s management were primarily to blame. This, the court found, gave Ledcor the right to terminate DMS’s work under the terms of their agreement.
However, the court’s finding on the termination did not lead to a victory for Ledcor on its substantial counterclaim. The judge then undertook a meticulous analysis of the damages Ledcor claimed, which totaled more than $5.5 million with contractual markups. This analysis dramatically shifted the financial outcome of the case. The largest single item in Ledcor’s claim was for “replacement costs” to pay Zencorp for completing the work. Ledcor claimed this cost it over $2 million more than the remaining balance on DMS’s original contract. Associate Justice Wiebe found the evidence supporting this amount, particularly the testimony of Zencorp’s project manager, to be “profoundly confusing,” “sloppy,” and “manipulated.” Citing a major contradiction in the evidence regarding the actual agreed-upon price for the completion work, the court rejected Ledcor’s multi-million dollar figure and instead accepted a much lower total of $806,132.50 for the replacement work.
The judge similarly dismantled other parts of Ledcor’s counterclaim. A delay claim of nearly $1 million for Ledcor’s own overhead costs was rejected entirely because Ledcor failed to provide a critical path analysis proving DMS was solely responsible for the overall project delay. Other claims were either reduced or disallowed, including a large delay claim passed on from the electrical subcontractor, which the court found was completely unsubstantiated. The court did, however, allow several of Ledcor’s back-charges, including costs for coring and patching concrete, some drywall and electrical repairs, payments made directly to DMS’s unpaid suppliers, and the cost of a new subcontract for the sprinkler system completion.
After calculating all the accepted back-charges, the court found Ledcor’s total legitimate expenses resulting from the termination amounted to $2,445,685.15. The court then calculated the “unpaid balance” that was owed to DMS under the subcontract, which included unpaid monthly draws from late 2019, statutory holdback, and the value of the uncompleted portion of its contract. This balance was determined to be $2,496,679.52. Because the amount owed to DMS was slightly greater than Ledcor’s proven damages, the judge ordered Ledcor to pay DMS the difference: $50,994.37.
The court also dismissed DMS’s claim for punitive damages, finding Ledcor had acted in accordance with its contractual rights. It also dismissed Ledcor’s counterclaim for damages beyond the amount set off against the contract balance. Finally, the judge addressed an argument that Ledcor could not claim damages because it had recovered most of its losses from a subcontractor default insurance policy. The court ruled that the “private insurance exception” applied, meaning a wrongdoer cannot benefit from the other party’s prudence in having purchased insurance. The parties were instructed to attempt to settle the matter of legal costs, which for both sides exceeded $1 million.
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