COURT FILE NO.: 81/02
DATE: 20030509
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BLAIR R.S.J., BENOTTO S.J. AND SOMERS J.
B E T W E E N:
SAFINCO MECHANICAL LTD.
Plaintiff/Defendant by Counterclaim
(Respondent)
- and -
TORONTO DISTRICT SCHOOL BOARD and AXOR CONSTRUCTION CANADA INC.
Defendant/Plaintiff by Counterclaim
(Appellant)
Court File No. 99-CV-180158
B E T W E E N:
SAFINCO MECHANICAL LTD.
Plaintiff
(Respondent)
- and -
LONDON GUARANTEE INSURANCE COMPANY
Defendant
(Appellant)
Bernie Romano, for the Respondent
Ronald W. Price, for the Appellants
HEARD: May 9, 2003
BLAIR R.S. J.: (Orally)
[1] Axor Construction Canada Inc. appeals the judgment of Pitt J. which awarded Safinco Mechanical Ltd. damages in the amount of $455,462.85 pursuant to the Construction Lien Act.
[2] Axor and Safinco entered into a subcontract in November 1997 whereby Safinco would provide mechanical services and materials to a job site in Toronto. The contract, eventually signed in March, 1998, was valued at approximately 2.2 million dollars. By mistake in its tender, Safinco failed to incorporate the Fair Wage Policy provisions of the City of Toronto. Safinco notified Axor about this but ultimately agreed to abide by those provisions in the contract. Work started on the project and continued until mid-December, 1998. Around December 9, 1998, Axor gave Safinco a cheque for $89,531.65 for work certified to the end of October. The cheque was a few days late and came after receipt of a letter from Safinco asking for payment and indicating that its own subcontractors were seeking payment.
[3] Inspectors from the Fair Wage office attended the site on December 14th. After the attendance, they advised Axor that there would be a backcharge of $40,000.00 because of Safinco's failure to comply with the City's Fair Wage requirements as called for under the contract.
[4] On December 15, Axor stopped payment of the cheque for $89,531.65. The following day it indicated for the first time concern about the Fair Wage issue and raised certain other complaints about Safinco's work for the first time as well. Safinco asked for an immediate replacement cheque or workers would be taken off the site. No cheque was forthcoming. Axor indicated it would not make further payments unless Safinco posted a bond for the entire balance of the contract, something it was not entitled to request under the agreement. On December 17, Safinco withdrew its workers.
[5] The trial judge found that Axor was in fundamental breach of its obligations under the subcontract, thus terminating the contract or entitling Safinco to treat it as terminated and to sue for damages. See Sinteris Inc. v. 541555 Ontario Ltd., [1988] O.J. No. 1992 (H.C.J.), affirmed [1991] O.J. No. 2179 (C.A.); 968703 Ontario Ltd. c.o.b. as Headlines Industries v. Vernon (2002), 58 O.R. (3d) 215 (C.A.). There was evidence to support this finding and we see no palpable or overriding error on the part of the trial judge in that regard. We agree that in the context of the factual matrix before the trial judge, the breaches by Axor were sufficiently substantial to excuse Safinco from continued performance of its part of the contract.
[6] Stopping payment on an $89,531.65 cheque in the circumstances of this contract had serious ramifications for Safinco. Axor had previously acquiesced in Safinco's failure to comply with the board's Fair Wage requirements. Safinco had received the cheque several days prior to the stop payment and in circumstances where Axor had been told Safinco's subtrades were demanding payment and it was reasonable to assume Safinco would make its own payments against the cheque immediately upon receipt. The potential consequences of Safinco's own cheques "bouncing" because of the stop payment and the significant reverberations that can flow from that circumstance in the construction industry are troubling. The $89,531.65 was for work and services certified to the end of October. When stop payment was issued in mid-December, Safinco had provided additional material and services worth over $175,000.00, as found by the trial judge. Thus, Axor was never at risk of funding itself with a shortfall of $40,000.00 and there was no need for the precipitous action. In addition, it is open on the evidence to conclude that Axor was late in making its payments to Safinco and that Axor's position that if it overpaid, Safinco was not correct. Importantly, Axor's insistence before Safinco confirmed in its December 17th letter that it was staying off the job, that Axor was not going to pay any further monies until Safinco provided security for the full value of the remaining part of the contract, was an unjustified demand.
[7] All of these factors in our view support the trial judge's conclusion that Axor was in fundamental breach of the contract having regard to the various factors outlined by the Court of Appeal in Headline Industries, supra at paras. 14-16. The obligations breached by Axor, taken as a whole were proportionately significant in terms of its overall obligations under the contract, the breaches were serious from the perspective of Safinco and the consequences to Safinco as indicated were actually and potentially severe.
[8] London Guarantee Insurance Company also appeals the judgment rendered against it on a labour and material payment bond filed in connection with the contract. London Guarantee did not defend, the bond was an evidence, Pitt J. was entitled on the evidence to find liability as he did. The appeals of Axor and London Guarantee are therefore dismissed.
[9] Costs to the respondent as agreed upon, fixed at $5,000 inclusive. I have endorsed the record: "Appeals dismissed for oral reasons delivered by Blair R.S.J. Costs to the respondent, as agreed upon, fixed at $5,000 inclusive".
BLAIR R.S.J.
BENOTTO S.J.
SOMERS J.
Date of Reasons for Judgment: May 9, 2003
Date of Release: May 23, 2003
COURT FILE NO.: 81/02
DATE: 20030509
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BLAIR R.S.J., BENOTTO S.J. AND
SOMERS J.
B E T W E E N:
SAFINCO MECHANICAL LTD.
Plaintiff/Defendant by Counterclaim
(Respondent)
- and -
TORONTO DISTRICT SCHOOL BOARD and AXOR CONSTRUCTION CANADA INC.
Defendant/Plaintiff by Counterclaim
(Appellant)
Court File No. 99-CV-180158
SAFINCO MECHANICAL LTD.
Plaintiff
(Respondent)
- and -
LONDON GUARANTEE INSURANCE COMPANY
Defendant
(Appellant)
ORAL REASONS FOR JUDGMENT
BLAIR R.S. J.
Date of Reasons for Judgment: May 9, 2003
Date of Release: May 23, 2003