CITATION: Landmark II Inc. v. 1535709 Ontario Limited, 2011 ONCA 567
DATE: 20110831
DOCKET: C52425
COURT OF APPEAL FOR ONTARIO
Laskin, Lang and LaForme JJ.A.
BETWEEN
Landmark II Inc.
Plaintiff (Appellant)
and
1535709 Ontario Limited
Defendant (Respondent)
Antonio Conte, for the appellant
Richard Belsito, Q.C., for the respondent
Heard: January 19, 2011
On appeal from the order of the Divisional Court (P.T. Matlow, J.D. McCombs and G.W. Tranmer JJ.) dated March 23, 2010, affirming the judgment of Justice Katherine M. van Rensburg of the Superior Court of Justice dated August 11, 2008, with reasons reported at 2008 41171 (ON SC) and 2009 78 (ON SC).
Laskin J.A.:
A. INTRODUCTION
[1] The issues on this appeal arise out of a construction lien action.
[2] The appellant, Landmark II Inc., has been in the landscaping and excavation business for many years. The respondent, 1535709 Ontario Limited, is in the trucking business and owns a truck terminal in Bolton, Ontario. In July 2004, the parties entered into a written contract under which Landmark was to expand a truck parking lot on 1535709’s property. The price of the contract was $58,850 to be paid in four equal instalments.
[3] 1535709 refused to pay the second instalment when it was due. Landmark then abandoned the job, filed a lien for the unpaid balance of the contract, and brought this action for the same amount. 1535709 counterclaimed for damages for Landmark’s failure to complete the contract.
[4] After a six-day trial, the trial judge found that 1535709 had breached the contract, and that Landmark was not obligated to do any further work. She found that the value of the work already done by Landmark was $16,000. After deducting the amount of the first instalment, she held that 1535709 owed Landmark $1,287.50. She dismissed 1535709’s counterclaim.
[5] However, the trial judge also found that Landmark was liable under s. 35 of the Construction Lien Act for filing a grossly excessive lien. She fixed 1535709’s damages at $5,146.39, which was its borrowing cost to vacate the lien. After adding prejudgment interest and setting off the two amounts, Landmark owed 1535709 $3,793.61. The trial judge then awarded 1535709 its costs of the action, which she fixed at $55,000.
[6] Landmark’s appeal to the Divisional Court was dismissed with very brief reasons, simply holding that the trial judge had not made any palpable and overriding error. Landmark obtained leave to appeal to this court. It submits that the trial judge made four errors:
(1) The trial judge erred by failing to award Landmark damages for breach of contract;
(2) The trial judge erred by relying on the lay opinion of another contractor to assess the value of the work Landmark had performed;
(3) The trial judge erred in finding Landmark liable under s. 35 of the Act; and
(4) The trial judge erred by awarding 1535709 its costs of the action.
B. ANALYSIS
First Issue: Did the trial judge err by failing to award Landmark damages for breach of contract?
[7] To put this issue in context, I will briefly review the terms of the contract and the trial judge’s finding of a breach.
[8] Landmark agreed to expand 1535709’s parking lot for trucks by stripping and piling topsoil, filling with brick rubble, and finishing a four-acre area with three inches of asphalt grindings. 1535709 agreed to pay the contract price in four equal instalments. The contract set out the following payment terms:
25% down $14,712.50
25% after stripping $14,712.50
25% 2 acre complete $14,712.50
25% after complete 2 acre $14,712.50
Not later than 1 month after finish job.
[9] Landmark began work in late July 2004 even though the first instalment had not been paid. Eventually 1535709 paid it. By September 30, 2004, Landmark had finished the stripping and asked for payment of the second instalment. 1535709 refused to pay. Its president claimed that he was not obliged to pay the second instalment until two acres were completed. When he maintained his refusal, Landmark walked off the job, removed its equipment, filed its lien, and started this action.
[10] The trial judge found that 1535709’s interpretation of the contract was inconsistent with its plain meaning, and that 1535709 was in breach by failing to pay the second instalment once stripping was complete. Until the second instalment was paid – and it never was – Landmark had no obligation to continue to do the work. The trial judge set out her findings at paras. 29-30 of her reasons:
While the plaintiff was prepared to begin work without receiving a downpayment, after completing the stripping of the four acres, it had no obligation to continue the work without having received the second payment. The plaintiff was entitled to insist upon the balance of the payment terms as the work progressed. Under the contract, two payments were due at the time the stripping was completed. The defendant defaulted on the payment that was due and therefore was in breach of contract. While the defendant may have considered the plaintiff’s refusal to perform any additional work to be unreasonable, and while it may have appeared that the plaintiff had in fact abandoned the work, the defendant had no right to insist on continued performance by the plaintiff until the second payment had been made.
Accordingly, the defendant was in breach of contract in failing to make the second instalment payment that was due under the Second Contract when the stripping had been completed.
[11] In the light of these findings, Landmark submits that the trial judge erred by failing to award it damages for breach of contract, in other words, its lost profits. It says that, at a minimum, its lost profits amounted to approximately $24,500. I do not accept Landmark’s submission because of the way it pursued its claim.
[12] By its actions of removing its equipment and abandoning the job, if not by its words, Landmark undoubtedly accepted 1535709’s breach as a repudiation of the contract. Landmark then potentially had two claims and two corresponding remedies available to it. One was a claim for the value of the work it had performed and the materials it had supplied up to that point. This claim, a quantum meruit claim, could be secured by registering a lien against 1535709’s property. The other claim was a claim for damages for breach of contract. This is an unsecured claim, but is expressly preserved in construction lien actions by s. 63 of the Act. See GNC Realty Products Ltd. v. Welglen Ltd., [1979] O.J. No. 3456 (H.C.J.), with additional reasons at [1979] O.J. No. 3457 (H.C.J.).
[13] Landmark, thus had a right to alternative remedies: a right to quantum meruit and a right to damages. However, and this is the important point, Landmark was required to elect between these alternative remedies, at the latest by the time of judgment: see GNC Realty Products Ltd. v. Welglen Ltd. at paras. 52-61.
[14] The problem for Landmark is that it never elected damages for breach of contract. Indeed, it never indicated that it was pursuing alternative remedies with the intention of making an election at some later point before judgment. Instead, the only claim that it maintained and the only remedy that it sought – in its pleading, in the way it presented its case, and in its evidence – was quantum meruit for the value of the work it performed.
[15] Landmark submits that the trial judge ought to have provided for an election herself, but that is not right. If Landmark was seeking damages for breach of contract, it was required to so elect. It did not do so. Its claim for damages must therefore fail. I would not give effect to this ground of appeal.
Second Issue: Did the trial judge err by relying on the lay opinion of another contractor to assess the value of the work Landmark had performed?
[16] To determine Landmark’s quantum meruit claim – the value of the work it had performed – the trial judge relied on the opinion evidence of Sam Di Gregorio, the contractor 1535709 hired to complete the job. Mr. Di Gregorio testified that, in his opinion, the value of Landmark’s work was $16,000. The trial judge accepted this figure to calculate the amount Landmark was owed.
[17] Landmark submits that the trial judge erred in relying on Mr. Di Gregorio’s opinion evidence. According to Landmark, the trial judge was required to calculate the value of the work it had performed by deducting from the contract price its own cost to complete the contract. I do not accept this submission for either of two reasons.
[18] First, this issue is not properly before this court. Although Landmark was granted leave to appeal under s. 6(1)(a) of the Courts of Justice Act, R.S.O. 1990, c. C-43, this court may only hear an appeal “on a question that is not a question of fact alone”. The issue raised by this ground of appeal is purely factual. Therefore no appeal lies on this issue.
[19] Second, even if this issue were appealable, there would be no basis to interfere with the trial judge’s assessment. The trial judge found that she could not rely on Landmark’s records to calculate its quantum meruit claim because those records were unreliable. For example, Landmark’s time records were prepared after-the-fact and were inaccurate. Therefore, the trial judge turned to the only reliable evidence available, the testimony of Mr. Di Gregorio. Without his testimony, she would have had no evidence from which to assess Landmark’s claim. Moreover, in construction lien actions, lay opinion evidence from an experienced contractor is commonplace. See Duncan W. Glaholt, Conduct of a Lien Action 2011 (Toronto: Thomson Reuters Canada Limited, 2010) at 411-412.
[20] The trial judge’s rejection of Landmark’s evidence on the value of the work it performed, and her acceptance of Mr. Di Gregorio’s evidence was entirely reasonable. I would not give effect to this ground of appeal.
Third Issue: Did the trial judge err in finding Landmark liable under s. 35 of the Construction Lien Act?
[21] Under s. 35 of the Construction Lien Act, R.S.O. 1990, c. C-30, a contractor may be liable for filing an exaggerated lien claim:
In addition to any other ground on which the person may be liable, any person who preserves a claim for lien or who gives written notice of a lien,
(a) for an amount which the person knows or ought to know is grossly in excess of the amount which the person is owed; or
(b) where the person knows or ought to know that the person does not have a lien,
is liable to any person who suffers damages as a result.
[22] The trial judge found Landmark liable under s. 35(a) for filing a lien for the unpaid balance of the contract, $44,137.50. In her view, Landmark knew or ought to have known that amount was grossly excessive. She awarded 1535709 damages equivalent to its cost of borrowing – its interest payments – to discharge the lien and pay the amount claimed into court. 1535709 had been required to discharge the lien to facilitate the conveyance of a strip of its land to the Town of Caledon in order to widen the road.
[23] Landmark submits that the trial judge erred in finding it liable under s. 35. It contends that it cannot be held liable for filing a lien for the unpaid balance of the contract. I do not agree.
[24] Registering a lien for the entire amount of the contract before construction is completed is not necessarily improper. The claimant will be secured only for the actual value of the work done, which is typically determined at trial. However, the trial judge’s finding that Landmark was liable under s. 35 for registering a lien for the three remaining instalment payments is supportable because of two circumstances.
[25] First, Landmark registered the lien two and a half months after it had abandoned the job, and when it had no intention of completing the contract. A claimant can register a lien for the unpaid balance if it stays on the job and intends to finish the contract. It cannot do so when it has left the job and does not intend to finish it.
[26] Second, the affidavit in support of the lien was signed by the sister of one of the principals of Landmark. She had no knowledge of how much of the job had been completed, and took no steps to find out. She simply followed instructions from her brother to claim the unpaid balance, even though he, too, did not know how much work had been done.
[27] In these unusual circumstances, I would not interfere with the trial judge’s finding of liability under s. 35 or with her award of damages.
Fourth Issue: Did the trial judge err in awarding 1535709 its costs of the action?
[28] The trial judge was initially inclined to order no costs. That would have been a sensible result. However, she changed her mind after receiving the parties’ written submissions on costs, and learning that 1535709 had made an offer to settle on terms that both the claim and counterclaim be dismissed without costs.
[29] The trial judge was of the view that 1535709’s offer was a “fair evaluation of the financial merits of the proceedings”, and that Landmark ought to have accepted it. She ordered that Landmark pay 1535709 its costs of the action, which she fixed at $55,000. Landmark submits that this costs award ought not to stand. I agree with this submission.
[30] A trial judge has broad discretion in fixing the costs of an action. This court rarely intervenes with the exercise of that discretion. However, this is one of those rare cases where intervention is warranted. The costs award of $55,000 in favour of 1535709 is not fair and reasonable, and it is not proportional to what was at stake in this litigation.
[31] Intervention is justified because of the following considerations:
• Landmark succeeded in what the trial judge termed the “central dispute” in the action: which party was in breach of contract. Because it succeeded on this issue it also succeeded in having 1535709’s counterclaim dismissed. It also succeeded on another disputed issue: the timeliness of its lien. 1535709 succeeded only on its claim under s. 35 of the Act, and in the dismissal of Landmark’s claim for extras.
• The amount of 1535709’s judgment was de minimis, less than $3,800.
• 1535709’s offer to settle came late in the day. It was made only four days before trial.
• This litigation occurred only because 1535709 stubbornly and unreasonably adhered to its interpretation of the contract. Although it may have believed its interpretation was correct, that interpretation had no air of reality in the light of the plain wording of the contract.
[32] The trial judge’s initial view of costs was correct. I would grant Landmark leave to appeal costs, set aside the trial judge’s costs order, and order that there be no costs of the trial.
C. CONCLUSION
[33] I would allow the appeal of the trial judge’s costs award and order there be no costs of the action. I would otherwise dismiss Landmark’s appeal.
[34] That leaves to be determined the costs of the appeal in the Divisional Court, the leave motion and the appeal to this court. The Divisional Court awarded costs of $10,000 to 1535709. In my view, justice would be done by giving no costs throughout – that is no costs at trial, in the Divisional Court, or in this court. I would so order.
RELEASED: Aug. 31, 2011 “John Laskin J.A.”
“JL” “I agree S.E. Lang J.A.”
“I agree H.S. LaForme J.A.”