Court File and Parties

CITATION: Coco Paving Inc. v. D&B Developments, 2018 ONSC 4387

COURT FILE NO.: 41-17

DATE: 2018/07/17

SUPERIOR COURT OF JUSTICE – ONTARIO (DIVISIONAL COURT)

RE: Coco Paving Inc., Plaintiff (Respondent in appeal) AND: D&B Developments, Defendant (Appellant)

BEFORE: Justice I.F. Leach

COUNSEL: Kyle A. MacLean, for the Defendant/Appellant Lori Goldberg, for the Plaintiff/Respondent

HEARD: July 16, 2018

ENDORSEMENT

[1] Before me, pursuant to s.31(a) and s.21(2)(b) of the Courts of Justice Act, R.S.O 1990, c.C.43, is an appeal from a decision made in relation to this matter by a Deputy Judge of the Small Claims Court.

Background

[2] The background and underlying facts giving rise to the appeal are not in dispute, and obviously are quite familiar to the parties. For the sake of expediency, they may be summarized as follows:

• In May of 2013, the appellant and the respondent entered into an agreement whereby the respondent would pave certain areas on properties owned by the appellant. Terms of the parties’ agreement included provisions whereby invoiced amounts would be due and payable 30 days from the date of their being invoiced, and overdue accounts would be subject to agreed interest at the rate of 18 percent per annum.
• In or about late June of 2013, the respondent embarked on initial paving work in relation to the appellant’s property located at 20 Dunkirk Drive, (a seniors residence), here in the city of St Thomas. The initial work, (including measures taken by the respondent to address some initial concerns relating to fatigue cracking and “soft spots”), was substantially completed in or about August of 2013.
• The appellant nevertheless had concerns about the ostensible “final product” provided by the respondent in relation to the Dunkirk Drive property. In particular, the paved parking lot surface created by the respondent gave rise to persistent “ponding”, (not occurring before the work done by the respondent), whereby precipitation would collect and remain in various areas of the paved surface without dissipating. That in turn created safety concerns, particularly in relation to what the effect would be on pedestrian safety when such ponding turned to extended frozen ice surfaces in winter weather.
• In response to such concerns expressed by the appellant, the respondent made a number of attempts to remedy the ponding issues. However, the efforts were unsuccessful, and relations between the parties broke down.
• On October 11, 2013, the respondent sent the appellant an invoice claiming a total of $62,773.59 for work done in relation to the Dunkirk Drive property. Pursuant to the terms of the parties’ agreement, that sum would become due and payable on November 11, 2013.
• Still unhappy with the paving work done by the respondent at the Dunkirk Drive property, the appellant responded to the received invoice by paying the respondent $42,674.45; i.e., approximately two-thirds of the total amount claimed and invoiced by the respondent. The appellant adopted that approach because approximately one third of the parking area paved by the respondent continued to suffer from ponding problems that would have to be remedied.
• In due course, the respondent brought a formal claim in the Small Claims court, seeking payment of the outstanding balance of its invoice, ($20,099.14), together with interest at the agreed rate of 18 percent per annum. The appellant not only defended the claim by delivering a defence, (including a pleaded defence of set off), but advanced a counterclaim seeking the costs of remediating the ponding issues, together with interest pursuant to the Courts of Justice Act, supra.
• The parties’ dispute proceeded to trial in the Small Claims Court, before a Deputy Judge, on or about September 6, 2017. By that time, the appellant had proceeded with remedial work on the parking lot of the Dunkirk Drive property, using the services of another paving contractor. In particular, the remedial work was carried out by the other paving contractor in or about August of 2016, and that work brought an end to the ponding problems. The remedial work in question was performed at a cost of $34,255.95, apparently paid by the appellant in September of 2016.
• In his substantive decision released on September 6, 2017, (released shortly after completion of the trial), supplemented by a further decision released on November 16, 2017, (wherein the Deputy Judge revised his substantive decision in some respects while also going on to address questions of prejudgment interest and costs):
  • The Deputy Judge found that the respondent had proved its entitlement to payment of $20,099.14, (representing the outstanding balance of its issued invoice), in accordance with the parties’ contract. The Deputy Judge also found that the respondent was entitled to interest on that balance at the 18 percent annual interest rate specified in the parties’ agreement, with that prejudgment interest to run from the date in November of 2013 on which payment became due.
  • The Deputy Judge nevertheless found that the appellant had proved deficiencies in the respondent’s completed and invoiced work; deficiencies warranting remedial damages, which the Deputy Judge eventually quantified at $22,444.06. As the Deputy Judge made clear in his reasons, that sum represented what he considered to be a fair cost of remediation work in September of 2016, inclusive of HST. (In that regard, the Deputy Judge did not accept that the actual remedial cost paid by the appellant to the other paving contractor it employed represented a fair award of damages, finding that the work could instead have been performed by another contractor at a lower cost.) The Deputy Judge also found that the appellant was entitled to prejudgement interest on that monetary award of damages, in accordance with the Courts of Justice Act, supra, but only from September of 2016.
  • After setting off the resulting comparative indebtedness of the parties, the Deputy Judge found that a balance of $7,953.55 was still owed by the appellant to the respondent, and went on to then address the respective cost claims of the parties. In that regard, the Deputy Judge found that, as the substantive outcome attained by the respondent was more favourable than a settlement offer made by the plaintiff, the provisions of Rule 14.07(1) were engaged, effectively doubling the costs to which the respondent was entitled.
• In December of 2017, the appellant commenced its appeal to this court. In doing so, the appellant did not challenge the underlying determinations of substantive entitlement made by the Deputy Judge, nor his quantification of damages. This appeal focused instead on the approach taken by the Deputy Judge in relation to prejudgment interest in relation to the appellant’s counterclaim, and its corresponding impact on cost determinations made by the Deputy Judge. In that regard:
  • It was submitted by the appellant that the Deputy Judge erred in law by not awarding the appellant prejudgment interest dating back to the time of the respondent’s invoice; i.e., by failing to use the same “start date” for prejudgment interest used in relation to the respondent’s claim, as the appellant similarly had a claim that existed at that point, albeit one which had yet to be quantified. That in turn was said by the appellant to have understated the total amount of the appellant’s entitlement, in turn resulting in a set-off miscalculation, which in turn resulted in the Deputy Judge finding that the respondent had achieved an outcome more favourable than its settlement offer, in turn resulting in mistaken application of Rule 14.07(1) based on the submitted underlying errors.
  • In the course of oral submissions, counsel for the appellant also argued that the Deputy Judge erred by awarding the respondent prejudgment interest at the agreed contractual rate of 18 percent per annum, having regard to other findings of the Deputy Judge that the respondent effectively had breached its contractual obligations by performing the relevant work in a defective manner. In that regard, I was asked to consider not only the suggested unfairness of the respondent breaching but simultaneously relying on the parties’ contract, but also the suggested unfairness of an overall trial result whereby the appellant unquestionably was left with deficient work requiring remediation, but nevertheless is being required to pay the respondent additional sums.
  • In response, the respondent took the position that the approach taken by the Deputy Judge in relation to prejudgment interest on the appellant’s award of damages was appropriate and correct, on the suggested basis that the appellant had no “crystallized” claim, upon which prejudgment interest should run, until the appellant paid for remedial work in September of 2016.
  • In relation to the appellant’s arguments about the propriety of the Deputy Judge awarding the respondent prejudgment interest at the contractual rate, counsel for the respondent relies primarily on the appellant’s failure to formally raise any such issue or complaint in its appeal material. In the circumstances, the respondent says the court should not be entertaining such arguments now.

Analysis

[3] Applicable standards of appellate review were confirmed by the Supreme Court of Canada in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. For questions of law, the standard of view is correctness. For questions of fact, appellate intervention requires an appellate finding of palpable and overriding error. For questions of mixed law and fact, the standard varies. In particular, where a legal principle can be extracted from the question of mixed law and fact, the standard for that question is correctness. Where the issue is the application of correct legal principles to the facts, the standard is palpable and overriding error.

[4] I frankly find it unnecessary to engage in prolonged examination of whether the situation before me involves an appeal focused on a suggested pure or “extricable” question of law as the appellant suggests, (e.g., as to whether or not it was incorrect for the Deputy Judge to use differential dates for the commencement of prejudgment interest on the parties’ respective claims, or deny the appellant prejudgment interest dating back to the date on which the respondent abandoned all further attempts at remedial work by rendering an invoice for defective work), or questions relating to the Deputy Judge’s application of correct legal principles to the facts, as suggested by the respondent.

[5] In particular, while I am inclined to think the situation involves the latter, the reality is that I am not persuaded that the Deputy Judge committed an error or sufficient error, on either standard, warranting appellate intervention.

[6] Again, for the reasons outlined above, the primary thrust of the appellant’s appeal centres on its argument that it improperly was denied prejudgment interest from November 11, 2013; i.e., the date on which the respondent’s invoice became due and payable, and therefore the date on which the respondent formally abandoned all further efforts to address its deficient work, and sought instead to bill the appellant for the full cost of that work despite the deficiencies confirmed by the Deputy Judge.

[7] In that regard, I accept that the appellant had a vested claim for breach of contract as of that date, in respect of which damages had not yet been formally quantified.

[8] Conversely, I reject the respondent’s submission, made in reliance on certain passages from Zellers Inc. v. 942125 Ontario Ltd., [2005] O.J. No. 655 (C.A.), that the appellant’s claim had not “crystallized” at that point. In that regard, I respectfully think respondent counsel mistakenly equates “crystallized” with “quantified”.

[9] In particular, in the Zellers case, the Court of Appeal found that a landlord purporting to claim a right of set-off “against taxes possibly owing at some future time” by Zellers was not permitted to do so, as the amount owing to the landlord “had not crystallized” at the relevant time. In that regard, a claim that may be “possible” at some point in the “future” certainly may not yet have “crystalized” and vested in the claimant. In my view, however, such a contingent or speculative claim is clearly distinguishable from a contract claim in respect of which there had been a breach and damages, even though the latter have yet to be formally quantified by a court.

[10] Having said that, in my view there are other sound reasons for finding that the Deputy Judge committed no error in allowing the appellant prejudgment interest only from September 2016 onwards.

[11] In particular, a review of the reasons provided by the Deputy Judge makes it quite clear that he chose to quantify the appellant’s damages for breach of contract by awarding what he considered to be the fair costs of remediating the respondent’s defective work as of September 2016. While our small claims court obviously is not a court of equity, (e.g., capable of ordering specific performance), the approach taken by the Deputy Judge in that regard was functionally and rationally equivalent to awarding equitable damages; i.e., a monetary award the court thinks sufficient to enable the breach of contract claimant to fund execution of work that the other party was to have performed.

[12] As recognized by our Court of Appeal in Pozios v. 776575 Ontario Ltd., [2001] O.J. No. 1942 (C.A.), at paragraphs 13 and 14, such damage awards, awarding the cost of remedial work as of a date later than when the cause of action arose, inherently incorporate the time value of money, which prejudgment interest is intended to address and reflect.

[13] For example, in this case, by expressly quantifying the appellant’s monetary damages by an award of damages considered sufficient to complete remedial work as of September 2016, the Deputy Judge already had granted the appellant monetary relief effectively including a component reflecting the time value of money between November of 2013 and September of 2016. To award the appellant damages reflecting the cost of remedial work as of September 2016 and prejudgment interest for the period from November of 2013 to September 2016 therefore effectively would have entailed a degree of over-compensation to the appellant in relation to that period. In essence, the Deputy Judge addressed such concerns by an exercise of discretion, pursuant to s.130(1)(a) of the Courts of Justice Act, supra, disallowing prejudgment interest on the appellant’s monetary damages prior to September of 2016. I see no error, and certainly no error justifying appellate intervention, in that regard.

[14] Of course, the Deputy Judge’s quantification of damages based on the fair cost of remedial work as of September of 2016 did not reflect the time value of money from September of 2016 to the date of trial. However, that reality was addressed by the award of prejudgment interest that was made in the appellant’s favour by the Deputy Judge.

[15] As for the appellant’s alternative submission, questioning the propriety of the Deputy Judge awarding the respondent prejudgment interest at the agreed contractual rate, rather than the rate dictated by the Courts of Justice Act, supra, I agree with respondent counsel that the issue was not raised in the appeal material filed by the appellant, and accordingly may not properly be raised or considered now.

[16] In the result, I find no error warranting appellate intervention, and the appeal accordingly is dismissed. An order shall go accordingly.

Costs

[17] At the outset of the hearing before me, counsel helpfully indicated that the parties had agreed, in advance, on an appropriate cost disposition in relation to the appeal. In particular, the parties were agreed that the successful party should be awarded costs of the appeal, fixed in the all-inclusive amount of $3,600.00.

[18] As the plaintiff/respondent was successful in having the appeal dismissed, a further order accordingly shall go, awarding costs of the appeal to the plaintiff/respondent fixed in that all-inclusive amount, payable forthwith.

“Justice I. F. Leach”

Justice I.F. Leach

Date: July 17, 2018