Executive Summary: Key Legal and Evidentiary Issues

• Central issue was whether Kelson directly subcontracted with Sjostrom for sheet metal labour

• Sjostrom’s lien and contract claims failed due to insufficient proof of actual labour hours worked

• Amar succeeded in claiming the full contract balance after the change order removed its remaining scope

• Kelson’s claim for indemnity or set-off was denied due to failure to issue a valid default notice under the contract

• The associate judge’s factual findings were upheld due to the high deference owed to trial-level credibility assessments

• Motions by both Sjostrom and Kelson to oppose the associate judge’s report were dismissed in full

Facts of the case

The litigation stems from construction work on the Centre for Cell & Vector Production for the University Health Network in Toronto. The general contractor, Turner Construction, subcontracted mechanical work to Geo A. Kelson Company Limited. Kelson then subcontracted A. Amar and Associates Ltd. for sheet metal work. Amar further retained Sjostrom Sheet Metal Ltd. to supply on-site sheet metal labour.

In July 2018, Sjostrom walked off the job due to non-payment by Amar. Kelson negotiated directly with Sjostrom, and the parties agreed that Kelson would pay Sjostrom directly going forward. On July 24, 2018, Kelson issued a change order to Amar, deducting $61,924.50 for “work performed by others,” a reference to Sjostrom.

Subsequently, Amar claimed $209,737.88 from Kelson for unpaid work under its fixed-price contract. Sjostrom preserved a construction lien for $162,840 and later commenced a lien action and breach of contract claim for $161,585.76. Kelson, for its part, maintained it owed neither party until the lien was resolved and counterclaimed against Amar.

Outcome at trial

Associate Justice Robinson heard both actions together in October 2022. He found that Sjostrom had entered into a sub-subcontract with Kelson, but that it failed to prove its damages. The only evidence of hours worked came from internal summaries prepared months after the fact, based on hearsay rather than first-hand accounts or contemporaneous time records. As a result, Sjostrom's claim and lien were dismissed.

In contrast, the associate judge ruled in favour of Amar, concluding that the July 24 change order fully removed sheet metal labour from Amar’s scope of work. Therefore, Kelson was obligated to pay the entire unpaid balance under Amar’s fixed-price contract. The court awarded Amar $209,737.88.

Review of the associate judge’s decision

Both Sjostrom and Kelson brought motions under Rule 54.09 of the Rules of Civil Procedure, challenging the associate judge’s findings. Sjostrom alleged that the wrong legal standard had been applied and that the evidence was misapprehended. Justice Centa rejected these arguments, affirming that the associate judge correctly applied the balance of probabilities standard and considered the relevant evidence, including testimony and contract documents.

Kelson argued that the change order did not remove Amar’s sheet metal scope and that it should be indemnified for payments made to Sjostrom. Justice Centa dismissed these arguments as well, finding that the associate judge reasonably interpreted the ambiguous change order in context and concluded that Amar's responsibility for sheet metal work had been removed. The judge also held that Kelson’s failure to issue a timely notice of default under the contract barred its claim for indemnity or set-off.

Final ruling

Justice Centa dismissed both motions and confirmed the associate judge’s report. Amar was awarded the full amount claimed, and Sjostrom’s claims were denied. The decision affirms the importance of proper documentation in support of damage claims, the enforceability of formal contract provisions such as default notices, and the significant deference owed to trial-level fact-finding in construction litigation.