COURT FILE NO.: 07-CV-344199SR

DATE: 20120420

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

LAN NGUYEN and PHO SHIZZLE RESTAURANT INC.

Plaintiffs

• and -

SON TIN TRAN and KIMTIN CONSTRUCTION LTD.

Defendants

Trung S. Nguyen, for the Plaintiffs,

J. Waldo Baerg, for the Defendants

HEARD: January 10-13, 17-20, 30, 2012

Kenneth L. Campbell J.

Introduction

[1] The plaintiffs, Ms. Lan Nguyen and Pho Shizzle Restaurant Inc., have brought an action against the defendants, Mr. Son Tin Tran and Kimtin Construction Ltd., alleging the defendants breached their contract concerning the construction of a new Vietnamese-Thai restaurant. The plaintiffs contend that, after leasing space in a “strip mall” in Cambridge, Ontario, they contracted with the defendants, essentially, to convert what was formerly a video store into a fully functioning “turn-key” restaurant operation within a specified time period. According to the plaintiffs, the defendants did not fulfill their part of the bargain. While receiving, over time, payment of almost all of the promised funds on the contract, the construction project experienced a number of unfortunate delays and, ultimately, was never properly completed. When the defendants stopped work on the project, the plaintiffs were left to hire another contractor to complete the project so that the new restaurant could open for business. In the result, the plaintiffs now claim damages for the total amount of $162,000.

[2] The defendants admit that there were delays in the construction project, but they blame the plaintiffs for these delays. The defendants claim that it was the plaintiff’s responsibility to arrange for the design of the necessary building plans and apply for the required building permits, and their delays in so doing caused the delays in the project. They continued to work diligently on the construction project, however, until they were locked out of the premises by the plaintiffs. In the result, the defendants deny any liability for the delayed completion of the project. In addition, the defendants have launched a counterclaim against the plaintiffs alleging their own damages of some $26,000. More specifically, the defendants claim that the plaintiffs still owe them $10,000 on the original construction contract, $11,000 for upgrading the “firewalls” in the restaurant, $2,000 for the purchase of a hot water heater, and $3,000 for the demolition of a wall inside the premises. These additional costs were not part of the original contract, and the defendants claim that the plaintiffs owe them for the cost of these extras.

[3] Accordingly, at issue in this case are: (1) the terms of the contract between the parties; (2) whether and to what extent any of the parties to the contract breached the terms of the contract; and (3) what, if any, damages were suffered in consequence of the alleged breach of the contract.

The Factual Background

A. The Original Contract Between the Parties

[4] The plaintiff, Ms. Lan Nguyen, is a hairdresser by profession. Indeed, she worked as a hairdresser for some 32 years before deciding to become involved in the restaurant business. She is the sole director, officer and shareholder of Pho Shizzle Restaurant Inc. This company was her first venture into the restaurant business.

[5] The defendant, Mr. Son Tin Tran, is 58 years old and operates a general construction company, and has done so for over 20 years. Indeed, he is the sole officer, director and shareholder of the corporate defendant, Kimtin Construction Ltd. Over the years, he has constructed at least 30 restaurants through his company. When Ms. Nguyen began to look for a contractor to help her with her restaurant construction project, she found the defendants through an advertisement in a Vietnamese newspaper. The newspaper advertisement indicated that Kimtin Construction was an experienced and reliable business operation that kept costs reasonable and completed its projects in a timely manner.

[6] Ms. Nguyen phoned the number in the advertisement in early April of 2007 and made an appointment to meet Mr. Tran. They discussed the proposed construction project on a number of occasions. Eventually, the parties came to terms. In a short, rudimentary written contract prepared by Ms. Nguyen, based partly upon an equipment list provided by Mr. Tran, the parties expressed their agreement. No lawyers were involved in the drafting of this agreement. The contract was written in the Vietnamese language, which both individual parties fully understood. The contract expressly stated that it was between Kimtin, Mr. Tran and Ms. Nguyen, the owner of Pho Shizzle. It was signed by both Mr. Tran and Ms. Nguyen as the “owners” of their respective businesses on May 2, 2007. Accordingly, the contract bound all of the parties to this action. More particularly, the express language of the contract bound both the corporate defendant, Kimtin Construction Ltd., and the individual defendant, Mr. Tran, personally.[^1] The contract included the following key terms:

• The defendants agreed to “construct a restaurant” including “materials and construction work” for the total price of $133,500.00.

• The defendants provided a “guarantee” that the construction project would be “completed within two months” starting by May 15, 2007 and being finished by July 31, 2007.

• The defendants agreed that if the project could not be completed within that time period, or if there were “technical problems,” the defendants would “take full accountability for everything.”

• The plaintiffs agreed that the funds were to be paid out to the defendants in accordance with a delineated payment schedule.

• The parties agreed that, after the construction was completed, if there were any problems or the products did not meet the standards of any inspector, the defendants would “take full accountability” and “make the necessary repair” so as to “meet compliance” with any government codes or requirements of the inspectors.

[7] The contract also contained many individual terms about the specific nature of the equipment that was to be installed in the restaurant by the defendants. For example, the contract contained detailed provisions outlining exactly the types of ventilation fans, stoves, sinks, washrooms, ovens, fryers, griddles, coolers, freezers, meat cutters, ice-making machines, and dish-washing machines that were to be installed in the restaurant by the defendants. The contract also outlined the agreed details concerning the construction of the bar area, the finish of the floor, the purchase of the chairs and tables for the customers, the painting of the walls, and the construction of the sound system for the “musical enjoyment” of the customers. The contract even provided for menus and advertising flyers. In short, as Ms. Nguyen testified, she was looking to the defendants to provide her with a “turn-key” restaurant operation. The nature of this contract suggested that this was what the defendants agreed to provide.

[8] Shortly after the execution of this contract on May 2, 2007, Ms. Nguyen began to advance funds to the defendants. More specifically, she paid Mr. Tran $15,000 on May 9, 2007, $35,000 on May 16, 2007, $16,000 on May 30, 2007, $26,000 on June 27, 2007 and $5,000 on August 22, 2007. There is no question these funds were, in fact, advanced to the defendants by Ms. Nguyen as Mr. Tran signed for all of these individual amounts on the back of the signed contract. Accordingly, by August 22, 2007, the plaintiffs had advanced a total of $97,000 to the defendants. Although the defendants had agreed to complete construction of the restaurant by July 31, 2007, it remained substantially incomplete at that time. This fact is acknowledged by the defendants.

B. The First Addendum to the Contract

The Defendant’s First Guarantee to Quickly Complete the Project

[9] By September of 2007 the construction of the restaurant was still substantially incomplete. At some point in early September Ms. Nguyen, in an apparent effort to press the defendants towards completion, had Mr. Tran prepare and sign a handwritten document promising that he would “complete” the project “at the earliest convenience” after the arrival of the “cooking stoves.” Indeed, this document went on to provide a “guarantee” by Mr. Tran that he would complete the project within 12 days of the arrival of the stoves. In this document, Mr. Tran acknowledged that, if the project was delayed beyond that guaranteed completion date, the plaintiff would penalize him with a “fine” of “$1,500 a week” or require him to “pay for all damages” or “indemnify” her for “all losses.”

[10] On September 5, 2007, Ms. Nguyen paid $22,000 for the stoves mentioned in this document. Ms. Nguyen paid this money directly to the company who sold the stoves, namely, Nella Equipment, not through the defendants.

[11] On the bottom half of the handwritten promise by Mr. Tran to complete the project within 12 days of the arrival of the stoves, Mr. Tran also signed an acknowledgement that he had received an additional $6,000 from the plaintiffs on September 4, 2007. This $6,000 sum was effectively described as the remainder of a $28,000 payment after the $22,000 payment was made to Nella Equipment for the stoves. Mr. Tran also signed an acknowledgment that he had received an additional $6,510 from the plaintiffs on September 12, 2007. At the very end of the note, Ms. Nguyen accurately noted that, including these most recent payments, the defendants had been paid a total of $131,510 for the project. The note also contained an acknowledgment, again evidenced by the signature of Mr. Tran, that there was still $10,000 remaining to be paid.

[12] Attached to this written promise by Mr. Tran was a page of calculations that helpfully explained these various amounts. These calculations started with the total price of the contract ($133,500) and added the applicable 6% GST ($8,010), for the total contract price of 141,510. There was then an acknowledgment of the payments that were made by the plaintiffs to the defendants to date totaling $97,000. This left a difference of $44,510 between the total contract price and the amount paid to the defendants. The calculations then took into account the $22,000 the plaintiffs had paid to Nella Equipment for the stoves, and the additional $6,000 paid to the defendants on September 4, 2007. After deducting these two amounts from the amount owing to the defendants, there was $16,510 remaining. The calculations then noted, like the notations on the bottom of Mr. Tran’s promise that the parties had agreed that $10,000 should be the remaining “hold-back” amount pending the completion of the project and the passing of all necessary inspections. After this agreed sum was deducted, this left only $6,510, which was paid to the defendants on September 12, 2007.

[13] These documents make it clear that, by mid-September of 2007, the defendants had received all of the monies that they were entitled to receive under the contract, except for the agreed “hold-back” amount of $10,000, which was not due to be paid until the construction project was finished and all necessary inspections had been passed.

C. The Second Addendum to the Contract

The Defendants Second Guarantee to Quickly Complete the Project

[14] By the end of October of 2007, the construction project was still not finished. On October 31, 2007 the parties both signed another handwritten agreement. In this document, Mr. Tran, the owner of Kimtin Construction, “once again” expressed his “promise and guarantee” to the plaintiffs that he would “finish the restaurant construction project” including all “electricity, plumbing, cabinetry, tables, chairs, etc.” (ie. “everything to do with the restaurant”) and will “transfer the completed restaurant” over to the plaintiffs on November 3, 2007. Mr. Tran also promised to “complete all necessary paperwork” in relation to the “inspection” within “5 days” such that Ms. Nguyen would receive all of the documentation no later than November 9, 2007. Finally, Mr. Tran indicated in this document that if he deviated from this “contract” or “any delay ensues” he would “accept all conditions” imposed upon him by the plaintiffs.

D. The Defendants Conclude Work on the Construction Project

The Plaintiff’s Final Offer of an Extension of Time

[15] The defendants stopped working on the Pho Shizzle Restaurant construction project in early November of 2007. At that point in time, the construction project was still not completed.

[16] Ms. Nguyen and Mr. Tran met in the restaurant and discussed the completion of the project. Mr. Tran wanted her to pay him the remaining $10,000 on the contract. Ms. Nguyen told him that he would only get that money when the project was finished. They also discussed payment of the applicable taxes. During this discussion Ms. Nguyen became so emotional and frustrated that she fainted and fell on the floor. Mr. Tran testified that she looked like she was having a seizure. Ms. Nguyen seems given to suffering such spells; she also experienced one during the course of her cross-examination at trial. When this happened at the restaurant, Mr. Tran called the “911” emergency number to summon medical help for Ms. Nguyen. An ambulance, fire truck and police car all attended on the scene.

[17] As to what happened thereafter, the parties have somewhat different recollections. Mr. Tran testified that, when he returned to the restaurant the following day, the locks had been changed and he was not able to gain entry to the premises. He tried to contact Ms. Nguyen, but was not successful. Later, when he went back to the restaurant on the weekend, Mr. Tran was told to remove his tools. He did. That was the last day he was in the restaurant. This version of events was substantially confirmed by the testimony of Mr. Sieu Psu, a long-time employee of Kimtin Construction who worked on the restaurant construction project. Ms. Nguyen denied changing the locks to the restaurant until the end of November. According to her, Mr. Tran simply stopped coming to work at the restaurant and abandoned the construction project. He did not try to contact her and refused any further communication with her.

[18] There is no dispute, however, that on November 8, 2007 counsel for the plaintiffs, at the request of Ms. Nguyen, wrote to the defendants. This letter traced the history of dealings between the parties, the delays and difficulties in the restaurant construction project, and the various promises made and extensions of time granted. Counsel for the plaintiffs noted that the defendants had been paid a total of $131,510 and yet the project remained “substantially incomplete” and the defendants had refused any further communications and made no further efforts to visit the restaurant. Counsel for the plaintiffs indicated that, in an effort to mitigate damages, the plaintiffs were prepared to provide the defendants with “one final extension” to complete the restaurant project.

[19] More specifically, in this letter counsel for the plaintiffs suggested a new deadline of November 16, 2007 for the completion of the project, provided the defendants reimbursed the plaintiffs for their rent for August through November (a total of $12,136.44) and agreed to pay the penalty of $1,500 per week for every week since September 26, 2007 in accordance with the defendants first guarantee to quickly complete the construction project. Counsel for the plaintiff indicated that, if the defendants intended to complete the project in accordance with this proposal, the defendants had to so advise by November 13, 2007, or the plaintiffs would have no choice but to retain another contractor to complete the project. Mr. Tran acknowledged receipt of this letter, but did not respond to it, and did not appear again at the construction site.

E. The City of Cambridge Building Permit and Inspections

[20] The City of Cambridge is responsible for the issuance of all of the building permits and for conducting all necessary building inspections (including mechanical, health and safety, heating and air conditioning) for construction projects in Cambridge like the Pho Shizzle Restaurant construction project. The City is not responsible, however, for fire safety inspections.

[21] The application for a building permit for the Pho Shizzle Restaurant construction project was filed with city on June 11, 2007. The application was accompanied by a detailed multi-page architectural building plan that had been approved by a professional engineer (L.Q. Tran). After some initial deficiencies were corrected, the building permit was issued on August 2, 2007.

[22] According to the records of the City of Cambridge, the Pho Shizzle Restaurant building project passed its final building inspection on November 19, 2007. These records show that there still remained deficiencies (relating to the exhaust hood and the sprinkler system) as of October 21, 2007, and that there was a “flurry” of activity between that date and the end of October. But the restaurant passed its final inspection on November 19, 2007. This permitted the restaurant to be occupied, and meant that there were no further requirements or deficiencies. The construction project had been completed and, with this final passed inspection, the City closed its file in relation to the building permit. The City records do not disclose who requested this final inspection, only that the premises passed this final inspection.

F. The Plaintiffs Hire a New Contractor to Complete the Project

[23] When it became apparent that the defendants were no longer going to be working on the Pho Shizzle Restaurant construction project, the plaintiffs hired a new contractor, Chi Shing Renovation Co. Ltd., to complete the job. On November 28, 2007, Ms. Nguyen met with Jackie Lo, the sole owner of this commercial renovation company, and agreed to pay a total of $37,110.60 to Mr. Lo to undertake and complete, by December 12, 2007, a lengthy list of renovations to the restaurant. This new contractor finished working on this project on December 15, 2007, when the Pho Shizzle Restaurant was finally ready to open for business. During November and December of 2007, the plaintiffs paid for all of these renovations, as the parties had agreed.

G. The Final Inspection and the Issuance of the Business License

[24] On December 12, 2007, the Cambridge Electrical Safety Authority conducted an electrical inspection at the Pho Shizzle Restaurant. This inspection was done at the request of JY Electric & Electronic Tech Inc. (a subcontractor for the Chi Shing Renovation Co. Ltd.), which request was made on November 29, 2007. Subsequently, the City of Cambridge issued Pho Shizzle Restaurant Inc. a business license for a restaurant on December 17, 2007. It was around this time that the Pho Shizzle Restaurant opened its doors for business for the first time.

The Burden of Proof – On the Plaintiffs

[25] The burden of proof is, of course, on the plaintiffs, who are obliged to establish all aspects of their claim on the balance of probabilities. This standard of proof requires that the relevant evidence be scrutinized with care to determine whether it is more likely than not that an alleged event occurred. See: F.H. v. McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41, at para. 40-49.

Analysis

A. Did the Defendants Breach the Contract With the Plaintiffs By Failing to Complete the Pho Shizzle Restaurant Construction Project in a Timely Manner?

1. The July 7, 2007 Project Deadline in the Original Contract

[26] The plaintiffs contend that the defendants breached their contract by not completing the restaurant construction project by the agreed deadline. The plaintiffs argue that the original contract signed by the parties on May 2, 2007 required the defendants to start the project on May 15, 2007 and, more importantly, to finish the project by July 31, 2007. This gave the defendants 2½ months to complete the contract. The plaintiffs argue that the defendants not only failed to meet that agreed deadline, but also failed to meet the deadlines set out in their two subsequently provided guarantees.

[27] The defendants contend that they did not breach their contractual obligations to the plaintiffs. They argue that their contract, when agreed and signed by them, did not include any start date or completion date with respect to the construction project.

[28] I accept the evidence of Ms. Nguyen in this regard and find as a fact that the defendants agreed to all of the terms of the agreement on May 2, 2007, including the agreed upon construction start date of May 15, 2007 and the agreed upon completion date of July 31, 2007.

[29] Clearly, the timing of the completion of the project was an important issue for the plaintiffs. When she personally typed this contract, Ms. Nguyen included the requirement that the construction project “be completed within two months,” but she initially left blank the specific start and completion dates so that they could be discussed with Mr. Tran. According to Ms. Nguyen, when they met on May 2, 2007, those dates were discussed, and the project start and completion dates of “15/05/07 to 31/07/07” were added to the contract in handwriting by Ms. Nguyen, in the presence of Mr. Tran, before the parties affixed their signatures to the contract. The contract also indicated that, if the construction project could not be completed within this time frame, or if there were any technical problems, Mr. Tran the contractor would “take full accountability for everything.”

[30] For the following reasons, I reject the testimony of Mr. Tran that the handwritten dates of “15/05/07 to 31/07/07” were not written into the contract when he signed it on May 2, 2007, but must have been somehow added later by Ms. Nguyen.

[31] First, given the obvious importance to the plaintiffs of the timely completion of the project, as evidenced by the typed inclusion of the “two months” limited duration of the construction project, it only makes sense for Ms. Nguyen to insist upon, and the parties agree, to the inclusion of the agreed upon start and completion dates for the project. There is little purpose in requiring the project to “be completed within two months” if the contract does not include a start date to trigger the running of that two month period. In her testimony, Ms. Nguyen confirmed that she would not have signed the contract if those dates had been left blank. Understandably, she needed to know when the project would be completed, so that she would know when she could open her restaurant and when she could let people know that she was opening her restaurant. Further, at the time, Ms. Nguyen was paying out significant monies in rent and other business-related expenses and wanted to begin operating her business and begin earning an income from the restaurant, as soon as possible.

[32] Second, the manner by which Ms. Nguyen kept track of the monies paid to Mr. Tran in relation to the contract strongly supports the notion that the start and finish dates of the construction project were already on the contract when it was signed by the parties. An inspection of this two-page contract (Exhibit #6) reveals that the second page of the contract contains the handwritten dates of “15/05/07 to 31/07/07” as the start and finish dates of the construction project and the signatures of both Mr. Tran and Ms. Nguyen. It was on the reverse side of that very page that Ms. Nguyen kept track of the first $97,000 she paid to Mr. Tran. More specifically, there are five separate notations indicating that, on five separate dates from May 9, 2007 to August 22, 2007, Ms. Nguyen “paid” various sums of money to Mr. Tran. Most importantly, in relation to each entry, Ms. Nguyen had Mr. Tran sign his name, thereby acknowledging receipt of those individual sums of money on the dates indicated. In other words, Mr. Tran was officially acknowledging receipt of large sums of money on the back of the page that indicated that the construction project had to be completed by July 31, 2007. It seems highly unlikely that Mr. Tran would have permitted this to take place if he had, in fact, not already agreed to the start and finish dates for the project that were specified on the other side of that same piece of paper.

[33] Third, it seems unlikely that Mr. Tran would subsequently agree, twice, to promise and “guarantee” the completion of the Pho Shizzle Restaurant construction project within particular periods of time if he had not already agreed to complete the project by an earlier specified deadline. Why would Mr. Tran commit to guaranteeing completion of the project by a deadline part way through the project, if he had not committed to any particular deadline in the original contract agreed by the parties? On the other hand, if Mr. Tran had already agreed to complete the project by July 31, 2007, it would make sense, if the construction project was delayed, to subsequently agree to replace his earlier promise with another guaranteed deadline that was, at that time, more realistic.

[34] While neither of the parties initialed the addition of the start and completion dates that were handwritten into the contract, none of the other handwritten additions to the contract were initialed either. For example, in item 7 on the list of project-specific installations, Ms. Nguyen added, in her own handwriting, a “counter for dishes”. Mr. Tran admitted that they had discussed this addition, that Ms. Nguyen had wanted this addition to the contract, and that he had agreed. There are no initials on the contract near item 7 to signify this agreement to the handwritten addition. Similarly, with respect to item 14, Mr. Tran testified that he was not sure what was required by that item. He said that, after clarifying the item with Ms. Nguyen, he added, in his own handwriting, the word “Broiler.” Neither party initialed this handwritten addition to the contract either. Accordingly, the absence of the initials of the parties near the added start and completion dates does not prove that the parties had not agreed to those dates at the time they signed the contract.

[35] The defendants did produce another version of the original contract. This version was nearly identical to the version of the contract produced by the plaintiffs. It also appears to have been signed by both Mr. Tran and Ms. Nguyen. But this version of the contract is: (1) for a total of $132,000; (2) has no handwritten dates for the start-up and completion of the construction project; (3) has no date indicating when the document was signed; and (4) displays an acknowledgment on the second page of the contract, just above the signatures, that Mr. Tran had received $15,000 from Ms. Nguyen on May 9, 2007. I am not sure how this document came into being. Mr. Tran testified that this document displayed both his signature and that of Ms. Nguyen. However, Ms. Nguyen testified that the signature on this version of the contract is not hers. She conceded that it looked very much like her signature, but she maintained that she did not sign this document. Nevertheless, she agreed that the other signature appeared to be that of Mr. Tran. In all of the circumstances, I am not satisfied as to the authenticity of this document, nor am I satisfied that it was the controlling document as between the parties.

2. The Defendant’s Failure to Meet Their Various Deadlines to Complete the Project

[36] While the May 2, 2007 contract between the parties required the defendants to complete the Pho Shizzle construction project by July 31, 2007, the defendants clearly did not meet this deadline. By the end of July of 2007 the construction was still substantially incomplete.

[37] As already noted, in early September of 2007, when project still remained substantially incomplete, Mr. Tran guaranteed, in writing, that he would complete the construction project within 12 days of the arrival of the cooking stoves. The evidence establishes that Ms. Nguyen paid for these stoves on September 5, 2007 and took delivery within a day or two thereafter. Accordingly, Mr. Tran effectively promised to complete the project no later than September 25, 2007 (assuming the guarantee meant 12 working days). However, even by this point in time the Pho Shizzle Restaurant construction project was still substantially incomplete.

[38] Again, as already noted, at the end of October of 2007, when the project was still not completed, Mr. Tran once again guaranteed Ms. Nguyen that he would “finish the restaurant construction project” and “transfer the completed restaurant” over to the plaintiffs by November 3, 2007. He also guaranteed to “complete all necessary paperwork” in relation to the inspections within “5 days” so that Ms. Nguyen would receive all of the documentation no later than November 9, 2007. Again, the defendants did not abide by their guarantee.

[39] Accordingly, it is clear that the defendants breached the original contract by failing to meet the deadline of July 31, 2007 and then breached the subsequent guarantees of completion by the other specific dates. Indeed, the evidence is clear that the Pho Shizzle Restaurant construction project did not pass all necessary building inspections until November 19, 2007, did not pass the final necessary electrical inspection until December 13, 2007, and was not given a Business License to open for business as a restaurant until December 17, 2007. Therefore, as the restaurant construction project was not finally completed until some 4½ months after completion was first promised by the defendants, I conclude that the defendants breached their contract in failing to complete the project in a timely way. Indeed, the defendants did not “complete” the project at all. That task was left for others.

3. Delays Were Not the Fault of the Plaintiffs

[40] The defendants contend that they are not to blame for the delays in the construction project. They say that the plaintiffs were responsible for obtaining the building plans and the building permit and significantly delayed the project when they failed to move quickly to secure these plans and the permit. For the following reasons I reject this argument.

[41] First, the contract agreed between the parties does not expressly give either of these responsibilities to the plaintiffs. This is hardly surprising given that Ms. Nguyen is a hairdresser by profession with no previous experience whatsoever in the construction industry, while the defendants have worked in the construction industry for over 20 years and have previously built some 30 restaurants. Instead, predictably, the contract expressly requires Mr. Tran to take “full accountability for everything” and guarantees completion of the project within a specified time period. The relationship between the parties could not realistically work in any other way.

[42] Second, the evidence does not support the contention that these responsibilities were ever undertaken by Ms. Nguyen. It was Mr. Tran who, in practical terms, secured the engineer to prepare the necessary building plans for the restaurant. While Ms. Nguyen paid for the preparation of these plans, it was effectively Mr. Tran who retained the services of the engineer to prepare the plans. Further, it was Mr. Tran who, in practical terms, secured the necessary building permit. Again, while Ms. Nguyen had to pay the applicable fees for this service from the City of Cambridge, it was Mr. Tran who filled out the necessary paper work in order to obtain the building permit. Indeed, Mr. Tran appears to have signed the application for a building permit on behalf of Ms. Nguyen. This understandable reality as to which party shouldered these responsibilities was clearly confirmed in the testimony of Ms. Nguyen.

[43] In short, in my view any delays in securing the necessary building plans and building permit for the Pho Shizzle Restaurant cannot properly be blamed on Ms. Nguyen. They were clearly the practical responsibility of Mr. Tran, the only party to the contract who had any knowledge or experience in dealing with such matters and the party who had knowingly, under the terms of the contract, accepted these responsibilities. Understanding that he was practically and legally responsible for taking care of these preliminary matters, Mr. Tran cannot now fairly blame Ms. Nguyen for any of his delays in completing these tasks in an efficient and timely manner.

4. Conclusion

[44] Accordingly, in my view the defendants breached their contract with the plaintiffs in that they failed to complete the Pho Shizzle Restaurant construction project in a timely way. Indeed, I conclude that the defendants were obliged, by the terms of the original contract, to finish the construction project by July 31, 2007. The project was not, in fact, finished until approximately December 17, 2007. Accordingly, the project was only completed some 4½ months after the original deadline, only after the defendants had failed to make good on two subsequent guaranteed completion dates and only after the defendants had stopped work on the project.

B. What Damages Did the Plaintiffs Suffer as a Result of the Delayed Completion of the Restaurant Construction Project Caused by the Defendant’s Breach of Contract?

1. Introduction

[45] The plaintiffs claim that they are entitled to significant damages for the defendant’s breach of contract in failing to complete the contract in a timely way. Instead of being completed on July 31, 2007, the restaurant was not completed until December 17, 2007. The plaintiffs claim damages between approximately $55,000 and $62,000 for this 4½ month period of delay. The defendants dispute the plaintiff’s quantification of these damages.

2. Any Business Losses?

[46] The plaintiffs claim that they lost between $3,666 and $5,333 each month in potential net business profits during this 4½ month period of delay. The plaintiffs contend that, once their restaurant business started, they generated monthly revenues of between $11,000 and $16,000 and, after deducting their monthly operating costs and expenses, their net profit amounted to between $3,666 and $5,333. Accordingly, over the course of the 4½ month delay, the plaintiffs lost total potential business profits of between $16,497 and $23,998.50.

[47] In partial support of this argument, the plaintiffs provided a chart of figures suggesting that the Pho Shizzle Restaurant generated gross annual sales revenues of $6,966.79 in 2007, $196,361.15 in 2008 and $193,464.82 in 2009.

[48] For the following reasons, I reject the plaintiff’s argument that they, in fact, suffered any potential business losses during this 4½ month period of delay in the construction of their restaurant.

[49] First, the figures provided by the plaintiffs represent only the total revenue in sales for the restaurant allegedly generated during these time periods. Ms. Nguyen testified that each and every business day, she hand-wrote the total sales for the restaurant on a monthly calendar. To calculate these annual sales figures she simply added up the daily and monthly totals from these calendars. Accordingly, as Ms. Nguyen explained, these were clearly gross sales revenue figures. They do not purport to represent the actual net profit of the restaurant during this time period. Without any detailed evidence as to the various costs and expenses that would have been paid by the restaurant during these time periods, this evidence as to gross revenues from sales is of little assistance in ascertaining the nature of any business profits the plaintiffs may have missed collecting in late 2007 when the construction project was delayed.

[50] Second, the figures that the plaintiffs have provided to the court, in their chart, as to the gross revenues of the restaurant in the 2007, 2008 and 2009 calendar years, are much different than the figures the plaintiffs reported to the Canada Revenue Agency as to their gross revenues from the operation of the restaurant during those same calendar years. More particularly, the corporate tax returns of the Pho Shizzle Restaurant reveal that the plaintiffs claimed that the restaurant generated gross revenues of $7,255 in 2007, $124,219 in 2008 and $133,989 in 2009. While the differences in relation to the 2007 figures (when the restaurant operated for less than a month) are not especially significant, the differences between the 2008 and 2009 figures are great. There is more than a $72,000 difference in relation to the claimed gross revenues for 2008, more than a $59,000 difference in relation to the claimed gross revenues for the 2009 calendar year.

[51] Given the vastly different claims about the restaurant’s gross sales revenues that the plaintiffs have made in court and to the Canada Revenue Agency, I cannot rely upon the claims that the plaintiffs made in court, especially in light of the evidence of Ms. Nguyen that all of the figures had their origin in the same place, namely, in her daily recordings of restaurant sales on her calendars. Moreover, there was no credible explanation forthcoming from Ms. Nguyen sensibly explaining these significant discrepancies. Accordingly, I reject as inaccurate and unreliable the figures provided by the plaintiffs in their chart as to their gross monthly and annual sales from the restaurant.

[52] It is noteworthy in this regard that, in relation to the 2009 calendar year, the plaintiffs have actually made three different claims as to the total sales of the restaurant. As I have already noted, in their chart tendered to the court the plaintiffs claim total sales of $193,464.82, and in their corporate tax return for the Canada Revenue Agency the plaintiffs claimed total sales of $133,989. The third figure, for this same calendar year of 2009, comes from the plaintiff’s Retail Sales Tax Return provided to the Ontario Ministry of Revenue, where the plaintiffs claimed total sales of $128,529. This evidence also significantly undermines any potential reliability in the figures provided by the plaintiffs in their chart as to their gross annual sales.

[53] Third, the corporate tax returns prepared on behalf of the Pho Shizzle Restaurant also paint a very different picture as to the overall profitability of the restaurant. While the plaintiffs claimed that their monthly profits (after all costs and expenses were taken into account) were between $3,666 and $5,333, the corporate tax returns of the restaurant revealed that the plaintiffs claimed that the restaurant suffered significant losses in each year of operation. More particularly, these tax returns claimed that the restaurant actually lost $15,340 in 2007, $27,347 in 2008, and $26,635 in 2009. This evidence, which I accept as accurate and which could only have come from the plaintiffs (and Ms. Nguyen more particularly), establishes that the plaintiffs did not lose any potential business profits as a result of the delayed completion of the restaurant construction project. Indeed, as the defendants accurately observed, their delayed completion of the construction project only served to postpone the economic losses that the plaintiffs would eventually suffer once their restaurant doors were open for business.

[54] Accordingly, for these reasons the plaintiffs are not entitled to any damages for lost business profits due to the delayed completion of the restaurant construction project.

3. The Agreed Liquidated Damages

[55] The plaintiffs alternatively argue that, based upon the first addendum to the contract, they are entitled to the agreed upon liquidated damages of $1,500 for each week of delay beyond the 12 days mentioned in the addendum. The plaintiffs argue that they are entitled, therefore, to a total of $18,000, as the construction project was not completed for another 12 weeks beyond the deadline that was agreed by the defendants. I agree.

[56] In the first addendum, Mr. Tran guaranteed, in writing, that he would complete the construction project within 12 days of the arrival of the stoves, or accept that Ms. Nguyen would penalize him with a “fine” of $1,500 for each week of delay or require him to pay for “all damages” or “indemnify” her for “all losses.”

[57] In his testimony, Mr. Tran candidly agreed that he personally wrote and signed this document. He testified that he wrote this addendum because Ms. Nguyen was rushing him to complete the job, and she told him that she wanted this guarantee. According to Mr. Tran, Ms. Nguyen told him what to write. Mr. Nguyen testified, however, that Mr. Tran wrote the contents of the addendum himself. In any event, however, Mr. Tran admitted that, by writing and signing the addendum, he thereby agreed to its terms, including the payment of $1,500 per week if the prescribed deadline was not met. Mr. Tran also testified that this figure was provided to him by Ms. Nguyen, and he was not sure how she may have calculated that number.

[58] As I have already noted, the evidence shows that the stoves arrived at the restaurant within a day or two of payment, which was made on September 5, 2007. Accordingly, as the stoves arrived no later than September 7, 2007, the defendants were obliged, by the promise in the first addendum, to complete the restaurant no later than September 25, 2007 (12 working days later). The restaurant was not able to open for business until after it received its business license on December 17, 2007. Accordingly, there was a total of 12 weeks of delay beyond the time that the defendants promised to complete the construction project. If this addendum is to operate effectively between the parties, the plaintiffs are entitled to the $18,000 that they have claimed.

[59] The defendants contend that they should not be bound by the terms of the addendum as the $1,500 a week “fine” or “penalty” was not a genuine pre-estimate of the liquidated damages that the plaintiffs would suffer if the construction was further delayed beyond the agreed delay, but rather was simply an unconscionable monetary penalty. In effect, the defendants ask that I strike down the addendum as an unenforceable penalty. I reject this submission. In my view the defendants have not met their onus of proving that the addendum to the contract was an unenforceable penalty. See: Canadian General Electric Co. v. Canadian Rubber Co. of Montreal (1915), 1915 CanLII 45 (SCC), 52 S.C.R. 349; Infinite Maintenance Systems Ltd. v. O.R.C. Management Ltd., [2001] O.J. No. 77 (C.A.) at para. 13; Calloway Reit (Westgate) Inc. v. Michaels of Canada, [2009] O.J. No. 761 (S.C.J.) at para. 84-89.

[60] While the parties expressly employed the term “penalty” or “fine” (depending upon which translation of the written addendum is accepted), this translated language is not conclusive of the issue. In every case, the court is still required to determine whether the stipulated payment is, in truth, an unenforceable penalty or an enforceable estimate of liquidated damages. To make this determination, the court will interpret the terms of the contract and its inherent circumstances, judged at the time of the making of the contract. The stipulated payment is properly viewed as an unenforceable penalty if it is an extravagant, extortionate, unconscionable or unreasonable amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach of contract. The essence of an unenforceable penalty is required payment of a stipulated sum that is oppressive to the party breaching the contract. The essence of enforceable liquidated damages, on the other hand, is a genuine advance estimate of the damage that would flow from a breach of the contract. In this assessment, it is important to recall that the jurisdiction to strike down penalty clauses is an exception to the general principle that parties have the freedom to contract as they wish. See: S.M. Waddams, The Law of Contracts (6th ed., 2010) at §452-465; J. Swan, Canadian Contract Law (2006) at pp. 714-720; Dunlop Pneumatic Tyre Co. v. New Garage and Motor Co., [1915] A.C. 79 (H.L.) at pp. 86-87; Elsley Estate v. J.G. Collins Insurance Agencies Ltd., 1978 CanLII 7 (SCC), [1978] 2 S.C.R. 916, at pp. 937-938; Prudential Insurance Company of America v. Cedar Hills Properties Ltd., [1994] B.C.J. 3055 (C.A.) at para. 37; 869163 Ontario Ltd. v. Torrey Springs II Association Ltd. Partnership (2005), 2005 CanLII 23216 (ON CA), 76 O.R. (3d) 362 (C.A.) at para. 22-36; Leave denied: [2005] S.C.C.A. No. 420; Birch v. Union of Taxation Employees, Local 70030, 2008 ONCA 809, [2008] O.J. No. 4856 (C.A.) at para. 34, 37-46; Action Auto Leasing v. Boulding et al., 2011 ONSC 7253 (S.C.J.) at para. 8-11.

[61] In the circumstances of the present case I am satisfied that, notwithstanding the language used by the parties in drafting the first addendum, the stipulated amount of $1,500 per week was not a “penalty,” but rather was an agreed amount of estimated liquidated damages likely to be suffered by the plaintiffs if the defendants were unable to complete the construction project in accordance with the stated deadline. My reasons for reaching this conclusion are as follows.

[62] First, as the Court of Appeal for Ontario observed in Infinite Maintenance Systems Ltd. v. O.R.C. Management Ltd., at para. 14, the “most important factor” in determining whether the contractual clause provides a genuine pre-estimate of liquidated damages or an unenforceable penalty is “quantum.” In my view, the amount of $1,500 a week (or $6,000 a month) prescribed in the addendum in this case is not a figure that was in any way unconscionable or unreasonable. At the time, the plaintiffs were paying significant sums each month for rent, property taxes and utilities. According to the testimony of Ms. Nguyen, she was paying in excess of $4,500 per month for these expenses. It would not have been at all unreasonable for the parties to have believed that, if the plaintiff’s restaurant was able to open for business in accordance with the deadline prescribed in the addendum, it would have be able to turn a tidy profit each month. More specifically, it would not have been unreasonable for the parties to have thought the restaurant could have made a profit of $1,500 per month. While the restaurant did not, in fact, turn such a profit, that subsequent reality does not undermine the reasonableness of the parties’ earlier anticipation that the business would have been successful. Accordingly, the agreed figure of $1,500 a week was not at all oppressive or unreasonable, but rather was a realistic estimate of the liquidated damages that might be suffered by the plaintiffs if the project was further delayed beyond the promised completion date.

[63] Second, a determination of unconscionability requires both a finding of “inequality of bargaining power” and a finding that the terms of the agreement “have a high degree of unfairness.” See: Birch v. Union of Taxation Employees, Local 70030, at para. 45; Calloway Reit (Westgate) Inc. v. Michaels of Canada, at para. 89. Neither finding can be made in the circumstances of this case. Given the nature of the business relationship between the parties in this case, it is hard to imagine what could have motivated Mr. Tran to agree to the imposition of any oppressive or unconscionable financial penalty clause for the delayed construction of the restaurant. It was Mr. Tran who was in the position of power over Ms. Nguyen, not the reverse. It was Mr. Tran who was the experienced member of the construction industry. It was Mr. Tran who knew the exact state of the construction project, what tasks still remained to be completed, and how long that remaining work would likely take to be completed. It was Mr. Tran who knew the capacity of his workforce. Moreover, it was Mr. Tran who could have simply refused to draft and/or sign the addendum. Ms. Nguyen, the former hair dresser and budding new restaurateur was hardly in the position of dictating oppressive penalty terms upon Mr. Tran that he was somehow required to accept. While there was clearly an “inequality of bargaining power” as between Mr. Tran and Ms. Nguyen, this inequality was in favour of Mr. Tran. Accordingly, Mr. Tran cannot rely upon his advantageous bargaining position to contend that enforcement of the addendum is unconscionable. Further, the terms of the addendum do not contain a high degree of unfairness to the defendants. Indeed, given the clear imbalance of power in their business relationship (favouring Mr. Tran), it would be highly unfair to now permit the defendants to escape from the consequences of the operation of the specific terms of the addendum.

[64] Third, based upon all of the evidence, I infer that Mr. Tran wrote and signed the addendum and agreed to the $1,500 a week payment upon default, because: (1) he wanted to continue the construction project (and continue to receive money from Ms. Nguyen); (2) he did not believe that he would fail to complete the project on time; and (3) he thought that $1,500 per week was a reasonable and realistic assessment of the liquidated damages that the plaintiffs would suffer each week the completion of the project was further delayed.

[65] Accordingly, I agree with the plaintiffs that, under the terms of the first addendum to their contract, the defendants are obliged to pay the plaintiffs $1,500 a week for the 12 week time period between September 25, 2007 (effectively the agreed extended deadline for the completion of the project) and December 18, 2007 (the first date that the Pho Shizzle Restaurant could lawfully open for business). In short, the plaintiffs are entitled to $18,000 for this delay in the project.

4. The Damages “Thrown Away”

[66] The plaintiffs also claim that there were damages that were simply “thrown away” in that, during this 4½ month delay in the completion of the construction project, the plaintiffs were paying their rent, property taxes and utilities on the leased commercial premises for the restaurant (ie. over $4,500 each month). Yet, during this time, they were unable to earn any income from the restaurant as they could not open and begin their restaurant business. To a significant extent, these damages have already been taken into account in the defendants’ payment of $1,500 a week in liquidated damages. However, the plaintiffs still pursue these “thrown away” damages in relation to the time period prior to the effect of the first addendum. The defendants argue, however, that they are not liable to reimburse the plaintiffs for these damages as the plaintiffs had already signed the lease and were responsible for paying these costs regardless of whether the restaurant was open for business or not.

[67] I agree with the plaintiffs that the defendants are liable for those damages for the time period between July 31, 2007 (the date the restaurant project was supposed to be completed according to the original contract) and September 25, 2007 (the date the restaurant was supposed to be completed according to the first addendum to the contract). While the defendants are quite right in observing that these monthly expenses had to be paid by the plaintiffs in any event, the defendants have failed to appreciate that these monthly expenses could have been offset by whatever sales revenues the restaurant might have generated had the plaintiffs been able to open for business on August 1, 2007. Accordingly, I conclude that the defendants are liable to reimburse the plaintiffs for these “thrown away” damages for the period of nearly two months (August 1 to September 25, 2007), which I calculate as totaling $8,250.

5. Conclusion

[68] In summary, the plaintiffs suffered damages totaling $26,250 for the 4½ months of delay caused by the defendants in the tardy completion of the Pho Shizzle Restaurant construction project. While the plaintiffs suffered no actual business losses from this delay, the defendants are still liable to reimburse the plaintiffs for their damages “thrown away” ($8,250) due to the delay of nearly two months between August 1, 2007 and September 25, 2007, and for their estimated liquidated damages ($18,000) due to the delay of over 2½ months from September 25, 2007 to December 17, 2007.

[69] This is a significant monetary award for the delayed completion of a construction project. However, it is important for builders and contractors to appreciate that when they contractually commit themselves to the timely completion of a construction project by a specific deadline, which is clearly important to their customer, they are obliged to complete that project in accordance with that agreed deadline. Otherwise, they will be responsible for the damages that reasonably flow from their breach of contract.

C. Did the Defendants Breach the Contract With the Plaintiffs by Failing to Construct the Restaurant in Accordance With the Specific Terms of the Contract?

1. Introduction

[70] The plaintiffs contend that the defendants also breached the terms of their contract by failing to construct the Pho Shizzle Restaurant in accordance with the specific terms of the contract. Indeed, the plaintiffs allege that, after the defendants abandoned the construction project, they had to employ an independent contractor to remedy the deficiencies and finish the job properly. The plaintiffs contend that the defendants should be required to reimburse them for the significant costs associated with the completion of the project in this way. The defendants, on the other hand, argue that, to the extent that they were permitted until they were locked out of the premises in early November of 2007, they wholly fulfilled their obligations under the contract in terms of the equipment that was required and the quality of the materials and workmanship employed in the construction of the restaurant. Indeed, considerable time during the trial of this matter was spent debating the quality and extent of the equipment, materials and workmanship used by the defendants on this construction project.

2. The Plaintiffs Specific Complaints

a. The Malfunctioning Kitchen Exhaust System

[71] The first specific item required by the contract was the installation of a kitchen ventilation fan. Ms. Nguyen testified that a ventilation fan and duct were provided by the defendants, but the assembly did not work properly. She testified that something was not done properly as, in the winter when she first opened the restaurant, it just circulated cold air through the kitchen and the kitchen workers had to wear jackets. Sometimes snow would drop into the kitchen through the exhaust. Further, the fan did not properly draw the smoke from inside the kitchen to the outside. After approximately a month, the exhaust system simply stopped working altogether. One of the belts was found broken. Eventually, she was able to find someone to fix the problem by installing a new exhaust fan, with belts and pulleys supplied by the plaintiffs, and by installing the defective starter in the fan.

[72] Mr. Tran denied this allegation. He testified that he subcontracted the responsibility for the installation of the kitchen exhaust system to another person. But, when it was completed, he tested the fan to see that it worked properly and, in his view, everything was fine.

[73] I accept the testimony of Ms. Nguyen and reject the testimony of Mr. Tran on this issue. The plaintiff produced three bills/invoices that show that in January of 2008, shortly after the Pho Shizzle Restaurant opened for business, Ms. Nguyen paid a total of $589.70 for various repairs to the kitchen exhaust system, using belts and pulleys they had earlier purchased for $270.00. I do not understand why the plaintiffs would willingly spend a total of $859.70 on the kitchen exhaust system so soon after the completion of the construction project and the opening of the restaurant, if there was nothing wrong with the system that was installed by the subcontractor for the defendants. Clearly, everything was not “fine” as Mr. Tran suggested in his evidence. I find that the defendants breached their contract with the plaintiffs by failing to properly install a new and functioning kitchen exhaust/ventilation fan in the restaurant, and the plaintiffs suffered at least $859.70 in damages in the result.

b. The Restaurant Washrooms – The Missing Door Locks

[74] The second specific item required by the contract was that the defendants build three washrooms for the restaurant customers (for females, males and persons with disabilities) and one for the staff. It also required the installation of a “diaper changing table” for children.

[75] After the customer washrooms were partially constructed, it became apparent to the parties that there were certain problems. The washroom built for persons with disabilities was simply not large enough to permit full wheelchair accessibility. Mr. Tran testified that he built the washrooms in accordance with the approved building plans that were provided to him, so any problems were design flaws and not construction issues. In any event, however, the defendants remedied this wheelchair accessibility issue by reconstructing the washrooms so as to give greater room in the washroom for persons with disabilities. The defendants did not charge the plaintiffs any additional cost for this additional work. The only repercussion was that this redesign and rebuild of the washroom spaces left insufficient room for the planned installation of the “diaper changing table.”

[76] The plaintiffs complain, however, that the defendants did not finish the job in relation to the construction of the washrooms as there were never any locks installed on any of the washroom cubicles or the washrooms themselves. Mr. Tran denied this allegation, testifying that the proper locks were indeed installed as required at the time the cubicles were constructed in October of 2007.

[77] Again, I accept the testimony of Ms. Nguyen and reject the testimony of Mr. Tran on this issue. First, the evidence of Ms. Nguyen was confirmed by the testimony of Jackie Lo of the Chi Shing Renovation Co. Ltd. Mr. Lo testified that one of the jobs he did, once he started work on the restaurant at the end of November of 2007, was to supply and install new locks in the washrooms. Like Ms. Nguyen, Mr. Lo testified that the restaurant washrooms did not have these locks installed when he arrived at the restaurant. Second, one of the photographs taken by Ms. Nguyen in late October of 2007 clearly shows a cubicle door in one of the washrooms with no lock on it. If the defendants had installed locks on these doors as Mr. Tran testified, a lock would have been evident in this photograph. It was not.

[78] Accordingly, I find that the defendants breached their contract in failing to properly complete this aspect of their responsibilities. While the contract between the parties does not expressly state that the washroom cubicles must have locking doors, this requirement is implicit in the construction of any restaurant washroom. Indeed, some type of locking mechanism to ensure privacy is an inherent and defining characteristic of a restaurant washroom. As the Chi Shing Renovation Co. Ltd. charged the plaintiffs $450.00 to complete this work, I find that the plaintiff’s damages for this breach of contract by the defendants is $450.00.

c. The Dishwasher

[79] Item number seven on the contract between the parties required the defendants to supply a commercial stainless steel “Gia” dishwashing machine having certain specified characteristics and capabilities. Indeed, the contract included the cost of such a specified unit, namely, $7,252.50. Ms. Nguyen testified that the defendants failed to provide any dishwasher at all, and she had to later purchase one on her own. She could not, however, recall the price of this unit or produce a receipt. Mr. Tran denied this allegation. He testified that he provided the plaintiffs with a dishwasher and paid for more than half of the purchase price. Mr. Tran was, however, unable to produce a receipt for the dishwasher or explain how he had managed to secure the unit for the plaintiff while only paying for approximately half of the total purchase price.

[80] In all of the circumstances I am simply not satisfied that the plaintiffs have established that the defendant breached the contract in relation to the provision of a dishwasher. There is no evidence confirming the testimony of Ms. Nguyen. If she had purchased a commercial dishwasher, especially one valued at some $7,252.50, she should have been able to produce a receipt establishing such a purchase. As the evidentiary record in this case establishes, Ms. Nguyen is someone who collects and keeps significant receipts. She has kept receipts for far less expensive items. Her inability to produce proof of the purchase of such a dishwasher, her inability to even recall what the unit cost, and the sworn testimony of Mr. Tran that he was the one that, in fact, supplied the dishwasher for the restaurant, all lead me to conclude that the plaintiffs have not established any breach of contract on the part of the defendants in relation to the dishwasher unit.

d. The Meat Cutter

[81] Item 16 on the contract between the parties required the defendants to supply a “heavy duty” Italian brand “meat cutter” with a ½ horsepower motor and having a price of $3,500. Ms. Nguyen testified that the meat cutter that the defendants provided for the restaurant was not the kind of meat cutter that was specified in the contract. Ms. Nguyen testified that the meat cutter provided by the defendants was used, not new, and was not suitable for the restaurant. She estimated that it was worth approximately $600 and broke and had to be fixed, frequently.

[82] Mr. Tran acknowledged that the contract required him to provide a new meat cutter worth $3,500. He testified, however, that he complied with this contractual requirement as the parties had orally agreed that the meat cutter could be used, but they had simply forgotten to write the word “used” into this clause of the contract. While Mr. Tran testified that he only paid between $500 and $700 for this unit, this was because he was able to secure a “contractor’s price” for the unit. Mr. Tran said he did not know the retail price for the unit, but if it were new it would have been very expensive.

[83] I am satisfied that the defendants did not abide by their contractual obligations in providing the required meat cutter for the Pho Shizzle Restaurant. The written contract clearly required the defendants to provide a very specific type of new meat cutter at a very specific cost. This was an important feature of the contract to the plaintiffs. It was not for the defendants to unilaterally provide a meat cutter of a markedly different quality and substantially reduced price. Further, I find that there was no oral amendment of the contract between the parties permitting the defendants to provide a used meat cutter. Significantly, Mr. Tran admitted that Ms. Nguyen complained to him that the meat cutter that he provided for the restaurant was not new, and made it clear to him that she had wanted a new unit. It seems that, as the written contract suggests, she never agreed to a used unit from the defendants. As the plaintiffs did not get the high quality new meat cutter that they had clearly contracted to receive from the defendants, I conclude that the plaintiff’s damages for this breach of the contract by the defendants amount to $3,000.

e. The Ice-Maker Machine

[84] Item 17 on the contract between the parties required the defendants to provide a Japanese manufactured ice-maker machine that was 70% new and which could produce 150 lbs. of ice. Ms. Nguyen testified that the defendants provided an ice-maker machine that was simply not operational. In the result, on December 1, 2007 the plaintiffs purchased a new ice-making machine for the price of $2,500 plus taxes. The plaintiffs produced a receipt establishing this purchase. Mr. Tran testified that he produced the ice-maker machine in accordance with his contractual obligations. He thought that it worked and was approximately 70% new.

[85] I accept the testimony of Ms. Nguyen and reject the testimony of Mr. Tran on this issue. As the receipt confirms, the plaintiffs spent $2,500 on a new ice-maker machine at the beginning of December, before the Pho Shizzle Restaurant was even open for business. It must have been immediately apparent to the plaintiffs that, while they quickly needed a functioning ice-maker, they did not have one. I cannot imagine why the plaintiffs would willingly spend $2,500 on a new ice-maker machine if the one that had been provided by the defendants was operational. Accordingly, I conclude that the ice-maker provided by the defendants was not operational when it was provided to the plaintiffs. In so doing, the defendants breached their contractual obligations. While the defendants were not required to provide a new unit for the restaurant, the “70% new” unit that they provided had to be functional. That was at least an implied term of this aspect of the contract. As the plaintiffs were entitled to receive a 70% new ice-maker machine, I conclude that the plaintiff’s damages are 70% of the cost of the new icemaker machine that they purchased, namely, the sum of $1,750 plus taxes ($245) for a total of total of $1,995.

f. The Open Bar

[86] Item 23 of the contract between the parties required the defendants to build an “open bar” to serve alcohol to the restaurant customers. More specifically, this clause of the contract required the defendants to build a wine rack, storage cabinets behind the bar, a table stand for tea and juice machines, a small sink for hand washing, and a small pail for garbage.

[87] Ms. Nguyen complained that, while the sink was installed behind the bar, the counter top was not stainless steel as the parties had orally agreed. Further, there was no small pail for garbage. Ms. Nguyen also complained that the defendants had not completed the cabinets behind the bar, and she had to subsequently hire someone to finish them. Jackie Lo testified that he did some work in relation to the cabinetry, but he was quite unsure what repairs he may have made to this area of the bar. Ultimately, he was simply unable to remember what work he did in relation to this part of the restaurant. Mr. Tran testified that he built the “open bar” as required by this clause of the contract. He finished the cabinetry behind the bar, installed the sink, and finished the counter top in wood. The contract did not call for the defendants to provide a stainless steel counter top.

[88] I accept the evidence of Mr. Tran and reject the testimony of Ms. Nguyen on this issue. The testimony of Mr. Lo was unhelpful on the issue. From my review of the various photographs that were taken by Mr. Nguyen at various points during the course of the restaurant construction project, it is apparent to me that the defendants constructed the “open bar” in the restaurant in compliance with the specific details outlined in clause 23 of the contract. While Ms. Nguyen may have imagined the appearance of the completed bar differently, she cannot reasonably complain that the bar was not constructed in accordance with the requirements of the contract. Further, I do not accept that the parties had reached any oral agreement that the counter top in the bar are would be made of stainless steel. I do not accept the testimony of Ms. Nguyen in this regard.

g. Signage, Menus, Business Cards and Advertising Flyers

[89] Item 24 of the contract between the parties provided that the defendants were to design the sign for the restaurant, provide 25 table menus, 1000 cards, and 5000 advertising flyers. Ms. Nguyen testified that the defendants designed a sign for the restaurant, but did not pay for it. Eventually, the sign shop contacted her, told her that the sign was ready and asked her to pay for it. According to Ms. Nguyen, that was the responsibility of the defendants under the contract. Moreover, the defendants failed entirely to provide menus or advertising flyers. Ms. Nguyen explained that Mr. Tran had advised her that he would secure the menus from a professional after she had a chance to review a draft or model, but they simply never got to the stage of crafting the details of the menu.

[90] Mr. Tran testified that he had, indeed, designed a sign for the restaurant. He explained that he had taken this business to an advertising company, which had agreed that, in addition to producing the sign, they would also provide 1000 business cards and print the advertising flyers and the table menus. Mr. Tran testified that, as he had no idea what was going to be on the menu, or how the flyers and business cards should look, these details were the responsibility of Ms. Nguyen. While Mr. Tran acknowledged that this work was not yet completed, he had already paid the advertising company to have this work done.

[91] I am not satisfied that the plaintiffs have established that the defendants breached this aspect of their contractual obligations. While it was the responsibility of the defendants, according to the terms of the contract, to provide the restaurant sign, the table menus, the business cards and the advertising flyers, these were not things that the defendants could do unilaterally. They needed the assistance of the plaintiffs in their creation. Moreover, the parties seemingly agree that the defendants did, indeed, order the necessary restaurant signage, likely the most expensive aspect of this aspect of the contract. While Ms. Nguyen has suggested that she was obliged to pay for this restaurant signage, Mr. Tran said that he had already paid for this work. Ms. Nguyen has failed to produce any documentation to support her claim that she was required to pay this expense. Again, in all of the circumstances of this case, especially given Ms. Nguyen’s proven ability to collect and keep receipts, I would have thought that she would have produced a receipt establishing her payment for the sign, if indeed she had paid for the restaurant sign. Accordingly, I do not accept that the defendants breached their contractual obligations in this regard.

h. Chairs and Tables

[92] Clause 25 of the contract between the parties provided that the defendants were responsible for the purchase of 80 chairs and 20 tables (new) for the restaurant. Ms. Nguyen testified that the defendants failed to provide any chairs and provided only the table tops but not the table legs. In his evidence Mr. Tran did not suggest otherwise. Mr. Tran explained that he was planning to eventually purchase the chairs and the table legs out of the $10,000 that he was still owed on the contract. Mr. Tran thought that he would have to pay approximately $25 each for the chairs. Given that there is no dispute between the parties on this issue, I conclude that the defendants breached the contract in failing to provide the chairs and tables required by the contract.

[93] The plaintiffs paid the Chi Sing Renovation Co. Ltd. $840 (plus GST) to supply and install some 83 table legs on the table tops that the defendant had provided to the plaintiffs. Accordingly, the plaintiffs paid a total of $890.40 (including GST) for the table legs and their installation on the table tops. Given the defendants admitted breach of contract in relation to this issue, I find that the defendants are obliged to reimburse the plaintiffs for this additional expense.

[94] Further, on December 3, 2007, the plaintiffs purchased 85 chairs for the Pho Shizzle Restaurant, at $50 each, plus taxes and freight. The plaintiffs produced a receipt clearly establishing this purchase. Again, given their admitted breach of this aspect of the contract, I conclude that the defendants are liable to reimburse the plaintiffs for their cost in the purchase of 80 of these 85 chairs, plus the applicable taxes and freight. By my calculations, based upon the details in the receipt for the chairs, I conclude that the defendants are liable to pay a total of $4,522 for the 80 chairs (including freight and taxes).

[95] Totaling these figures, for the supply and installation of the 83 table legs and the purchase of the 80 chairs, the defendants are liable to pay the plaintiffs a total of $5,412.40. This figure represents the total extent of the plaintiff’s damages in relation to clause 25 of the contract.

i. The Electrical System – Safety Outlets and Commercial Pot Lights

[96] Clause 26 of the contract required the defendants to provide and install all “electrical wires,” “all electric outlets, and the “speaker wires” for the speaker system for the “musical enjoyment” of the customers, while the plaintiffs were responsible for the purchase of all “lightings.” In essence, as the parties testified, the plaintiff was required to buy the light fixtures and bulbs, but the defendants were obliged to install all of the electrical wiring that was necessary for the restaurant.

[97] Ms. Nguyen testified that, in hiring the Chi Shing Renovation Co. Ltd. to complete the restaurant construction project, one of the things that she paid Jackie Lo to do was fix the wiring and lighting issues in the restaurant so that it would pass the necessary electrical inspection. Indeed, as the Chi Shing Renovation Co. Ltd. Invoice established, the plaintiffs spent $18,780 on a host of “electrical work” in the Pho Shizzle Restaurant. Mr. Lo testified that this work was necessary for the Pho Shizzle Restaurant to pass the requisite electrical inspection so that it could open for business. Mr. Tran testified, on the other hand, that the defendants properly, with the assistance of a sub-contractor who was a licensed electrician, installed all of the necessary electrical wiring as required by clause 26 of the contract.

[98] There are two main areas of dispute between the parties in relation to the electrical wiring and lighting of the restaurant, namely: (1) the nature of the electrical outlets; and (2) the pot lights that were installed by the defendants.

[99] Jackie Lo testified that his renovation company had to install a total of 12 new “ground fault interrupted” (GFI) electrical outlets in the kitchen of the restaurant near “wet areas” in order to provide the necessary level of safety near water. These GFI outlets automatically shut off the electricity if they are exposed to water. Mr. Lo testified that the outlets that the defendants had installed in the kitchen were not GFI outlets and would not have passed the electrical inspection.

[100] Jackie Lo testified that his company also had to change all 40 of the residential pot lights that had been installed by the defendants and replace them with commercial grade pot lights. Mr. Lo explained that defendant’s residential pot lights were unsatisfactory as they had no support structure, but rather were just installed into the ceiling tiles. This permitted them to drop down very easily and present a danger to customers. The commercial pot lights that his company installed, however, had the necessary metal supports in the ceiling and were attached and held in place with metal chains. Mr. Low said that the pot lights installed by the defendants would not have passed inspection, but his lights did pass inspection.

[101] Mr. Tran testified that that he installed the electrical outlets, and saw no problems with the outlets he installed. Further, Mr. Tran testified that, as Ms. Nguyen purchased the pot lights, as she was required under the contract, he was obliged to install whatever lights she purchased.

[102] Tom Quackenbush, the experienced electrical inspector with the Cambridge Electrical Safety Authority, who conducted the inspections on the Pho Shizzle Restaurant construction project, testified that, as the business records of the Authority established, on November 29, 2007, JY Electric (the subcontractor for Chi Shing Renovation Co. Ltd.) requested a permit to complete the electrical work started by the defendants. Mr. Quackenbush also confirmed that, on December 12, 2007, he conducted the final electrical inspection of the premises, and the Pho Shizzle Restaurant passed this inspection.

[103] I accept the testimony of Jackie Lo in relation to the inadequate nature of the electrical outlets and the residential pot lights that were installed by the defendants, and I reject the explanations provided by Mr. Tran. By the time the defendants quit the construction project, the restaurant had not passed any electrical inspection. Jackie Lo testified that, when he arrived on the scene at the end of November of 2007, the restaurant would not have passed the necessary electrical inspection. Indeed, Mr. Lo testified that he had to replace many of the electrical outlets and all of the many pot lights in the restaurant so that it could pass the electrical inspection. When he had completed his electrical work in the restaurant, it passed the necessary inspection by the Cambridge Electrical Safety Authority. Mr. Tran did not seriously challenge, in his evidence, the inadequacy of the pots lights that he installed in the restaurant, but rather explained that he was simply obliged to install whatever pot lights were purchased by the plaintiffs. I cannot accept this explanation.

[104] Given the nature of their contractual relationship, the plaintiffs were clearly dependent upon the defendants for their professed and advertised expertise in relation to this construction project. Moreover, the concluding clause of the contract expressly stated that it was the defendants who were responsible for ensuring that the “products” met the standards required by the inspectors. The clause also stated that the defendants assumed “full accountability” for any deficiencies and were required to make the necessary repairs to ensure that the products met “compliance with the government’s codes” according to the inspector. In these circumstances, the defendants can hardly argue that if they installed products that were not in accordance with the applicable electrical standards, this was the plaintiff’s fault for buying the wrong products. Ms. Nguyen is a career hair dresser completely new to the restaurant business with no experience in the construction industry. The defendants are in the construction business, and have great experience in constructing restaurants. Accordingly, it is not surprising that, under their contract, the defendants assumed the responsibility of ensuring that the products installed in the restaurant met the necessary electrical standards. As the defendants installed products without ensuring that they met these standards, according to the evidence of Jackie Lo which I accept, they are fully accountable for remedying the situation. They breached this aspect of the contract and must compensate the plaintiffs for their damages in relation to this issue.

[105] As already noted, the plaintiffs paid the Chi Shing Renovation Co. Ltd. a total of $18,780 plus taxes for electrical work in the restaurant. While I have concluded that the defendants breached the contract with respect to their installation of sub-standard outlets and pot lights, clearly not all of the other electrical work that was performed by Chi Shing was absolutely necessary in order for the Pho Shizzle Restaurant to pass the electrical inspection, or for the defendants to comply with their contractual obligations. For example, at the request of Ms. Nguyen, Chi Shing installed additional electrical outlets in the dining room and an additional “exit” sign. However, this additional electrical work would have amounted to only a small portion of the overall expense the plaintiffs incurred to remedy the deficient electrical work of the defendants. Without an itemized account of the cost of each aspect of the electrical work performed by Chi Shing, it is impossible to assess, with precision, the plaintiffs’ damages in relation to this aspect of the defendants’ breach of contract with precision. However, in my view it is fair to conclude that the plaintiffs’ damages in relation to these electrical issues are at least $15,000 plus the applicable 6% GST ($900) for a total of $15,900.

j. Upgrading the Building Sprinkler System

[106] The building space leased by the plaintiffs already had a sprinkler system in place. However, during the course of the construction project, it became apparent that, to safely convert the premises into a restaurant, some new sprinkler heads needed to be installed and some other sprinkler heads needed to be relocated. This was determined by Avid Fire Prevention in mid-October of 2007. Indeed, on October 18, 2007, Avid Fire Prevention sent Kimtin Construction an Invoice, to the specific attention of the individual defendant “Sonny” Tran, as per an earlier “quotation,” for $2,332 for the installation and relocation of these various sprinkler heads.

[107] Ms. Nguyen testified that this was an incidental cost associated with the construction project that should have been paid by the defendants, but they refused to pay. Ms. Nguyen testified that the fire inspector required these alterations to the existing sprinkler system, but that the defendants refused to pay this invoice. In the result, given that the restaurant could not be opened unless this sprinkler system alteration was paid for, Ms. Nguyen felt she had no choice but to pay for this work. Accordingly, on November 13, 2007, a cheque for $2,332 was issued to Avid Fire Prevention to pay for this work.

[108] Hardy Bromberg, the Cambridge building inspector, testified that the City relied upon professional sprinkler testers such as Avid to determine the adequacy of sprinkler systems. Mr. Bromberg testified that he eventually received the report and certificate from Avid, dated November 16, 2007, indicating that the sprinkler system in the Pho Shizzle Restaurant had been tested and was operating properly. This report noted that there had been an “existing base building system” and that some of the existing sprinkler “drops” had been relocated to conform to “NFPA standards.” Having received this “final report” from Avid, the City of Cambridge approved the restaurant sprinkler system on November 19, 2007.

[109] Mr. Tran testified that, originally, he thought that no changes to the sprinkler system were required. There was already an existing system in the building, and the building plans showed no changes to the existing sprinkler system. The system alterations were required by the inspector. Mr. Tran testified that he refused to pay the invoice submitted by Avid as, in his view, this cost was not something that was included in the contract, even though Ms. Nguyen had asked him specifically to pay this invoice.

[110] I agree with the plaintiffs that the defendants are liable to pay for the costs associated with the necessary upgrade of the building sprinkler system. The defendants agreed to “construct a restaurant” on the leased premises. Moreover, as the final clause of the contract expressly suggests, the parties contemplated that, if there were any difficulties with the construction of the restaurant or the materials used in that construction, in terms of meeting the standards of an inspector, the defendants were to take “full accountability” to make the necessary repairs to bring the restaurant into compliance with the applicable codes. It seems to me that this agreement requires the defendants to pay for any alterations of the existing sprinkler system that are required by the inspector. Just because the expense was an unexpected one does not mean that the defendants are justified in foisting that expense on the plaintiffs. Indeed, the terms of the contract clearly suggest that any such unexpected costs must be assumed by the defendants. Accordingly, I find that, in refusing to pay the invoice forwarded to them by Avid Fire Prevention, the defendants breached their contractual obligations to the plaintiffs, and the defendants are liable to pay the plaintiffs damages in this regard, which total $2,332.

k. Other Miscellaneous Claims by the Plaintiffs

[111] The plaintiffs have made a number of other claims in relation to the allegedly deficient performance of the contract on the part of the defendants. For example, without attempting to exhaustively list all of the other complaints, the plaintiffs allege they suffered significant damages in connection with the following:

• The installation of the hot water heater, including all of the necessary connections and the exhaust venting of the unit;

• The purchase and installation of a new commercial grade, fire graded kitchen ceiling in the Restaurant;

• The redesign and construction of an appropriate “pivoting” door dividing the kitchen of the restaurant and the area where the patrons sit and eat their food, so as to prevent the patrons from being able to look directly into the kitchen when eating their meals;

• The installation of a panel of new “clear glazing” glass in the vestibule at the front entrance way to the restaurant;

• The installation of the hot water pipe for the “noodle pot;”

• The need for any “touch up” painting in the restaurant; and,

• The purchase and installation of CO2 tank.

[112] Without conducting a detailed review and analysis of all of the conflicting evidence from the parties and the other witnesses on each of these various individual issues, in my view it suffices to simply conclude that I am not satisfied that the plaintiff has proven, on the balance of probabilities, any breach of contract by the defendants in relation to any of these other miscellaneous issues. Accordingly, the plaintiffs’ claim is otherwise dismissed.

3. Conclusion

[113] In conclusion, I find that the defendants breached their contract with the plaintiffs in failing to construct and equip the restaurant in the specific manner dictated and required by the terms of the contract, as agreed by the parties. As outlined in the analysis above, to summarize, the damages suffered by the plaintiffs as a result of these various specific breaches of their contract, are as follows:

• The malfunctioning kitchen exhaust system: $859.70

• The missing door locks on the washrooms: $450.00

• The meat cutter: $3,000.00

• The ice-maker: $1,995.00

• Chairs and tables: $5,412.40

• The electrical system – safety outlets and commercial pot lights: $15,900.00

• Upgrading the building sprinkler system: $2,332.00

[114] Accordingly, in total, the plaintiffs are entitled to damages in the amount of $29,949.10 from the defendants for these specific breaches of contract.

The Defendant’s Counterclaim

A. Introduction

[115] The defendants, by way of counterclaim, contend that the plaintiffs owe them the sum of $26,000 for breach of their contract. More specifically, the defendants argue: (1) the plaintiffs failed to pay the final $10,000 that was still owing on the contract; and (2) the plaintiffs should pay the defendants for installing upgraded “firewalls” ($11,000) and a hot water heater ($2,000) and for demolishing a dividing wall ($3,000) in the premises, at the request of the plaintiffs, all of which were extra charges not included in the original price of the construction project.

B. Setting-Off the Final “Hold Back” of $10,000 on the Construction Project

[116] Both the original contract and the first addendum make provision for a $10,000 “hold back.” The first addendum is the clearest in this regard. The addendum expressly stated that there still remained $10,000 to be paid. Indeed, Mr. Tran signed his name right next to this amount, apparently signifying his agreement with this feature of the addendum. Further, in his testimony Mr. Tran admitted that there was a $10,000 “hold back” on the agreement. Indeed, the fact of this $10,000 “hold back” was accepted by the parties as an admitted fact at trial. This is not unusual in the construction industry. Often contracts provide that the contractor will not receive payment of the final installment on the contract until all of the work has been completed. The defendants now, however, want payment of that outstanding amount.

[117] It was perfectly understandable for the plaintiffs to initially withhold payment of the final $10,000. After all, the defendants had long-delayed the completion of the construction project and had failed to honour every promise they had made as to when the project would finally be completed. It is no wonder that the plaintiffs wanted to keep the final $10,000 owing on the contract until the project was, in fact, finished by the defendants. That last “holdback” payment was the only financial incentive they had left to try to motivate the defendants to complete the project. That said, the defendants are still legally entitled to effectively set-off this final $10,000 payment on the contract against the damages they are liable to pay to the plaintiffs for their breaches of that contract.

[118] As a matter of general principle the purpose of a damages award in a breach of contract case is to try to place the innocent party in the position they would have occupied had the contract been carried out by both parties. See: Wertheim v. Chicoutimi Pulp Co., [1911] A.C. 301 (J.C.P.C.) at p. 307; Ticketnet Corp. v. Air Canada, 1997 CanLII 1471 (ON CA), [1997] O.J. No. 4638 (C.A.) at para. 155; McCormick Delisle & Thompson Inc. v. Ballantyne, [2001] O.J. No. 1783 (C.A.) at para. 25; Agricultural Research Institute of Ontario v. Campbell-High (2002), 2002 CanLII 10432 (ON CA), 58 O.R. (3d) 321 (C.A.) at para. 26.

[119] The practical application of this general principle in the circumstances of this case requires two things. First, as I have already indicated, it requires the defendants to pay the plaintiffs a total of $56,199.10. This total consists of $26,250.00 in damages in relation to the delays in the completion of the project, and an additional $29,949.10 in damages in relation to the individual breaches of contract in the construction of the restaurant and in the equipment that was supplied. A damages award of $56,199.10 will effectively put the plaintiffs in the same position that they would have occupied had the defendants properly fulfilled all of their obligations under the contract in a timely way. Second, the practical application of this general principle also requires the plaintiffs to pay the final $10,000 “holdback” payment on the contract to the defendants. If the plaintiffs were permitted to keep this outstanding amount, they would be $10,000 ahead of the position they would have occupied if the contract had been carried out by the parties. The plaintiffs would be placed in the position of having had the contract fully and properly completed, but at a $10,000 discount from the contract price. The defendants, of course, would be out-of-pocket the final $10,000 payment on the contract. Therefore, the operation of this general principle also dictates that the plaintiffs be required to complete their own obligations under the contract, and pay the remaining $10,000 “hold back” to the defendants.

[120] Accordingly, for these reasons I accept this aspect of the plaintiffs’ counterclaim. To implement this decision, it makes sense, in my view, to permit the defendants to effectively set-off this $10,000 final payment owing to them against the total damages award in favour of the plaintiffs. Under rule 27.09(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, where both the plaintiff in the main action and the plaintiff by way of counterclaim succeed, either in whole or in part, and there is a “resulting balance” in favour of one of them, the court may “give judgment for the balance” and dismiss the smaller claim. This is how I propose to practically implement my acceptance of this aspect of the defendants’ counterclaim.

C. The Extra Charges

1. The Construction of the Upgraded Firewalls

[121] The approved building plans for the restaurant (drafted by L.Q. Tran) required that the two existing side walls of the restaurant premises be “upgraded” to two hour fire-rated walls according to Underwriter’s Laboratory of Canada (ULC) standard designs.

[122] This design requirement came as a surprise to the defendants when they first received the plans on May 27, 2007. Mr. Tran, the individual defendant, testified that, in the past, he had never had to construct these types of improved firewalls for restaurants. He had assumed that, in the construction of the Pho Shizzle Restaurant, the existing walls would be satisfactory. Nevertheless, Mr. Tran understood that he was obliged to follow the approved design of the professional engineer (L.Q. Tran) and construct the proposed firewalls. According to Mr. Tran, he approached Ms. Nguyen and told her that upgrading these firewalls would be very expensive, and he suggested that they should try to convince the landlord to contribute to the costs associated with the upgrades. Ms. Nguyen followed up on this suggestion and made a request, through her agent, to the landlord, seeking financial contribution to the costs associated with the upgraded firewalls. The landlord, however, declined to provide any monetary contribution.

[123] Ms. Nguyen testified that at no point in time did Mr. Tran ask her for more money to pay for the upgraded firewalls in the premises. Nor did she ever agree to pay the defendants $11,000 for the upgraded firewalls. Indeed, Ms. Nguyen thought that the defendants were responsible to pay for the upgraded firewalls given that clause 28 of the original contract indicated that the defendants took “full accountability for everything” and that, if there was any problems, it was for the defendants to ensure that the restaurant complied with all government codes and inspections. Mr. Tran candidly agreed that there was nothing in the contract that suggested that the owner of the premises was required to pay for the upgraded firewalls.

[124] I accept that the defendants were responsible for constructing the Pho Shizzle Restaurant in accordance with the approved building plans. This included upgrading the existing firewalls. Mr. Tran may not have anticipated this additional costly expenditure, but the contract between the parties required him to be responsible for this expense. With clause 28 of the contract, the defendants accepted “full accountability for everything” and agreed that, if there were any issues or problems, the defendants were responsible for ensuring that the restaurant complied with all government codes and inspections. Upgrading the firewalls of the premises was included in that responsibility. Further, there is no evidence to suggest that Ms. Nguyen at any point expressed her agreement to pay for the upgraded firewalls in the restaurant. Accordingly, I dismiss this aspect of the plaintiffs’ counterclaim.

2. The Purchase of a Hot Water Heater

[125] Mr. Tran testified that he bought a hot water heater for the restaurant. He said that he paid $2,000 for this unit. Mr. Tran testified that he has the bill for this hot water heater, but that he forgot to bring that evidence to court. Mr. Tran implied that Ms. Nguyen had asked him to buy it for her, and that he agreed to do so, in part, to compensate her for the various delays in the construction project.

[126] The defendants did not, however, install this hot water heater. Indeed, Chi Shing Renovation Co. Ltd. charged the plaintiffs $2,500 to install the various necessary connections (gas and electricity) to the hot water heater and to properly vent the unit outside.

[127] I am satisfied that in the early fall of 2007, the Pho Shizzle Restaurant had a hot water heater on the premises. The photographic evidence clearly establishes that there was, in fact, a hot water heater on the restaurant premises by early October of 2007. However, I am not satisfied on the balance of probabilities that the defendants purchased this unit. While Mr. Tran testified that he had proof of this purchase, he simply forgot to bring that evidence to court. At no point during this trial did the defendants tender any evidence of any type of receipt or invoice proving that Mr. Tran had in fact purchased this hot water heater. I conclude that, if Mr. Tran had the proof he claimed, this evidence would have made an appearance at some point during the trial. I simply do not accept the excuse offered by Mr. Tran that he just forgot to bring the evidence to court.

[128] Moreover, even if the defendants purchased the hot water heater as Mr. Tran testified, the evidence surrounding the circumstances of that alleged purchase are sufficiently vague that I cannot be satisfied that any such purchase was made in circumstances that rendered the plaintiffs liable to reimburse the defendants for the cost of that purchase. Therefore, I also dismiss this aspect of the counterclaim by the defendants.

3. The Demolition of the Wall

[129] The defendants claim damages in the amount $3,000 for the demolition of a wall. The premises had previously been used as a video store, and there was a wall in the premises dividing the retail part of the store itself from the area where the videos were stored. According to Mr. Tran, there were some heavy duty shelves on one side of the wall and they had to be taken down in addition to the dividing wall. The defendants claim they are entitled to $3,000 for this work.

[130] Ms. Nguyen testified that the demolition of this wall related to the construction of the washroom facilities and, accordingly, were the responsibility of the defendants under the terms of the contract. Mr. Nguyen testified that, in any event, Mr. Tran never asked her to pay $3,000 for the demolition of the wall, and she never agreed to pay $3,000 for this work.

[131] I accept the evidence of Ms. Nguyen and reject the evidence of Mr. Tran on this issue. The defendants have produced no documentation or other confirmatory evidence that would provide any support for the testimony of Mr. Tran. Presumably, before agreeing to perform any additional work not covered by the governing contract between the parties, especially significant work having an alleged value of $3,000, the defendant would secure the plaintiffs’ written request to undertake the additional work and the plaintiffs’ written agreement to pay for the work for a particular price. See: 1351150 Ontario Inc. v. Construction Vergo Inc. (2005) 47 C.L.R. (3d) 83 (Ont.S.C.J.) at para. 17-30. Given the absence of such predictable documentation in this case, I find that the defendants are not able to establish their claim. Accordingly, this aspect of the defendant’s counter claim is also dismissed.

D. Conclusion

[132] In conclusion, while I accept that the defendants are entitled to the final $10,000 “holdback” payment that is owing to them, practically implemented by way of a set-off against the greater damages award in favour of the plaintiffs, all remaining aspects of the counterclaim by the defendants are dismissed.

Conclusion

[133] In summary, I find that the defendants breached their contract with the plaintiffs in: (1) failing to complete the Pho Shizzle Restaurant construction project in a timely way; and (2) in failing to construct the restaurant in the specific manner dictated by the terms of the contract. Moreover, I find that the plaintiffs suffered $26,250.00 in damages for the breach of contract in relation to the delays in the completion of the construction project, and they suffered $29,949.10 in damages for the breach of contract in relation to the specific and individual failures of the defendants to construct the restaurant, and supply it with equipment, in accordance with the contract. In total, the plaintiffs suffered $56,199.10 in damages due to the breaches of contract by the defendants.

[134] Pursuant to rule 27.09(3) of the Rules of Civil Procedure, the defendant’s counterclaim against the plaintiffs is dismissed, but the total damages award that would otherwise be payable to the plaintiffs is reduced by $10,000, in recognition of the fact that I have accepted that the defendants are entitled to effectively set-off the final $10,000 “hold back” payment owed to them as part of the original contract.

[135] Accordingly, in the result, judgment shall issue in favour of the plaintiffs, against the defendants in the total amount of $46,199.10, plus pre-judgment interest.

Costs Submissions

[136] The only remaining issue is the costs of this action. If the parties cannot agree on the issue of costs, they should follow the following timetable in the filing of their materials relating to costs.

[137] Counsel for the plaintiffs will have until May 4, 2012 to file their Costs Outline and their submissions on costs, and counsel for the defendants will have until May 18, 2012 to file their Costs Outline and their submissions on costs. The written submissions from the parties on any and all of the costs issues shall be no longer than five pages each, excluding the Costs Outlines, and excluding, of course, copies of any authorities that the parties may elect to provide in support of their respective arguments.

[138] In the event that reply submissions are necessary, they shall be no longer than three pages, and shall be filed by May 25, 2012.

Kenneth L. Campbell J.

Released: April 20, 2012

COURT FILE NO.: 07-CV-344199SR

DATE: 20120420

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

LAN NGUYEN and PHO SHIZZLE RESTAURANT INC.

Plaintiffs

• and -

SON TIN TRAN and KIMTIN CONSTRUCTION LTD.

Defendants

REASONS FOR JUDGMENT

Kenneth L. Campbell J.

Released: April 20, 2012

[^1]: At the time that the parties entered into this contract on May 2, 2007 the corporate defendant, Kimtin Construction Ltd., had been dissolved, cancelled and rendered inactive as a result of non-payment of taxes. Further, it was not until November 18, 2011 that the corporation was legally revived by Mr. Tran. According to s. 241(5) of the Business Corporations Act, R.S.O. 1990, chap. B.16, however, where a corporation is subsequently revived after having been cancelled in this way, the corporation “shall be deemed for all purposes to have never been dissolved.” Accordingly, while this earlier dissolution has no impact upon any legal rights or liabilities of the corporate defendant, it shows that Ms. Nguyen was prescient in making sure that the contract regarding the construction of the restaurant bound both Kimtin Construction Ltd. and Mr. Tran personally.