COURT OF APPEAL FOR ONTARIO DATE: 20200306 DOCKET: C66011

Lauwers, Hourigan and Thorburn JJ.A.

BETWEEN

Fermar Paving Limited Plaintiff (Respondent)

and

567723 Ontario Ltd. o/a Winter’s Pit Defendant (Appellant)

Counsel: Marco Drudi, for the appellant Charles C. Chang, for the respondent

Heard: February 24, 2020

On appeal from the judgment of Justice Carole J. Brown of the Superior Court of Justice, dated September 21, 2018, with reasons reported at 2018 ONSC 5485.

REASONS FOR DECISION

[1] Fermar Paving Limited (“Fermar”) is an Ontario road builder. On July 29, 2010, Fermar entered into a construction contract with the Ontario Ministry of Transportation (“MTO”) to provide road construction on a portion of Highway 26 in Simcoe County (the “Project”).

[2] To complete the Project, Fermar required two types of aggregate: granular “A” and granular “B”. The aggregate was required to meet the Ministry’s specifications.

[3] Rocco Buono, the principal of 567723 Ontario Limited, operating as Winter’s Pit (“Winter’s Pit”), approached Fermar to discuss Fermar’s needs for aggregate.

[4] After some discussion, Fermar sent a document (“the Document”) to Winter’s Pit setting out the proposed terms of an agreement. Winter’s Pit requested a higher price for the granular A and granular B but asked for no other changes. The Document was signed by both parties on September 3, 2010.

[5] A few days later, through its solicitor, Winter’s Pit said that it could not provide as much aggregate as it was required to in accordance with the signed Document. There were discussions over several months, but no new signed agreement was reached.

[6] In November 2010, Fermar was told to leave the site or Winter’s Pit would commence proceedings for trespass.

[7] Fermar brought an action for breach of contract by repudiation of the agreement and sought damages to compensate Fermar for the cost of having to source the aggregate from elsewhere.

[8] The trial judge found that: a) The Document was an enforceable agreement; b) The agreement was not void or illegal, nor did contra proferentum apply as the terms were not ambiguous; and c) Winter’s Pit repudiated the terms of the agreement such that it was responsible to pay the respondent damages in the amount of $816,436.37.

[9] Winter’s Pit appeals from the trial judge’s decision. The appeal is allowed on the basis that the trial judge erred in her determination of damages. The issue of damages is remitted to a judge of the Superior Court of Justice.

WINTER’S PIT’S ARGUMENTS ON APPEAL

[10] Winter’s Pit claims that the trial judge made palpable and overriding errors of fact and mixed fact and law in finding the Document was an enforceable contract and in awarding damages.

[11] Winter’s Pit submits that there was no binding contract: the Document was only an agreement in principle. Moreover, the Document was void as Fermar knew it was illegal for Winter’s Pit to extract more than 100,000 tonnes of aggregate per year, since the extraction licence was attached. Winter’s Pit also argues that the terms of the Document are unclear. Because the Document was drafted by Fermar, the rule of contra proferentum applies.

[12] Winter’s Pit denies that it repudiated any contract with Fermar.

[13] Winter’s Pit argues that Fermar is not entitled to damages because Winter’s Pit did not breach any contract. Alternatively, Winter’s Pit argues that Fermar failed to adduce cogent evidence to support its claim for damages or its efforts to mitigate its damages.

ANALYSIS OF THE TRIAL JUDGE’S DECISION AND CONCLUSION

Liability of Winter’s Pit for Repudiation of the Agreement

[14] For the following reasons, we see no error in the trial judge’s conclusion that there was a valid agreement between Fermar and Winter’s Pit and that Winter’s Pit repudiated that agreement: a) Fermar provided Winter’s Pit with a draft agreement on September 2, 2010. After Fermar visited the site, engaged in testing, and revised the terms at Winter’s Pit’s request, Winter’s Pit signed the draft agreement on September 3. b) The Document provides that “Winters Pit warrants and represents that a minimum of 335,000 tonnes of granular ‘B’ material is available to F.P.L.” and that “F.P.L. shall have the right to manufacture a minimum of 140,000 tonnes of granular ‘A’” (emphasis added). c) The terms of the two-page agreement were clear and unambiguous. d) The agreement was not rendered void because Winter’s Pit’s licence did not permit it to extract the quantities of granular A and B stipulated in the agreement. An increase in the licenced quantities was necessary. It was incumbent on Winter’s Pit to revise the terms of agreement before signing. It failed to do so at its peril. e) On September 7, 2010, counsel for Winter’s Pit wrote to the Senior Operations manager of Fermar to advise that: We have been consulted in connection with a September 1, 2010 agreement between 567723 Ontario Limited and Fermar Paving Limited. Prior to signing the agreement, our client did not note the quantity requirements of the agreement. Our client cannot comply with the agreement and is not prepared to fulfil its obligations under the agreement … [Emphasis added.] f) On September 15, counsel for Fermar wrote to Winter’s Pit to reiterate that an agreement had been reached and that Winter’s Pit was now seeking to “resile from the agreement”. He stated that Fermar was prepared “on a completely without prejudice basis to engage in further discussions”. g) Winter’s Pit obtained no extension or temporary increase to the tonnage of aggregates that could be extracted from Winter’s Pit. h) Fermar tried to resolve its differences with Winter’s Pit while maintaining its position that the September 3 Document was an enforceable contract. None of Fermar’s overtures as per Fermar’s letters of October 22 and November 11, were accepted by Winter’s Pit. i) When Fermar put its equipment on the property in November 2019, Fermar was told to leave the property, failing which Winter’s Pit would sue Fermar for trespass. At no time thereafter did Winter’s Pit invite Fermar back or indicate that Winter’s Pit was ready, willing, and able to meet the terms of the agreement.

[15] The appeal in respect of liability is therefore dismissed.

Damages

[16] Fermar sourced its aggregate elsewhere and sued Winter’s Pit for breach of contract.

[17] The trial judge correctly held that as a result of Winter’s Pit’s repudiation of the agreement, Fermar was entitled to be restored to the position that it would have been in had Winter’s Pit met its obligation to supply all necessary aggregate. Fermar was required to find other sources of aggregate and incurred costs for equipment rental, cost of the aggregate, transportation, labour and other valid expenses. Fermar had an obligation to mitigate its losses.

[18] The trial judge awarded Fermar damages in the amount of $816,436.37, which she found to be the difference between what Fermar would have paid to Winter’s Pit and the amount it did pay to the third-party suppliers for the aggregate.

[19] In so doing, the trial judge relied on only two documents. The first was a document entitled, “Cost Summary for Alternate Sourcing of Granular “A” and Granular “B” by Supplier”, which purported to summarize approximately 1000 pages of invoices and other documents. The second was a document entitled, “Production Cost Analysis”, which compared the costs that Fermar says it would have paid to Winter’s Pit and the costs it paid to third parties for the aggregate. These documents were adduced at trial through Charles Ezomo, Fermar’s project manager.

[20] The trial judge noted that Mr. Ezomo was responsible for planning all assigned projects, preparing contracts, progress certificates, payments and completion of the projects. He oversaw the completion of this project and obtained alternate sources of aggregate. Mr. Ezomo testified that Fermar obtained the requisite Granular A from Brock Pit and Granular B, as well as some additional Granular A, from Walker’s Pit.

[21] Mr. Ezomo testified that he had to approve all invoices used in the analysis when they were originally received and did not review them again for purposes of preparing the summary. Mr. Ezomo is not an accountant.

[22] Mr. Ezomo did not do an independent analysis but prepared the cost summary based on a report generated by Fermar’s accounting department. It is not clear who prepared the accounting report. None of the source documents were produced at trial.

[23] Although the two summaries were included in a Joint Book of Documents, there appears to have been no agreement that the parties were thereby acknowledging the truth of the contents of those documents.

[24] We agree with the trial judge that Fermar is entitled to damages resulting from the repudiation of the agreement by Winter’s Pit and mitigated its losses by sourcing aggregate from elsewhere. Fermar was not required to continue to deal with Winter’s Pit, who the trial judge found was not willing to provide Fermar with any more aggregate.

[25] It is not possible on this record to calculate the amount of the appellant’s damages because the source documents were not part of the trial record, nor was there agreement on the quantum of damages at trial. Because it is not possible for this court to make the factual findings necessary to determine these issues on the existing trial record, we return these issues to a judge of the Superior Court to quantify the damages: Gholami v. The Hospital of Sick Children, 2018 ONCA 783.

[26] There is no order as to costs of this appeal given the divided success.

“P. Lauwers J.A.”

“C.W. Hourigan J.A.”

“J.A. Thorburn J.A.”