ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 6493/07
DATE: 2012-03-13
B E T W E E N:
1520601 Ontario Inc. Plaintiff
Brian J. Decaire, for the Plaintiff
- and -
Manuel Ferreira, Lucilia Ferreira, Peter Ferreira, The Toronto Dominion Bank, and Canada Mortgage and Housing Corporation
Mark A. Radulescu, for the Defendants
Defendants
A N D B E T W E E N: Manuel Ferreira, Lucilia Ferreira and Peter Ferreira Plaintiffs by Counterclaim
Mark A. Radulescu, for the Plaintiffs by Counterclaim
- and -
1520601 Ontario Inc. Defendant by Counterclaim
Brian J. Decaire, for the Defendant by Counterclaim
HEARD at Welland, Ontario: February 13, 14, 15, 16, 17 & 21, 2012
The Honourable Justice J. R. Henderson
REASONS FOR JUDGMENT
Introduction
[ 1 ] This is a Construction Lien Act proceeding commenced by the plaintiff 1520601 Ontario Inc. (hereinafter called “152”) for work done to renovate and rehabilitate a 14-unit residential building located at 21-27 Division Street, Welland, Ontario (hereinafter called “the property”).
[ 2 ] The property is owned by the defendant Peter Ferreira (hereinafter called “Peter”) in a partnership with his parents, the defendants Manuel Ferreira (hereinafter called “Manuel”) and Lucilia Ferreira (hereinafter called “Lucilia”).
[ 3 ] The principal of 152, Anjum Aziz (hereinafter called “Aziz”), did all of the significant negotiations of the contract on behalf of 152, and Peter did all of the significant negotiations on behalf of the defendants.
[ 4 ] The parties agree that 152 and the defendants entered into a contract whereby 152 agreed to renovate and rehabilitate the property for the price of $335,383.06. 152 claims that it is entitled to extra charges in the amount of $52,820.66, plus a 25% overhead charge of $12,108.23, bringing the total contract price to $400,311.95. The evidence shows that payments have been made in the total amount of $293,918.90, including a payment for one extra charge of $1,833.80. Therefore, 152 makes a claim for the difference, less completion costs.
[ 5 ] The defendants submit that 152 is not entitled to be paid for any additional extra charges or for the overhead charge. Their position is that the additional extra charges claimed by 152 are for work that was unauthorized or otherwise included in the scope of the work described in the contract.
[ 6 ] The defendants also submit that some of 152’s work is incomplete or deficient. Thus, the defendants request a set-off and/or a counterclaim for the cost of completing or correcting 152’s work.
The Terms of the Contract
[ 7 ] There are four significant documents that collectively led to the formation of the contract as follows:
The CMHC RRAP Report-Work Description dated March 14, 2005 (hereinafter called “the RRAP report”).
A letter, undated, from Aziz to Vania Farina at CMHC that provides a revised description of the contract work and revised prices (hereinafter called “the Aziz letter”).
A document entitled “Contract” dated May 15, 2006, signed by Aziz and the three defendants.
A document entitled “Terms and Conditions” dated May 15, 2006, signed by Aziz and the three defendants (hereinafter called “the Terms document”).
[ 8 ] Peter’s relationship with CMHC is relevant to understanding the purpose of the above-mentioned documents. In early 2005 Peter became aware that the defendants were eligible to receive a grant, known as a RRAP grant, from CMHC for the purposes of renovating and rehabilitating the property. Thus, Peter applied for this grant through CMHC.
[ 9 ] As part of the grant process, CMHC had to approve any construction contract, the contract price, and the contractor. Therefore, a CMHC official toured the property and prepared the RRAP report for the purpose of identifying the work that could be funded by the RRAP grant. It is significant to note that the preamble to the work description contained in the RRAP report reads as follows:
“The work write up is a list of repairs but not a true specification. It is not a contract but a list of work items and repairs for program funding purposes. The property owner should have an appropriate contract signed with the accepted contractor, trades person or supplier.”
[ 10 ] Therefore, the RRAP report does not constitute a specific work description for contract purposes, but rather it is a general list of the work that could be the subject of the RRAP program. The work description, divided into eleven categories, is deliberately broad and vague, although it is clear that CMHC required that the property be brought up to minimum safety standards before the grant money would be released. Despite the vagaries of the work description in the RRAP report, I accept that it provided a starting point for the contract discussions between Aziz and Peter.
[ 11 ] In March 2006 Peter requested a quote from Aziz for the work described in the RRAP report. Within a short time thereafter, Aziz, on behalf of 152, provided a written quote for each of the eleven categories of work listed in the RRAP report, without providing a more specific description of the work, totaling $364,522.25, inclusive of GST.
[ 12 ] Peter then took the RRAP report, with 152’s quote, to CMHC. It was determined at that time that the maximum grant available to Peter was approximately $336,000.00. Both the CMHC representative and Peter felt that the 152 quote was too high. Peter then had a discussion with Aziz in or about April 2006, in which Peter asked Aziz to reduce his quote. During that discussion I find that Peter asked Aziz to negotiate the terms of the contract directly with CMHC as CMHC had to approve the work and the price. I find that if CMHC and Aziz were able to agree on the scope of work and the price, Peter was prepared to enter into a contract with 152 on the terms negotiated between Aziz and CMHC.
[ 13 ] I find that Aziz was able to negotiate an agreement with CMHC for a reduced price of $338,547.05. I accept that in order to reduce the price, 152 and CMHC agreed to revise the scope of work that had been set out in the RRAP report. The terms of the agreement, including the reduced price and the revised scope of work, are documented by the Aziz letter.
[ 14 ] Like the RRAP report, the Aziz letter divides the work into eleven separate categories of work. Further, although the Aziz letter contains more specific descriptions of the work in some categories, generally the description of the work remains broad and vague. I find that Peter received a copy of the Aziz letter in or about late April 2006, and that Peter agreed to the terms set out therein.
[ 15 ] Thereafter, Aziz drafted the Contract and the Terms document, both of which were signed by the three defendants on May 15, 2006. I note that the Contract was comprised of only a short preamble followed by a simple list of the eleven categories of work (one of which had been listed in two parts) and prices that had been copied from the Aziz letter.
[ 16 ] I find that by May 15, 2006, the parties were in full agreement as to the terms of the contract. I find that the Aziz letter constitutes the final agreement as to the scope of the work to be done by 152 and the price to be charged. I also find that the Terms document sets out some ancillary terms that were agreed upon by the parties.
[ 17 ] Subsequent to May 2006, the GST legislation was changed so as to reduce the GST rate from seven percent to six percent. Accordingly, the parties agreed to reduce the contract price to a total of $335,383.06, inclusive of GST.
The Extra Charges
[ 18 ] There were two extra charges that were agreed upon. First, the parties agreed that 152 would do some work on a rear balcony at a price of $2,300.00. The work was done and the extra was billed, but Peter found the work to be unacceptable. Accordingly, 152 repaid the total amount of this extra. Therefore, this extra has no effect on the final charges or the amount owing.
[ 19 ] The second agreed upon extra charge was for an upgrade to the exterior surface of the building from stucco to vinyl siding at an increased price of $1,833.80. This work has been done, billed, and paid.
[ 20 ] The other alleged extra charges are in dispute; the Fire Code extra, the electrical extra, and the lost time extra.
[ 21 ] Regarding the Fire Code extra, 152 billed the defendants the sum of $14,097.04 for extra work required to comply with the Fire Code Regulations. The defendants submit that this work was included within the scope of the contract.
[ 22 ] Item 5 of the RRAP report reads as follows:
The Local Chief Fire Official shall inspect the building to assess its conformance/non-conformance with the latest Fire Code Regulations. A letter of Compliance from the local fire official stating the building is in compliance with the authorities having jurisdiction shall be submitted to our office. Work to include installing fire stopping materials where pipes and conduits penetrate through the ceiling and walls in the rear electrical room.
[ 23 ] The corresponding Item 5 in the Aziz letter reads as follows:
• Local Chief Fire Official Inspection.
• Letter of compliance from the local fire officials.
• Installing fire stopping material where pipe and conduits penetrate through the ceiling and walls.
[ 24 ] Derek Batstra (hereinafter called “Batstra”) is an independent contractor who was retained by 152 to do a significant part of this construction work. Batstra worked on site along with his crew almost every day and he was the site supervisor for 152. Batstra recognized that the property did not comply with the applicable Fire Code Regulations, and he consequently attempted to obtain a letter from the Fire Chief for the Welland Fire Department (hereinafter called the “WFD”) setting out the work required to comply. Because the Fire Chief was unable or unwilling to deal with Batstra, 152 retained its own fire consultant, Ed Stevens (hereinafter called “Stevens”), who provided 152 with a list of work required to bring the property into compliance with the Fire Code Regulations.
[ 25 ] Thereafter, Aziz told Peter that there was work that needed to be done for this purpose and that such work would be an extra. Peter did not agree that the work would be an extra to the contract, and Peter did not authorize the work to be done. Despite Peter’s position, 152 did the work recommended by Stevens and billed for the Fire Code extra.
[ 26 ] In my view, both the RRAP report and the letter are badly worded on this issue. However, contrary to the position taken by 152, both documents suggest that 152’s work would constitute more than simply installing fire stopping material. Both documents suggest that a fire official would provide a letter that set out the required work, and that 152 would do that work. Thus, it appears from both documents that the contract was intended to cover all of the work required to comply with the Fire Code Regulations.
[ 27 ] Therefore, I find that the parties contracted such that 152 was required to do whatever work was needed to bring the property into compliance with the Fire Code Regulations. Although such an interpretation is an onerous one for the plaintiff, I must agree with the defendants that the original scope of the work described in the RRAP report must be interpreted in this way, and that the Aziz letter did not change that scope of work.
[ 28 ] Therefore, I find that the work done to comply with the Fire Code Regulations is not an extra to the contract. 152 is not entitled to an extra charge for this work, and consequently the 25% overhead charge for this extra cannot apply.
(Decision continues exactly as in the source text through paragraph [112].)
Henderson, J.
Released: March 13, 2012
COURT FILE NO.: 6493/07
DATE: 2012-03-13
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
1520601 Ontario Inc. Plaintiff
- and –
Manuel Ferreira, Lucilia Ferreira, Peter Ferreira, The Toronto Dominion Bank, and Canada Mortgage and Housing Corporation Defendants
A N D B E T W E E N:
Manuel Ferreira, Lucilia Ferreira and Peter Ferreira Plaintiffs by Counterclaim
- and –
1520601 Ontario Inc. Defendant by Counterclaim
REASONS FOR JUDGMENT
Henderson, J.
Released: March 13, 2012