Superior Court of Justice - Ontario

Divisional Court

Court File No: 03/08 Date: 2008-12-04

Re: Onyx-Fire Protection Services Inc. Plaintiff (Respondent)

• and -

Scepter Industries Ltd. Defendant (Appellant)

Before: KENT, LEDERMAN and SWINTON, JJ.

Counsel: Brent J. Arnold, for the Defendant (Appellant) Christopher Ashby, for the Plaintiff (Respondent)

Heard at Toronto: November 26, 2008

ENDORSEMENT

Nature of Proceeding

1This is an appeal from the decision of Allen J. dated December 5, 2007 in which she held that the defendant, Scepter Industries Ltd. ("Scepter"), was to pay the plaintiff, Onyx-Fire Protection Services Inc. ("Onyx"), $21,466.17 plus interest and costs.

2Scepter was the general contractor on a project to construct a building for an H & M Store in the Eaton Centre Mall in the City of Toronto. Onyx was the subcontractor hired to install the building's fire protection system.

3On July 13, 2004, a heavy rainfall caused damage to the escalators inside the store. The water was able to enter the store because a drain line cap was not put back in place following the draining of the fire protection system.

4Scepter claims that H & M back-charged Scepter for the cost of repairing the water damage by deducting $27,969.80 from a Scepter progress draw.

5Onyx invoiced Scepter for its work on the project. Scepter advised Onyx that it would not pay the full amount in light of several adjustments required, including the deduction of H & M's back-charge. Onyx disputed this and subsequently sued.

6There was also a dispute regarding a mark-up fee of 10% charged by Onyx for administering a fire watch service. Scepter argued that Onyx never provided this service and disputed Onyx's entitlement to this amount.

7In her judgment, the trial judge found that:

a) Scepter failed to prove that the flood and consequent damage were caused by Onyx's negligence;

b) Scepter failed to prove the $27,969.80 back-charge from H & M;

c) Scepter accepted a 10% fee for Onyx providing fire watch services and Onyx was entitled to the mark-up of $6,408.44.

Causation and Damages

8The trial judge made a palpable and overriding error in failing to find on the balance of probabilities that the evidence established that the flood and consequent damage were caused by Onyx's negligence. In her Reasons, the trial judge misidentified Nick Rossit as being Scepter's project manager when he, in fact, was Onyx's project manager although he testified as a defence witness. That being the case, both Onyx and Scepter through the testimony of each of their project managers concurred that only Onyx's personnel could have been responsible for the error in leaving the drain line cap off, as only Onyx's employees were working on the drain line at the material time. Therefore, this evidence (and it was the only evidence before the trial judge on this issue) leads to the inescapable conclusion that Onyx was negligent and responsible for the ensuing damage.

9Moreover, the trial judge misapprehended the evidence in finding that Scepter did not mention the flooding to Onyx until almost a year after the incident. In fact, Scepter gave written notice to Onyx the day after the incident indicating that the flood was caused by the fault of one of Onyx's employees. Nick Rossit testified that he went to the premises the morning after the flood and observed water damage to the escalator.

Back-charge

10The trial judge was further in error in finding that there was no evidence or testimony to prove the back-charge of $27,969.80.

11Fujitech Canada Inc. (the trial judge misidentified it as the company that provided fire watch services) performed repair work on the escalator for which it invoiced H & M. The testimony of Scepter's witness was that H & M back-charged Scepter for the cost of repairing the water damage by deducting $27,969.80 from a Scepter progress draw. This back-charge was specifically brought to Onyx's attention in a letter dated June 13, 2005 to which was appended an invoice for this amount from Fujitech, the company that had repaired the water damage, and statements of adjustments that included the following entry: "Water damage to escalator due to drain being left open by Onyx … $27,969.80."

12This evidence was uncontradicted and established the fact that there had been water damage; that the cost of repairs was in the amount of $27,969.80; and a deduction was made from Scepter's progress draw. Accordingly, there was no basis for the trial judge's finding that Scepter did not prove the back-charge in question.

Administrative Mark-Up Fee

13The 10% administrative mark-up fee was to be in consideration of Onyx coordinating and paying for fire watch services during construction. There is no question on the evidence that no such services were, in fact, performed by Onyx. In anticipation that Onyx would have to pay the property owner, Cadillac Fairview, for those costs, Onyx carried a receivable from Scepter on its books for a number of months. As it turned out, Scepter, not Onyx, paid Cadillac Fairview directly for the fire watch services that were provided. Onyx, therefore, was relieved of its obligation to pay for such services and, thus, did nothing to earn the 10% administrative mark-up fee.

14The trial judge took the view that by its conduct, Scepter had accepted Onyx's entitlement to the administrative fee. However, the evidence indicates that Scepter had indicated to Onyx in a letter as early as June 13, 2005 that it would not pay this fee as Onyx had not performed any fire watch services.

15The trial judge stated that Scepter's position with respect to the administrative fee was not set out in its original pleading, but was referred to only at the opening of trial when it amended its statement of defence to include this denial of Onyx's entitlement to a mark-up charge. The amendment to the pleading in this Simplified Rules Procedure action was sought at the opening of trial rather than at an earlier time, probably as a cost saving procedural measure. More importantly, the amendment of the pleading to include this defence was not opposed by Onyx's counsel and came as no surprise to Onyx. This procedural amendment cannot give rise to the inference that the trial judge suggested.

Conclusion

16Because of the reviewable errors set out herein, either singly or cumulatively, the trial judgment cannot stand. The amount claimed by Onyx is less than the amount owing to Scepter by way of set-off. The appeal is allowed, the trial judgment is set aside and the action is dismissed.

17For the first time on the hearing of the appeal, counsel for Scepter sought judgment in Scepter's favour for the excess by which the set-off exceeds Onyx's claim. Such a judgment was not sought in the amended statement of defence at trial. Nor was it claimed in its Notice of Appeal or even referred to in the appellant's factum. That being the case, Scepter is not entitled to a judgment in its favour.

18Scepter will have its costs at trial fixed at $8,000 all inclusive and its costs on appeal, fixed at $3,000 all inclusive for a total of $11,000 payable by Onyx.

Kent J.

Lederman J.

Swinton J.

Released: December 4, 2008