CITATION: C.S. Bachly Builders Limited v. Major, 2019 ONSC 2976
COURT FILE NO.: CV-18-134936
DATE: 20190514
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
C.S. Bachly Builders Limited c.o.b. Bachly Construction
Plaintiff (Respondent)
– and –
Jason Major and Paula Smoke
Defendants (Appellants)
David Tompkins, for the Plaintiff (Respondent)
Saba Ahmad, for the Defendants (Appellants)
HEARD: April 24, 2019
REASONS FOR DECISION
CHARNEY J.:
[1] The appellants, Jason Major and Paula Smoke (the appellants), appeal the judgment dated February 12, 2018 of Deputy Judge Skolnik of the Richmond Hill, Ontario Small Claims Court. In judgment, the Deputy Judge awarded the plaintiff C.S. Bachly Builders Limited (Bachly) (the respondent on this appeal) $24,828.48 for breach of contract.
[2] The appellants request an order setting aside the judgment of the Deputy Judge and granting judgment to the appellant.
Factual Background
[3] The appellants’ Richmond Hill family home (the home) was destroyed in a fire in November 2007. The home had to be demolished and rebuilt.
[4] The appellants were insured for the replacement cost of the home, contents and additional living expenses by Wawanesa Mutual Insurance Company (Wawanesa). Wawanesa relocated the appellants and their children to rental accommodation and agreed to cover the cost of rebuilding the house in accordance with the insurance policy.
[5] Wawanesa retained John Michailidis of Claims Pro to serve as independent adjuster on the file. Claims Pro was responsible for assessing the damages and retaining professional trades to rebuild the home in accordance with the insurance contract.
[6] Wawanesa retained engineer Giffin Koerth Inc. to prepare plans for the reconstruction based on the pre-loss condition of the home. On February 6, 2008, Giffin Koerth provided Wawanesa with drawings for the reconstruction of the home. These drawings included a 4-foot crawl space under the home.
[7] On May 14, 2008, Mr. Michailidis asked Bachly to provide an estimate for the reconstruction of the home based on the engineer’s drawings. On May 30, 2008, Bachly submitted an estimate for the project in the amount of $225,704.34 (the first estimate). The first estimate included a partially new foundation, and stipulated that additional costs would arise if additional areas of the foundation or concrete slab required replacement.
[8] On January 19, 2009, Mr. Michailidis provided Bachly with revised drawings that had been prepared by Robert Segarra Architect Inc. (the Architect drawings). The Architect drawings were identical to the engineer drawings but also included a deck at the rear of the home, a rough in for a second floor washroom and walk-in closet, and an 8-foot basement instead of a 4-foot crawlspace.
[9] Bachly revised its estimate to include the complete replacement of the foundation walls. Mr. Michailidis did not ask Bachly to provide an estimate for the construction of a deck or 8-foot basement since there was a dispute between the appellants and Wawanesa whether Wawanesa would pay for these features as part of the replacement cost of the home. Bachly’s estimate to Mr. Michailidis did not include the cost of these disputed “upgrades”.
[10] On January 23, 2009, Bachly submitted a revised estimate of $268,338.22 (the second estimate).
[11] The contract for rebuilding the home was awarded to the plaintiff (respondent), Bachly, on June 4, 2009. The defendant Major executed a Work Authorization authorizing Bachly “to carry out temporary and/or permanent repairs as per estimate, necessary as a result of fire damage to my property…as per attached estimate dated January 23, 2009. I/we direct payment of all insurance monies for such repairs to C.S. Bachly Builders Ltd. upon completion…”
[12] On June 11, 2009, Mr. Major advised Bachly that he would like to do some of the construction work himself. In particular, Major wanted to install the windows, finish the bathrooms and finish the kitchen. In exchange Major would receive a “credit” from the plaintiff. In other words, Wawanesa would pay Bachly for doing the work, and Bachly would credit Major.
[13] On either October 11, 2009, or November 10, 2009 (the documents are not consistent in the ordering of the day and month, although this uncertainty is not relevant to the legal analysis), Bachly provided Mr. Michailidis with a revised estimate of $305,017.90 (the final estimate). The revised estimate, sent to Mr. Michailidis’ attention, states: “At this time we are providing the following estimate to reflect the additional costs associated in returning the dwelling to its considered pre existing condition. The additional costs have been discussed and only those approved have been included in this quotation.”
[14] On September 21, 2010, Bachly agreed to issue a cheque to Major for $14,805.72. This cheque was intended as the “credit” for the work performed by Major. Upon acceptance of the cheque, Major signed an agreement that stated:
By accepting this cheque in the amount of $14,805.72, I, Jason Major, hereby agree that the account with Bachly Construction is settled and that no further monies are owed to me from Bachly Construction.
[15] The dispute between the parties centres on the final payment made by Wawanesa on June 16, 2010. On that date the defendants received a cheque from Wawanesa for the sum of $24,828.48. The three previous cheques from Wawanesa were made co-payable to “Jason Major, Paula Smoke and Bachly Construction”. This fourth and final cheque was made payable only to Jason Major and Paula Smoke.
[16] The three previous co-payable cheques were for $63,278.10, $177,115.20, and $39,796.12, for a total of $280,189.42.
[17] The plaintiff alleged that the fourth cheque was intended to cover the final payment for the building repairs as per the October/November, 2009 estimate, and should have been paid to the plaintiff in accordance with the terms of the Work Authorization, which directed “payment of all insurance monies for such repairs to C.S. Bachly Builders Ltd. upon completion”.
[18] The plaintiff notes that this last cheque for $24,828.48 represents the exact amount that was outstanding on Bachly’s October/November, 2009 estimate of $305,017.90.
[19] The defendants denied that the cheque was owing to the plaintiff. In their Statement of Defence the defendants alleged that the final payment was a “reimbursement of personal property lost in a fire, and that any relation to the alleged monies outstanding is purely coincidental”. At trial the defendants alleged that the payment was intended as compensation for the non-completion of work by the plaintiff.
The Judgment
[20] One would have thought that this would be a straightforward case that could be easily resolved by Wawanesa advising what the final cheque was meant to cover. At trial, however, it became clear that Wawanesa relied on Mr. Michailidis to review all costs, payments and credits and that Wawanesa directed payment on the basis of his instructions. It also became clear that Mr. Michailidis had no real recollection of what he had done or why. The Deputy Judge noted, at para. 50, that Mr. Michailidis was a probationary adjuster at the time, and “may have not been up to the standard required for this type of project. He should have been supervised by a fully qualified insurance adjuster”.
[21] The Deputy Judge reviewed the evidence presented by the parties with respect to the final Wawanesa cheque.
[22] The plaintiff’s key witness was Mr. Cameron Snodden, the estimator responsible for compiling the plaintiff’s quotation for restoring the home to its pre-loss condition. Mr. Snodden testified that the final price for the plaintiff to complete the construction was $305,017.90 based on the quotation that had been approved by Mr. Michailidis on behalf of Wawanesa. While Mr. Major did do some of the work himself, this was covered by the $14,805.72 credit agreed to by the parties on September 21, 2010.
[23] On behalf of the defendant, Mr. Major testified that the amount of $24,828.48 was based on invoices he presented to Mr. Michailidis which totalled more than that amount. He stated that these invoices were for items that he purchased or was to complete himself and be reimbursed from the project funds.
[24] Mr. Michailidis initially testified (at para. 45 of the decision) that he believed that the $24,828.48 was due to the defendants as a result of work done and materials provided by them, and was calculated on the basis of invoices provided by the defendants. He could not, however, recall receiving any invoices from the defendants.
[25] The Deputy Judge notes (at para. 47) that Mr. Michailidis subsequently changed his mind, and testified that he made a mistake. He agreed with the plaintiff that the money should have been paid to them for the construction work that they did.
[26] In reviewing the transcript of his evidence, there is no doubt that Mr. Michailidis had difficulty recalling the basis for his recommendations to Wawanesa. This is not entirely surprising given that the trial was some seven years after the events at issue. Mr. Michailidis did testify, however, that the final cheque to Major and Smoke “should have been issued as a co-payable because of the approved $305,017.90”.
[27] While the Deputy Judge accepted Mr. Major’s evidence that he presented an invoice to Mr. Michailidis, he found that Mr. Major “may have overstated what the invoices were”.
[28] The Deputy Judge also accepted the plaintiff’s final October/November, 2009 estimate as an accurate accounting of the amount that they were owed on the project.
[29] While the Deputy Judge accepted that the defendants retained the final payment “in the sincere and genuine belief that they were entitled to it” (para. 54), he also found that the payment of the final cheque for $24,828.48 to the defendants “was an error” and “contrary to the protocol that the parties had established with regard to issuing of the cheques” (para. 57). Accordingly, he found in favour of the plaintiff’s and allowed their claim for $24,828.48.
The Superior Court Action
[30] The Deputy Judge made reference to a Superior Court action at para. 53 of his decision. This was an action brought by Jason Major and Paula Smoke, the defendants in this Small Claims Court proceeding. In that action Major and Smoke sued ClaimsPro and Wawanesa Mutual Insurance Company in relation to the disputed “upgrades”. Bachly was not a party to that action. That action was settled in August, 2014 with a payment to Major and Smoke of $52,500 inclusive of costs, disbursements and interest.
Issues on Appeal
[31] The appellants argue that there was no evidence that they ever agreed to the $305,017.90 estimate relied on by Bachly as the basis for its claim to the final Wawanesa payment. They agreed only to the January 23, 2009 estimate of $268,338.22.
[32] The appellants also argue that the trial judge made palpable and overriding errors by missing invoicing errors made by Bachly in its final invoice to Wawanesa.
The Standard of Review
[33] The appeal is brought pursuant to s. 31 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The standard of review is set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 at paras. 6-10 and 36-37. On a pure question of law, the standard of review is correctness. The standard of review for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a “palpable and overriding error”. Questions of mixed fact and law are subject to the “palpable and overriding error” standard, unless it is clear that the trial judge made an error of law or principle that can be identified independently in the judge’s application of the law to the facts of the case.
Analysis
[34] The appellant’s appeal is based on the premise that the contract price for the rebuilding of his home was based exclusively on the January 23, 2009 estimate of $268,338.22, and that any payment over that amount must belong to the appellant.
[35] The case, however, is somewhat more complicated than that. As the respondent points out, this case involves several contracts. The first is the insurance contract in which Wawanesa agreed to cover the replacement cost for the appellants’ home. The second contract is the agreement that Major would direct all of Wawanesa’s payments for repairs to Bachly. Bachly had to have these estimates approved by Mr. Michailidis on behalf of Wawanesa. When approved by Mr. Michailidis, the approved amount became another contract.
[36] It was certainly open to Mr. Michailidis to reject Bachly’s final invoice, either because the work was not done, or because the work done related to “upgrades” that were not covered by the insurance policy. Rightly or wrongly, Mr. Michailidis approved the final invoice, and the final cheque from Wawanesa was intended to cover the additional costs approved by Mr. Michailidis.
[37] The Superior Court action between Major and Wawanesa regarding payment for upgrades was settled in August, 2014 and had no bearing on the matter before the Small Claims Court.
[38] The only issue for the Deputy Judge was whether Wawanesa intended this payment to cover construction work performed by Bachly, or whether the payment was intended for some other purpose to be retained by the defendants.
[39] The Deputy Judge accepted the evidence of Mr. Snodden that the final price for the plaintiff to complete the construction was $305,017.90 and that this amount was approved by Mr. Michailidis on behalf of Wawanesa.
[40] The Deputy Judge found that Wawanesa agreed to pay Bachly $305,017.90 for the rebuilding of the home, and the final payment of $24,828.48 was meant to cover the balance of the Bachly invoice. The amount of the final payment was a matter between Wawanesa and Bachly. The fact that the final cheque was payable only to Major and Smoke, and not co-payable to Bachly as were the previous cheques, was an error, and did not negate the defendants’ obligation to direct the payments to Bachly.
[41] The Deputy Judge rejected the contention that the final payment was made to cover invoices provided by the appellants to Mr. Michailidis.
[42] The cheque for $24,828.48 represents the exact amount that was outstanding on Bachly’s October/November, 2009 estimate of $305,017.90. The Deputy Judge rejected the far-fetched contention that this was “purely coincidental”. Even in the appeal before me, no attempt was made to explain how the appellants’ invoices equalled the exact amount outstanding on Bachly’s final estimate.
[43] There was evidence on the record to permit the Deputy Judge to make these factual findings, and I would not give effect to the contention that he made any palpable and overriding errors in this regard. His legal conclusions flow directly from the factual findings made, and he made no errors of law or principle that can be identified independently of his application of the law to the facts of the case.
Conclusion
[44] For the foregoing reasons, the appeal is dismissed.
[45] Pursuant to the agreement of the parties, costs of this appeal to the respondent in the amount of $6,000.
Justice R.E. Charney
Released: May 14, 2019
CITATION: C.S. Bachly Builders Limited v. Major, 2019 ONSC 2976
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
C.S. Bachly Builders Limited c.o.b. Bachly Construction
Plaintiff (Respondent)
– and –
Jason Major and Paula Smoke
Defendants (Appellants)
REASONS FOR DECISION
Justice R.E. Charney
Released: May 14, 2019