2012 ONSC 6110
COURT FILE NO.: CV-12-0056-000
DATE: 2012-10-26
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
1188710 ONTARIO LIMITED TRADING AS BURNETT CONSTRUCTION
Donald B. Shanks, for the Plaintiff
Plaintiff
- and -
GREGORY GARTNER AND SUZANNE GARTNER
Robin A. Clinker, for the Defendants
Defendants
HEARD: August 15, 17, 20, 21, 22, 24, 30, 2012 , 2010,
at Thunder Bay, Ontario
Regional Senior Justice H.M. Pierce
Reasons For Judgment
Introduction
[1] This is a claim by a contractor against two owners pursuant to the Construction Lien Act, R.S.O. 1990, c. C.30, as amended. The defendants are residents of Minnesota in the United States of America. Mr. Gartner is the chief executive officer of a corporation he started called Gartner Studios. His corporation has two offices in China as well as offices in Canada and the United States.
[2] In summer of 2009, the defendants purchased a private island in a remote lake in northwestern Ontario at a cost of between 1.3 – 1.4 million dollars. The purchase of the property was financed by a mortgage of $750,000. When they acquired it, the island housed a main cottage of about 2,000 square feet, a guest cottage, a hanger, and a generator shed.
[3] The Gartners intended to make the island into a “legacy property” for their family. Mr. Gartner described this cottage as “our vision.” To that end, they engaged an architect and planned extensive renovations. Their plans involved rebuilding the cottage with log construction, supported by concrete footings; enlarging the kitchen; building a great room with a stone fireplace; a screened sun room with windows; an extra bedroom; and a shower room with tub. The finished cottage would comprise about 3,200 square feet. They also planned extensive elevated decking around the cottage. Mr. Gartner estimated the cost of the renovations at 1.1 million dollars.
[4] The cottage is not accessible by road, except for an ice road during a short period in winter. Otherwise, access is by boat or air, depending upon the vagaries of weather and ice conditions. The plane ride from the communities of Nestor Falls or Sioux Narrows takes about 20 minutes. Otherwise access to the cottage requires a journey off the main highway down a rough logging road followed by a boat ride of 45 – 60 minutes.
[5] The Gartners hired Mr. Cliff Hagen as their log builder and carpenter. At his recommendation, Mr. Gartner engaged Mr. Jay Burnett to build a stone fireplace in the great room of the cottage. The fireplace was to be the focus of the room and a show piece for the cottage.
[6] Mr. Burnett lives in Fort Frances, Ontario and is the president and sole director of the plaintiff corporation whose business is masonry construction. He is a qualified journeyman brick and stone mason of 35 years’ experience, having apprenticed with his father and attended George Brown College. He employed other tradesmen and an apprentice to assist him on this project. The scope of work expanded as the project continued. The plaintiff began work on the project on March 1, 2010 and finished on July 27, 2010. The fireplace was finished in June, 2010.
[7] In the course of the project, Mr. Burnett submitted invoices totaling $213,617.79. When his invoices were not paid in full, he filed a lien on the property pursuant to the Construction Lien Act and started this action. There is no dispute about the timeliness or perfection of the lien. The defendants paid the plaintiff $110,031.10 on account of his invoices. Mr. Burnett conceded before the trial that certain credits are due the defendants in relation to his invoices. Once these credits are taken into account, Mr. Burnett seeks judgment of $98,681.83 plus interest of $48,470 and late charges of $6,183.85 for a total of $153,335.68.
The principal issues to be decided are:
What was the agreement between the parties?
Were billings in accordance with the agreement?
Is the plaintiff entitled to interest and late charges and if so, to what extent?
[8] The defendants say the plaintiff was paid in full in relation to Mr. Burnett’s initial estimate. They complain that Mr. Burnett over-billed for the plaintiff’s work and stayed on the job longer than the initial time estimate. The defendants submit that the work was not completed within the time agreed and that it was deficient such that additional credits for repair should be granted. They also contend that the agreement between the parties did not contemplate interest and so none should be ordered.
[9] Counsel have identified issues in dispute in the case and the positions of the parties, which I will refer to later in these reasons.
Terms of the Contract
[10] Mr. Gartner and Mr. Burnett first met at the site in the fall of 2009. Also present was Walter Shoumaker, who is Mr. Gartner’s brother-in-law. Mr. Shoumaker took a role in coordinating construction and testified at trial. As Mr. Burnett signified his interest in the project, Mr. Gartner provided him with contact information for the architect. At that point, plans for the fireplace were not complete. Mr. Gartner testified that he discussed with every contractor that he wanted all renovations complete by May 15, 2010.
[11] The defendants required a custom fireplace of stacked stone that would take a zero clearance fire box to be designed and built by the manufacturer. The stone they selected for the fireplace was a large, landscape-style stone rather than a thinner, lighter veneer stone. Mr. Barnett was unfamiliar with the stone selected, and first saw it when it was delivered to the site.
[12] Plans for the fireplace were never formalized beyond the architect’s sketches. Had blueprints been produced instead of sketches, overhead, front, side views and cross-sections of the fireplace would have been shown as well as dimensions. Mr. Gartner testified that he “allowed” the architect and Mr. Burnett to figure out the rest. At the time of the fall site visit, the firebox had not been chosen.
[13] Mr. Gartner and Mr. Burnett had a telephone discussion about the contract in February, 2010. Where the evidence of these witnesses differs, I prefer the evidence of Mr. Burnett
[14] Mr. Burnett’s evidence throughout was usually corroborated by contemporaneous e-mails, journal entries, time-sheets, invoices, receipts, and other documentation. His testimony was precise and was not challenged despite a thorough cross-examination.
[15] By contrast, Mr. Gartner was seldom on the construction site and had little in the way of documentary evidence, contemporaneous notes or photographs. He strenuously disputed the plaintiff’s position that there was no project schedule and testified that there was a project schedule: it was in his mind.
[16] He refused to acknowledge receipt of the plaintiff’s invoices when it was patently obvious by a postal receipt that they were sent by registered mail and delivered to his home. He stated, “I don’t look at my own mail unless someone thinks I should look at it.” He added, “If there’s something I had to see, it would be given to me.” I do not accept his evidence that he did not see the plaintiff’s invoices until September, 2010.
[17] Mr. Gartner denied receiving the plaintiff’s invoices that were listed in his own affidavit of documents and testified that he had no idea how he got them. Mr. Gartner refused to open mail from the plaintiff sent to his home at his direction. At times he disputed statements in the agreed statement of fact, such as when the fireplace was completed, insisting it was not done until late July or mid-August whereas the agreed statement of fact states it was finished in June. He testified that the contract rate for labourers was $40 per hour when the agreed statement of fact stipulates it was $45 per hour. When confronted with this point in the agreed statement of fact, Mr. Gartner said he didn’t recall.
[18] Mr. Gartner was also not truthful about matters unrelated to the plaintiff’s claim – for example, the amount of mortgage on the cottage, or the timely payment of the Hagen’s accounts. E-mails from his own staff contradicted his testimony denying that the plaintiff wasn’t paid because of a corporate cash flow problem.
[19] At times, Mr. Gartner’s evidence was contradicted by his own witnesses: for example, Mr. Gartner testified that he was the general contractor. Mr. Shoumaker said Mr. Hagen was the general contractor. The architect identified Mr. Shoumaker as the general contractor and project coordinator.
[20] Another example was Mr. Shoumaker’s testimony that Mr. Gartner instructed the cabinet installers to tell the Canadian border officials that they were coming to Canada to fish. Mr. Gartner hotly denied this evidence. Generally, Mr. Gartner’s testimony was characterized by arrogance and obfuscation. His credibility was destroyed in cross-examination.
[21] Mr. Gartner’s other witnesses did not assist in the defence of the case. Mr. Shoumaker, who was Gartner’s representative on site during the cottage renovation, was contradictory and confused about when photos of alleged deficiencies were taken, and the state of the deck railings when Mr. Burnett and his crew left the site. He testified that the defendants chose the bathroom tile, which Mr. Gartner disputed. Mr. Shoumaker also admitted making up evidence about a heated argument between Gartner and Burnett. His credibility was also seriously undermined in cross-examination.
[22] Mr. Whorpole testified for the defendants. He is employed as their groundskeeper for the cottage. He testified that he was giving evidence to support the defendants. In fact, he had little to say that shed light on the dispute.
[23] Mr. Burnett called Mr. Gartner in February, 2010 and agreed to take on the work. By that time, Burnett had spoken with the architect. He was concerned that working with bulky landscape stone might be time-consuming and unwieldy. He was also concerned about the grain of the stone and whether he might have to fabricate it by splitting or sawing it before installation.
[24] Because Mr. Burnett was unfamiliar with the specific stone required, he accepted the project based on a time and materials contract. Mr. Gartner did not really dispute this evidence. He agreed that Mr. Burnett did not quote a fixed price. It may be that Mr. Gartner was naïve about the difficulties of performing this kind of work on a remote island: there were slippages in work preliminary to the plaintiff’s work, multiple trades competing for work space, design changes increasing cost and delay, interruptions to work caused by the owner, and materials that did not arrive on time. Nevertheless, I find that the parties agreed to a time and materials contract. Mr. Burnett testified and I find that there was also some conversation about the potential for additional work beyond the fireplace but nothing was specifically discussed at that time. In fact, additional work was later assigned to the plaintiff as I will describe.
[25] Mr. Burnett testified and I find that he also discussed with Mr. Gartner expenses, including room and board, travel and consumables as well as heating and hoarding if required. I find that Mr. Gartner agreed to these terms. Mr. Burnett lived in Fort Frances, some 80 miles distant from the fly-in loading site. One of his tradesmen lived in Dryden. Burnett testified that he would not have taken the contract if the defendants would not assume the costs of travel. The defendants recognized that it was not feasible for Mr. Burnett and his crew of three others to commute to the job daily. The defendants agreed to fly Burnett and his crew from a loading area to the island at the beginning of the work week and return them to that point at the end of the week and to provide room and board during the week; in fact, they did so.
[26] The contract included reimbursement of costs for consumables. Consumables are tools and materials that are used up during the course of a job. These include blades, masks, drills, and other equipment that can’t be re-used. There was no dispute about Mr. Burnett charging consumables; there was, however, a minor issue about what items were properly billable. The plaintiff conceded some small credits for disputed items in the course of the trial.
[27] Mr. Gartner asked Mr. Burnett to say how long the work would take. They part company over the answer. Mr. Gartner testified that Mr. Burnett told him 2 – 3 weeks; undoubtedly he remembered what he wanted to hear.
[28] Mr. Burnett’s testimony was qualified and more specific. Mr. Burnett stated that he advised that the project would take 2 – 3 weeks with veneer stone and under ideal conditions. He explained that ideal conditions did not involve working on a remote island in winter where there could be access issues, cold and wind that necessitated the use of hoarding and functional heaters. He explained in cross-examination that it was “like night and day” to work with veneer stone compared to landscape stone. He had never worked with landscape stone before. Perhaps the subtlety of his answer was lost on Mr. Burnett, in his enthusiasm to have the cottage finished and his naiveté about the complications of construction in such a setting. Mr. Burnett testified in cross-examination that he was aware Mr. Gartner wanted the project done by May 15th, but he did not agree to that date.
[29] I accept Mr. Burnett’s evidence that he did not specify how long this project would take. I conclude it was not a term of the contract that the fireplace would be completed by May 15, 2010. As Burnett knew, there were too many contingencies over which he had no control. Apart from the remote location, he had not yet seen the stone or the fire box; he had no blueprints for the design; his work followed the carpenters` work and could be impeded by other trades. There could be late delivery of materials, malfunctioning tools or other problems. It was also a fact that the scope of work assigned to the plaintiff expanded once work commenced at the site.
[30] In fact, delays of this nature did occur. Mr. Gartner testified that the plaintiff’s start time on the project would be February or March, depending on the carpenter’s progress. Mr. Burnett would stand-by, waiting for a call. In fact, Burnett did not begin until March 1, 2010 when he prepared the block foundation for the fireplace. The fireplace was not delivered until March 25th and then it required assembly, which was not in the plaintiff`s scope of work. No directions for assembly were included with the fireplace, so Mr. Burnett was forced to contact the manufacturer for directions.
[31] As the fireplace stone was also delivered late, the plaintiff’s work force left the site, returning later when Mr. Shoumaker had procured materials for their work. When the landscape stone did arrive, it was caked in dirt and had to be cleaned before it could be used. Because the stone was so bulky, it was time-consuming to fabricate and move into place. The chimney cap was manufactured in the United States and was not available at the site until at least May 12th.
[32] Construction on the site was, at times, chaotic and uncoordinated, with trades interfering with the orderly progression of each others work and lay-down areas being unavailable. On one occasion, all trades were instructed to pack up their tools and clean-up the site so that the defendants could use the cottage for a weekend. Consequently, the tradesmen spent time after the weekend sorting tools and laying out their work anew. In some instances, design changes, such as in the bathroom, led to delays and caused shortage of materials such as tile. In other instances, directions to use the materials on hand led to additional fabrication work to make use of the materials according to the design. This happened with the sun room floor, which had to be built up in places to provide an even finished surface for the uneven stone. Extra work was also assigned to the plaintiff. These are but a few examples of why the plaintiffs work was delayed.
[33] Mr. Gartner and Mr. Burnett also discussed the rates that would be charged. Mr. Gartner recalled $60 per hour for masons and $45 per hour for journeymen or helpers. He did not appear to understand that a journeyman is a qualified mason and not the same as a helper. Mr. Gartner appeared to rely simply on his memory for these figures. I accept as more probable, Mr. Burnett’s testimony that the rates were $62 per hour for a journeyman mason and $45 per hour for a labourer, also called a mason tender. This category of worker included his apprentice. Mr. Gartner was an experienced tradesman, responsible for paying his crew of one mason and two mason tenders, and generating a profit. I have no doubt that Mr. Burnett knew what rates would be required to do so. I find that Mr. Gartner accepted these rates, which were charged in due course. The initial invoices were paid without complaint.
[34] I find that there was no agreement that the plaintiff would charge at the lower carpenter’s rate for assisting the carpenters as assigned. While it may be that Mr. Gartner and Mr. Shoumaker discussed the desirability of paying the masons at a reduced rate, there is no evidence that this was ever discussed with Mr. Burnett, much less agreed by him.
Interest
[35] Did the terms of the contract include a requirement that interest would be paid on overdue accounts?
[36] The defendants submit there was no agreement between the parties to pay interest and therefore a credit of $11,963.12 should be granted for interest charged to October 18, 2010. They point out that the plaintiff’s invoices did not indicate that interest was chargeable.
[37] Mr. Burnett concedes that interest was not discussed initially and that it didn’t appear on the plaintiff’s invoices until June 30, 2010 when he claimed interest at 5%. Claims for interest and late charges also appeared on the plaintiff’s final statement of account as of August 3, 2010. Thus, the defendants were on notice that their delay in payment was becoming an issue.
[38] Mr. Burnett argues that the defendants were in breach of their agreement to pay and damages equal to the amounts he had to pay his suppliers and his bank should be awarded to reflect the breach. He seeks interest of 2% per month from August 15, 2010 to payment, or $48,470 to trial plus late charges of $6,183.85. Mr. Burnett testified that his suppliers charged him interest at rates between 1.5 – 3% per month.
[39] The burden is on the plaintiff to prove, on a balance of probabilities, that payment of interest is a term of the contract (1089954 Ontario Ltd. v. 146812 Ontario Inc. 2008 CanLII 4777(ON SC), par.58. Can the plaintiff prove, on a balance of probabilities, that the defendants agreed to pay interest on unpaid accounts?
[40] Mr. Burnett testified that Mr. Gartner offered to pay the plaintiff’s invoices within a week of receiving them, with payment to be made by wire transfer. He explained that, for this reason, there was no discussion about interest. This evidence was not contested.
[41] Early in the contract, Mr. Gartner’s accounting department asked for Mr. Burnett’s banking information in order to wire funds. In the beginning, funds were wired in accordance with this agreement. I find that the parties agreed there would be timely payment of the plaintiff’s invoices – within a week of their submission.
[42] In my view, Mr. Gartner, a businessman who understood cash flow, realized that timely payment was a term of the contract. That was why at trial he hotly disputed receipt of the plaintiff’s invoices when it was evident the invoices were sent to his home. He knew he had agreed to pay invoices within a week of receipt. Even in the face of a post office receipt proving that invoices had been delivered to his home, he stubbornly denied receiving or reviewing them.
[43] Interestingly, when Mr. Burnett called Mr. Gartner on September 11, 2010 about overdue accounts, Gartner did not pretend he had not received the invoices. Instead, he replied that he would pass the claims, which included interest, on to his accounting official, implying they would be paid.
[44] Thus, the agreement was not just to pay for time and materials at some indefinite date, but to pay within a week of invoices being tendered. Consequently, I find that the defendants are liable for interest as a result of their failure to pay the plaintiff’s invoices in a timely manner.
Scope of the Work
[45] There is no agreement as to the initial scope of the work or the extra work performed by the plaintiff. In exhibit 1, the plaintiff identified the following as within the scope of the work it performed:
stonework for the fireplace;
exterior stonework on chimney and cap and fireplace foundation;
prefab walls for exterior fireplace room;
assemble fireplace;
stone floor in sunroom;
backsplash areas for two bars and kitchen;
tile work in the bath and shower area;
carpentry work as follows:
a) prefab walls for exterior of fireplace room;
b) assist carpenters to surround fireplace with insulation, vapour barrier and sheeting of exterior walls of room;
c) frame gable-end/chimney and wood ledge cap;
d) install rim joist and flashing for decking;
e) cut out and frame wood box door openings;
f) laminate and install beam under floor for hearth; sheet fireplace walls;
g) start deck layout: dig holes for tubes, drill, pin, and epoxy; dig holes for deck tubes and drill, epoxy and rebar; install sauna tubes; mix concrete, pour tubes and complete;
h) work on decks;
i) assist with logs and haul materials;
j) fabricate deck beams;
k) clean logs for sealant; build floor beams;
l) move, trim and fit new beams under cabin;
m) jack up floor; cut support posts; shim joints;
n) assist in stage area, build storage building; sand and stain ceilings;
o) reinforce bathroom floor; fabricate post and small beam for soaker tub;
p) install metal roof on storage shed;
q) extend cement board from shower;
r) load and unload material; clean up unrelated to material for fireplace.
[46] Mr. Shoumaker denied he directed the plaintiff to prefabricate the walls for the exterior fireplace room but he acknowledged this may have occurred as a result of an agreement between Mr. Hagan and Mr. Burnett. Otherwise, he did not dispute that Mr. Burnett or his crew worked on items 1 – 2 and 4 – 7 above. He complained about the tiling in the bathroom.
[47] Exhibit 4 is a comprehensive collection of photographs taken by Mr. Burnett showing the construction of the fireplace and the exterior chimney and cap from the start of the project until completion. It documents construction of every phase of the fireplace from the foundation to completion. He intended to present the book of photographs to the defendants at the completion of the project.
[48] In addition, the detailed timesheets of the tradesmen were sent to the defendants during the project and are filed as part of exhibit 2. Exhibit 3 includes photographs of the plaintiff’s workmen in the kitchen, sunroom, and bathroom. I find that the defendants asked the plaintiff to perform the work identified in items 1 – 7 above.
[49] Mr. Shoumaker and Mr. Burnett agree that the plaintiff’s work force were asked to assist the carpenters when they were not required for mason’s work. The defendants preferred this approach to the cost and delay of bringing in more carpenters. The extra work was documented by time sheets and photographs.
[50] Most of the work relates to the deck. Mr. Burnett testified that his forces worked on the deck under the direction and supervision of the carpenters.
[51] Mr. Shoumaker testified that the masons were involved in bracing underneath the tub area at his direction. He agreed that the masons worked on the deck, and built and roofed the shed. He was aware the plaintiff built floor beams to support the centre of the cabin, and jacked up the floor to do so, while supporting posts and shimming joints. He testified that the plaintiff could have assisted with unloading the helicopter slings.
[52] In some instances, Mr. Shoumaker testified that he was not aware of who assigned the work but conceded the work was part of the plan. He conceded that it could have resulted from an agreement between Mr. Hagan and Mr. Burnett in his absence
[53] Exhibit 3 contains photographs taken by the plaintiff and the defendants, showing the masons’ work on the deck. I conclude that the defendants’ representative, Mr. Shoumaker, assigned the masons extra work to assist the carpenters with the knowledge and approval of the defendants, thus extending the plaintiff’s scope of work as set out above.
Deficient Work
[54] The defendants claim the plaintiff`s work was deficient in two areas: the deck footings, posts and beams, and the tile floor in the shower. I will consider the evidence on each point separately.
Deck Footings, Posts and Beams
The defendants claim that deck footings (or piers), posts and beams were improperly built. The plaintiff admits it performed some of this work but contends this was within the scope of work for the carpenters and supervised by them. Consequently, the plaintiff denies responsibility for this work.
[55] It is common ground that the masons were asked to assist the carpenters from time to time, including in construction of the deck. Despite Mr. Gartner’s assertion that he was the general contractor, he was rarely on site. It is evident that this project had no general contractor and no project manager, despite the cost involved.
[56] The defendants’ complaints about deficiencies in deck construction include the concrete piers not being centred against the beam supporting the decking above; one concrete pier which was not plumb; and wooden posts overhanging concrete piers below.
[57] Mr. Burnett testified that Mr. Hagen supervised construction of the deck. He stated that Hagen was responsible for it and was satisfied with it. With respect to the photographs at exhibit 3, tab 19, Mr. Burnett agreed that the first concrete post is not centred under the beam but disagreed that it must be centred. He testified that his tradesmen did not work on the piers and posts depicted in photograph #1.
[58] In photograph #3, he agreed that the concrete post is not plumb. It appears, in the photograph, to butt up against a rock outcropping. He stated that the pier is, nevertheless, structurally sound.
[59] As to photographs # 4, 8, and 9, the wooden posts are not centred on the concrete piers below. He agreed the posts should not overhang the pier, but should rest completely on the concrete base. However, he stated that his workers left these posts as instructed and explained that the beam and rim joists could be moved to centre on the concrete piers. He added that his workmen didn’t leave the posts as depicted. The witnesses agree that deck was not completed when Burnett left the site in July.
[60] As to photographs #7 and 10, Mr. Burnett denied this work was done by his forces.
[61] Mr. Gartner was not on site during the time Mr. Burnett and his tradesmen were working on the deck. Consequently, he was not able to say what portions of the deck work were done by the plaintiff. He did testify that Hagan corrected some deficiencies, but he stated that not all deficiencies were corrected.
[62] Mr. Shoumaker testified that he was at the site off and on when the deck footings and related work were being done in late June or early July. In cross-examination, Mr. Shoumaker testified that the work was given to the plaintiff; that it was not Mr. Hagen’s to correct. Then he admitted that Mr. Hagen was responsible for the construction of the deck. He added that he didn’t know who was responsible for correcting deficiencies as his role was limited.
[63] There is no evidence as to whether deficiencies were corrected before or after the photographs in exhibit 3, tab 19 were taken. Nor is there any evidence about what deficiencies were corrected by Mr. Hagen and what remained to be done. There is no evidence as to the cost of correction, if any, that was borne by the defendants.
[64] I find that construction of the deck, including its supports fell within the scope of the carpenters’ contract. The fact that Mr. Hagen returned to correct deficiencies confirms this. Mr. Burnett was not asked to do so. The first complaint about deficiencies in the plaintiff’s work came on the eve of trial, some two years after Mr. Burnett and his workers left the site. I conclude that the work on the deck and any deficiencies were not the responsibility of the plaintiff.
Bathroom Floor Tiles
[65] Mr. Gartner complained about grout lines that were apparent in the floor tiles in the bathroom. This is an aesthetic complaint; there is no criticism of the tiles being improperly laid. Rather, the defendants say that Mr. Burnett promised he could achieve the pebbled effect on the tile without grout lines but selected tiles that showed the grout lines. He also complained that a similar tile of longer and narrower dimensions was available at the site could have been used instead of the larger square tiles that were actually laid.
[66] I do not accept that Mr. Burnett chose the floor tiles for the bathroom. Mr. Shoumaker and Mr. Burnett testified that the tiles were selected by the defendants. It is not probable that, having marked this property out as a “legacy property,” retaining a decorator and an architect and taking what Mr. Gartner called a “hands-on” role with respect to the renovations, he would ask another person to choose the floor tile.
[67] Mr. Burnett stated that he advised Mr. Gartner that a larger tile would show fewer joints, once laid. To that end, he directed the Gartners to a lumber store in International Falls for larger floor tile. The defendants took his advice and procured the tiles they wanted. Mr. Burnett laid them, pursuant to instructions. The defendants’ first complaint about the appearance of the tile came in August, 2012, on the eve of trial. The defendants cannot now complain that because they don’t like the appearance of the tile they chose, this represents a deficiency attributable to the plaintiff.
Billings
[68] The next issue to be determined was whether the billings were in accordance with the agreement. The parties have identified these issues by a number of categories and I will deal with them in the same fashion. The issue of interest and penalty charges will be dealt with separately.
[69] The parties agree that the defendants are due credits of $2,449.63 for a charge for a late source deduction remittance and a credit of $963.90 for charging one tradesman at the full rate instead of as an apprentice.
Equipment and Tools
[70] The defendants claim credit of $2,087.94 for improperly billed equipment and tools. The question of whether equipment and tools could properly be billed to the defendants depends on whether they are consumables, meaning materials that are used up in the course of the contract.
[71] The plaintiff conceded that a few small items such as a water container, 3 disposable flashlights, key rings and a hatchet sheath should be credited against the amount claimed. Mr. Burnett said he would have granted the credit at the time. The defendants agree to accept the proposed credit of $54.99 for these items.
Fuel
[72] The defendants dispute that they agreed to pay for the plaintiff’s fuel to and from the loading site. As well, they claim they were billed for some fuel when the plaintiff was not on site. They seek a credit for all fuel charges in the amount of $1,518.05 and for fuel charges when the plaintiff was not on site in the amount of $388.83. It is their position that when the terms of the contract were discussed, Mr. Gartner agreed to time and materials plus travel and room and board. Travel was discussed, but it was not broken down into time and fuel.
[73] Mr. Burnett used both a half ton truck, fuelled with gas, and a one ton truck, fuelled with diesel, to transport his crew and their tools and materials to and from the pick-up site. The plaintiff’s fuel receipts are in evidence. They were produced to the defendants at the time the initial billings for time and materials were rendered and were paid. The first objection taken to billings for fuel was made in August, 2012.
[74] Mr. Burnett testified that he would not have taken the job had he believed he could not charge his fuel. It was his opinion that fuel was a consumable, to which the defendants had agreed. It was a necessary expense to ferry his work force to and from the pick-up site. He conceded that a fuel invoice for February 12, 2010 in the amount of $68.50 was included in productions in error: that the defendants should not be charged for that fuel, when he was not on the job.
[75] I agree that a necessary component of travel expenses is fuel. The defendants accepted the charge for travel time. The work force would not have been able to get to the pick-up site unless Mr. Burnet transported them as the defendants did not offer to pick them up at Fort Frances where most of the tradesmen lived. Fuel is a consumable necessary to the job. It was more economical for the defendants than mileage, which Mr. Burnett might well have demanded but didn’t.
[76] I accept Mr. Burnett’s explanation that he occasionally refilled his truck after returning from the job site. These costs are fairly chargeable on account of fuel expenses. They are documented and proximate to his attendance at the work site. I find there is no substance to the defendants’ objections to fuel costs charged. The defendants will have a credit for $68.50.
Preparation Time
[77] The defendants object to the time they were billed each week for preparation: grocery shopping, procuring materials and loading the plaintiff’s trucks. They submit that this was not agreed to as part of the contract. The defendants also submit that Mr. Burnett did not discuss preparation time with Mr. Gartner when the contract was formed and thus it did not form part of the contract. They do not contest preparation time claimed when the plaintiff’s forces were on site; however, they argue that time claimed for securing groceries and materials on weekends should be minimal as Mr. Shoumaker was assigned to do this.
[78] Mr. Shoumaker testified that his role at the site was to ensure that the contractors had what they needed: telephone, internet, television, generators, and accommodation. He added that if there were problems, he would help solve them. He made no mention of securing tools, miscellaneous materials, or groceries. Mr. Gartner’s evidence was to the same effect: that Mr. Shoumaker was to ensure the contractors had all of the materials they needed on site, together with fuel, water, propane, internet, phone and cable television. He made no mention of tools or groceries.
[79] Mr. Burnett testified that the first objection to this billing was lodged in August, 2012. Mr. Gartner previously approved these hours as invoiced in May, 2010. Subsequently, Mr. Burnett supplied Mr. Gartner with time sheets, receiving his assurance that the invoices would be paid. He added that he would not have taken the job if he could not have charged for preparation time as this is a component of time and materials
[80] Mr. Burnett testified that in addition to groceries, his crew brought hand tools, a welder, drills, saws, bits, etc. to the site. The time sheets, receipts and invoices document the purchase of both groceries and materials. Mr. Burnett testified about packing his trucks with these items and tools the morning of departure to avoid theft. He also explained that loading took place at his residence and at his shop in the industrial park in Fort Frances. As the plaintiff’s crew were confined to the island for the work week, I find these steps to be reasonable to advance their work and within the ambit of “time” and “board,” as discussed by the parties. These charges therefore fall within the terms of the contract between the parties.
Travel Time
[81] The defendants submit that travel time between Fort Frances and the loading site was not part of the agreement between the parties and claim a credit in the amount of $7,639.80. I do not accept this submission.
[82] As discussed above, the contract between the parties was for time and materials together with travel, room and board. Travel includes the 80 mile drive each way from Fort Frances to the pick-up site. Mr. Gartner well knew that these were not local tradesmen who lived in the area of the pick-up site. He knew that they were travelling for the exclusive purpose of coming to his work site. Had they not spent their time travelling to and from his project, they might have taken other remunerative work. To object to paying for travel time is therefore unreasonable and constitutes a breach of the parties’ agreement.
Time Not Worked
[83] At the start of trial, the defendants claimed a credit of $1,348.20 for time billed that was not worked by the plaintiff. The plaintiff proposed a credit of $499.80 to represent a credit of 3 hours for 3 men at applicable rates when they missed a plane while picking up supplies. The defendants accepted this credit at completion of the trial.
Overbilling for Groceries, Sanders’ Time, Tool Sorting, Installation of Kerdi Board, Performance of Carpentry Work at a Lower Rate and Statutory Holiday Pay
[84] At the conclusion of trial, the defendants conceded that these issues were no longer in dispute.
Quantum of Interest and Late Payments
[85] Delays in payment began when the June 10, 2010 invoice was not paid. Mr. Gartner could not explain the delay in this payment and admitted this was a mistake on the defendants’ part. Nor could he explain why the July 16th and 29th payments were delayed.
[86] I find that the defendants’ refusal to pay was not based on complaints about the plaintiff’s work; their objections to his work were raised for the first time two years after Mr. Burnett finished the job, just prior to trial. On the contrary, the documentary evidence confirms that Mr. Gartner was pleased with Mr. Burnett’s work.
[87] When Mr. Burnett left the island for the last time, he said to Mr. Gartner, “I’m vulnerable. You owe me a lot of money.” Mr. Gartner replied, “You’ll have $25,000 next week and $25,000 the following week.” The promised funds were never paid.
[88] The Gartners’ cottage renovation proved to be more expensive than they had budgeted. Mr. Gartner explained that the project was “self-funded” and the billings “just hit at a bad time.” He stated that if the plaintiff did not get funds, it was because his chief financial officer, Mr. Hinker, was out of cash saved for the project.
[89] This attempt to deflect blame is puzzling. Mr. Hinker is employed by Mr. Gartner’s corporation. Presumably, he acts under Mr. Gartner’s instructions. There is no explanation why the defendants did not finance the balance of the project and pay the plaintiff. Instead, the defendants built beyond their budget, exhausted their savings and decided not to pay their contractors. They made their contractors their lenders but declined to pay interest as any institutional lender would have demanded.
[90] Their refusal to pay even extended to materials purchased for other contractors at Mr. Shoumaker’s request. For example, Mr. Burnett testified that Mr. Shoumaker asked him to purchase materials in Fort Frances for the electrician. He did so, and submitted the invoice in the amount of $125.48 marked, “pick-up material for Wally.” The invoice was never paid. The interest rate on this invoice was 1.5% per month or 19.5% per annum. (See: exhibit 2, tab 2, p. 86).
[91] Another example of materials Mr. Burnett purchased for the fireplace project is found in exhibit 3, tab 9, p. 51. This is an invoice from Gavel Custom Manufacturing dated May 18, 2010 in the amount of $4,832.44 for materials related to the fireplace. The invoice claims interest at the rate of 3% per month. Mr. Burnett stated that the defendants did not pay the invoice. He testified that he paid interest on the outstanding account until close to the end of 2010. This evidence was not challenged on cross-examination.
[92] As I have stated, Mr. Burnett called Mr. Gartner on September 11, 2010 to discuss his unpaid accounts. Mr. Gartner blamed non-payment on Mr. Hinker and stated:
“… Yeah I know they have got their they have been working on getting everything re-financed and they got you know they got it’s just one of those things that it just hit at a bad time of the year for him so and you know he had planned out the whole project ending in May, June at the latest so I know that you know we kinda threw him a curve ball and cut into his cash flow.”
[93] As well, Mr. Burnett testified that Mr. Gartner spoke of re-financing windows and doors in May. Despite these conversations, Mr. Gartner testified Mr. Hinker didn’t need to re-finance Gartner Studios. He denied re-financing and then back-tracked, saying, if Gartner Studios properties were re-financed; it wasn’t for the cottage project.
[94] This contradictory explanation is not credible. First, the pattern of late payments began in May, the period when payments to contractors would have been anticipated, according to Mr. Gartner’s evidence. Exhibit 1, paragraph 8 shows that the defendants failed to pay the full amount of any of the plaintiff’s invoices without explanation. The pattern of partial payment continued from May until August, 2010.
[95] Second, if money was budgeted for the project, it should have been available during the currency of the project
[96] Third, the e-mail correspondence from Mr. Hinker to Mr. Hagen dated September 28, 2010, put to Mr. Gartner in cross-examination, refers to re-financing some properties. Mr. Hinker was never called as a witness.
[97] During cross-examination, Mr. Gartner said he instructed Mr. Hinker to hold the plaintiff’s invoices and not pay them. He added that the plaintiff was the only vendor for which he issued these instructions. Then he qualified his answer saying, “There might be others but I can’t recall.”
[98] Mr. Gartner denied late payments to Mr. Hagen. However in cross-examination, Mr. Gartner testified that “he wanted to make sure that Hagan finished work so he put him on a delayed payment schedule.”
[99] In cross-examination, Mr. Gartner was shown a chain of e-mail correspondence between Mr. Hinker and other financial officials, and the Hagens. These documents confirm that for months after the completion of the project. Mr. Hagan had to beg for payment of his accounts and that payments were contingent on Gartner Studios cash flow. Despite Mr. Gartner’s contradictory testimony, I conclude that payments to Mr. Hagan were indeed sporadic. The plaintiff was not the only tradesman having trouble getting paid.
[100] Mr. Burnett testified that he had no working capital left when the job was done because he had not been paid. He stated that he had to draw deeply on his line of credit, paying interest at the rate of 5.5% per annum. He commented that he still has a line of credit outstanding. This evidence was also not challenged in cross-examination.
[101] Unfortunately, there is no evidence about how much Mr. Burnett had to draw on his line of credit for this project, or how much interest he paid. Nor is there evidence about how much Mr. Burnett was out of pocket by paying his suppliers. Nevertheless, I am drawn to the reasoning in Ross Steel Fabricators & Contractors v. Loaring Construction Co., 15 C.P.C. (2d) 27 (H.C.J.). In that case, prejudgment interest was awarded at the plaintiff’s borrowing rate to compensate for the monies the defendant withheld during four years of litigation. At para. 13 of the decision, the court held
…To deny the plaintiff interest at his borrowing rate will result in the plaintiff financing the defendant’s involvement in this project. That, in my view, would clearly be unjust.
[102] There is evidence that the plaintiff’s suppliers charged interest and late charges on unpaid invoices. The defendants have had the use of the plaintiff’s money from July 29, 2010 when arrears began to mount until trial.
[103] Exhibit 2, tab 8, pp. 33-34 shows the plaintiff’s final statement of account to August 3, 2010. The covering letter Mr. Burnett sent to Mr. Gartner says in part,
Please find attached the final invoice for the work at Eagle Island. Our original agreement was that upon receiving my invoices, payment would be forthcoming to my account via wire transfer shortly thereafter (within 1 week). A portion of this account has been in arrears for 90 days and at present time, the majority of the remaining account is 60 days old. As payments have been late and for less than the amounts invoiced, I have incurred late charges on all my accounts. Therefore I have added 2% interest per month on the outstanding invoices. (This is the amount being charged to me.) Also enclosed is a penalty charged by the Government for late remittance of payroll deductions. I was unable to address this as all my working capital was depleted and all my payables in arrears.) I had requested payment from you a number of times so that these late charges could be avoided. Funds received were either too late or insufficient to address my payables. As our original agreement was defaulted, these penalties are added to your account.
[104] The plaintiff has since agreed to withdraw his late source deduction remittance of $2,449.63. Mr. Gartner made no response to this letter and no objection to the addition of interest charges, which total $6.183.85.
[105] In my view, Mr. Burnett is entitled to be compensated for the costs of carrying Mr. Gartner, but he is not entitled to be over-compensated. I conclude that an award of 2% per month on the balance at August 3, 2010 would represent over-compensation to the plaintiff, who paid a lesser rate of 5.5% per annum on his line of credit. The late charges included in the final invoice already impose a penalty for late payment on time and materials. In my view, the rate of 5.5% per annum on the balance found to be due from August 15, 2010 to the date of these reasons for judgment will adequately compensate the plaintiff for his out-of-pocket expenses and lost working capital pending trial. Thereafter, the plaintiff is entitled to post-judgment interest pursuant to the Courts of Judgment Act, R.S.O. 1990 c. C43.
Summary
[106] The plaintiff invoiced the defendants for a total of $213,617.79 and was paid a total of $110,031.10, leaving a balance of $103,586.69. For the reasons set out above, I calculate the defendants are entitled to the following credits against the plaintiff’s claim:
• $2,449.63 for a charge for a late source deduction remittance;
• $963.90 for charging the apprentice as a journeyman;
• $54.99 for tools improperly billed as consumables;
• $68.50 for fuel improperly billed; $499.80 invoiced for time not worked,
totalling $4,036.82. Perhaps I have overlooked an additional credit as the plaintiff submits that the defendants are entitled to credits of $4,904.86, which is more generous than my conclusion. I do not have the benefit of the plaintiff’s calculation, but as it is in the defendants’ favour, I accept it for purposes of determining liability. The defendants will be credited with the sum of $4,904.86. The balance remaining is therefore $98,681.83.
[107] The plaintiff is also entitled to late charges, invoiced, of $6,183.85. The total amount due to the plaintiff from the defendants is therefore $104,865.68.
[108] In addition, the plaintiff is entitled to interest on that sum in the amount of 5.5% per annum from August 15, 2010 to October 26, 2012 $12,688.75. Thereafter, the plaintiff is entitled to post-judgment interest in accordance with the Courts of Justice Act.
[109] The plaintiff shall have judgment against the defendants, jointly and severally, as follows:
in the amount of $117,554.43.
a declaration of lien in the amount of $117,554.43 attaching to Pcl 15972 Sec DFK; Summer Resort Location Island EB475 in Dryberry Lake unsurveyed Territory as in PA12084, District of Kenora, Pin Number 42185-0216 LT;
a declaration that, in default of payment of $117,554.43 and costs, that all of the estate and interest of the defendants in the lands and premises described in the claim for lien shall be sold and the proceeds applied toward payment of the plaintiff’s claim, including costs, pursuant to the provisions of the Construction Lien Act.
[110] If the parties cannot agree on costs, either party may apply to the trial coordinator within 30 days for an appointment to argue same. If an appointment is not sought within 30 days, costs will be deemed to be settled. Cost submissions are not to exceed 5 pages.
“Original signed by”
Regional Senior Justice H.M. Pierce
Released: October 26, 2012
2012 ONSC 6110
COURT FILE NO.: CV-12-0056-000
DATE: 2012-10-26
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
1188710 ONTARIO LIMITED TRADING AS BURNETT CONSTRUCTION
Plaintiff
- and –
GREGORY GARTNER AND SUZANNE GARTNER
Defendants
REASONS FOR JUDGMENT
Pierce J.
Released: October 26, 2012
/nf