Court of Appeal for Ontario

Date: 2019-10-23 Docket: C66643

Panel: Feldman, Fairburn and Jamal JJ.A.

Between

Lopes Limited Plaintiff (Respondent)

and

The Guarantee Company of North America and Gorf Manufacturing/Contracting Ltd. Defendant (Appellant)

Counsel

G.L. Sonny Ingram, for the appellant

Kenneth W. Movat and Maxwell Reedijk, for the respondent

Heard and Released Orally

October 23, 2019

On Appeal From

The judgment of Justice Peter J. Cavanagh of the Superior Court of Justice, dated January 31, 2019, with reasons reported at 2019 ONSC 804, 89 B.L.R. (5th) 339.

Reasons for Decision

[1] This is an appeal from a decision granting the respondent summary judgment under a labour and materials payment bond issued by the appellant.

[2] The respondent claimed against the appellant under a payment bond for unpaid invoices for work completed under a subcontract with Gorf Manufacturing/Contracting Limited ("Gorf"), the general contractor for a construction project. Gorf abandoned the project and a new general contractor was engaged. The respondent then successfully bid to complete work that remained under the original subcontract and was paid more for the completion subcontract than it would have received for that work under the original contract with Gorf. The respondent nevertheless claimed against the appellant under the payment bond for the unpaid invoices for the completed work for Gorf.

[3] The appellant did not dispute that the claim fell within the terms of the payment bond, but argued that the respondent was not entitled to claim thereunder because it had not suffered any damages. It asserted that the respondent had fully mitigated its damages by concluding the completion subcontract for the remaining work on terms more favourable than under the original subcontract. The motion judge rejected this argument and granted summary judgment under the payment bond in the amount of $183,824.23.

[4] The appellant says that the motion judge erred in his application of the principles of mitigation of damages to the facts of this case. It asserts that the amounts received under the completion subcontract should be considered as mitigation of any damages incurred for the unpaid work, and that a trial was needed to determine the damages actually incurred by the respondent. We do not agree.

[5] The case law is clear: "the plaintiff [has] the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and [this] debars him from claiming any part of the damage which is due to his neglect to take such steps": Cockburn v. Trusts and Guarantee Co., 55 S.C.R. 264, at p. 267, citing British Westinghouse Electric Co. v. Underground Electric Railways Co., [1912] A.C. 673 (H.L.), at p. 689. The motion judge both stated and applied this test correctly.

[6] Here, the respondent's decision to bid on and enter into a new completion subcontract was not an action taken to mitigate the loss consequent on the breach that was Gorf's failure to pay for the completed work. The respondent would have secured the benefits flowing from the completion subcontract regardless of Gorf's failure to pay for the completed work. It was Gorf's abandonment of the subcontract, not its failure to pay for completed work, that created the necessity for the completion subcontract. In short, as the motion judge correctly held, the respondent's successful bid for the completion subcontract was not consequent on Gorf's failure to pay its invoices.

[7] The appeal is therefore dismissed, with costs to the respondent in the agreed-upon amount of $12,500 inclusive of taxes and disbursements.

"K. Feldman J.A." "Fairburn J.A." "M. Jamal J.A."