CITATION: Demir v. Kilic, 2018 ONSC 7279

DIVISIONAL COURT FILE NO.: 161/18

DATE: 20181210

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

C. HORKINS, CONWAY and LABROSSE JJ.

B E T W E E N :

HACI AHMET DEMIR

Plaintiff (Respondent)

– and –

ERDAL KILIC

Defendant (Appellant)

Bruce G. McEachern, for the Plaintiff (Respondent)

Christopher M. Stanek and Cathleen Brennan, for the Defendant (Appellant)

HEARD at Toronto: December 6, 2018

THE COURT

[1] The Appellant, Erdal Kilic, appeals from the judgment of Perell J. (the “Motions Judge”) dated February 8, 2018. The Motions Judge refused to confirm the report of Master Albert (the “Master”) dated August 11, 2017 (the “Report”). The Report granted the Respondent, Haci Ahmet Demir, judgment for $31,556 pursuant to a construction contract between the parties.

Background

[2] In May 2012, Mr. Kilic purchased a single family home in Toronto. He contacted Mr. Demir about renovating the property. In July 2012, Mr. Demir agreed to undertake the project. His role included, among other things, arranging for and supervising the renovation of the property, and paying workers for their labour and supplies. The parties’ arrangement was not set out in writing.

[3] In August 2012, Mr. Kilic paid Mr. Demic $18,000 in pre-construction costs and the renovation commenced and proceeded over the next year. Mr. Demir supervised the renovation and paid for labour and materials in cash. Mr. Kilic reimbursed Mr. Demir from time to time upon request, also in cash or bank draft. By June 2013, Mr. Kilic had paid Mr. Demir $18,000 in pre-construction costs and approximately $275,000 in construction costs.

[4] In June 2013, Mr. Demir requested more money. Mr. Kilic refused to make any additional payments and the relationship subsequently came to an end. In October 2013, Mr. Demir registered a construction lien against the property. He then issued two invoices to Mr. Kilic, one for $30,000 and one for $76,770.

[5] In November 2013, Mr. Demir registered a certificate of action against Mr. Kilic’s property, claiming judgment for $106,770. This amount consisted of $32,006 for remaining labour and materials, $65,932 for a 20% management fee on the project, and HST.

[6] The action was referred for a trial before the Master. The trial proceeded as a summary trial over three days. Each party filed an affidavit, with numerous exhibits, as evidence in chief and was cross-examined at trial. The parties also filed an agreed statement of facts setting out the amounts Mr. Demir had paid to contractors and workers ($202,719); the amounts Mr. Kilic had paid Mr. Demir to the time of trial ($329,664); the net amount that Mr. Demir was out of pocket ($32,006); and the quantification of deficiencies claimed by Mr. Kilic ($7,950).

Master’s Decision

[7] At trial, the parties agreed that they had entered into a contract. In their affidavits, they both stated that they had come to an agreement in mid-July 2012. Mr. Demir stated that they agreed that he would design and advise Mr. Kilic about the project, and arrange for and supervise the purchase of material and labour for the renovation. Mr. Kilic likewise stated that he and Mr. Demir came to an agreement for the renovation.

[8] The issues before the Master were: (a) whether the parties entered into a contract and if so, on what terms; and (b) whether Mr. Demir was liable to Mr. Kilic for deficiencies and if so, in what amount.

[9] The Master found there was a contract between the parties, as there had been an offer, acceptance and consideration. She stated “Mr. Demir offered to renovate the property owned by Mr. Kilic and Mr. Kilic accepted the offer, paying Mr. Demir the preconstruction costs of $18,000.00 as consideration to get started.” She stated that she was satisfied that the parties had entered into a contract, noting that there was a “meeting of the minds as to the role of each of the parties: Mr. Demir would be in charge of renovating the property and Mr. Kilic would pay him his cost of doing so.”

[10] The main issue at trial was whether the contract was a fixed price or a “cost plus” contract. As the Master stated, the court had to determine whether Mr. Demir or Mr. Kilic assumed the risk of cost overruns and the benefit of cost savings. Mr. Kilic’s position was that the parties had agreed on a fixed price contract capped at $250,000 plus $18,000 for pre-construction costs. Mr. Demir’s position was that the contract was for time and materials (construction costs), plus a 20% management fee.

[11] The Master assessed the contradictory evidence of the parties and found that their oral evidence was not reliable. After considering the parties’ testimony and the documentary evidence, she rejected Mr. Kilic’s position that the contract was for a fixed price. She explained that Mr. Kilic had not provided a shred of corroborating evidence to support his position of a fixed price contract, that he had paid Mr. Demir more than $250,000 in construction costs, and that he had considered price in selecting certain materials (which would not have made sense if it was a fixed price contract).

[12] The Master accepted Mr. Demir’s position that the contract was for construction costs and was not capped at $250,000. The Master noted that there was no evidence that the parties had agreed to any particular price for labour on an hourly basis or to materials of a particular type. She also noted that Mr. Demir had not sent any invoices prior to November 2013 and was paid in cash. She found that Mr. Demir was entitled to be paid for his remaining construction costs, which the parties had quantified as $32,006.

[13] The Master found that Mr. Demir had not met his onus of proving that the contract included a term entitling Mr. Demir to receive 20% of the construction costs as a management fee. She found that Mr. Demir had not produced any corroborating evidence to support his position that the parties had agreed on a management fee – there was no letter, email or other document in which Mr. Demir clearly stated that he would be charging a management fee and that Mr. Kilic had accepted that charge as part of the contract. The first reference to any management fee was in a spreadsheet Mr. Demir sent to Mr. Kilic in June 2013. The Master found that this was a “unilateral assertion by one party as to a charge imposed once the parties were in conflict over price.” The Master also found that the invoices rendered in November 2013 were “an attempt to paper over Mr. Demir’s claim” once he had registered his construction lien. She noted that Mr. Demir had previously done two projects for which he had not charged a management fee.

[14] The Master concluded that in light of her findings, it was not necessary for her to address Mr. Demir’s alternative claim based on quantum meruit.

[15] She granted judgment to Mr. Demir for $32,006, less $450 that she accepted on account of deficiencies, for a total of $31,556. She awarded costs in favour of Mr. Kilic in the amount of $5000.

Motions Judge’s Decision

[16] Mr. Demir opposed the confirmation of the Report. He moved for an order to set aside the Report and sought a new trial before a different master.

[17] The Motions Judge granted Mr. Demir’s motion and set aside the Report. He stated that he accepted and deferred to all of the Master’s findings of fact. However, he held that although there was “a strong evidentiary basis” for the Master to conclude that the parties intended to create a legally binding contract, there was no basis for her to find that any contract had been proven, as the parties had not agreed on all of the essential contract terms (including price, methodology to calculate price, the scope of the contract, specifications, and deadlines.) He held that the Master had made a palpable and overriding error in finding that a contract had been proven. He held that there was a contradiction between her factual findings and her conclusion, and that her decision was therefore unreasonable and reversible, citing the case of 1162251 Ontario Limited v. 833960 Ontario Limited (M-Plan Consulting), 2017 ONCA 854.

[18] The Motions Judge found that it was necessary for the Master to have considered the alternative claim of quantum meruit because the parties had failed to reach an enforceable agreement. He accepted Mr. Demir’s evidence that he worked 2,500 hours on the project for which he received nothing. The Motions Judge held that it would be “unjust for Mr. Kilic to pay nothing for receiving the benefit of over 2,500 hours of Mr. Demir’s good work.”

[19] The Motions Judge held that Mr. Demir was entitled to an award of $106,060 on a quantum meruit basis. He awarded costs of the action to Mr. Demir in the amount of $38,000 and costs of the motion before him in the amount of $6,000.

[20] Mr. Kilic seeks to set aside the Motions Judge’s decision and confirm the Report.

Court’s Jurisdiction and Standard of Review

[21] Under s. 71(1) of the Construction Lien Act, R.S.O. 1990, c. C.30, an appeal lies to the Divisional Court from a judgment or an order on a motion to oppose confirmation of a report under that statute.

[22] The standard of review of an appeal from a judge’s decision is set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. On questions of law, the standard is correctness, on questions of fact, the standard is palpable and overriding error and on questions of mixed fact and law, there is a spectrum. Where there is an extricable legal principle, the standard of review is correctness. However, with respect to the application of the correct legal principles to the evidence, the standard is palpable and overriding error.

Analysis

[23] Mr. Kilic submits that Motions Judge erred by failing to correctly apply the standard of review in determining whether or not to confirm the Report. We agree.

[24] The standard of review on a contested confirmation of a report from a reference is that on a true appeal and not on the basis of a hearing de novo. The result should not be interfered with unless there has been some error in principle demonstrated by the master’s reasons, some absence or excess of jurisdiction, or some patent misapprehension of the evidence: Rosedale Kitchens Inc. v. 2114281 Ontario Inc., 2014 ONSC 7143 at para. 7 (Div. Ct.); RSG Mechanical Inc. v.1398796 Ontario Inc., 2015 ONSC 2070 at para. 22 (Div. Ct.). Further, an award should not be disturbed unless it appears unsatisfactory on all the evidence: RSG, at para. 22.

[25] There are several problems with the Motions Judge’s decision. In this case, while the Motions Judge said that he deferred to the Master’s findings of fact, and accepted them as well founded, he came to a result that was inconsistent with those findings of fact. In so doing, he erred in failing to defer to the Master’s factual findings.

[26] The Master found that the parties had entered into a contract for Mr. Demir to renovate the property and for Mr. Kilic to pay him his costs. She based her conclusion on the parties’ evidence that they came to an agreement in July 2012, their conduct, and her findings as to the agreed terms of the contract. On the motion opposing the Report, Mr. Demir did not challenge the Master’s finding that there was an enforceable contract or suggest that the parties had not agreed on all of its essential terms. Rather, he challenged the Master’s finding that the contract did not entitle him to receive a management fee. The Motions Judge nonetheless held that there was no contract between the parties based on his own determination that the parties had not agreed on all of the essential terms. In our view, he failed to defer to the Master’s conclusion, which was open to her on the record, that the parties had entered into a contract for the renovation.

[27] The Master found that the 20% management fee claimed by Mr. Demir was not a term of the contract. The Motions Judge stated that he accepted the Master’s findings of fact and did not suggest that she made any error in her findings. However, he did the exact opposite in awarding Mr. Demir the sum of $106,060, which included the $65,932 management fee. He therefore failed to defer to her finding that the parties did not agree to the management fee.

[28] The Motions Judge determined that Mr. Demir was entitled to the 20% management fee based on his view that “it would be unjust for Mr. Kilic to pay nothing for receiving the benefit of over 2,500 hours of Mr. Demir’s good work.” There are two problems with this conclusion. The first is that the Motions Judge came to his own determination that Mr. Demir received nothing for his work. The Master made no such finding – she only rejected Mr. Demir’s claim that the parties agreed to a 20% management fee as a term of their contract. The second is that the Motions Judge simply accepted Mr. Demir’s evidence that he spent 2,500 hours on the project. Given that the Master had found Mr. Demir to be an unreliable witness, the Motions Judge failed to defer to the Master’s assessment of credibility.

[29] In effect, the Motions Judge treated the motion as a de novo hearing, in which he substituted his own view of the merits of the case for that of the Master. He found that there was no contract, assessed the case on a quantum meruit basis, re-weighed the evidence, and awarded the amount which he thought Mr. Demir should receive. This constituted an error of law.

[30] Finally, the Motions Judge’s reliance on the decision in 1162251 Ontario Limited was misplaced. In that case, the court held that the judge’s factual conclusions contradicted his factual findings. In the case at bar, the Master’s factual findings as to the terms of the parties’ construction contract are consistent with, and fully support, her conclusion that Mr. Demir was entitled to be paid the outstanding construction costs of $32,010, but no management fee.

Decision

[31] The appeal is allowed, the decision of the Motions Judge is set aside, and the Report of the Master is confirmed.

[32] Mr. Demir is entitled to costs of $5,000 for the trial before the Master, as awarded by her. Mr. Kilic is entitled to costs as follows: (i) $6,000 for the motion before the Motions Judge; (ii) $6,000 for the motion before Harvison Young J. (as she then was) to extend the time for the appeal; and (iii) $7,500 for this appeal. All amounts are inclusive of disbursements and HST.

C. HORKINS J.

CONWAY J.

LABROSSE J.

Released: December 10, 2018

CORRECTION NOTICE

Corrected decision: The text of the original judgment was corrected on December 20, 2018 and the description of the correction is appended.

December 20, 2018: Paragraph 32 of the original reasons for judgment was corrected to provide that Mr. Demir, not Mr. Kilic, is entitled to $5,000 in costs for the trial before the Master, as awarded by her.

CITATION: Demir v. Kilic, 2018 ONSC 7279

DIVISIONAL COURT FILE NO.: 161/18

DATE: 20181210

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

C. HORKINS, CONWAY and

LABROSSE JJ.

B E T W E E N :

HACI AHMET DEMIR

Plaintiff (Respondent)

– and –

ERDAL KILIC

Defendant (Appellant)

REASONS FOR JUDGMENT

THE COURT

RELEASED: December 10, 2018