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Liability for Unknown Site Conditions: Priestly v. Walsh

The recent Ontario Superior Court of Justice decision, Priestly Demolition Inc. v. Walsh Construction Company Canada, 2022 ONSC 5071, has emphasized the duty of care owed by contractors regarding unknown or differing site conditions and the liability for damages arising out of subcontractors’ negligence in proceeding with the work when faced with such conditions.


In May 2013, the City of Toronto (the “Owner”) retained Walsh Construction Company Canada (“Walsh”) as general contractor for a project at the Ashbridges Bay Wastewater Treatment Plant (the “Project”). In September 2013, Walsh retained Priestly Demolition Inc. (“Priestly”) as its demolition subcontractor (the “Subcontract”). Priestly was to demolish a building called the Odour Control Building (the “OCB”) at the Project site, which included a room called the MCC Room. There was an old duct bank running under the MCC room connecting to an electrical substation. However, there was some inconsistency in the Project drawings as to the exact location of the old duct bank in relation to the MCC room.
In May 2019, Walsh and Priestly started working on demolishing the OCB. Walsh sent a Shutdown Request Notification to the City asking whether all services to the OCB were disconnected. The City confirmed that it had isolated all services to and from the building. In July 2019, Priestly finalized its demolition plan, which instructed that should the existing conditions vary from the plan, work was to be halted immediately and the Project engineers to be contacted for assessment. In July 2019, Walsh approved the demolition plan. However, not all of the cables running through the old duct bank were disconnected.
Demolition began in July 2019. During the work, Priestly’s operator encountered the old duct bank and the cables inside. He contacted Priestly’s site superintendent for clarification multiple times and was told to proceed with the demolition. Priestly’s operator proceeded to remove a number of cables which led to the plant losing power.
Walsh began remedial work to restore power to the plant via temporary generators and repairing the old duct bank, which took months and cost Walsh $866,680.72. Priestly continued its work but was not paid for all rendered invoices due to the damage done to the old duct bank. Priestly registered a lien for the amount of $390,953.95. 
Walsh took the position that it should be allowed to offset the cost of repairing the old duct bank against the amount it owed to Priestly. The noteworthy issues of this proceeding were: (i) whether Priestly was negligent and breached the subcontract in damaging the old duct bank; and (ii) whether there was contributory negligence attributable to Walsh.

Was Priestly Negligent and therefore Breached the Subcontract?

The court found that Priestly appeared to have breached the Subcontract in a number of ways. However, to find whether Priestly actually breached the subcontract, the judge conducted an analysis on the standard of care and whether Priestly was negligent.
The court found that there was a high standard of care associated with the demolition work, based on factors such as the nature of the Project site (a water treatment plant), the need for it to stay operational at all times, the gravity that damage to the utilities could cause to the facility, the low cost of avoidance, and the risk of serious injury to the demolition crew.

The court then found that Priestly did not meet the high standard of care and therefore was in fact negligent, and in breach of the subcontract, for the following reasons:

  1. It failed to examine the provided Subcontract drawings and locates properly in relation to the old duct bank, failed to locate the functioning old duct bank as indicated in those documents, failed to mark it off and failed to protect it;
  2. It failed to confirm which cables leading to the OCB had been disconnected and which ones had not been disconnected;
  3. It failed to obtain its own locates for the utilities concerning the OCB;
  4. It failed to follow its own demolition plan and stop when the old duct bank was unexpectedly encountered by its crew to get clarification from the demolition engineer and project consultant; and,
  5. It failed to have a supervisor present when the old duct bank was worked on.
Causation and quantum of damages were not contested by Priestly and the judge found no evidence to the contrary.

Was there contributory negligence attributable to Walsh?

The court found that Walsh did contribute to the damage by its own negligence. The court specifically held that “[j]ust as there was a duty of care on the subcontractor, Priestly, concerning the performance of the Subcontract work, there was, in my view, a duty of care on Walsh in performing the contractor’s duties of management and coordination of the project”, notwithstanding a clause in the Subcontract stating “[Walsh’s] review shall not relieve [Priestly] of responsibility for errors and omissions in the Shop Drawings or for all requirements of the Subcontract Documents.”
Walsh owed the same duty of care and standard of care as Priestly. Walsh was negligent in failing to:
  1. Verify Priestly’s demolition plan;
  2. Ensure the old duct bank was protected;
  3. Ensure utilities were isolated;
  4. Conduct a proper walkthrough with Priestly regarding the demolition; and,
  5. Communicate its knowledge regarding the old duct bank to Priestly.
However, the court did not assign a large degree of fault to Walsh, mainly based on the fact that according to the demolition plan, Priestly should have halted operation when they encountered the old duct bank and sought clarification. Had they done that, much of the damage would have been avoided.

The Outcome

The court assigned 15% of the fault to Walsh and the rest to Priestly. Therefore, while Priestly was entitled to the amount claimed in the lien, Walsh was allowed to offset the lien amount with 85% of the cost of repairs to the old duct bank, which resulted in a judgement for damages payable to Walsh by Priestly. 

Key Takeaways

This decision serves as a reminder that subcontractors are required to do their due diligence in obtaining information about their work and the project site, and to seek clarifications regarding the scope of their work and unforeseen conditions encountered during such. This duty is heightened when the operation of the project site is critical, the risk of harm is high, and the cost of avoidance is low. 
However, notwithstanding any contractual provisions that a contractor’s review does not release the subcontractor from liability for errors and omissions, the contractor has the same high standard of care in reviewing the work of the subcontractor and ensuring its accuracy and compliance with project requirements. Failing to do so can result in the contractor being found to have contributed to the negligence and liable for a portion of the damages.