CITATION: Corflex v. Unimac, 2012 ONSC 5419

DIVISIONAL COURT FILE NO.: DC-11-00501-00

DATE: 20120925

ONTARIO

SUPERIOR COURT OF JUSTICE

(DIVISIONAL COURT)

BETWEEN:

CORFLEX PARTITIONS

Appellant

– and –

UNIMAC GROUP LTD.

Respondent

B. Morris, for the Appellant

J.P. Baichoo, for the Respondent

HEARD: September 11, 2012

ON APPEAL FROM THE JUDGMENT OF DEPUTY JUDGE C. MARCHAND DATED SEPTEMBER 20, 2011

McCARTHY J.:

[1] This is an appeal from the decision of Deputy Judge C. Marchand dated September 20, 2011, dismissing the plaintiff’s claim. The appeal is brought to this court pursuant to ss. 19(1) and 19(1.2)(a) of the Courts of Justice Act, 1990, R.S.O. c. C.43.

[2] The grounds for the appeal are that the trial judge erred in law on the issues of mitigation, entitlement to profits, and breach of contract. In addition, the judge both misapprehended the testimony of the Plaintiff’s witness Jason Oliveira and made key findings without an evidentiary basis.

The Standard of Review

[3] On a question of law, the standard of review for an appellate court is correctness. On a question of fact, the standard of review is one of palpable and overriding error: the lower court judge must be found to have been clearly wrong in his factual findings. On a question of mixed fact and law, the standard of review lies along a spectrum and the lower court judge is to be afforded a reasonable degree of deference (see R v. Davidson, 2011 ONSC 249, 231 C.R.R. (2d) 342).

Summary of Facts

[4] The plaintiff (appellant) was a supplier and installer of partitioning walls. The defendant (respondent) was a general contractor who provided certain design and building services for its client, Oneida (“the project”). On May 7, 2009, the defendant ordered $18,602 worth of custom partitions from the plaintiff. On July 10, 2009, the defendant ordered an additional $2,195 worth of custom partitions from the plaintiff. These partitions were intended for the project. Corflex, in turn, ordered these partitions from its own suppliers: from Hufcor Inc., on October 16, 2009, and from Amstel Manufacturing Inc., on November 10, 2009. When the partition units were ready for delivery, the defendant declined acceptance.

[5] The defendant stated that it advised the plaintiff, in late November 2009, that Oneida had suspended all work in connection with the project. The defendant contended that it also advised the plaintiff that the delivery of the partitions to the Oneida project had been suspended, unless and until Unimac and Oneida were able to reconcile their differences. The defendant denied that the partitions were custom built. It took the position that, in any event, the plaintiff failed to mitigate its damages.

[6] The plaintiff denied that Unimac had provided this notice. It was the plaintiff’s position that the defendant only informed Corflex that it would not accept delivery of the partitions after Corflex had received the shipment of the partitions from its supplier. By this time, the plaintiff had already incurred the entire cost associated with the order and the delivery from the suppliers. According to the plaintiff, the defendant would not take delivery because it could not afford to pay for the partitions.

Findings of the Trial Judge

[7] The trial judge made a number of findings of fact on the evidentiary record. The appellant argued that certain findings were either unsupported by the evidence, or arrived at through a misapprehension of the evidence. These constitute overriding and palpable errors which call for appellate court intervention. Specifically, the appellant pointed to the trial judge’s findings that:

(a) the defendant notified the plaintiff that the doors were to be put on hold; and,

(b) the plaintiff’s witness could not tell the court when Corflex ordered the doors to be manufactured.

[8] I agree that there was clear evidence before the court of the date the partitions were ordered from the suppliers. The dated purchase orders to the respective suppliers were both made exhibits at trial. The documentary evidence was supported by the viva voce evidence of witness Jason Oliveira. The trial judge’s finding in this regard requires scrutiny. A moment after making the impugned finding, he referred to the very exhibits that supported the oral evidence of the witness.

[9] However, in reading more fully the reasons for judgment, it is apparent that the trial judge was more concerned with when the doors were actually made. At the bottom of page 38 of the transcript, he stated, “I don’t know when those doors were made.” This information was critical to the trial judge. It formed part of his rationale for denying the plaintiff the relief sought, namely that there was no evidence before the court that the plaintiff made any effort to have the manufacturing of the doors stopped.

[10] During an exchange between counsel for the plaintiff and the court which took place during the trial judge’s oral reasons, the court reiterated its concern with the absence of evidence on the point:

The Court: I think the first issue of mitigation would have been for the Plaintiff to be before me and say, ‘we immediately upon being told we don’t need those doors now, to stop the manufacturing of those doors.’ I have no such evidence that they tried to do that.

Mr. Morris: But they were already made by the time that they were told.

The Court: I have no evidence that they were made.

Mr. Morris: Okay

The Court: I have no such evidence. I know that’s what’s being argued, but that’s not what the evidence revealed.

Mr. Morris: But is that standard procedure? It was argued that this is standard procedure in the industry and that’s why I proceeded like this.

The Court: I have no evidence before me as to when these doors were made. I have evidence that it was invoiced on October the 16th, to be delivered on December the 15th. The delivery date was certainly way beyond the time when the Plaintiff heard and learned that the doors were not needed. And I have no evidence before me that they tried to stop building those doors.

[11] Counsel for the plaintiff insisted that the partitions were already made by the time defendant’s representative allegedly notified the plaintiff that the doors were to be put on hold. The trial judge disagreed, pointing out that there was no evidence “that they were made.” The plaintiff was seemingly unable at that point to direct the court to any such evidence. Indeed, the record before me does not contain any evidence to suggest that the partitions were partially or entirely manufactured by mid to late November. Similarly, there was no evidence led by the plaintiff as to the status of the partitions at the time of the defendant’s notification of suspension. Since the trial judge accepted that the notification had in fact been given, it was crucial for him to understand what, if any, efforts were made by the plaintiff to have the production of the partitions stopped, and what stage of production they might have been at as at the date of this notification.

[12] It is worth noting that, in the exchange with counsel for the plaintiff on the above point, the trial judge corrected his earlier erroneous finding about when the doors (partitions) were ordered. He explicitly referred to the invoice of October 16. He acknowledged the delivery date (December 15) but noted that this date was, “...way beyond the time the Plaintiff heard and learned that the doors were not needed.” The trial judge then reiterated that he had no evidence before him that the plaintiff tried to stop building those doors.

[13] The appellant contended that the trial judge’s finding about the notification did not correspond with the evidence supplied at trial. It is clear from the record that the only basis upon which that finding could have been made is the testimony supplied by Ken Tsui found at pages 33-34 of the transcript. Speaking about a conversation that he had with Corflex at the end of November 2011, the witness stated as follows:

He ask me what’s the – what’s your situation right now, and I told him honestly were sent off the site because we have a dispute with the owner, so they sent us off the site, to put this project in suspension...That was the end of November. I’m not sure of the exact day, but the end of November. And then I told him, Joseph, that we – I’m not sure, because everything is under negotiation right now, so I was not sure when we will get back to the site. And even though I think it’s two or three conversation – I had with Joseph, and all of them, they just – they just question about when we will be – get back to the site and my answers was still the same, because I don’t know okay. But even though at that time I was never being notified the door has been made.

[14] The trial judge accepted as a fact that the defendant notified the plaintiff that the doors were to be put on hold. The above excerpt from the record is the only evidence upon which he could have made that finding. There was nothing in writing to substantiate or buttress the oral testimony.

Appellate Review of Finding of Fact

[15] The trial judge was within his rights to make the finding that he did. While the evidentiary record was thin on the point, the trial judge accepted that Mr. Tsui had advised the plaintiff of the project’s suspension and that this constituted adequate notice to the plaintiff that the manufacturing of the partitions should be suspended. It is not for this appellate court to substitute its own finding for that of the trial judge. Nor should it embark on speculation of what other trial judges might have concluded on the same evidentiary record. On a question of fact, the test for appellate review is whether the trial judge committed a palpable and overriding error. In this case, I conclude that he did not. There was evidence upon which the trial judge could conclude that the notification of project suspension was given.

A Question of Mixed Law and Fact

[16] The finding of mitigation in this case is one of mixed law and fact. It was open to the trial judge to find that notice had been given to the plaintiff to suspend the manufacture of the doors. Yet, the plaintiff could only have been expected to reasonably mitigate (that is, instruct its suppliers to suspend the construction of the partitions) to the extent that the partitions were not wholly or partially manufactured by the date of that notice. The trial judge accepted that the order for manufacturing was placed with the suppliers beginning on October 16, that the stated delivery date was December 15, and that the defendant gave notification to suspend in late November. Implicit in the trial judge’s reasoning is that reasonable diligence by the plaintiff would have allowed it to arrest the entire manufacturing process before it began. In other words, reasonable mitigation could have prevented the entire loss alleged to have been suffered. There was no evidence as to what stage the manufacturing of the partitions was at in late November. There was no evidence as to what charges, if any, the plaintiff would have incurred from the suppliers had the orders been cancelled or suspended on, or around, the notification date. That was evidence that presumably the plaintiff could have lead. While the plaintiff did not accept the allegation that the defendant had given notice sufficient to trigger the duty to mitigate, it must have anticipated the defendant calling evidence to that effect at trial in light of the defendant’s pleadings. The trial judge made a finding that, in the absence of evidence to the contrary, the plaintiff had failed to mitigate. While it would have been open to the trial judge to infer from the facts that the partitions were at least partially completed by the notification date, he was equally entitled not make such an inference. Again, it is not for an appellate court to substitute its inference for that of the trial judge unless the latter cannot be reasonably supported on the evidence. Nor should it speculate on what the evidence might have been had it been adduced. In this case, there was no evidence led on the issue of when the partitions were completed, or what stage their construction was at on the date of notification. [emphasis mine]

The Application of the Law

[17] On a question of law, the standard of appellate review is that of correctness. Having found that the plaintiff had a duty to mitigate its potential losses and failed to do so, the trial judge dismissed the plaintiff’s claim on that basis. Failure to mitigate is a complete defence to a claim of this nature. A plaintiff must take all reasonable measures to reduce his or her damages and cannot claim any damages due to its neglect to take such steps (see 3Com Corp v. Zorin International (2006), 221 O.A.C. 222 at para. 59 (C.A.). Failure to mitigate does not mean that the total claim of the plaintiff is barred. It is merely reduced in cases of contract to the loss the plaintiff would have suffered if he had acted reasonably (see Ippolito v. Janiak (1982), 34 O.R. (2d) 151, aff’d 1985 62 (SCC), [1985] 1 S.C.R. 146.) In the absence of evidence that the plaintiff took any steps to arrest the construction of the partitions or evidence of the state of construction of the partitions at the critical time, the trial judge was unwilling to find anything but a total failure to mitigate. The trial judge committed no error in law.

[18] The Notice of Appeal lists further grounds to include (i) that the judge misinterpreted the law regarding the plaintiff’s entitlement to profits; and, (ii) that the judge misinterpreted the law regarding breach of contract.

[19] I was directed to no findings of the trial judge on the first ground. The trial judge declined to assess damages because he dismissed the plaintiff’s claims on other grounds. There was no adjudication on the issue of “entitlement to profits”.

[20] In respect of the law regarding breach of contract, the appellant has failed to elucidate what aspect of the law the trial judge misinterpreted. The question posed in Part V of the appellant’s factum is, “was His Honour unreasonable in failing to make any finding regarding whether the delivery of the doors was attempted by the Plaintiff?” The answer, plainly, is no. The ratio decidendi of the trial judge wass clearly set out in his reasons for judgment. He dismissed the plaintiff’s claim on the basis of failure to mitigate. I have found that he was entitled to do so. The trial judge did not find it necessary in adjudicating on the matter to embark on findings of fact which would not have added to, or detracted from, his ultimate disposition on the matter. Section 25 of the Courts of Justice Act states that “The Small Claims Court shall hear and determine in a summary way all questions of law and fact and may make such order as is considered just and agreeable to good conscience.”

[21] I find that the trial judge heard and determined the questions of law and fact that were necessary for him to adjudicate on the matter on its merits.

Disposition

[22] I conclude, therefore, that the trial judge made no overriding or palpable error on the facts. There was no misapprehension of the evidence. On the question of mixed law and fact, namely the finding that the plaintiff had failed to mitigate by not taking steps to suspend the manufacture of the partitions, the trial judge relied on the failure of the plaintiff to adduce evidence of when the partitions were actually manufactured. He chose not to infer that the partitions had been partially or wholly manufactured by that date. His findings and discretions on that issue are entitled to reasonable deference. In deciding that this failure to mitigate as found was the basis for a dismissal of the plaintiff’s claim, the trial judge committed no error in law.

[23] The appeal is therefore dismissed.

[24] If the parties are unable to agree on the issue of costs, I will receive written submissions on that issue. The respondent shall provide those submissions on costs, limited to two pages, by October 15, 2012. The appellant shall have until October 31, 2012, to provide responding submissions, limited to two pages. The respondent shall have until November 7, 2012, to provide reply submissions, limited to one page.

McCARTHY J.

Released: September 25, 2012