Court File and Parties

COURT FILE NO.: 10-49675
DATE: 2012/11/08
SUPERIOR COURT OF JUSTICE – ONTARIO

In the matter of the Construction Lien Act, R.S.O. 1990, c. C.30 as amended

RE: Exteriors By Design, Plaintiff

AND:
Mark Traversy and Stephanie Traversy, Defendants

BEFORE: Master MacLeod

COUNSEL:
Christopher Spiteri, for the Plaintiff
Marcus Boire, for the Defendants

HEARD: August 8 th & 9 th , 2012.

REASONS FOR JUDGMENT

[ 1 ] The trial of this action proceeded before the master pursuant to a judgment of reference under s. 58 (1) of the Construction Lien Act. The judgment of reference was signed by the Honourable Mr. Justice Robert Smith on May 31, 2012 and had its origins in competing summary judgment motions originally before me on May 29 th , 2012. [1] As it was apparent that summary judgment in the face of competing affidavit evidence was unlikely the parties agreed to proceed by a form of modified summary trial.

[ 2 ] As provided by the directions given on May 29 th and validated by the issuing of the judgment, the evidence to be used at trial included the affidavits contained in the three motion records supplemented by limited examination in chief of the party deponents and the oral evidence of other witnesses called at trial. I will summarize that evidence in more detail shortly. Of course the court is charged under s. 67 (1) of the Construction Lien Act with adopting a procedure which is as much as possible of a summary character.

[ 3 ] Although this is a lien action, there are no issues about the technical validity of the lien and this is not a case about holdback since the lien claimant and the property owners were in a direct contractual relationship. This is in reality a breach of contract case. It concerns what were in essence two separate projects, a landscaping project and a window replacement project. There are claims for relatively minor deficiencies in the landscaping but a major issue in relation to the windows. For the reasons that follow a report will issue granting a judgment to the plaintiff for $3,646.59 inclusive of pre-judgment interest and costs.

[ 4 ] There is an outstanding motion by the plaintiff to substitute “Exteriors By Design Inc.” for the named plaintiff, “Exteriors By Design”. The defendant would not consent and I had deferred the question to be dealt with once I had dealt with the case on the merits. That question has now acquired new significance.

The landscaping

[ 5 ] The defendants own a home located at 1807 Hunter’s Run Drive in Ottawa. The plaintiff is a landscaping and home renovations company owned by Todd Langille. The Langilles and the Traversys know each other and in fact Mr. Langille’s company had previously done some interlock installation at the home in 2004.

[ 6 ] Mrs. Traversy is in a management position at Minto Homes. Mr. Traversy is currently on long term disability as a consequence of a head injury sustained in an automobile accident. He was a project manager involved in construction of airports at one point in his career and more recently, until the accident about seven years ago, he was an investment adviser for BMO Nesbitt Burns.

[ 7 ] The defendants wished to install a swimming pool and spa and to landscape their back yard. At some point in early 2010 they contacted Mr. Langille to obtain an estimate. I accept the evidence of Mrs. Traversy that initially they had hoped to have the entire project managed by the plaintiff but ultimately that is not what occurred. There was an estimate for all of the work prepared by Eric Lemieux, a salesman for the plaintiff on April 13 th , 2010 and this document was also signed by Stephanie Traversy but the pool and spa were removed. The Traversys entered into separate contracts with the pool installer for the spa and pool. The plaintiff then prepared a formal “fence agreement”, a “deck agreement” and an “interlock agreement”. These were dated April 16 th , 2010. The defendants were to pay $8,946.39 inclusive of GST for the fence, $37,394.37 inclusive of GST for the interlock and $12,504.90 for the deck. There was also a change order signed on April 27 th , 2010 which added $2,700.00 (tax included) to the deck contract. A drawing showing the work was also dated April 27, 2010.

[ 8 ] Work commenced on the landscaping. There were some issues about delay and apparently a problem with one of the neighbours but the work was eventually completed. The total price for the three landscaping contracts was $61,545.66 and this was paid by the defendants. There are however certain claims for deficiencies which need to concern the court because they are the subject of the counterclaim.

[ 9 ] The first claim is for damage to a shed. The plaintiff acknowledges that in moving a garden shed to the corner of the lot, the shed was damaged by a forklift. The question is the extent and value of the damage. There is also a drainage issue as the defendants have experienced constant pooling of water where the concrete apron of the pool intersects with the stonework done by the plaintiff. Finally the defendants state that they received less deck and less interlock than called for in the contracts and so are entitled to a rebate.

[ 10 ] It is significant that after the work was completed there was an invoice prepared for the contract and there was a meeting between Mr. Langille and the defendants. At that meeting Mr. Langille produced another invoice for extras and there was discussion about the deficiencies. It is clear that there was no agreement to pay any extras and there was a commitment to deal with any deficiencies. In particular there was agreement to deal with the drainage and the shed repair and there was agreement to adjust the price if the amount of interlock was significantly less than in the contract. The defendants paid in full but understood that adjustments would be made if necessary out of the window contract.

The windows contract

[ 11 ] Whatever concerns there were with the manner of completing the work on the landscaping, there was obviously still a good working relationship at the beginning of June. On June 2 nd , 2010 the Traversys entered into a contract with the plaintiff to replace the wooden windows in the back of the house with new vinyl windows. According to Mr. Traversy’s evidence he had replaced the master bedroom window the previous year and would have gone back to the company who did that but he was told by Mr. Langille that his company did windows as well as landscaping. He therefore agreed with the plaintiff that the plaintiff would replace 9 windows for a total cost of $15,175.08 including tax and paid a deposit of $3,793.77. This turned out to be a disaster.

[ 12 ] The first problem was that the defendants instructed the plaintiffs to match the existing windows. This led to a misunderstanding. The old windows on the back of the home were wooden windows with “brick mold”. Brick mold is essentially exterior window trim. In the case of vinyl windows it is part of the window frame itself pre-installed by the manufacturer. The plaintiff appears to have assumed that matching the existing windows meant to match the windows that were being removed. In fact what the defendants wanted was to match the new master bedroom window which was a vinyl window without brick mold.

[ 13 ] The second problem was that the windows leaked. Much of the trial was taken up with the question as to whether this was because the wrong size of windows had been ordered and whether it was a minor deficiency that the plaintiff could have readily rectified under warranty. Whether or not the windows were sized incorrectly they should not leak. There are other installation deficiencies which require the court to determine whether the defendants are entitled to set off damages against the balance owing.

Findings

[ 14 ] Dealing firstly with the landscaping, it is conceded that there was damage to the pool shed. This was an existing shed that had to be moved by the plaintiff. It is clear that the damage was something more than the replacement of a piece of siding estimated by the plaintiff to cost $60.00. There was also damage to the floor joists. But the defendant has estimated the damage at the full cost of the shed or $5,000.00 and suggests that the damage is impossible to repair. I cannot accept that evidence. The shed is in use. The underside of the shed is accessible. It should be possible to replace or brace broken joists. I will allow a credit of $500.00 to reinforce the floor of the shed plus the $60.00 to repair the siding.

[ 15 ] I accept the defendants’ evidence that the drainage around the pool is not satisfactory. The plaintiff was supposed to grade the ground so that the interlock matched the pool apron and provided satisfactory drainage. Instead there is constant accumulation of water at a point where the apron meets the pavers. One way to rectify this would be to remove some of the interlock, add, compress and regrade the base material and replace the interlock. Certainly the defendants should not have to constantly be concerned with pooling of water.

[ 16 ] Rather than lifting and reinstalling the interlock, due to certain difficulties with the site, the plaintiff had proposed to install a drain. The challenge with the site apparently was the need to grade the interlock to a 2% slope off the back of the house while also as much as possible grading it away from the pool. There was a 2.5 foot poured concrete apron around the pool which the interlock had to meet. While it is important to have water drain away from the pool, it is more important to have water drain away from the house. I accept the evidence that this is challenging and installation of a drain would have rectified the problem.

[ 17 ] The plaintiff’s proposed drain would have dealt with the water accumulation. Though he had initially proposed to deal with the drain as an extra, at various times on June 30 th and afterwards he agreed to either install it or to provide a credit for the work. I conclude that the defendants are entitled to a credit for the drain installation.

[ 18 ] The defendants have estimated the cost of repairing the deficiency at $4,500.00 whereas the plaintiff estimated it at $2,000.00. I prefer the plaintiff’s number to that of the defendants but I also recognize that a drain is not as aesthetically pleasing. Accordingly I will allow a credit of $2,700.00 for the water pooling problem.

[ 19 ] I am not satisfied by the evidence that the defendants received a significantly smaller deck than anticipated. The subtrade that installed the deck calculated it as 140 square feet plus framing and deck around the hot tub. In any event the deck was constructed substantially in accordance with the design and the drawings. Although the defendants suggested they had expected to be able to put a patio table and chairs on the deck, it was acknowledged in cross examination that the drawings show that not to be the case. The deck was built to fit the space around the hot tub as shown in the drawings. I find that the deck met the terms of the contract.

[ 20 ] The interlock was also installed substantially in accordance with the plans. Mr. Langille however acknowledged that he would provide a credit for interlock if a calculation showed that the area was less than in the contract. He reiterated this commitment on June 30 th when he received the Traversys’ cheque for the balance of the money due under the landscaping contracts.

[ 21 ] The defendants have calculated that the interlock was 1025 sq. ft. rather than 1150 sq. ft., but it is not clear how reliable that calculation can be. The plaintiff’s records show that 1246 s. ft. of interlock was ordered and delivered. I am not satisfied that a discrepancy of the magnitude suggested by the defendants has been proven. Mr. Traversy gave evidence that the shed is further from the fence than originally anticipated. He thinks it may be as much as 3.5 feet from the fence though the photographs do not suggest the gap is as wide as that. If the shed is 15 ft. wide, there would be a 52 sq. ft. discrepancy. Mr. Langille’s material cost appears to have been on the order of just under $4.00 per sq. ft. based on the Ottawa Brick and Stone invoice. There would have been little saving on labour. Even accepting there are other minor discrepancies from the plans, a generous allowance would be a $250.00 credit for the interlock which is the amount I allow.

[ 22 ] There was some evidence that the existing patio stones were not disposed of by the plaintiff but were given away to neighbours. There was insufficient evidence to find that the plaintiff’s workers were relieved of the responsibility for taking up the stones. Mr. Langille certainly believes his forces did this work. He acknowledged that a credit should be allowed if he did not have to dispose of the old stones though he testified that he thought this was offset by work he had to do which should really have been charged as extras. Indeed he had prepared an invoice for extras though he did not seek to enforce it. A credit should be allowed but there is no basis for the $2,500.00 claimed by the defendants. $500.00 will be allowed for this item.

[ 23 ] I conclude that the defendants have proven entitlement to damages of $4,010.00 for deficiencies or credits in connection with the landscaping work.

[ 24 ] Turning to the windows, there can be no doubt that the installation of the windows fails to meet a good and workmanlike standard. The first complaint by the defendants is that the windows were not of the correct design. Mr. Traversy apparently wanted the windows to match the existing vinyl master bedroom window which had been installed the previous year. Instead the plaintiff ordered windows with brick mold to match the existing wooden windows which were being replaced.

[ 25 ] I find that the phrase “to match the existing windows” is a phrase capable of two constructions. The windows that were ordered had brick mold and so matched the existing old wooden windows that were being removed. Of course they did not match the design of the existing new vinyl window that had been installed in the master bedroom the previous year. The consequence is that the windows on the back of the house do not match exactly. I find that clear communication on this point was a joint responsibility. In any event it was evident when the windows arrived but the defendants did not direct the plaintiff to halt the installation. In addition the fact that the windows are of a different style from the large window in the master bedroom would not attract significant damages.

[ 26 ] If the windows were otherwise satisfactory the fact that they did not match the master bedroom window could have been remedied by replacing the master bedroom window with a matching window. Based on the contract price and the cost of each window from the contract sheet, this would have cost of no more than $1,000.00. It might even have been possible to simply install a matching vinyl window frame in order to have all of the windows match. I award no damages for this misunderstanding.

[ 27 ] Sadly, the appearance of the windows was not the only problem. The biggest problem by far is that there were significant leaks because the windows were not watertight. I heard evidence of two contractors who are knowledgeable concerning window installation.

[ 28 ] Ryan Keith is an experienced contractor. Mr. Langille and his company were relative novices in the window business though he had many years experience with landscaping. Consequently Mr. Langille retained the services of Mr. Keith to assist him in measuring and ordering the windows. Mr. Keith calculated the sizes of the window openings by measuring the outside dimensions of the existing wooden windows and subtracting the appropriate thickness. Windows of course must be slightly smaller than the opening into which they must fit and they must then be shimmed, levelled and insulated before the frame is secured into place and trim is added. I accept that this method of estimating window sizes may be appropriate but of course it is an estimate and it is possible to make mistakes.

[ 29 ] Peter Clare gave evidence for the defendant. He is also an experienced contractor. It was his view that the method of measurement used by Mr. Keith was inherently unreliable. The best way to measure the size of the window opening in his view would be to remove the interior trim and to measure the rough window openings and the outside dimensions of the existing window frames directly. Clearly this is a much more intrusive way to calculate window sizes since it requires access to the interior of the house and will cause damage which the homeowner must live with until the new windows arrive. I accept however that this method is more accurate.

[ 30 ] Ultimately it does not matter whether the method used to measure the windows was appropriate. What matters is whether the windows as supplied and installed met the terms of the contract. Mr. Clare examined the windows as installed. It was his evidence that the windows are all smaller than the windows they replaced. This in his view is one of the reasons the plaintiff could not make the windows watertight or windproof. The industry standard is to allow ½ inch on all sides of the frame. That is the dimensions of the window frame should be no more than 1 inch smaller than the rough opening. If they are smaller then there will have to be additional shimming and insulation and proper weather tight installation is quite difficult.

[ 31 ] The reasons for Mr. Clare’s conclusions were addressed in evidence and are summarized in his report. He surmises that the windows are all small because of the way in which they were measured and on the basis of two windows he has examined. In the kitchen the window had to be raised and it now has at least 1 inch of shimming under the sill. He conceded however that he did not remove the upper window trim to see how much of a gap exists at the top of the window frame. Similarly he reaches that conclusion by examining the paint on the drywall which shows that the new windows appear smaller. He admitted however that he did not check to see if the trim on the new windows is the same width as the trim on the old windows. This evidence does not prove that all of the windows are too small though it may be a reasonable inference when combined with the other observations.

[ 32 ] The fact is that there have been window leaks and the leaks appear to relate to installation problems. When the kitchen window first leaked, Mr. Traversy called Mr. Langille and though Mr. Langille did not necessarily believe the window was low, he raised it by a full inch. He did not disagree that this might remedy the leaking problem. It is a reasonable inference that if it was necessary to raise the window by that much to stop the leaking then the window frame is too small. In fact it did not stop the leak as Mrs. Traversy states that it now leaks at the bottom.

[ 33 ] Mr. and Mrs. Traversy also testified that other windows had leaked. The kitchen window still leaks from the bottom and certain of the other windows leak when the rain is heavy. I accept that the windows as installed are not watertight under all conditions.

[ 34 ] The size of the windows is not the only reason for this problem. Mr. Clare also testified that the installation itself is faulty. Because the house has aluminum siding, it is a mistake to try to caulk between the siding and the brick mold without proper aluminum flashing. Furthermore he has found examples of window sag. This is caused by failure to properly shim and support the window sill. According to Mr. Clare vinyl window frames are not as rigid as wooden frames and they require better support. It is evident to him that certain of the vinyl sills have sagged and are “racked”. Mr. Langille agrees that the racking problem should be remedied but he believes it is a minor problem he would have repaired under warranty had he been paid.

[ 35 ] The total price for the window contract inclusive of tax was $15,175.08. The Traversys paid a deposit of $2,850.00 leaving a balance under the contract of $12,325.08. An invoice for this amount was sent on July 20 th , 2012 and that is the amount set out in the claim for lien.

[ 36 ] I am forced to the conclusion that at least some of the windows were wrongly sized and are more than 1” smaller than the rough openings. There are also installation problems such as cracked caulking, lack of flashing, racking of windows and other problems discussed above. I therefore have no hesitation in finding as a fact that there are significant problems with the window installation and it was not completed in a good and workmanlike fashion.

[ 37 ] The problem I am faced with is that the defendants (plaintiffs by counterclaim) led no specific evidence on the quantum of damages. They have not done remedial work or if they have they did not put the cost of such repairs into evidence. They spoke of water damage but did not prove any cost of repairs. They have not proven that the windows are worthless or that the installation problems cannot be repaired.

[ 38 ] To the contrary, the recommendation of Peter Clare contained in his report was that the windows should be “removed and reinstalled correctly ensuring proper levelling, shimming, sealing and fastening at the load points.” He also recommended “installation of new flashings as required to provide a weather tight installation and verification that air vapour barrier is sealed correctly.” There is no suggestion in his report that the windows have to be replaced or that they are not otherwise suitable. Mr. Clare estimates the cost of these repairs as $5,000.00. That number is not supported by a detailed quotation but is the only evidence to put a number on the cost of repair.

[ 39 ] I do have the invoice for the windows themselves (Exhibit 6). Inclusive of tax, the cost of the windows as supplied to the plaintiff was $8,077.07. The contract price included the windows and therefore the contract price not including the windows themselves was $7,098.73. On that basis the estimate of $5,000.00 to remove and reinstall the windows appears reasonable and I accept it as a reasonable quantification of the damages suffered by the defendants.

[ 40 ] I recognize that the defendants feel they should not have to pay for the windows (and should get back the deposit) because they are not the design they wanted, do not function properly, require re-installation and are not properly finished in a good and workmanlike fashion. That however is not how damages are calculated. There is a duty to mitigate which is another way of saying to make the best of the situation. I find the defendants are entitled to damages of $5,000.00 which should be deducted from the balance owing on the contract.

Summary and Conclusion on the Merits

[ 41 ] I have found that the defendants are entitled to damages of $5,000.00 for the windows and $4,010.00 for the landscaping. This is a total of $9,010.00 which would be offset against the balance owing of $12,325.08. This would result in the defendants owing the plaintiff $3,315.08.

[ 42 ] I must however consider the question of costs. This proceeding began as a lien action for $12,325.00 which could have been brought as a breach of contract action in Small Claims Court. It was met by a counterclaim for $34,001.16. Though I have found that there are minor deficiencies in the landscaping work and significant problems with the windows, the defendants have failed to prove damages of this magnitude and the counterclaim must be regarded as grossly exaggerated.

[ 43 ] According to the bills of costs and costs outlines the plaintiff has spent nearly as much as the counterclaim in prosecuting the action and defending the counterclaim. The defendants have spent almost as much as the plaintiff’s claim in defending against it and in prosecuting the counterclaim.

[ 44 ] All of this was completely disproportionate to the amounts in dispute. There was never any question about the amount owing to the plaintiff. The only question was what amounts should be allowed on the counterclaim and set off against the outstanding bill. The trial was entirely about the counterclaim which was, as I have found, exaggerated.

[ 45 ] Consequently the plaintiff has been successful in obtaining a net award but the defendants have been partially successful in proving setoff. Under these circumstances I am not prepared to award costs to either party and decline to do so. Each party will bear its own costs.

[ 46 ] The plaintiff is entitled to pre-judgment interest. I decline to award interest at 24% per annum which is the contract rate claimed by the plaintiff. Rather I allow $331.51 for prejudgment interest which is the amount calculated under the Courts of Justice Act .

[ 47 ] A report may therefore issue requiring the defendants to pay $3,646.59 to the plaintiff.

Legal Status of the Plaintiff

[ 48 ] At the opening of trial Mr. Spiteri made a motion to substitute Exteriors By Design Inc. for the name of the plaintiff, “Exteriors By Design”. Mr. Boire indicated that his client would not consent to this. It appeared at the time that the issue was whether or not Mr. Langille should be personally liable for any resulting judgment. I deferred the question to the end of the trial since the question of limited liability would only be important if the defendants obtained judgment. That of course turned out not to be the case.

[ 49 ] This question has now gained importance. Firstly I note that neither counsel referred to the provisions of the Business Names Act, R.S.O. 1990, C. B.17. Now that I have heard the evidence and reviewed the contracts, it is evident that the contracting party is referred to as “Exteriors By Design” and nowhere in any of those documents does it indicate that the business name is the registered style name of a corporation or a sole proprietorship. Under the Act business style names must be registered and the name of the actual legal entity must be disclosed. Section 7 of the Act provides that non compliance with the Act does not void contracts but it does prohibit the business from suing in its name without leave of the court. This problem can be cured. It would be unjust not to grant leave nunc pro tunc.

[ 50 ] The position taken by the plaintiff that the proper party was Exteriors By Design Inc. is problematic. That is because the corporation filed an assignment in bankruptcy on September 28 th , 2012. This is after the trial was concluded but before the release of my decision. A copy of this assignment and notice of first meeting of creditors was delivered to my office. The bankruptcy has the effect of staying any legal proceeding involving the corporation and vesting any property of the corporation in the trustee, Ginsberg, Gingras & Associés / Associates Inc. A stay does not prevent the court from releasing a judgment in connection with a trial already concluded.

[ 51 ] Presumably this issue need not trouble the parties if the defendants pay the judgment voluntarily and the plaintiff directs that it be paid to the trustee in bankruptcy. In the event that further steps must be taken or the plaintiff attempts to resile from the position that this is a debt owed to the corporation then I may have to hear further argument.

[ 52 ] The trustee in bankruptcy is to be put on notice and served with a copy of this decision by counsel for the plaintiff.

Next Steps

[ 53 ] Under Rule 55.02 (19) the party with carriage of the reference is required to prepare a draft report. In this case it is the responsibility of the plaintiff.

[ 54 ] The term “report” is often misunderstood. The report is not the reasons but should be in the form of a judgment. If there is any dispute about the form and content of the draft report then an appointment must be made to settle it under Rule 55.02 (20).

[ 55 ] The procedure then is to have the signed report issued by the court (but not entered) and served on the other party. The report becomes a judgment after 15 days unless an appeal is launched by way of a motion to oppose confirmation. See Rule 54.09.

[ 56 ] All of this can be avoided if the parties consent. The parties may consent to immediate confirmation in which case the report is confirmed at once. Once confirmed the report is entered and becomes a judgment. See Rule 54.07. Alternatively parties to a reference will frequently agree to simply pay the amount awarded and then consent to an order dismissing the action and the counterclaim without costs. On consent I would also be prepared to sign such an order provided I am satisfied that the interest of the trustee in bankruptcy has been satisfied.

[ 57 ] If the proper name of the plaintiff must be determined and is contested then a motion will be necessary under Rule 5.04 (2). This may be done either before the report issues or may be accomplished by motion to amend the name of the party after the report has become a judgment.

[ 58 ] Counsel are directed to confer on these points, to seek agreement and to keep the trustee in bankruptcy apprised of the status of the matter. I may be spoken to for further direction.

Master C. MacLeod
Date: November 8, 2012

[1] See 2012 ONSC 3164