the judgment of the Master for overhead is composed of two items, firstly, 4.99 per cent of the sum of $72,171.06, being the additional out-of-pocket costs incurred by the appellant (plaintiff), equals $3,601.33, plus $2,802 per month for 43 months equals $13,309.50, totalling $16,909.33 (the $1.50 error is unexplained). The 4.99 per cent used as the factor for the overhead was the average of the actual overhead taken as a percentage of direct cost for the fiscal year ending April 3, 1960 (3.35 per cent), and for the fiscal year ending April 3, 1961 (6.64 per cent). The period of 41 months was the additional time required for the completion of the contract due to the failure of the subcontractors (the defendants, respondents) to perform their part thereof.
The Court of Appeal seemed to have cut out the $2,802 per month for 4 months allowed in the overhead and allowed 4.99 per cent figuring it on $73,990.56 as the Court increased the direct cost by addition of $1,819.50 "miscellaneous".
In essence, therefore, the Court of Appeal has disallowed any compensation in overhead for the 4- months' delay. I have considered the argument made by counsel and I have read the cases cited and I am of the opinion that this is not a proper deduction. The overhead in a year is figured as a percentage of the direct cost and then that percentage is assigned to the direct cost of each individual job. When the job here in question occupied 4- months more of the plaintiff's (appellant's) time then during that 43 months the overhead costs were continuing to run but it was obtaining no revenue from which to defray the overhead costs. The allowance of 4.99 per cent on the extra direct cost is not a compensation for this delay but is an allowance of the same percentage rate on an item which would not normally have pr been in the year's operations, and I am therefore of the J. opinion that the Court of Appeal erred in taking this amount from the Master's assessment.
Counsel for the respondent during the argument mentioned a series of calculations which did not appear in the factum. Counsel were permitted additional time to put those calculations in writing and additional time to reply thereto.
I have perused both the additional figures supplied by the respondent and the appellant's reply, and I am convinced that the appellant has properly explained the examples submitted by the respondent. Indeed, I agree with the counsel for the appellant that the figures submitted by the respondent have confirmed the respondent's argument that the 41 month's delay when, of course, the plaintiff company could not devote its enterprise to other undertakings but when its fixed costs kept running, is largely responsible for the unproductive fiscal year ending on April 3, 1961, and for the very large increase in the percentage of its overhead to direct costs in that year as compared to the previous year.
I would therefore allow this appeal and increase the amount of the award by $13,309.50. The appellant is entitled to its costs in this Court and of the order of Stewart J. There will be no costs of the appeal to Aylen J. or in the Court of Appeal. There is, of course, no variation in the judgment of McRuer C.J.H.C.
J. (dissenting) :-Shore & Horwitz Construction Co. Limited took a contract from the Government of Canada to construct a building in the City of Ottawa for a total contract price of $724,300, the contract to be completed within one year. They employed Franki of Canada Limited to do the pile driving at a price of $57,500, to be completed within 22 days. The piles driven by Franki were totally rejected by inspectors appointed by the Government of Canada. The result of this was that the piles had to be driven again,. the whole structure had to be shifted by five feet and there was 4- months' delay in the completion of the main contract. Shore & Horwitz sued Franki for damages. They established liability and the trial judge referred the assessment of damages to the Local Master at Ottawa. The two relevant paragraphs in the order of reference are:
that that The Local Master assessed the damages at $99,598.13 and itemized them under 13 heads. Aylen J. confirmed the report and Franki appealed on two items:
(a) OVERHEAD, $16,909.38
The Local Master allowed the sum of $16,909.33 for overhead. Without giving reasons, the Court of Appeal reduced this item to $3,692.10. In spite of the lack of reasons, it is not difficult to trace the principles on which the Court acted. The sum of $3,692.10 was an allowance of 4.99 per cent on $73,990, which was the actual cost of certain additional construction which Shore & Horwitz did and for which Franki was to pay.
The disallowed sum of $13,309.50 is claimed by Shore & Horwitz for the delay. They say that when they took the contract, their overhead was established at $2,802 per month for a twelve month period of performance and that because Franki delayed the performance of the contract for a period of 4- months, Franki must pay for that period of delay at the rate originally established of $2,802 per month. This is the sole basis of the claim. Delay resulting from the performance by a subcontractor may well cause loss to the main contractor, such loss of profit arising from inability to accept or to move on to another contract. Nothing of that kind is alleged or proved here. Further, there is no suggestion that Shore & Horwitz stayed in business solely for the purpose of completing this delayed job or with existing overhead made necessary during the period of delay. In the absence of any evidence to support such a claim, the Court of Appeal was right in disallowing the sum of $13,309.50.
The Court of Appeal, also without giving reasons, reduced this item from $7,539.91 to $1,256.66. However, there is no dispute that the sum of $1,256.66 was arrived at by giving an allowance at the rate of 10 per cent per annum for a period of 43 months on the value of the plant tied up during this period. This plant consisted
Shore & Horwitz contend that they should be compensated on a commercial rental basis for this plant and equipment which was tied up too long. The Local Master accepted this and allowed them 5 per cent per month for the period 4- months on the above valuation. It should be made clear that this was an idle plant, not in use on the job and, course, not capable of profitable use until moved to another job. If Shore & Horwitz thought that they should have compensation on the basis that this was a profit-making asset during the period of the tie-up, they should have given evidence that there was profitable work for this asset to do elsewhere. I think that the Court of Appeal was right in treating this as a non-profit-earning asset during the period of 41 months. The allowance of 10 per cent per annum on the valuation was generous.
There is a well established distinction between compensation for loss of use when the property is profit-earning and non-profit-earning: Mayne & McGregor on Damages, 12th ed., pp. 578-590; Street, Principles of the Law of Damages, pp. 203-210. I adopt the statement of Street at p. 207 as a compendious summary: