The landscape of high rise construction in Toronto often involves complex layers of contracts and substantial financial risks, a reality that was recently highlighted in a ruling by the Ontario Superior Court of Justice1. On January 2, 2026, Associate Justice C. Wiebe issued a decision in the case of Dependable Mechanical Systems Inc. v. Concord Adex Developments Corp., addressing a heated dispute over tens of millions of dollars in construction liens. The case centered on several major condominium projects, including the Block 22 development at 23 Spadina Avenue and the Block 15 project at 40 Esther Shiner Boulevard. At issue was a request by developers and construction managers to drastically reduce the security posted for liens registered by a mechanical subcontractor, Dependable Mechanical Systems Inc., which is also known as the Dependable Group of Companies.
The history of the dispute dates back to July 2019, when Reliance Construction Toronto Inc., acting as the construction manager for the developer Concord Adex Developments Corp., hired Dependable Mechanical Systems Inc. (DMSI) for a massive mechanical scope of work. This work was spread across four phases of the Block 22 project, ranging from the parking garage and podium to the high rise towers. The parties entered into four fixed price subcontracts, which are standard in the industry but often carry rigid terms regarding price increases. Specifically, these contracts stated that there would be no changes to the price simply due to cost increases and required that any claim for delay costs be supported by a timely written notice within seven days of the delay starting.
While the original master schedule for Block 22 anticipated that the work would be substantially performed by July 5, 2023, the project faced significant and prolonged delays. As the timeline stretched, the construction environment in Toronto shifted dramatically due to rapid inflation. According to evidence provided by Rajesh Ahuja, the principal of DMSI, the costs for mechanical work in the high rise market surged by an average of 60% to 70% during this period. By late 2021, it had become clear to the subcontractor that the original 2023 completion date was no longer attainable. Reliance eventually issued 27 different schedule updates, pushing the anticipated date of substantial performance for Block 22 all the way to August 2025.
As the delays mounted and costs spiraled, DMSI began seeking financial assistance to stay afloat. By October 2022, the subcontractor had completed only 32% of its work on Block 22, far behind the expected 90%. Similar issues plagued the Block 15 project, where DMSI had completed only 3% of its scope. Mr. Ahuja sent a pivotal email to the developers on October 27, 2022, outlining the dire financial situation. He noted that DMSI had already absorbed nearly $1,500,000 in escalation costs for Block 22 and anticipated overages between $6,600,000 and $8,000,000 for Block 15. The email explicitly requested price increases, stating that the company would be unable to complete the work without additional funding.
In response to these financial pressures, Concord and DMSI entered into a series of discussions that led to what were termed Gratuitous Payment Agreements in April 2023. Under these agreements, Concord agreed to provide $9,000,000 in additional funding across several projects, including Block 22, Block 15, and others known as Widmer and Block 11. In exchange for this support, DMSI provided security in the form of preferred shares in its company to a Concord affiliate. Crucially, during the negotiations for this relief, Mr. Ahuja sent an email on January 13, 2023, promising that DMSI would not request any further support for escalation costs beyond the $9,000,000. This promise would later become a central point of contention in the courtroom.
Despite the infusion of $9,000,000, DMSI continued to struggle with rising costs and mounting debts, including obligations to the Canada Revenue Agency and various unions. By mid 2024, the situation reached a breaking point. Concord attempted to keep the projects moving by directly paying DMSI’s suppliers approximately $3,500,000 between May and July 2024. However, the problems persisted, and in late August and early September 2024, Concord terminated DMSI’s right to work on the projects, citing defaults. This led to a flurry of legal activity, with DMSI registering multiple claims for lien on the project titles. On Block 22 alone, the total of the four liens registered by DMSI amounted to nearly $29,000,000.
Concord and Reliance subsequently moved to vacate these liens by posting security, a common practice that allows construction to proceed while the legal merits of the liens are sorted out. However, they then brought a motion under the Construction Act to have that security reduced by over $22,000,000. Their primary argument was that this portion of the lien represented cost escalations that DMSI had no legal right to claim. They argued that the fixed price contracts barred such claims, that DMSI had failed to provide proper notice of delay, and that Mr. Ahuja’s January 2023 email constituted a binding waiver that prevented the subcontractor from seeking any money beyond the initial $9,000,000 assistance package.
In his analysis, Associate Justice Wiebe noted that a motion to reduce security is not a substitute for a full trial. He explained that the moving parties bear the burden of proving that there is no reasonable basis for the amount claimed in the lien. The court must be satisfied that the lien is clearly and unequivocally excessive before it will take the step of reducing the security. Justice Wiebe then addressed the three main hurdles raised by the developers: the issue of notice, the effect of the January 2023 promise, and the lack of precise documentation regarding the dollar amounts claimed.
Regarding the notice of delay, the court found that while the contracts required strict written notice within seven days, the reality of the project was more nuanced. Justice Wiebe pointed out that Reliance, as the construction manager, was well aware of the massive delays, having issued 27 schedule updates themselves. He noted that the October 2022 email from Mr. Ahuja, while framed as a request for help, clearly communicated the financial impact of the delays. The judge ruled that whether this email satisfied the notice requirements was a matter that required a trial to determine, especially since there was no clear evidence on exactly when the specific delays causing the cost increases began.
The court also scrutinized the promise made by Mr. Ahuja in January 2023. While the developers argued that this was a binding waiver of any future claims, Justice Wiebe observed that the subsequent actions of the parties complicated the matter. Even after the promise was made, DMSI continued to ask for more money, and Concord actually provided millions more in direct payments to suppliers in 2024. This behavior suggested that the developers might have waived the subcontractor’s waiver. The judge concluded that the legal effect of the promise and whether it was made under duress or as a formal contract condition could only be resolved through a more complete evidentiary record at trial.
Finally, the court addressed the question of quantum, or the specific calculation of the $22,000,000. The developers criticized DMSI for using a modified total cost approach, which essentially compares actual costs against original estimates. They pointed out that DMSI had lost its original tender documents, making its baseline estimates less reliable. However, Justice Wiebe noted that DMSI had provided invoices for materials and equipment and contemporary lists of labour hours. He stated that while the subcontractor’s math might be imprecise or difficult to prove, it was not without a reasonable basis. The judge emphasized that determining the merits of such complex delay claims is the function of a trial judge, not a motion judge.
Ultimately, Associate Justice Wiebe dismissed the request to reduce the security. The decision means that the full amount of the security remains in place to protect DMSI’s claims as the litigation moves toward a trial. The court also addressed the issue of legal costs for the motion, noting that DMSI, as the successful party, appeared entitled to costs. The parties were encouraged to settle the cost issue themselves, with a schedule for written submissions set for later in January 2026 if they are unable to reach an agreement. The ruling serves as a reminder of the high stakes and procedural complexities involved when massive construction projects face the twin pressures of schedule delays and economic inflation.
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