Curran et al., v. Queen Milling, 2021 ONSC 2731
CITATION: Curran et al., v. Queen Milling, 2021 ONSC 2731
CHATHAM COURT FILE NO.: 494/20
TORONTO DIVISIONAL COURT FILE NO.: 496/20
DATE: 20210413
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: JAMES CURRAN EXPERT REMOVAL & EXCAVATING LIMITED, Plaintiff (Respondent)
AND
QUEEN MILLING INC., Defendant (Appellant)
BEFORE: Justice S. Nicholson
COUNSEL: J. O’Brien for Plaintiff (Respondent)
C. Patterson for Defendant (Appellant)
HEARD: April 6, 2021
REASONS
NICHOLSON J.:
[1] This is an appeal from a Small Claims Court decision of Deputy Judge Glenn C. Walker dated December 17, 2019 to a single judge sitting on the Divisional Court. After a two-day trial, the trial judge found in favour of the plaintiff, awarding $27,625.78 in damages, plus pre-judgment interest and costs. As the amount of damages exceeded the monetary jurisdiction of the small claims court, the plaintiff waived the excess and judgment was entered for $25,000 plus interest and costs.
Nature of the Dispute:
[2] Queen Milling Inc. (“QMI”) hired James Curran Expert Removal & Excavating Limited (“Curran”) to demolish two buildings located on its premises, a main warehouse and a smaller building located near the warehouse. Curran provided a quotation for the project in the amount of $105,000.00 inclusive of HST dated May 5, 2017. QMI signed an Authorization form for the benefit of Curran to do the work on May 17, 2017. The Authorization described the work to be done as “Demo of 2 buildings 1- 90’ x 150’ 2- 20’ x 40’ Removal of all asbestos, steel, concrete (Attached sheet)”. Curran’s principal, James Curran, executed the attached sheet to the authorization which also contained a diagram of the buildings to be demolished, and included four small buildings attached to the warehouse that were not to be demolished. There were typed words on the attached sheet which Mr. Curran did not recall being on the sheet when he signed it. The President of QMI, Ms. Norcini, signed the Authorization. Mr. Gazarek, an employee of QMI, witnessed her signature on the Authorization and affixed his initials to the attached sheet.
[3] The trial judge described that it was understood by the parties that the cement floor of the warehouse was not to be removed and that any items of salvage which QMI wanted to keep were to be marked with red. Otherwise, Curran believed it was entitled to the salvage not marked in red.
[4] The work was undertaken and completed by July 12, 2017. By that time, QMI had made payments of $80,000.00 and ostensibly owed a further $25,000.00. However, on October 24, 2017, QMI presented Curran with a “Reconciliation of Quote, Payments and Differences” purporting to deduct certain costs which QMI alleged had been incurred due to certain failures by Curran in completing the work properly. QMI deducted the sum of $16,008.35 and provided funds to Curran in the amount of $8,991.65.
[5] In response, Curran presented an invoice dated November 4, 2017 for “extras” in the amount of $20,340. It was Curran’s position that it was required to do work over and above the agreed upon work in the Quotation. The most noteworthy item for the purpose of this appeal was $12,000 on account of removal of asbestos from an internal office located within the main warehouse.
[6] Thus, the total amount claimed by Curran in the Small Claims Court action was $16,008.35 owing on the original contract and the $20,340.00 it claimed as “extras”. As noted, Curran explicitly waived recovery in excess of $25,000.00.
[7] In addition to claiming the offset for the deductions it had made, QMI presented its own “Defendant’s Claim” in the action, which included $6,500.00 for additional roof repairs and a claim for $48,364.00 for building restoration or replacement.
Decision of the Trial Judge:
[8] At trial, Curran was represented by a paralegal. QMI was represented by its president, Ms. Norcini. Mr. Curran testified on behalf of the plaintiff. Furthermore, Curran called evidence from two of its employees as to the manner in which the work was completed. The only witness that testified on behalf of QMI was Ms. Norcini. Importantly, Mr. Gazarek did not testify.
[9] The trial judge found that the “extras” charged by Curran were properly charged in addition to the contract price as set out in the Quotation. In his view, the removal and disposal of the additional asbestos found in the interior walls of the warehouse was not anticipated, nor could it be prior to the commencement of the demolition, by Curran, and thus could not have been included in the Quotation. However, he determined that in the absence of a written change order, QMI could not be said to have agreed to the amounts charged for the extras. Noting that the amounts charged were “ball-parked” and suspiciously rounded-off, the trial judge found the charges unreasonably high and discounted them by 30%, except for a charge of $1600 for overhead and profit, which was allowed in its entirety. Thus, Curran was determined to be allowed the sum of $11,480.00 plus $1600.00, plus HST thereon for a total of $14,780.40. Curran was also awarded the sum of $16,008.35, the amount owing on the original contract, for a grand total of $30,788.30.
[10] However, the trial judge offset that amount by $3,162.57 in relation to some of the items in QMI’s reconciliation, based upon admissions by Mr. Curran. He dismissed the balance of those items. He also dismissed QMI’s claim for the $6,500.00 relating to additional roof repairs and the $48,364.00 for building restoration or replacement.
[11] The final disposition was that QMI owed Curran the sum of $27,625.78. This was reduced to $25,000.00, the monetary limit available in Small Claims Court, plus pre-judgment interest. He subsequently ordered costs in favour of Curran, doubled because Curran had obtained a result in excess of its offer to settle.
The Appeal:
[12] QMI appeals the decision on the narrow issue of whether the trial judge erred in awarding Curran the amount of $14,780.40 with respect to the “extras”. If successful, the amount of Curran’s recovery would be reduced to $12,845.38 and, in QMI’s submission, the costs awarded at trial ought to be reduced by half since the result no longer exceeded the offer to settle.
[13] In QMI’s submission, the evidence demonstrated that this was a “fixed price” contract such that Curran was not entitled to charge for “extras”. Alternatively, QMI argued that in a “cost plus” contract, there is a substantial evidentiary burden on Curran to keep accounts that are adequate to show proof of its charges. As Curran provided no accounts, it was not open to the trial judge to “ball-park” the charges.
Appellate Review of Small Claims Court Judgments:
[14] In Maple Ridge Community Management Ltd. v. Peel Condominium Corporation No. 231, 2015 ONCA 520, the Ontario Court of Appeal considered the standard of appellate review in the context of small claims court decisions. Hourigan J.A., at paragraph 34, noted that the Small Claims Court is mandated under s.25 of the Courts of Justice Act, R.S.O. 1990, c. C. 43, to “hear and determine in a summary way all questions of law and fact and may make such order as is considered just and agreeable to good conscience.” Accordingly, its process and procedures are designed to ensure that it can handle a large volume of cases in an efficient and economical manner.
[15] In that context, appellate judges reviewing Small Claims Court reasons must recognize the informal nature of that court. In assessing the adequacy of reasons, the appellate court must consider that Small Claims Court reasons may not always be as thorough as those in Superior Court. It is important not to impart too much formality and delay into a legal process that is designed to be informal and efficient.
[16] Trial judge’s factual findings are entitled to considerable deference. The standard of review with respect to findings of fact is palpable and overriding error. The standard of review for findings of law is correctness. Contractual interpretation involves issues of mixed fact and law, which attracts appellate deference (see: 2270739 Ontario Ltd. (c.o.b. DEBT BUYER$) v. 1499998 Ontario Inc. (c.o.b. Property Management Co.), 2017 ONSC 5913 (Div.Ct.).
Analysis:
[17] In addition to reviewing the trial judge’s reasons, the transcript of the evidence and the parties’ submissions were considered. As can occur frequently in matters involving self-represented parties, the transcript reveals that the trial judge was confronted with procedural challenges. He waded through these in a manner which provided a fair trial to both parties, in my view.
[18] The trial judge’s reasons include a comprehensive summary of Mr. Curran’s testimony. Important elements of that testimony cited include the following:
• It was understood by the parties that the cement floor of the warehouse was not to be removed and that any items of salvage which QMI wanted to keep were to be marked with red in some way.
• Demolition work was only permitted to be done by Curran when Gazarek, the foreman, was present and most of Mr. Curran’s interactions were with him. He did have some meetings with Norcini Mr. Curran felt that she was trying to “micro-manage” the project.
• Mr. Curran was aware that there was asbestos in the warehouse. During the course of the demolition of the warehouse it was discovered that there was additional asbestos, previously undetected, found behind the drywall in the interior walls of the office area. The presence of this additional asbestos could not be ascertained until demolition was started.
• Mr. Curran estimated that there were approximately 20 tonnes of four feet by eight feet asbestos board discovered in the interior walls.
[19] Clearly important to the trial judge’s disposition of the action was the failure by QMI to rebut the plaintiff’s evidence in many respects. The trial judge noted that Mr. Gazarak, the foreman who was on the evidence clearly integral to the project given that QMI would not permit Curran to work in his absence, was not called by QMI to give evidence. The trial judge comments in his six-page reasons on six occasions about the failure of QMI to call evidence disputing the plaintiff’s evidence. Clearly, the absence of evidence contradicting Curran’s witnesses’ testimony was critical to the trial judge’s determination.
[20] On page 2 of his reasons, it is not clear whether the trial judge was making a finding of fact about whether the asbestos in the interior office could have been discovered by Mr. Curran. In summarizing the evidence of Mr. Curran, the trial judge states as follows:
The Plaintiff was aware that there was asbestos present in the warehouse. However, during the course of the demolition of the warehouse it was discovered that there as additional asbestos, previously undetected, found behind the drywall in the interior walls of the office area. The presence of this additional asbestos could not be ascertained until demolition was started.
[21] While the above quote may simply be interpreted as the trial judge’s recitation of Mr. Curran’s testimony, the trial judge later leaves no ambiguity that he is making a finding of fact that the asbestos was undiscoverable, stating as follows:
In the absence of evidence to the contrary, the Court finds that the extra charges found in the Extras Invoice were properly charged in addition to the contract price set out in the Quotation. The removal and disposal the additional asbestos found in the interior walls of the warehouse was not anticipated, nor could it be prior to the commencement of the demolition, by Curran and could not, therefore, have been included in the Quotation.
(emphasis added).
[22] The trial judge’s finding that the asbestos located in the interior walls was undiscoverable is entitled to considerable deference and on the evidence before him, the uncontroverted testimony of Mr. Curran, was there to be made. A review of excerpts from the transcript of Mr. Curran’s evidence supports the trial judge’s finding relating to the discoverability of the asbestos in the interior office walls. The brief cross-examination of Mr. Curran did not broach the subject of the asbestos in the interior office.
[23] Mr. Curran also testified that when the asbestos was discovered he spoke with both Mr. Gazarek and Ms. Norcini about its presence, the need for its removal and that it would be considered an “extra”. He admitted that he did not provide a price, or a ballpark figure for that work. He testified that it was agreed between them that it was not part of the contract. I reiterate that Mr. Gazarek did not testify. From a review of the trial transcript, Ms. Norcini did not challenge Mr. Curran’s evidence in this regard during his cross-examination.
[24] Importantly, Ms. Norcini did not address the discoverability of the asbestos in the office, nor whether she and Curran discussed the fact that its removal would constitute an extra in her own examination in chief.
[25] Accordingly, as the trial judge frequently noted, the plaintiff’s evidence was uncontested in the areas in which this appeal concerns. In my view, he was perfectly entitled to make the factual findings that he did.
[26] On this appeal, QMI argues that Curran ought to have discovered the asbestos within the interior walls prior to commencing the demolition, and that it should have been considered as part of the original contract. QMI referred to Regulation 278/05 under the Occupational Health and Safety Act which requires all asbestos-containing material that may be disturbed during demolition of a building to be removed before the demolition. As an experienced demolition expert, QMI argues that Curran ought to have considered the requirement to ensure that all asbestos was discovered prior to undertaking the demolition.
[27] Curran argues on this appeal that a bulletin under the Ontario Ministry of Labour, Training and Skills Development clearly places the onus upon the owner of the premises to determine whether any material that is likely to be handled, dealt with, disturbed or removed includes asbestos.
[28] Neither party made these arguments at trial. In my view, trial was the time for these arguments to have been raised. In any event, the regulation and bulletin do not alter the fact that the trial judge, on the evidence before him, determined that Curran could not have anticipated asbestos within the interior walls prior to commencing the actual demolition.
[29] QMI argues that this was a fixed-price contract and that Curran charged its extras on the basis that it was a “cost plus” contract. Even if it was a cost-plus contract, the law requires that a contractor seeking to recover on a cost plus basis must strictly prove the costs. In QMI’s submission, the trial ought not to have awarded extras based on Curran’s ballparked figures.
[30] In Balmoral v. Biggar, 2016 ONSC 319, at paras. 9 and 10, Master Albert stated the following regarding fixed price contracts and cost-plus contracts:
[9] Construction contracts fall into two basic types: contracts for a fixed price and contracts in which the price is based on time spent and materials used (also referred to as "cost plus" contracts). In a fixed price contract the contractor assumes the risk of bringing the project in at a cost that will cover the contractor's expenses overhead and profit. If the project comes in on budget then the contractor achieves a profit. If the project is over budget then the contractor absorbs all of the losses and the owner is protected by the contractually fixed price. The owner shoulders none of the risk in a fixed price contract.
[10] In a cost plus contract the risk lies with the owner. The contractor charges the owner based on the contractor's actual costs for labour and materials, to which is added an agreed upon percentage for overhead and profit. The contractor bears no risk of losing money on the project but the owner has no guarantee of the total contract price. In a cost plus contract the contractor must keep track of all costs, including labourers’ hours, hourly rates, the employment burden, proof of costs for materials and other items.
[31] Master Albert concluded that the contract in Balmoral was a fixed price contract. However, this did not preclude her from finding that parties may agree to add or delete items from the scope of a fixed price contract. In that case, the parties had included a formula for determining the cost of extras in their contract.
[32] Both parties refer me to Proxema v. Birock, 2018 ONSC 2553, QMI relying on McCarthy J’s comments in paragraph 120 and Curran on the comments in paragraph 118. I include the full statement of the law made by McCarthy J. at paras 118-120 as follows:
[118] The Alberta Supreme Court set out what constitutes valid extras to a construction contract in Chittick v. Taylor, 1954 492 (AB QB), [1954] A.J. No. 23:
When a contractor performs work or supplies materials not called for by the contract without instructions, express or implied, from the owner, or the consent of the owner, it is not entitled to charge for this additional work or materials as an "extra". However, when the contractor performs work or supplies materials not called for by the contract on the instructions, express or implied, of the owner, it is entitled to charge for additional work or materials as an "extra". What amounts to instructions from the owner depends on the circumstances relating to each item. If the owner, without giving definite instructions, knows that the contractor is doing extra work or supplying extra materials, and stands by and approves of what is being done and encourages the contractor to do it, that will amount to an implied instruction to the contractor, and the owner is liable [citation omitted] (Catan at para. 13).
[119] I adopt that passage as an accurate statement of the law of construction extras. Where an owner has knowledge that extra work is being done and fails to object, but is passive, he is deemed to be acquiescing and is thus liable to pay the contractor for that work.
[120] The law is clear that extra work entitling the contractor to additional payment must be work which is substantially different from, and wholly outside the scope of the work contemplated in the contract: see Ron's Trenching & Hauling Ltd. v. Estevan (City) (1985), 11 C.L.R. 148 (Sask. Q.B.) at paras. 8-9, citing with approval Goldsmith, Canadian Building Contracts (3rd ed., 1983), p. 83.
[33] The trial judge did not specifically categorize the contract in his reasons as fixed price or cost plus. However, he did make specific findings that the extras were in addition to the $105,000 contract price. While it is true that the hidden asbestos was the same substance as was contemplated under the contract, it was open to the trial judge to conclude that given that this hidden asbestos could not have been discovered by Curran, it fell outside “the scope of the work contemplated in the contract.” He did so.
[34] There was clearly a misapprehension by the parties as to how much asbestos was on the premises. The quotation that was agreed to was based upon what both parties thought was on the premises. The trial judge found that, on the uncontested evidence, once the parties discovered that there was additional asbestos on the premises, there was an agreement that the removal of the asbestos needed to be done and would constitute an “extra”. That subsequent agreement was enforceable.
[35] The transcript discloses the following evidence of Mr. Curran:
…”For the removal of extra asbestos hidden from panel.” Well, in my industry, if you—if you don’t find – if you find something that’s—this was very, very unusual. I don’t even know why they did this, but these were like offices inside the warehouse and they were full of asbestos which, I would have never ever guessed that in all the years I’ve done it. I don’t know why they did it, but that was put in there, and we had to take the drywall off and that is how we found it. We were up stripping some of the salvage. We took a piece of drywall off and then we discovered that it was all full of it, so that’s where I come up with—that’s just standard procedure in something that you have no idea that it’s there. Unforeseen.
Q. How did you—who did you inform of this?
A. Oh, I informed Steve and her. She went through it—and him.
Q. Okay and what was the comment? What was the approach?
A. She said she couldn’t believe it that—that it was in there.
Q. Okay, so did you state how much—what the—this was an extra?
A. Yes.
Q. Okay, did you give a price?
A. No.
Q. Did you give a ballpark figure?
A. No.
Q. But it was—it was agreed to that it obviously needed to be done.
A. We had to do it, yes.
Q. And it was agreed to, that it wasn’t part of the contract?
A. Yes.
[36] And later, Mr. Curran testified as follows:
Q. How did you inform her that you would have to cut around the door and that would be an additional charge?
A. In person.
Q. Okay, and the same thing with the –what about the catwalk in the—in the roof?
A. Same thing.
Q. Okay and the stairs and the stair?
A. Yes, same.
Q. No, why weren’t these in the contract?
A. Because he didn’t take me up on the roof and show me that there was anything up there.
[37] Mr. Curran testified that Mr. Gazarek was advised of the extra $700 charge associated with moving the bins back and approved it. Furthermore, he testified that QMI agreed to the extra expense associated with the jackhammering of the cement pad.
[38] I reiterate that this evidence was completely unchallenged at trial by QMI. Accordingly, it was open to the trial judge to accept the evidence of Curran and conclude that QMI had agreed that these were all “extra” expenses to the original contract. In my view, these findings ought not to be disturbed on appeal.
[39] McCarthy J. in Proxema, was confronted by extras that were generally unsupported by signed change orders or written instructions from the defendants. He found in that case that there was a pattern of conduct between the parties that they each relied upon. Accordingly, given the either explicitly or implicitly obtained consent of the defendants to the extra work, they were responsible for those expenses. The same reasoning applies here.
[40] The difficulty that the trial judge faced in this case is how to value the extras, since there was no agreed upon price between the parties. In his reasons, the trial judge said this about the value of the extras:
However, in the absence of a written change order, QMI has not agreed to the prices being charged. The principle of quantum meruit should therefore be applied to determine whether the prices charged by Curran are reasonable. Neither party called evidence to support these prices, other than the evidence of James Curran as to the break down of the cost for the removal and disposal of the additional asbestos. The Court does not have any evidence of the number of hours or the hourly wages of employees for each separate extra work done to support each charge. Nor does it have evidence of the value of the salvage items retained by QMI.
It would appear that all these items have been “ball-parked” by Curran and it is suspicious that they are all “rounded-off” figures or estimates not supported by time and actual cost. The Court finds that these items appear to be unreasonably high based on the little evidence there is before it. The charges will be discounted by 30 per cent, save and except the charge of $1,600.00 for over head and profit, which is allowed in its entirety. Curran shall be allowed the sum of $11,480.00 plus $1,600.00 for over head and profit, plus HST of $1,700.40 for a total of $14,780.40.
[41] QMI argues that Curran was required to keep proper accounts with respect to the costs of these “extras” and essentially argues that the failure to do so means that there ought to be no compensation for work which the trial judge concluded was additional to the contract, and actually performed. QMI relies upon G.T. Parmenter Construction Ltd. v. Sanders, [1947] O.J. No. 568 (Ont.H.C.), in which Assistant Master Marriott described that in a cost-plus contract, there is an onus upon a contractor to keep proper accounts so that the other party, and the court, can assess the amount of materials used and the labour spent.
[42] While I accept that the G.T.Parmenter case is good law with respect to cost-plus contracts, its application to the facts before the trial judge is less clear. In cost-plus contracts, the contractor must establish the cost of the materials used on the project and set out the time expended for labour. In the within case, there are no materials provided. The project was a demolition. The nature of the project made it less amenable to the requirements of a cost-plus contract.
[43] The appellant also relies upon A-Jac Demolition (London) Ltd. v. Urlin Rent-a-Car Inc. (Div.Ct.), 1990 6924 (ON SC). In that case, a demolition contractor had “miscalculated” when quoting the job the amount of concrete debris that could fit into an existing basement necessitating extra expense in hauling concrete from the job site. It was held that this miscalculation was done at the contractor’s peril in the absence of an agreement by the defendant to pay additional costs. However, in this case, there was evidence before the trial judge that QMI agreed to pay additional costs associated with the extras charged by Curran.
[44] The approach utilized by the trial judge recognized that QMI agreed to pay some unspecified amount for the extras. The work was performed by Curran for the benefit of QMI and thus, there was entitlement to be compensated the reasonable value of that work in accordance with the principle of quantum meruit. This possibility was discussed in A-Jac, supra, but since it was found in that case that there was no agreement to pay additional charges, quantum meruit did not apply.
[45] Quantum meruit is an equitable remedy that can be applied when there is a contract for a service but the contract does not provide a rate of remuneration. It can also be applied when a benefit is conferred and is voluntarily accepted by the defendant, but the plaintiff cannot collect the full amount of an agreed upon price due to only demonstrating part performance of the contract. In these circumstances, the court may determine a reasonable figure for the work actually performed by the plaintiff.
[46] At trial, Mr. Curran did testify with some specificity about how the sum of $12,000.00 was arrived at in respect of the removal of the hidden asbestos. There was less evidence tendered in respect of the other extras. In the trial judge’s view, the amount charged by Curran was excessive and he discounted the amounts charged by 30%. While this may appear to be an arbitrary figure, the trial judge was required to place some value on the work he concluded was actually performed.
[47] I would not interfere with that approach. The trial judge was permitted in the circumstances of this case, having found that the defendant agreed to the extra work, to determine a reasonable and fair amount to award for the work he found was done. The trial judge was required to do the best he could to quantify the monetary damages to which the plaintiff was entitled (see: Aluma Systems Inc. v. Resolute FP Canada Inc., [2020] O.J. No. 5421, 2020 ONCA 792).
[48] It should be noted that even if there is a valid argument that the trial judge did not adequately discount the amount charged by Curran, or failed to properly disallow some of the “extras”, the claim was further reduced by $2,625.78 by operation of the Small Claims Court monetary jurisdiction. The total of the amount charged for the non-asbestos related extras was $3,700.00, 70% of which is $2,590.00. Thus, even if all these items were disallowed by the trial judge, the amount of the judgment would be unaltered.
[49] In my view, the trial judge’s approach was consistent with the mandate of the Small Claims Court to hear and determine in a summary way all questions of law and fact and to make such order as is considered just and agreeable to good conscience, as per s. 25 of the CJA.
Conclusion:
[50] The trial judge relied upon the evidence that was presented to him by Curran to determine that the parties agreed that certain items would be considered “extra” or additional to the work specified in the contract. This evidence was not challenged on cross-examination of the plaintiff’s witnesses. The defendant did not lead any evidence of its own to dispute this agreement. The trial judge was justified in making the findings of fact that he made. Absent palpable and over-riding error, those findings are entitled to deference from this court.
[51] In arriving at a reasonable price for the cost of the extras, the trial judge was provided significant evidence with respect to the $12,000 charged for the hidden asbestos. There was less evidence with respect to the other extras. The trial judge reduced these amounts but still awarded what he considered to be a fair and reasonable amount for work that the defendant had agreed to and had benefitted from. In my view, the trial judge was within his jurisdiction in doing so.
[52] Accordingly, I would dismiss the appeal.
Costs of the Appeal:
[53] Only after completing my decision did I review the Costs Outlines filed by each party. I did not have the parties address costs during the hearing. While the respondent is entitled to its costs of this appeal, it would be improper for me to award costs absent providing the appellant an opportunity to make submissions as to quantum, or perhaps persuade me that costs ought not to follow the event.
[54] In the hopes that the parties can reach agreement as to the quantum of costs, I would simply point out that the two costs outlines are remarkably close to each other in terms of the amount of fees sought. Both parties clearly had comparable expectations of what the costs of the appeal would entail and put comparable time into the appeal.
[55] If the parties are unable to agree on the amount of costs of this appeal, I will receive costs submissions in writing. The respondent shall serve and file its written submissions, no longer than two pages double spaced, along with any relevant offers, no later than April 30, 2021. The appellant shall serve and file responding submissions on the same terms, no later than May 7, 2021.
Justice Spencer Nicholson
Date: April 13, 2021