Langford v. Trigiani Construction Limited, 2011 ONSC 6505

CITATION: Langford v. Trigiani Construction Limited, 2011 ONSC 6505

DIVISIONAL COURT FILE NO.: 10-218

DATE: 20111205

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

JENNINGS, McCARTNEY and SWINTON JJ.

B E T W E E N :

TIMOTHY LANGFORD and SUZANNE LANGFORD

Plaintiffs

(Appellants)

– and –

TRIGIANI CONSTRUCTION LIMITED

Defendant

(Respondent)

William P. Dermody and

Angela Papalia

for the Plaintiffs (Appellants)

Michael G. Emery

for the Defendant (Respondent)

HEARD: Hamilton, October 26, 2011

JENNINGS J.:

OVERVIEW

[1] The plaintiffs appeal from the judgment of Festeryga J. released May 19, 2010, awarding them $1,336.53, including pre-judgment interest of $164.13, and net of a judgment on the counter-claim in favour of the defendants for $100,000. The plaintiffs ask that the judgment be set aside and that they receive a judgment for the proceeds of an insurance policy, together with damages for breach of contract, totalling something in excess of $300,000. They also ask that the counter-claim be dismissed and that they receive the costs of the action and the appeal.

[2] The defendant asks that the appeal be dismissed with costs. It seeks leave to appeal from the costs disposition made by the trial judge and, if leave be granted, asks that it receive costs of the trial in the sum of $78,120.

FACTS

[3] The plaintiffs are husband and wife. In September, 2009, they entered into a contract with the defendant, a builder of homes, for the construction of a 7,200 square foot, single family dwelling for a fixed price of $1,078,500 plus GST. Payments were to be made in instalments throughout the course of the contract. Construction began. The plaintiffs paid the first two instalments as required by the contract. Framing of the home was almost completed to the point where the roof could be installed when the entire structure was consumed by a fire in December 2003.

[4] Pursuant to the contract between them, the defendant was to arrange at its expense an all risk insurance policy on a “replacement cost” basis showing the plaintiffs and the defendant as the insured, and to provide a copy of the policy to the plaintiffs within 30 days. The defendant took out the insurance, but did not name the plaintiffs as co-insured and did not deliver a copy of the policy to the plaintiffs. In the result, the defendant’s failure in that regard does not affect any issue to be tried.

[5] Following the fire, and without consulting the plaintiffs, the defendant negotiated with the insurer for insurance proceeds. It ultimately received from the insurer $195,990.

[6] At the time of the fire, the plaintiffs had paid to the defendant pursuant to the contract $154,080. The evidence before the trial judge was that when the fire occurred, a third instalment of $160,000 would shortly fall due under the contract, awaiting only the installation of the roof. That draw was never paid.

[7] Following the fire, the parties discussed how the building was to be completed. The plaintiffs wished changes to the original design to be made and the defendant complied with their requests for fresh drawings to incorporate the changes. However, there was no agreement on the price of the changes. The relationship between the parties deteriorated, possibly due in part to the direct intervention in the negotiations by Mrs. Langford’s father and undoubtedly not helped by the plaintiffs’ discovery that the defendant had received and kept the insurance proceeds. Ultimately, the plaintiffs decided to engage other contractors to complete the construction of the house.

ISSUES

[8] By the time of trial the parties had agreed that the insurance proceeds were to be deemed to be trust funds held by the defendant in trust for the plaintiffs and the defendant as their interests might appear. The issues tried by the trial judge were:

the determination of the amount of those interests,
which party had breached the contract, and
depending upon his finding on issue no. 2, whether the party not in breach of the contract was entitled to damages owing from the breach.

STANDARD OF REVIEW

[9] We accept the defendant’s submission that the standard of review is that in Housen v. Nikolaisen 2002 SCC 33, [2002] 2 SCR 235, palpable and overriding error on finding of fact, and correctness on questions of law.

ANALYSIS

[10] The trial judge found that the defendant was ready, willing and able to complete his agreement to build the house, but that the contract was repudiated by the plaintiffs who had others complete the work. The plaintiffs’ counsel made a forceful argument that the trial judge erred in his factual findings in support of his conclusion. The question is not whether we would have come to the same conclusion as did the trial judge, but whether there was evidence before the trial judge which, if he accepted, would support his conclusion. There clearly was such evidence and we are not able to interfere with the trial judge’s findings that the plaintiffs terminated the contract. He made no palpable or overriding error in his conclusion.

[11] Nor did he err in law in drawing an adverse inference because of the plaintiffs’ failure to call Mrs. Langford’s father as a witness.

[12] We were told during argument that the statement of claim filed by the plaintiffs asked for a finding that the insurance proceeds constituted a trust for the benefit of the parties to the extent of their interest, although a copy of that statement of claim was not included in the appeal book and compendium. The trial judge found in the plaintiff’s favour on that issue. That notwithstanding, when attempting to calculate the interests of the parties in the trust funds, the trial judge augmented the trust funds by adding to them the sum of $154,080 paid by the plaintiffs in the first two draws due under the contract. The trial judge did not explain his reasons for so doing and in my opinion it not only complicated the task of dividing the trust funds between the parties, but was an error in law.

[13] The language of the Builders’ Risk coverage in the insurance policy provided that the insurer would indemnify the insured against the direct loss caused to an amount not exceeding the least of the replacement cost value of the property, the insured’s interest in the property and the amount of insurance specified in the declarations in respect to the damaged property. Therefore, the plaintiffs’ interest in the trust funds was that which they had paid to the defendant, namely $154.080.

[14] It is agreed that although not to be considered a deduction from the trust funds there is owing by the plaintiffs to the defendant $73,315 for windows and doors paid for by the defendant, not destroyed in the fire, and subsequently used by the plaintiffs in the construction of their house. It is appropriate that that sum be set off against the amount due to the plaintiffs leaving a net amount to them from the trust funds of $80,765.00.

DAMAGES

[15] As he found that the plaintiffs terminated the contract, the trial judge was correct in dismissing the plaintiffs’ claim for damages arising out of the termination.

COUNTER-CLAIM

[16] The defendant counter-claimed for damages for loss of profits because of the plaintiffs’ termination of the contract.

[17] The totality of the trial judge’s discussion of the defendant’s counter-claim for loss of profits is to be found at paragraph 54 and 55 of his reasons as follows:

[54] I find that the defendant is entitled to loss of profits and supervision with respect to payments C to G inclusive since the defendant was not allowed to return to the premises to complete the contract. I am unable to put an exact figure on the loss, however, I am required, in my view, to put a figure on it the best I can on the evidence before me.

[55] I estimate the aforesaid loss on the counter-claim at $100,000.

[18] The trial judge referred to no evidence to support his conclusion, and thus it is impossible for us to review the conclusion that he arrived at. It is to be observed that as this was a fixed price contract, presumably profit was built into the draws paid on account of the contract price, and there should have been no loss of profit with respect to the work done and paid for prior to the fire.

[19] Daniel Trigiani testified that he built 15% profit into the contract. The defendant had almost completed the work that would have entitled it to the third draw of $160,000.00. There was expert evidence that the cost of finishing the roof would have been $10,372. Therefore, the defendant was entitled to the profit of 15% built into the work done, which I calculate as $20,000.00.

[20] The amount to be awarded for profits that would have been earned on the rest of the contract is more difficult to determine. Where the breach of a contract has caused loss to a party, but it is very difficult to quantify the loss, the difficulty in assessing damages is not a basis to refuse to make a damage award (Eastwalsh Homes Ltd. v. Anatal Developments Ltd. (1993), 12 O.R. (3d) 675 (C.A.)).

[21] The suggestion that the plaintiffs caused the defendant losses in a project called the Bluffs was not borne out by the evidence.

[22] Following the breach of contract, Mr. Trigiani testified that his company obtained other work finishing a basement n March or April, 2004 and in building another house in the summer of 2004. He provided few details of the amounts earned from these projects, saying that the basement project was worth $60,000 to $70,000 with a built-in profit margin of 15%. There was no detail provided about the other house project.

[23] In the absence of evidence of the amounts expected and earned through 2004, the court is not in a position to calculate the loss of profit, with the exception of the amounts earned on work up to the fire. Therefore, the award on the counterclaim is reduced to $20,000.00.

CROSS-APPEAL

[24] If needed, leave to appeal the award of costs is granted.

[25] It is trite to say that costs are a matter within the discretion of the trial judge. The defendant’s complaint is that the trial judge failed to acknowledge settlement attempts, made by the defendant, short of a rule 49 offer, but, strangely, pleaded without objection in the statement of defence. In his brief endorsement dealing with the disposition of costs the trial judge does not refer to the those settlement discussions, but they were clearly before him and there is nothing to suggest that he did not take them into account in his decision that in view of the divided success, the amounts claimed by each party and the amount recovered by each, no costs should be awarded, leaving each party to bear their own costs. It does not appear to me that there was an improper exercise of discretion and I would not interfere with the trial judge’s award as to costs based on the evidence that was before him. The cross-appeal is dismissed.

COSTS

[26] If the parties cannot agree on costs of the appeal, they may make submissions in writing not to exceed five pages in length to be delivered to the Registrar in Hamilton within 30 days of the release of these reasons.

CONCLUSION

[27] The appeal is allowed. When the damages on the counterclaim are subtracted from the amount awarded to the plaintiffs, the judgment below is varied to provide judgment for the plaintiffs for $60,765.00 plus pre-judgment interest from the date fixed by the trial judge and post-judgment interest in accordance with the rules. Leave to appeal the award of the costs of the trial is granted and the appeal is dismissed.

JENNINGS J.

McCARTNEY J.

SWINTON J.

RELEASED: December 5, 2011