CITATION: 1157391 Ontario Inc. v. Ortiz, 2021 ONSC 5923
DIVISIONAL COURT FILE NO.: 307/20
DATE: 2021/09/22
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
McWatt A.C.J.S.C., Sachs and Penny JJ.
BETWEEN:
1157391 Ontario Inc. o/a ANT Construction
Plaintiff (Respondent)
– and –
Alejandro Dada Ortiz, Michelle Dada Ortiz and Michael Joseph Tremblay
Defendants (Appellants)
R. Christopher M. Belsito, for the Defendants, Appellants
Paul Pape and Brodie Noga, for the Plaintiff, Respondent
HEARD at Toronto by videoconference: July 5, 2021
Sachs J.
Overview
[1] This appeal arises out of the construction of a residential home. The Plaintiff entered into a fixed price contract with the Defendants, Mr. and Mrs. Dada Ortiz. The Plaintiff was the general contractor and the Defendants are the owners of the home. The contract provided for certain draws to be made at certain points in the construction. After the framing was complete, which triggered the payment of the first draw, the Defendants terminated the contract, claiming fundamental breach by the Plaintiff. The Defendants alleged that the Plaintiff had unilaterally changed the construction of the home and had caused delays such that the Defendants had not received what they bargained for. The Plaintiff disputed the breach allegations, claiming that the changes were necessitated by failings in the construction drawings that the Defendants were responsible for, that the Defendants had approved the changes, that the changes did not amount to a fundamental breach, and that any delays were the fault of the Defendants. The Plaintiff registered a lien against the property and commenced an action against the Defendants for the monies owing under the contract for the work done and for loss of profit.
[2] On June 19, 2020, after thirteen days of trial and submissions in writing, McCarthy J. found in favour of the Plaintiff. He awarded the Plaintiff judgment for the amount owing under the contract, valued according to the draw schedule in the contract, and for loss of profit. In doing so, the trial judge accepted the evidence of the Plaintiff’s witnesses and did not accept the evidence of the Defendants’ witnesses. The trial judge also awarded the Plaintiff a lien on the property for the amount found to be owing under the contract, excluding the amount awarded for loss of profit.
[3] This is an appeal of the trial judge’s judgment. On this appeal, the Defendants submit that the trial judge made the following errors. First, the trial judge erred by failing to apply relevant construction law jurisprudence when he found that there had been no fundamental breach of the contract. Second, the trial judge erred in valuing the Plaintiff’s work in accordance with the draw schedule in the contract as opposed to the Defendants’ evidence as to the value of the work. Third, the trial judge erred in awarding any amount for loss of profit, as the judgment for the draw amount already included profit. Fourth, the trial judge erred in failing to deduct the deposits paid from the amount awarded. Finally, the Defendants also allege that the trial judge demonstrated a reasonable apprehension of bias.
[4] For the reasons that follow, I would dismiss the appeal. I reject the submission that the trial judge erred in law in assessing the issue of fundamental breach. I also find that the trial judge made no palpable and overriding errors in his factual findings that led to the judgment under appeal. In particular, he rejected the Defendants’ expert’s reasons as to the value of the work the Plaintiff had done and gave reasons for doing so. He did take into account the deposits paid when calculating damages and he awarded loss of profits in relation to the work that was not performed under the contract, rather than for the work that was performed. He found, as he was entitled to, that the Defendants had no right to terminate the contract and they were therefore obligated to compensate the Plaintiff for the profit it would have earned under the contract. I also find that the Defendants have not reached the evidentiary threshold necessary for establishing a reasonable apprehension of bias. They make no complaint about the conduct of the trial. Their complaints centre on the trial judge’s negative findings of credibility about their witnesses as opposed to the positive findings of credibility the trial judge made about the Plaintiff’s witnesses. A trial judge is entitled to prefer one party’s evidence over that of another’s as long as reasons for doing so are given, which the trial judge did. Fundamentally, I agree with the Plaintiff that the Defendants are seeking to retry their case on appeal. That is not the function of an appellate court.
Factual Background and Trial Judge’s Findings
[5] The contract between the parties is dated August 10, 2016. The contract sets out a fixed price for the construction of the Defendants’ home of $571,929.81. Schedule “C” to the contract sets out when payments were to be made. These were to be paid according to the percentage of work completed, as identified by the lender’s guidelines. Pursuant to that schedule, the Defendants paid $100,000.00 in deposits and were to pay $123,052.62 on completion of the first milestone, which included completion of the framing and the roof, and the installation of the exterior doors and windows. Under the contract, the Defendants were responsible for providing the project drawings.
[6] The contract was to be completed within four months of the date when the necessary permits were obtained from the City. The Defendants delivered approved permits on August 25, 2016 and work began on the site shortly after that date. The first difficulties with the project arose on September 6, 2016. Those difficulties continued and on December 11, 2016, shortly before the Plaintiff completed the milestone entitling it to a draw of $123,052.62, the Defendants delivered a written notice to the Plaintiff terminating the contract. After receiving the termination letter, the Plaintiff tried to discuss the matter with the Defendants and continued to work on the project on a sporadic basis until December 23, 2016.
[7] On December 20, 2016, the Plaintiff invoiced the Defendants for the $123,052.62. The Defendants demanded a full accounting from the Plaintiff and a Release. On December 21, 2016, the framing inspection was completed, with some minor items noted by the city building inspector. On December 23, 2016, the Plaintiff sent the Defendants an invoice for extras. The contract contained a schedule setting out a rate sheet for extras.
[8] The Defendants refused to pay the Plaintiff the amounts invoiced. In spite of this, on January 5, 2017, the Defendants obtained an advance from their lender of $155,350.00 on the basis that the Plaintiff had completed the first milestone. They then used this advance to hire another contractor to complete their home.
[9] The Plaintiff brought this action claiming damages for breach of contract and a lien under the Construction Act, R.S.O. 1990, c. C.30. The damages claim was for the draw of $123,052.62, $5704.90 for extras, and $35,256.29 for loss of profit. The Defendants defended the claim on the basis that their termination of the contract was justified.
[10] The Defendants relied upon the following issues to justify their termination of the contract:
(a) The Foundation Wall Issue: Under the contract, the Defendants were responsible for providing the project drawings. Those drawings called for a hybrid foundation wall (a “knee” wall). The Plaintiff advised the Defendants that because of site elevation issues, the knee wall had to be replaced with an eight-foot solid poured concrete wall. According to the Defendants, the Plaintiff pressured them into agreeing to this change. After hearing from the witnesses called by both sides on this issue, the trial judge accepted the evidence of the Plaintiff’s witnesses that the change to the foundation wall was necessitated by a miscalculation in the site plan drawings (which were the Defendants’ responsibility) and that the solution suggested by the Plaintiff was the most appropriate solution to the problem. Any other option would have resulted in delay and increased cost. The trial judge found that the Defendants agreed to the change and did not accept the Defendants’ evidence that the Plaintiff forced them to do so. According to the trial judge, Michelle Dada Ortiz “fully understood the issue and provided clear and explicit instructions to proceed with the least costly and most timely solution to the foundation wall issue”: at para. 85. As put by the trial judge at para. 115(b):
In respect of the foundation wall, I find that [Michelle Dada Ortiz, who is an engineer] gave clear instructions to ST [the Plaintiff’s project supervisor] to forego the knee wall in favour of the far more practical and less expensive poured wall. Had the hybrid wall been of such importance to the Defendants, they would have suffered the accompanying delays involved in salvaging that design feature. Moreover, as with the porch issue, it was not cited as a ground for termination on December 11 even though it would have been plainly obvious to the Defendants for months that there was no hybrid wall.
(b) The Front Porch Issue: The drawings provided by the Defendants called for a vaulted natural timber frame porch. The Plaintiff constructed a porch with joists and a flat drop ceiling. According to the Defendants, this change was made unilaterally by the Plaintiff and justified their action in terminating the contract. The Plaintiff’s witnesses testified that a vaulted porch could not be built to Code without engineering drawings and that the Defendants were aware of this. Instead of providing those drawings, the Defendants’ designer instructed the Plaintiff on September 21, 2016 to build the porch with collar ties and no ridge beam (as opposed to a vaulted porch). Again, the trial judge accepted the Plaintiff’s evidence on this issue and rejected the Defendants’. Specifically, the trial judge found at para. 120:
The front porch (including the roof) was built in accordance with the design, direction and drawings provided by Bailey [the Defendants’ designer] on September 21. The vaulted porch which the Defendants ultimately had constructed in the post project period [after they terminated their contract with the Plaintiff and employed another contractor] could only be legally erected with engineered drawings of the kind prepared and submitted by a qualified architect in March 2017. I accept the evidence of Ron Koerth [a professional engineer who was called as an expert by the Plaintiff] that, without engineering drawings, the porch designed by the Defendants could not be constructed in accordance with the Code.
The trial judge made a specific finding that if the Defendants wanted a vaulted porch, it was their responsibility under the contract to provide engineering drawings. He also found that “[e]ven if I am wrong in this finding, the final direction by Bailey to proceed with collar ties and a ridge board served to obviate any requirements for engineered drawings”: at para. 122. He also found that the “Plaintiff fulfilled its obligations under the contract to provide the porch it was directed to construct by the Defendants and Bailey”: at para. 123.
(c) The Basement Windows Issue: The Defendants alleged that the Plaintiff made unilateral changes to the basement windows that resulted in the windows not being properly aligned with the windows on the first floor. The Plaintiff’s evidence was that the continuous nine-foot window in the Defendants’ design could not be supported in a concrete wall. The windows needed to be smaller with spacing in between for interior posts to be set in place. This made it impossible for the basement windows to line up with the main floor windows. According to the Plaintiff, the Defendants received the same amount of window space as was set out in the plans. Again, the trial judge accepted the Plaintiff’s evidence on this issue. The trial judge also refused to allow the Defendants a $7,000.00 credit for the basement windows. As put by the trial judge at para. 139(e):
Similarly, I am not prepared to allow a credit to the Defendants for seven basement windows at $1000. There is simply no basis for it. There is no evidence that there has been a diminution in the value of the home. A continuous window would not have been supported in the foundation wall. I am not prepared to assign some notional value to the loss of aesthetic perfection because the basement windows are slightly out of alignment with the main floor windows or because a small portion of the windows are underneath the rear deck. I find it telling that the Defendants would have gone ahead to install the rear deck in the fashion that they did had reduced light in the basement been of such concern to them.
(d) Failure to Communicate: The Defendants alleged that the Plaintiff’s poor communication with them justified their termination of the contract. On this issue, after hearing from the witnesses and reviewing the relevant recorded exchanges between the parties, the trial judge found as follows:
[58] I find that ST [the project supervisor] responded promptly, courteously and completely to issues raised, questions posed, and concerns expressed during the project. This is evidenced by his many emails to the designers, the Defendants, the sub-trades and his willingness to convene and attend site meetings. Examples include: a September 12 email to Doug Betts regarding the porch beams; the September 13 discussions with [the Plaintiff’s president and directing mind] and [Michelle Dada Ortiz] regarding the front porch; the October 20 memo containing summary notes from a site meeting three days earlier; an October 24 summary of the recent meeting; the October 28 discussion of the steel beam issue with [the Defendants’ designer]; the November 1 email to [the Defendants’ designer] regarding the steel beam connection; the November 7 site meeting summary which included confirmation that [the Defendants’ designer] would be addressing issues with its engineer. In the absence of satisfactory responses and directions from [the Defendants’ designer], and to keep the project moving, ST took the initiative to order additional materials to resolve the beam support and connectivity issues. Finally, on December 8, ST provided detailed answers to a host of questions posed by the owners.
[59] Overall, I find that ST was responsive, prompt, courteous and thorough in his communications with the sub trades, [the Defendants’ designer], the Defendants and others at the Plaintiff’s office. I would go as far as to say that his communications on matters of importance and immediate concern was exemplary.
[115] (d)…If anyone failed to communicate or respond in a timely manner it was the Defendants. I refer to the Plaintiff’s written requests for flooring choices (December 1); interior selections (December 2) and plumbing rough ins (December 9), each of which went unanswered.
[119] Both the Plaintiff and the framer were diligent, consistent and reasonable, if not perfect, in communicating with and updating the Defendants on the status of the projects and the issues and challenges encountered. The complaints of the Defendants in this regard are not supported by the evidence. I find that ST was particularly responsive, timely and helpful in addressing questions and concerns; moreover, I find that he was proactive, respectful and fair in approaching the Defendants and the designers about the challenges encountered on the project.
(e) Delay: The Defendants argued that they were justified in terminating the contract because the Plaintiff failed to properly coordinate construction and forecast potential causes of delay, which they alleged resulted in a significant delay of 42 days. At one point during the term of the contract, the framing sub-contractor hired by the Plaintiff attended to other projects. The trial judge accepted that there were delays in the project but did not accept that they were the Plaintiff’s responsibility. He found that any delays were caused by the design deficiencies in the drawings and the changes that then had to be made to the drawings. He also found that the framing sub-trade only attended to other projects until the problems caused by those deficiencies could be resolved. As put by the trial judge at para. 144:
To the extent that there were delays in the project, they were not the fault of the Plaintiff’s or its sub-trades. The challenges in locating the water and sewer services; the issues surrounding the beams; the absence of proper drawings for porch pads; the prevarications over the front porch design; the insufficiency of the stair opening; the changes to window locations and openings – these were all the result of design flaws or deficiencies and/or the failure of the designer to address identified problems in a timely fashion. Taken together, these caused the project delays complained about by the Defendants. I recall the comment of the experienced ST [the Plaintiff’s project supervisor] that a day’s delay on the front end of a project can cause many days delay on its back end. Moreover, it is entirely understandable that framing sub-contractors would not want their workers standing around a project site waiting for design flaws to be addressed.
(f) Failure to Protect the Site: The Defendants maintained that the Plaintiff failed to properly clean and care for the construction site and failed to protect their home from the elements, which caused mould growth. Again, the trial judge heard the Defendants’ evidence on this issue and did not accept it. With respect to the most serious aspect of this claim, the mould issue, the trial judge found as follows at para. 139(f):
There was insufficient proof that mould was present on the site in December or that the Plaintiffs were responsible for it. The photographs taken by the Defendants which purport to be evidence of mould are not persuasive. Although KV [a carpenter who attended at the site] detected what might have been mould in some of the areas where he was working, his suggestion to have it investigated was apparently ignored. There were no samples taken; no testing done. I note a complete absence of any remediation costs. Surely, the Defendants, both of whom are clearly health and environment conscious individuals, would have gladly borne such costs had the problem been so manifest as they claim.
With respect to the other aspect of the failure to clean up allegation, the trial judge accepted the Plaintiff’s project supervisor’s evidence that as of the termination date, there was no snow build up on the property and that a cleanup of the site was not part of the first milestone that the Plaintiff had met when it rendered its invoice for the first draw of $123,052.90: see trial judge’s Reasons, at para. 63.
[11] In summary, the trial judge rejected the Defendants’ defence to the Plaintiff’s claim. He found that this was a fixed price contract and that “nothing the Plaintiff did at any stage of the contract served to undermine the integrity of the fixed price contract…”: at para. 113. He found that there was no fundamental breach by the Plaintiff. He also found, at para. 124, that:
[T]he Defendants knew precisely what they were doing when they terminated the project on December 11, just before the framing inspection. When presented with an invoice for the first draw, the Defendants then made an unwarranted and unreasonable demand for an accounting detail and a release. By adopting this tactic, the Defendants sought to retain the benefit of the labour and materials supplied by the Plaintiff under a fixed price contract while demanding a detailed accounting upon which they could then negotiate a more favourable price for the project. This was a unilateral attempt to re-write the contract.
[12] The trial judge found that the Plaintiff had completed the work necessary to be paid the claimed draw of $123,052.62. He found both that the Defendants should not be able to unilaterally try and convert the fixed price contract into a labour and materials contract and that the value of the labour and materials supplied by the Plaintiff “had the value assigned to them in that fixed price contract”: at para. 130. He discounted the Plaintiff’s claim for extras and only awarded $1,011.75 in relation to that claim. He allowed the Plaintiff’s claim for loss of profit, but fixed the value of that claim at $19,723.00. He did not allow any aspect of the Defendants’ claim for set-offs or back-charges.
Issues Raised on this Appeal
[13] The Defendants made the following arguments on this appeal:
(1) The trial judge erred both in fact and in law in failing to find that the Plaintiff had committed various breaches that entitled the Defendants to terminate the contract.
(2) The trial judge erred in assessing the value of the Plaintiff’s work at the time of the termination and in awarding an amount for loss of profit.
(3) The trial judge’s reasons give rise to a reasonable apprehension of bias against the Defendants and in favour of the Plaintiff.
Analysis
Did the trial judge err when he found that that Defendants were not justified in terminating the contract?
[14] The trial judge found that the Defendants were only entitled to terminate the contract if the Plaintiff had fundamentally breached the contract. In doing so, he relied on the Court of Appeal’s decision in Spirent Communications of Ottawa Ltd. v. Quake Technologies, 2008 ONCA 92, 88 O.R. (3d) 721, leave to appeal to S.C.C. refused, 2008 CarswellOnt. 4317. Spirent establishes the following principles:
(a) Only a fundamental breach gives a party the right to terminate a contract: at para. 35.
(b) A “fundamental breach is one which deprives the innocent party of substantially the whole benefit of the contract”: at para. 35.
(c) There are five factors to consider in deciding whether there has been a fundamental breach:
The five factors are: (1) the ratio of the party’s obligations not performed to that party’s obligations as a whole; (2) the seriousness of the breach to the innocent party; (3) the likelihood of repetition of such breach; (4) the seriousness of the consequences of the breach; and (5) the relationship of the part of the obligation performed to the whole obligation: at para. 36.
[15] The trial judge found that the Plaintiff had not breached the contract and that none of the factors for fundamental breach were present.
[16] The Defendants argued on appeal that the trial judge erred in law in relying on Spirent to guide his analysis. According to the Defendants, Spirent is not a construction lien case and the principles that should have been followed are the ones set out in construction lien cases such as Heyday Homes Ltd. v. Gunraj, [2004] O.J. No. 429 (Sup. Ct.) and D. & M. Steel Ltd. v. 51 Construction Ltd., 2018 ONSC 2171, [2018] O.J. No. 1770. This submission has no merit. First, Spirent, while not a construction lien case, is a binding authority on when a party is entitled to terminate a contract. Second, the overarching principles referred to in the construction lien cases cited by the Defendants are consistent with the principles established in Spirent. For example, in Heyday Homes, Master Sandler identified the central issue in the case as being whether either party was in fundamental breach of the contract. He confirmed that a fundamental breach had to be serious and work that is merely “bad or defective” will not entitle an owner to terminate a contract: at para. 343, quoting Goldsmith on Canadian Building Contracts, 4th ed. (Carswell, 1988), at p. 6-4. In D. & M. Steel, Perell J. at para. 51 also accepted that only a fundamental breach will entitle an owner to terminate a contract and that “mere bad or defective work or insignificant non-completion will not, in general, entitle an owner to terminate a contract”. Instead, the owner must first give the contractor an opportunity to remedy the defects or complete the work. Then, the owner may be entitled to sue for damages: at para. 52. An owner may terminate a contract “if a contractor abandons the contract, repudiates the contract, fundamentally breaches the contract, or performs the contract in a way that is so defective as to amount, in substance, to a failure or refusal to carry out the contract work”: at para. 53.
[17] The Defendants also argued that the trial judge “committed a palpable and overriding error and misapprehended the facts” when he failed to find that the changes to the foundation, basement window, and porch and the delay in performing the contract did not constitute a fundamental breach of the contract. According to the Defendants, these breaches amounted to a “clear repudiation of the contract by [the Plaintiff]”: Defendants’ Factum, at paras. 40 and 49. The problem with this aspect of the Defendants’ submission is twofold. First, the trial judge carefully reviewed and weighed all of the evidence and made findings based on his view of that evidence, including his view as to the credibility of the various witnesses. In doing so, he accepted the evidence of the Plaintiff over that of the Defendants. Those findings led to him conclude that there had been no breach of the contract. Instead of demonstrating that the trial judge made a palpable and overriding error in reaching his conclusions, the Defendants essentially re-argued their case at trial and invited this court to reweigh the evidence and second guess the trial judge’s credibility assessments. This is not our function as an appellate court. Second, the following undisputed facts undermine the Defendants’ submission that the trial judge made a palpable and overriding error when he found that there had been no fundamental breach of the contract by the Plaintiff:
(a) The day after the Defendants sent their letter of termination, a building inspector conducted a framing inspection and, aside from some minor issues, approved the structure. This supports the trial judge’s finding regarding the first of the factors set out in Spirent for fundamental breach. As put by the trial judge at para. 115(a), “to the extent that there were some aspects of the first milestone left to be completed, they represented only a small fraction of the work envisaged for that stage of the project.” In other words, any breach, if it existed, was a small proportion of the project as whole.
(b) Shortly after the Defendants terminated the contract, they applied for and received from their lender a draw on their construction loan that was only to be made once the first milestone was reached. Thus, at the same time as they were refusing to pay the Plaintiff for the work it had done in reaching the first milestone, the Defendants represented to their lender that the milestone had been reached – a representation that the lender accepted.
(c) One of the Defendants, Michelle Dada Ortiz, admitted on cross-examination that after they terminated the contract with the Plaintiff, they were able to make “use of at least most of the work done” by the Plaintiff and to complete the contract acting as their own general contractor.
(d) As the trial judge noted, there was no evidence before him that the value of the home had been affected by the changes the Defendants complained of.
[18] All of these facts support the trial judge’s finding at para. 115(b) that “any breach by the Plaintiff was not serious.”
Did the trial judge err in assessing the value of the Plaintiff’s work at the time of termination?
[19] As already noted, the trial judge made two findings in respect of the value of the Plaintiff’s work at the time of termination. The first was that this was a fixed price contract and it would be unfair for the Defendants to be able to unilaterally try and convert what they had agreed to under that contract into a contract based on valuing labour and materials. There is no issue that the contract in question was a fixed price contract and that the Plaintiff never agreed that the contract could be converted into one based on the value of labour and materials.
[20] The trial judge also found that the work supplied by the Plaintiff had the value assigned in the fixed price contract. In coming to this conclusion, he had the evidence that the draws in the contract were set by the lender and the parties had agreed to these draw milestones. Further, in January of 2017, the Defendants received a progress draw from the lender in the amount of $155,350.00. The trial judge reasonably drew “the inference that as a commercial lender, MCU was satisfied that a scheduled draw should be paid to the borrowers based on the value of the work put into the home”: at para. 130.
[21] The Defendants submit that in coming to his conclusion regarding the value of the Plaintiff’s work, the trial judge ignored the evidence of the Defendants’ expert, Joseph Emmons of Abacus Construction Consulting Inc., who testified that 28% (not 39%) of the contract was completed. The trial judge did not ignore Mr. Emmons’ evidence; he placed no weight on it. In doing so, he found that the 28% figure was “completely unfounded, arbitrary and unreliable”, that it failed to take into account the “completed aspects of the project like surveying and Tarion costs” and that it did not “consider any extra effort expended by the Plaintiff in addressing and adapting for design flaws.” He also found that Mr. Emmons “seemed completely ignorant of the fact that this was a fixed price contract”: at para. 108. These findings are entitled to deference by this court.
[22] The Defendants also argued that the trial judge, in making his award, failed to take into account the deposits totalling $100,000.00 that were paid under the contract. There is no merit to this submission. The evidence that the trial judge accepted included an email from the Defendant, Michelle Dada Ortiz, dated August 8, 2016, that requested that the contract set up a draw schedule in accordance with the percentages of the funds that the Defendants would be able to receive from their lender. The lender specified that 12% of the project amount would be paid for excavation, footing and foundation; 2% would be paid for damp-proofing and weeping tile; 18% for framing, sheathing and roofing; and 7% for exterior doors and windows installed. These amounts totalled 39%. The contract specified that the first draw (after the deposits) was payable when these milestones were met. The total project price was $571,929.81. Thirty nine percent of that amount is $223,052.62. After deducting the deposits of $100,000.00, the amount owing was the amount set out in the contract, namely, $123,052.62. This amount formed the primary basis for the trial judge’s lien award. It clearly took into account the deposits.
[23] Finally, the Defendants submitted that the trial judge erred in awarding the Plaintiff any amount for loss of profit, since the Plaintiff’s profit was already included in their draws. This submission misunderstands the basis for the trial judge’s loss of profit award. He did not award any amount in relation to any profit on completed work. What he awarded was an amount for loss of profit (calculated at 10% net of HST) for the work yet to be done.
Do the trial judge’s reasons create a reasonable apprehension of bias?
[24] The Defendants argued that the trial judge’s negative comments about the Defendants’ evidence, contrasted with his positive comments about the Plaintiff’s evidence, created a reasonable apprehension of bias. To highlight this submission, they point in their factum to the following comments the trial judge made about the Defendants’ evidence:
(a) Michelle Dada Ortiz: The trial judge used the following words to describe Michelle Dada Ortiz’s evidence: “I found MO to be singularly lacking in credibility…. [She] opted instead to provide an incoherent, rambling and evasive answer which skirted as best it could the real substance of the question”: at para. 81. “Such a position is simply untenable.…Her additional evidence … descended into the preposterous”: at para. 84. “Overall, I can assign little to no weight to the evidence of MO”: at para. 87.
(b) Alejandro Dada Ortiz: According to the Defendants, the trial judge attacked Mr. Dada Ortiz’s “verbiage and language” in paras. 88 and 89 of his decision, which was particularly concerning because Mr. Dada Ortiz is from Costa Rica and English is not his first language. The trial judge also described Mr. Dada Ortiz’s evidence in the following ways: “In cross-examination, AO’s evidence often disintegrated into the absurd”: at para. 93. “His response … was vague, unsubstantiated, unconvincing and frankly silly”: at para. 97.
(c) Lindsey Tkaczuk, the Defendants’ Designer: The trial judge said, “Her evidence was scripted and contrived. I assign it no weight”: at para. 98. “This evidence was pure nonsense”: at para. 100. “I found preposterous her suggestion…”: at para. 101. “I place no weight on the evidence of LT”: at para. 106.
(d) Joseph Emmons, the Defendants’ Expert: The trial judge misspelled Mr. Emmons name and referred to him as a quality surveyor, as opposed to a quantity surveyor: at para. 107. In regards to his evidence, the trial judge stated: “I place no weight on his evidence.…His conclusion that 28% of the contract was completed struck me as a completely unfounded, arbitrary and unreliable figure…He seemed completely ignorant of the fact that this was a fixed price contract”: at para. 108.
[25] The Defendants contrasted the above with the trial judge’s comments about the Plaintiff’s witnesses.
(a) Wayne Ezekiel, the Plaintiff’s President and directing mind: “WE made for an excellent witness”: at para. 45. “I accept WE’s evidence…”: at para. 46.
(b) Sigmond Tronowicsz, the Plaintiff’s Project Supervisor: “[ST] made for an impressive witness: understated, soft spoken…. [A] reliable historian. I would attach significant weight to his evidence”: at para. 48. “ST was responsive, prompt, courteous and thorough in his communications with … the Defendants…”: at para. 59.
(c) Doug Betts, owner of the framing sub-trade: “DB was a straightforward, knowledgeable and entirely credible witness. His evidence was logical, compelling and consistent. I attach great weight to it”: at para. 66.
(d) Ron Koerth, the Plaintiff’s Expert: “I place great weight on the opinion evidence offered by RK. It was logical and compelling and generally consistent with the observations of both ST and DB”: at para. 78.
[26] According to the Defendants, the Ontario Court of Appeal in Hazelton Lanes Inc. v. 1707590 Ontario Limited, 2014 ONCA 793, [2014] O.J. No. 5365 found that negative comments by a trial judge could form the basis for a finding of reasonable apprehension of bias.
[27] In Hazelton Lanes, the Court of Appeal set aside a trial judgment on the basis of reasonable apprehension of bias, which was demonstrated in a number of ways: interjections during one party’s cross-examination; the trial judge’s suggestion to one side that they move for a Mareva injunction; his mid-trial ruling on the motion for the Mareva injunction he had suggested, in which he made a finding of fraud against the defendants and found that one defendant was not credible; his 19 mid-trial directions to the defendants to produce masses of documents that had not been previously requested and that the Court of Appeal found had little or no relevance to the issues at trial; and his mid-trial finding that the defendants were in contempt for failing to fully comply with his 19 directions. As put by the Court of Appeal at para. 10 of its decision, “[W]hen considered cumulatively, the trial judge’s conduct of the trial creates an appearance that he prejudged Faraci’s conduct and credibility and aligned himself with the respondents on the issue of mid-trial production in a manner that rendered the trial unfair.”
[28] In the case at bar, the Defendants make no complaint about the trial judge’s conduct of the trial. Rather, they complain about the trial judge’s findings of credibility after the trial – after he had heard all of the evidence and the parties’ submissions. Thus, this case is not analogous to Hazelton Lanes. Further, as set out at para. 64 of Hazelton Lanes, a judge who is impartial is a judge who is disinterested in the outcome and is open to persuasion after hearing all of the evidence and submissions. In contrast, a biased judge is one who approaches the case with a closed mind on a material issue. In this case, unlike in Hazelton Lanes, there is no evidence that the trial judge approached the case with a closed mind. Rather, after hearing all the evidence and the parties’ submissions, he concluded that he believed the Plaintiff’s witnesses and did not believe the Defendants’. He gave detailed reasons for why he made the findings he did – reasons which were grounded in the record before him.
[29] Hazelton Lanes also reminds us that the threshold for a finding of reasonable apprehension of bias is a high one: “Courts presume that judges will carry out their oath of office”: at para. 64, quoting Marchand (Litigation Guardian of) v. Public General Hospital Society of Chatham (2000), 51 O.R. (3d) 97 (C.A.), at para. 131. The onus is on the party alleging bias and meeting that onus requires cogent evidence. In this case, the Defendants have not met that onus. Instead, the Defendants have chosen to rely on certain phrases used by the trial judge in his reasons that are taken out of context and omit the reasons that he gave for his use of these phrases.
[30] The Defendants’ suggestion that the trial judge was troubled by Alejandro Dada Ortiz’s “pattern of verbiage” is true, but taken in context, it is clear that this comment had nothing to do with the fact that Mr. Dada Ortiz was from Costa Rica or that English was his second language. Rather, the trial judge found it revealing how cautious Mr. Dada Ortiz was in his answers: he never committed fully to an answer and he always left himself room to maneuver in case anyone tried to pin him down with a particular answer. The trial judge was also not impressed with the language that Mr. Dada Ortiz used to describe his expectations: “lack of leadership and team-building strategies,” “feeling neglected, isolated,” that he did not feel like a “happy customer that was being pampered,” that he “was pulled into a drama,” that “we wanted the project to be joyful,” that he expected “a flowing way to deal with the challenge,” and that he “did not feel positivity.” According to the trial judge at para. 89:
While it is always to be hoped that parties to a commercial contract will not come to feel isolated or neglected and that the experience will be a joyful and smooth one, the subject of the contract was the construction of a custom-built home. Such a project involves designs, estimates, schedules, quotes, materials, sub-trades, suppliers, labour, wood, steel, nails, concrete and glass. Team building, pampering and synergy are of course desirable, but they are not essential to a successful and timely house build. Emotions and feelings do not erect buildings; labour and materials do.
These comments do not demonstrate a bias based on ethnicity or language.
Conclusion
[31] For these reasons, the appeal is dismissed. The Plaintiff is entitled to its costs of this appeal. Both parties filed Bills of Costs. The Defendants claimed that they would have been entitled to just under $18,000.00 if they had been successful on their appeal. The Plaintiff claimed just over $32,000.00 by way of costs. Given the amount claimed by the Defendants (which is an indication of their reasonable expectations as to costs), the amount at issue estimated by the Defendants in their Bill of Costs at $400,000.00), the importance of the issue to the parties, and the medium complexity of the case, I find that a reasonable amount for the Defendants to pay by way of costs for the appeal is $25,000.00 all inclusive.
H. Sachs J.
I agree _______________________________
McWatt A.C.J.S.C.
I agree _______________________________
Penny J.
Released: September 22, 2021
CITATION: 1157391 Ontario Inc. v. Ortiz, 2021 ONSC 5923
DIVISIONAL COURT FILE NO.: 307/20
DATE: 2021/09/22
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
McWatt A.C.J.S.C., Sachs and Penny JJ.
BETWEEN:
1157391 Ontario Inc. o/a ANT Construction
Plaintiff (Respondent)
– and –
Alejandro Dada Ortiz, Michelle Dada Ortiz and Michael Joseph Tremblay
Defendants (Appellants)
REASONS FOR JUDGMENT
H. SACHS J.
Released: September 22, 2021