COURT FILE NO.: C-858-06
DATE: 2013-07-12
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF THE CONSTRUCTION LIEN ACT, R.S.O. 1990, c. 30 and the amendments thereto
BETWEEN:
2016637 ONTARIO INC. operating as BALKAN CONSTRUCTION
Plaintiff
– and –
CATAN CANADA INC. and ANTONIO DUSCIO also known as TONY DUSCIO
Defendant
Stephen T. Brogden, for the Plaintiff
Douglas Edward Snider, for the Defendants
HEARD: February 11 and 12, June 10, 11, 12, 13, 17 and 18, 2013
The honourable Mr. Justice D.A. BROAD
Background
[1] The Plaintiff (“Balkan”) was the general contractor on a renovation to a commercial property at 20 Queen Street North, Kitchener, Ontario (the “Property’) owned by the Defendant Catan Canada Inc. (“Catan”). It was admitted in the Statement of Defence that the Defendant Antonia Duscio, also known as Tony Duscio is an officer and director of Catan (although he stated that he was not an officer or director in testimony). Balkan claims it is owed the sum of $87,902.03, comprised exclusively of the balance owing for extras which it says were performed by it in excess of the base contract set forth in its quotation accepted by Catan.
[2] Mr. Duscio became bankrupt following the commencement of the action and it is therefore stayed as against him. The counterclaim of the Defendants for libel and slander was not pursued at trial.
[3] Catan takes no issue with the timeliness of registration of Balkan’s Claim for Lien and Certificate of Action.
[4] The trial commenced on February 11, 2013 at which time it was discovered that no Notice of Trial had been served by the Plaintiff in accordance with section 60(4) of the Construction Lien Act, R.S.O. 1990, c. 30 (the “CLA”), including on three mortgagees with registered charges against the Property, one prior to registration of the Claim for Lien and two subsequent. The trial was stood down to June 10, 2013 to permit Notice of Trial to be served in accordance with the CLA. On the return date, none of the three mortgagees appeared to request participation in the trial.
[5] Balkan argues that the principals of Catan, or their authorized agents, expressly or impliedly authorized numerous extras to the contract, for which it is entitled to payment on a quantum meruit basis. Catan argues that there was an oral term of the contract that no extras would be charged for unless authorized in writing by it, that the price set forth in Balkan’s quotation was a total “upset limit” and Balkan agreed to perform some of the claimed extras without compensation due to complaints by Catan respecting substandard workmanship. Catan also claims set-off against Balkan’s claim and has counterclaimed against Balkan for various deficiencies in its work. However, it does not seek payment of any amount from Balkan on its counterclaim over and above the set-off claim.
[6] The base contract was largely represented by a quotation submitted by Balkan dated February 13, 2006 (the “Quotation”) and verbally accepted by one of the principals of Catan, Leanne Duscio (Tony Duscio’s spouse) shortly thereafter. The Quotation called for Balkan to “supply and install necessary material and labour to complete the work as per plans and specification [sic]” and provided that “all the work [is] to be performed to Owners [sic] satisfaction” Attached to the Quotation was a two-page schedule entitled “Scope of Work” listing various aspects of the work under the headings “General”, “Ground Floor” and “Second Floor”. Prior to the issuance of the Quotation, Balkan was provided with a set of plans prepared by Catan’s interior designer Eva Lewis, upon which certain handwritten comments were endorsed by an architect retained by Ms. Lewis, John Robulack. The parties are apart on the question of which version of the plans were provided to Balkan prior to preparation of its Quotation. Ten days prior to the date of the Quotation Mr. Robulack sent an e-mail to Balkan, to which was attached a three-page schedule entitled “20 Queen Street Project Clarifications” and which stated in bold letters “please ensure that these items are included in your final price quote to the owners.” The schedule listed various items under the headings “Second Floor,” “Ground Floor” and “General.”
[7] The parties were in agreement that the Quotation, as verbally accepted on behalf of Catan, constituted a fixed price contract. The Statement of Claim alleges that “the Plaintiff entered into an oral contract based on a written proposal with [Tony] Duscio to send all bills to Catan” and that "the original base contract was for $294,250.00.” The Statement of Defence asserts that "Catan entered into a fixed price contract with the plaintiff”. Both parties maintained the position at trial that the accepted Quotation represented a fixed price contract. The controversy between the parties is whether there were extras beyond the scope of the fixed-price contract, authorized by Catan, to which Balkan is entitled to payment.
[8] Given that the parties are agreed that there was a fixed price contract, the reference by Catan to a "total upset limit" is misplaced. A total, or guaranteed, upset limit may be relevant in the case of a unit price or "cost-plus" contract, whereby an owner would not be responsible to pay for any costs in excess of such limit, and would receive the benefit of any saving below it (see Crump Mechanical Contracting Ltd. v. Toronto Dominion Centre Ltd. 1976 CanLII 21 (SCC), [1977] 1 S.C.R. 25, at para. 12). This concept has no relevance in the case of a fixed price contract.
Issues
[9] The issues in the action are:
What was the scope of work called for in the base contract?
What extras did Balkan perform, if any, in excess of the scope of work in the base contract?
Were the extras authorized by Catan or is Balkan otherwise entitled to payment for them?
How much is Balkan entitled to in respect of authorized extras?
Were there deficiencies in the work performed by Balkan?
Is Catan entitled to claim set-off for deficiencies and, if so, in what amount?
Governing Legal Principles Respecting Extras
[10] It is well-established that in a lump sum contract, the contractor is entitled to the whole of the price, but to no more, irrespective of whether the work actually carried out is more or less than anticipated. However, extras to the contract must be paid for in addition to the contract price, and the parties may agree to make a deduction for work omitted (see C.E.D. Building Contracts I.1.(d) para. 12).
[11] A contractor is obliged to perform only such work as is included in its contract, and accordingly, a contract may provide the owner with the right to order extra work and may specify some method of payment for such work, e.g. on a cost-plus basis. In the absence of such a provision in the contract there must be a new agreement between the owner and contractor covering the performance of, and payment for, any work not comprised in the contract. Such an agreement may be an express contract, or it may be an implied contract to pay for work done at the request of the owner and accepted by him/her. If no price is fixed for the performance of such work, the court will imply a promise to pay a reasonable amount on a quantum meruit basis (see DIC Enterprises Ltd. v. Kosloski (1987) 26 C.L.R. 85 (Sask Q.B.) at para. 30, quoting Goldsmith, Canadian Building Contracts (3rd) (1983) at pp.81-82).
[12] Whether a particular item of work is an extra or not must be determined by reference to the terms of the contract, the nature of the work, and the surrounding circumstances. The contractor will, therefore, be able to recover payment on a quantum meruit basis only if it has performed work for the owner in pursuit of a contract which changed so fundamentally that the payment provisions in the contract no longer have any application to the work actually performed. There would be an implied promise to pay what the work is reasonably worth (see McGrath v. Woodrow (1998) 2001 CanLII 24163 (ON CA), 40 C.L.R. (2d) 145 (Ont. Gen. Div.) at para. 56, quoting Hudson- Building Contracts (1996), paras. 4-27.
[13] When a contractor performs work or supplies materials not called for by the contract without instructions, express or implied, from the owner, or the consent of the owner, it is not entitled to charge for this additional work or materials as an "extra". However, when the contractor performs work or supplies materials not called for by the contract on the instructions, express or implied, of the owner, it is entitled to charge for additional work or materials as an "extra". What amounts to instructions from the owner depends on the circumstances relating to each item. If the owner, without giving definite instructions, knows that the contractor is doing extra work or supplying extra materials, and stands by and approves of what is being done and encourages the contractor to do it, that will amount to an implied instruction to the contractor, and the owner is liable (see Chittick v. Taylor (1954) 1954 CanLII 492 (AB KB), 12 W.W.R. (N.S.) 653 (Alta S.C.) at paras. 8-10).
[14] Despite the fact that a contract may require certain formalities in relation to requests for extras, where an owner has acquiesced in the provision of extras, it may be found to have made an implied promise to pay for them (see Colautti Construction Ltd. v. Corporation of the City of Ottawa (1984) 7. C.L.R. 264 (C.A.) at para. 30). A provision in a contract requiring a written order as a condition precedent to payment for extra work may be waived by the owner's conduct or acquiescence, such as where the owner requests extras which he or she must, as a reasonable person, have realized would involve extra expense (see DIC Enterprises Ltd. v. Kosloski at para. 34 (quoting Goldsmith at pp. 87-88) and para. 37.)
Analysis
(a) The Scope of the Original Contract
[15] As indicated above, the parties are in agreement that they entered into a fixed price contract on or about February 13, 2006 represented by the Quotation prepared by Balkan and accepted verbally by Ms. Duscio on behalf of Catan. The Quotation required Balkan to “supply and install all necessary material and labour to complete the work as per plans and specification” and a detailed list of items to be included in the work was set forth on a two-page schedule entitled "Scope of Work".
[16] The Quotation was prepared by Sasa Filipovic, the secretary and half-owner of Balkan. He testified at trial that he was given, in order to prepare the Quotation, drawings identified as D-1, D-2 and D-3 prepared by Catan’s designer Eva Lewis. These drawings were included in Exhibit 1(e) at Tab 1. The evidence indicated that "D" on these drawings signified "demolition". He testified on discovery that he also had drawings prepared by Ms. Lewis identified as A-1, A-2 and A-3 (“A” standing for “architectural”), however he stated that the versions of drawings A-1 and A-2 which he had been given were those reproduced at Tab 2 of Exhibit 1(e) and not those at Tab 1. The difference between the two versions was in respect of handwritten endorsements or instructions made on the drawings reproduced at Tab 1 of Exhibit 1(e) by Mr. Robulack. In particular, Mr. Filipovic maintained that the handwritten indication in the reception area, identified as room 102, stating "leave walls as is" as well as the handwritten indication of an additional office to be installed in the area of the existing hallway and staircase between offices 109 and 111 were not present on the version of the drawings given to him to prepare his quote. Parenthetically, it is noted that no claim for extra payment is made for the work associated with these alleged changes, but counsel for Balkan indicated that they are indicative of substantial changes having been made during the course of the work.
[17] The evidence of the witnesses for Catan was not as definite with respect to the plans and specifications which were given to Balkan in order to prepare its Quotation. Indeed there was a surprising lack of attention given by the principals of Catan to the maintenance of continuity in the documentation in order to prevent future confusion on what Balkan was asked to quote on, notwithstanding the involvement of a professional designer and architect in the planning of the project. There was no adequate explanation offered by the witnesses for Catan as to how the versions of drawings A-1 and A-2, without the handwritten indications referred to above and reproduced at Tab 2 of Exhibit 1(e), came to be in Balkan’s possession.
[18] Ms. Lewis testified that Mr. Robulack’s involvement was limited to "marking-up” the basic floor plans. With the exception of his attendance on one or both of the "walk-throughs” of the building with representatives of Balkan prior to preparation of the quotation, and his e-mail to Mr. Filipovic referred to above, Mr. Robulack had very little direct involvement with Balkan and in particular, was not involved in receiving or approving the Quotation, nor in supervising Balkan’s work. In her testimony, Ms. Lewis was not able to recall if marked up drawings were forwarded to Balkan through her and could not recall how they came into the possession of Balkan.
[19] Mr. Robulack testified that he was asked by Ms. Lewis to help her to develop notes respecting the scope of the work on the drawings. He indicated that during the course of the meeting with Ms. Lewis he made handwritten notations on drawings D-1, A-1, D-2, A-2 and D-3 of Exhibit 6. The drawings themselves were not prepared by him, but rather were provided to him by Ms. Lewis. The “D” drawings already had typewritten “General Notes” on them, setting forth particulars of work to be performed, referenced by numbers corresponding to numbers in hexagonal boxes shown at various specific locations on the drawings. Mr. Robulack made a number of handwritten deletions, changes and additions to the pre-existing General Notes and added a number of additional notes signified by numbers in hexagonal boxes, together with a series of additional unnumbered notations. On drawing D-1 he inserted five specific numbered terms relating to the contractor's responsibilities for certain matters, including liability insurance, WSIB proof of coverage, safety certificates, on-site safety measures and signage, and first aid centres. He testified that he also made certain notations to the Room Finish and Door and Frame Schedules identified as Drawings X-X and reproduced as part of Exhibit 6.
[20] The evidence indicated that the drawings, as marked-up by Mr. Robulack, were provided to another contractor, in addition to Balkan, in order to obtain a quotation from it.
[21] The parties were in agreement at trial that it was orally agreed that electrical component of the fixed price contract would be based upon a $50,000.00 “allowance”. The evidence indicated that this was agreed to during one of the “walk-throughs” of the premises prior to preparation of the Quotation by Balkan. The Quotation itself is silent with respect to the extent and nature of the electrical work to be performed by Balkan and with respect to an “allowance” for electrical work, simply stating “Electrical work to meet new building standards Design-build by engineer” However, the parties were in agreement at trial that Balkan was to perform electrical work and that the fixed price included an “allowance” of $50,000.00 for electrical work. However, there was no evidence on how the $50,000.00 allowance would be determined, and in particular, what mark-up Balkan would be entitled to charge on the costs of supplies and electrical subcontractors in order to make up the allowance before it was exhausted.
[22] Mr. Filipovic testified that, during one of the walk-throughs of the premises, he was instructed on behalf of Catan to allow $50,000.00 for electrical work in Balkan’s quotation, as a “starting point” as there would be more electrical work with a value beyond that amount as part of the project. He testified further that in a renovation project like the subject one, it is not possible to determine what might be encountered with respect to electrical work and for that reason it is common to price electrical work utilizing an allowance.
[23] Ms. Duscio testified that she was advised by Mr. Robulack that the $50,000 figure for the electrical allowance was “generous” and she therefore did not expect it to be exceeded. This, however, was not confirmed by Mr. Robulack in his testimony.
[24] Mr. Robulack, in his testimony, could not recall a discussion regarding a $50,000 electrical allowance during the walk-through which he attended, nor could he recall discussing the allowance with representatives of Balkan at any time. However, on the schedule which he prepared and e-mailed to Mr. Filipovic entitled “20 Queen Street Project Clarifications” he stated, under the heading "General items," “Contractor to allow as a cash allowance $50,000.00 for the electrical work. Contractor to confirm prior to starting work, final electrical pricing. Contractor responsible for all permits, approvals for his work. All work to new code standards."
[25] Mr. Robulack testified that the electrical allowance was designed to permit the owner to evaluate the quotations of the two contractors, including Balkan, on an equivalent basis. Implicit in this is that, at the time that Balkan was asked to provide its quotation, the extent of the electrical work had not been determined. Indeed, there was no evidence that any representative of Catan, including Ms. Lewis or Mr. Robulack, provided Balkan with detailed specifications of the electrical work to be performed prior to its preparation of the Quotation, or prior to the commencement of the work.
[26] I find that the stipulation in Mr. Robulack’s “clarification” document that “Contractor to confirm prior to starting work, final electrical pricing” did not comprise a term of the contract. The "clarifications" document stated in bold letters "please ensure that these items are included in your final price quote to the owners”. The stipulation in the document that Balkan was to confirm, prior to starting work, the final electrical pricing, represented, at most, a request that such a term be included in its Quotation. However the Quotation did not include such a term and the Quotation was accepted by Ms. Duscio on behalf of Catan on that basis, without amendment. It is true that a provision for the $50,000.00 allowance for electrical work was likewise not included in the Quotation, however, an oral term to that effect was acknowledged by both parties in testimony. In contrast, there was no evidence that Balkan agreed to provide final pricing for the electrical work prior to commencing work on the project. It is questionable how it could have done so, in any event, without detailed specifications of the electrical work to be performed being provided by Catan.
[27] I also find that the stipulation in Mr. Robulack’s "clarifications" document requiring the provision of final pricing for electrical prior to work commencing was not a "specification" incorporated by reference into Balkan’s Quotation and therefore into the contract. The Oxford English Dictionary defines a "specification" as “a detailed description of the design and materials used to make something.” In the context of a construction contract a "specification" therefore relates to the design and materials for the physical improvements to be made and not to matters such as pricing and terms for payment, in the absence of some other express provision in the contract.
[28] I therefore find that the scope of work called for in the fixed price contract comprised the work listed on the two-page schedule attached to Balkan's Quotation, which incorporated the drawings identified as D-1, D-2 and D-3 and in Exhibit 1(e) at Tab 1 and A-1, A-2 and A-3 reproduced at Tab 2 of Exhibit 1(e), including the detailed specifications endorsed thereon by means of the numbered hexagonal symbols, as changed and augmented by Mr. Robulack. The electrical work, having not been specified, was to be determined as work progressed, and the value of such electrical work, determined on a "cost-plus" or "time and materials" basis, with the first $50,000.00 to be included in the base price set forth in the Quotation and the balance to be billed by Balkan.
[29] The scope of work largely comprised demolition, preparation of the plaster and wood work for painting and staining, painting and staining of the walls, ceilings, crown mouldings and paneling. Framing, carpentry, installation of carpet and tile, installation of plumbing fixtures, replacement of broken glass, caulking of windows and cleaning of marble and marble partitions were also included. Ms. Duscio testified that the overall purpose of the renovation project was to "freshen up" the building in order to upgrade it for office use and to "make it appear very pretty." She went on to testify that the "project was to be more cosmetic than anything."
[30] The contract called for Balkan to "check and repair all radiators if possible (replacing not included)” and other miscellaneous work as listed in the Quotation and specified on the drawings. Catan, as owner, was required by the contract to supply certain components of the materials to be utilized in the project such as bathroom fixtures and cabinets. Although the Quotation required Balkan to skim coat walls to receive wallpaper, “as per owner’s instructions,” it was silent with respect to the supply and application of wallpaper. It was acknowledged in testimony that Catan, as owner, was to supply any wallpaper which it wished to be applied to the walls.
[31] On Drawing D-3, referencing the third floor, there was a notation stating “No Work in this Area” extending to the entire third floor with the exception of the staircase and hall on the bottom left corner of the drawing where removal and replacement of the carpet was signified. Similarly, no work was called for in the basement of the building with the exception of replacement of the basement exit door and frame, as set forth in the Quotation.
(b) Extras – Authorization and entitlement to payment
[32] Mr. and Mrs. Duscio each testified that they communicated to the principals of Balkan that they had a budget for completion of the renovations (although there was no evidence that they disclosed the amount of the "budget") and that they made it very clear to Balkan prior to the Quotation that they needed a "ceiling price" or "upset limit." Mr. Duscio testified that he largely left the decision-making on the project to Ms. Duscio and Ms. Lewis. He stated that they "ran the show" and that he had very little involvement as he traveled extensively on business during the time that the project was undertaken.
[33] Ms. Duscio testified that she made it very clear to Balkan that "if there were any extras we would need to know" and that she never expressed a commitment to Balkan to pay anything more than the original contract price. The evidence of both Mr. and Mrs. Duscio in response to Balkan’s claim for extras consisted largely of assertions that they communicated to the principals of Balkan from the beginning that there was to be no payment in excess of the fixed-price agreed to, and that they had, at no time, made any commitment to pay for extra work. Ms. Duscio stated that Balkan agreed not to charge for certain extra work that was done either to appease her due to her dissatisfaction with the quality of some of the workmanship or, with respect to certain items, such as the supply of wallpaper, Balkan agreed to "throw it in." These assertions were denied by Balkan. I find that it very unlikely that Balkan would have agreed to “throw in” the wallpaper particularly in light of Ms. Lewis’ email to Mr. Filipovic dated April 24, 2013 (Ex. 1(e) Tab 25) instructing him to order the wallpaper so that Balkan could make the mark-up on it. In any event, there appears to have been no consideration for the alleged promises by Balkan not to charge for certain extras.
[34] Mr. and Ms. Duscio testified that Balkan never provided them with prices or estimates for extra work, nor did it communicate to them that they intended to charge for extra work until receipt of Balkan’s invoice for extras dated June 8, 2006, reproduced in Exhibit 1(a) Tab 1. Mr. Duscio specifically denied receipt of the document reproduced at Exhibit 1(a) at Tab 7 dated April 5, 2006 prepared by Mr. Filipovic entitled "Work Performed and to be performed with all known up to date changes and additions but not in the original quote and Contract” and listing a number of completed items with prices attached as well as a number of "items to be completed and price to be determined."
[35] When asked on cross examination whether she disputed that the specific items set forth in Balkan’s invoice for extras dated June 8, 2006 were actually performed by Balkan, Ms. Duscio was somewhat equivocal. She responded to only a number of the items as follows:
(i) drywall conference room (3 half walls) – “I don't know why it would have been done, the three walls were drywall before."
(ii) Second floor back offices wall demolition – “not sure.”
(iii) Radiator re-piping – “don't know about rads re-piping.”
(iv) Replace existing Drain Pipe - “don't know if replacing drainpipe was done."
(v) Locksmith fixing the doors to operate with card entry – “don't know about locksmith for card entry."
(vi) Electrical over $50,000.00 cash allowance (including fire and emergency exits) – “I have a huge problem with the electrical overage.”
(vii) Paint stripping back hall – “disputes 96 hours of paint stripping. Was apparently not a big deal. Balkan said ‘we'll get it done for you.’”
(viii) Framing , drywall door trim for rear stair fire separation – “regarding framing of the doors, if it was done, it was of very poor quality.”
[36] Ms. Duscio did not dispute, in response to the direct question on cross-examination, that the balance of the items listed on Balkan’s invoice for extras were in fact performed. It was also acknowledged by Catan, at the commencement of the trial, that the invoices of the various sub-trades and suppliers would be accepted into evidence as proof that the work and materials referred to therein was performed or supplied, without the necessity for Balkan to call representatives of those subtrades and suppliers to testify.
[37] I find that Mr. and Mrs. Duscio’s expectation that the cost of the renovation would be limited to the fixed-price set forth in Balkan's Quotation, regardless of the actual extent of the work performed at their direction, was wholly unrealistic. It is evident that they knew, or should have known, as soon as the Quotation was received and accepted that the price could, and likely would, exceed the amount set forth therein for electrical work alone. It was acknowledged that the portion of the amount of the Quotation represented by electrical work was an allowance only, as the nature and extent of the electrical work had not been specified. Indeed, as it transpired, the largest item on Balkan’s invoice for extras was the amount of electrical work in excess of the allowance, being $34,615.68, or 40% of the total. The evidence indicated that a large portion of the electrical overage was represented by the cost of a fire alarm system installed by Balkan at the direction of Catan, as required by the fire department. A further significant extra in the sum of $22,658.03 is represented by a security system which was specifically admitted by Catan, in its Statement of Defence, as having been agreed to as an extra.
[38] Various other items set forth on the invoice for extras were clearly, on their face and without any need to examine the plans and specifications, beyond the original scope of the contract, including replacement of the existing drain pipe to the basement due to a leak and replacing the sump pump in the basement (both of which were site conditions requiring repair), replacement of all washroom faucets, (originally supplied by Catan) due to defects, and supply of wallpaper and a washroom vanity (which were acknowledged to be the responsibility of Catan).
[39] I find that there was no term of the contract requiring extras to be authorized in writing on behalf of the owner. To the extent that Ms. Duscio testified that she expressed that stipulation to Balkan, it was not clear when she did so. If she did so prior to receipt of the Quotation, the stipulation was not included by Balkan as a term of its Quotation, and therefore it represented only a pre-contractual negotiation, or alternatively, if she did so after acceptance of the Quotation, there was no evidence that Balkan agreed to it as an amendment to the contract. In any event, I find that Catan, by the conduct of its principals and authorized representatives in directing that extra work be performed, waived any requirement for written authorization of extras.
[40] It is not necessary for me to make a finding as to whether Balkan's interim list of extras dated April 5, 2006 was delivered by it to Mr. Duscio in order to make a determination of whether Balkan is entitled to payment for some or all of the claimed extras. However I find, on a balance of probabilities, that the document was delivered to him, and that therefore Catan did receive specific written notice that various extras had been performed to that point, and additional extras had been requested, for which Balkan would be looking for payment. To find otherwise would require a finding that Mr. Filipovic concocted the document or his evidence that he had delivered it to Mr. Duscio. On an assessment of the whole of Mr. Filipovic’s evidence, I am unable to make this finding. Mr. Filipovic’s testimony was balanced and fair and his evidence was not significantly undermined or shaken on cross-examination. Moreover, I find that, in the context of the contract and the project, it makes sense that Balkan would prepare and deliver such a document to the owner, both for the owner’s benefit and for Balkan’s protection. From the context, the document was clearly intended to be communicated to the owner and was not simply intended for Balkan’s internal use, and having prepared the document, there would have been no reason for Mr. Filipovic to withhold it from the owner. I am not suggesting that Mr. Duscio, in denying receipt of the document, was deliberately attempting to mislead the court, but rather, due to the passage of time, and his other involvements at the time, he was likely mistaken in his recall on this point.
[41] I find that in respect of many of the extras claimed by Balkan, express authorization or instruction was given on behalf of Catan to complete the work. I further find that, as set out in Chitteck v. Taylor, even if Catan did not give definite instructions for certain particular extras, it knew that Balkan was doing the extra work or supplying the extra materials, and stood by and approved of what was being done and encouraged Balkan to do it. This supports a finding that there was an implied instruction to Balkan to perform those extras which renders Catan liable for the reasonable cost thereof.
[42] The following are my findings with respect to the various extras set forth in Balkan’s invoice for extras:
| NO. | EXTRA CLAIM | AMOUNT | COMMENT | DISPOSITION |
|---|---|---|---|---|
| 1 | Drywall conference room (3 half walls) | $1,648.53 | Reference is to three interior walls. Contract called only for replacement of wood panelling on lower part - Mr. Duscio was not happy with plaster/drywall above and instructed replacement. Drawing D-1 – note 38 “Repair drywall above wainscotting” Specific reference on drawing A-1 to demolition and re-build of exterior wall (not interior walls). | Allow at $1,648.53 |
| 2 | Second floor back offices wall demo and building new wall with wood door frames and windows | $3,108.32 | See drawing D-2 instruction that existing wall to remain. Owner wanted to create new offices at back and to move kitchen to main floor. Entire front wall of rooms 208 and 209 removed and replaced with new wall with doors and windows. Was not part of scope - directed to perform by owner during construction |
Allow at $3,108.32 |
| 3 | Remove and re-pipe 2 rads in upstairs washrooms could not install in same place | $869.55 | Rads had to be relocated to accommodate size of new vanities supplied by owner in rooms 210 and 211 | Allow at $869.55 |
| 4. | Remove 2 rads from 3rd floor and install on second floor | $423.82 | Requested by owner during construction to fit rads under windows in rooms 208 and 209 | Allow at $423.82 |
| 5 | Convert storage room into men’s washroom | $1,130.00 | Requested by owner during construction to create new men’s washroom in room 114. See Drawing D-1 – no reference to new washroom | Allow at $1,130.00 |
| 6 | New plumbing for kitchen on main floor and remove plumbing from upstairs kitchen | $980.00 | Originally kitchen was to remain upstairs See drawing D-2 note 15 – “remove existing kitchen, millwork unit, make good to receive new” Instructed by owner (by Leanne Duscio and Eva Lewis) to move kitchen to Room 111 on main floor |
Allow at $980.00 |
| 7 | Drop ceiling in boardroom and rear office on main floor | $1,342.48 | See drawing D-1 – Note 40 “Demolish existing ceiling (suspended) and replace with new grid and tile. Armstrong Double Square” See Balkan Quotation - included in scope of work “replace ceiling tile and repair grid where necessary” and Ground floor # 4 “Replace entire suspended ceiling tiles with Armstrong regular 2-drop tiles. Existing grid to remain.” |
Not allowed |
| 8 | Plumbing material for radiators | $8,005.21 | Radiators not operating – had to get heat into the building. Discussion with Tony Duscio and instructed to install new valves and traps as needed. Although quotation called for “repair all radiators if possible” supply of replacement parts was not included Invoices of Emco for materials totalling $4,454.33 plus tax. Balance not proven. |
Allow at $4,454.33 |
| 9 | Insert window main floor by kitchen door | $448.90 | Owners requested installation of interior window in new office between Rooms 109 and 111 after completion of framing and drywalling. Plaintiff cannot produce invoice for window – says has been lost. Claim not proven. |
Not allowed |
| 10 | Supply and install new door for conference room from hall | $524.00 | Eva Lewis wanted to retain antique door. Tony Duscio instructed to replace with new door. Cost of new door and trim – no charge for cutting or demolition New door $394.38 plus taxes. Galaxy – stain door and trim – 2.5 – 3 hours @ $25/hr. No reference to new door on plans or in Balkan quotation |
Allow at $524.00 |
| 11 | Replace existing drain pipe to the basement due to leaking | $1,846.59 | Replacement of sewer drain pipe throughout all floors Old cast iron pipe leaking – replacement required for occupancy. Existing site condition. |
Allow at $1,846.59 |
| 12 | Framing and drywall for French doors to corridor 107 | $350.00 | Instructed by Eva and Leanne Verbal estimate given by Riverside $300-$400. Second door not charged for Original plan called for framing for single door (see drawing FP-1 “3”) |
Allow at $350.00 |
| 13 | Wallpaper supply | $2,624.21 | E-mail from Eva Lewis April 24, 2006 Ex 1(a) Tab 25 instructing Balkan to order wallpaper. See architect’s “20 Queen Street Project Clarifications.” Second floor #3 “all wallpaper installation by you. Wallpaper supply by owner.” | Allow at $2,624.21 |
| 14 | Locksmith fixing doors to operate with card entry | $840.00 | It was originally intended that the existing antique door handles and locks would remain but during the course of the work Tony Duscio gave instructions to change the locks to a card entry system Invoice of Jackson Locksmith $864.00. Plans and well as architect’s clarifications are silent with respect to locks on main entry doors. Architect’s clarifications and Balkan Quotation only reference to main entry doors is to replacement of glass. Quotation excludes exterior work, phone and security. |
Allow at $840.00 |
| 15 | Supply vanity for men’s washroom (room 204) | $405.00 | Owners to supply vanities but could not find one small enough for this room. Balkan found one at Rona. Eva Lewis instructed Balkan to pick it up. Quotation called for owners to supply all bathroom fixtures. Balkan cannot produce invoice, but no issue that it was owner’s responsibility to supply and that it was purchased by Balkan. No charge for delivery or mark-up |
Allow at $405.00 |
| 16 | Supply kitchen faucet for Room 111 (office converted to kitchen) | $91.78 | Owners to supply faucet but did not do so. Leanne Duscio and Eva instructed Balkan to buy faucet. Invoice lost. $91.78 cost with no mark-up.Quotation called for owners to supply on bathroom fixtures. No issue that Balkan supplied and installed faucet. | Allow at $91.78 |
| 17 | Replace sump pump in boiler room | $124.18 | Boiler room had water accumulation Balkan ran snake to investigate any blockage in drainage pipes. Sump pump found to be non-operational. Purchased new sump pump at Home Depot. Requirement to clean out pit. Tony Duscio’s father Mario Duscio present. Invoice not produced but no dispute that pump was supplied. Charge was cost of sump pump with no mark-up or charge for labour. Was a site condition which required rectification. Replacement of sump pump not within scope of work in Quotation and not mentioned in drawings or in Quotation | Allow at $124.18 |
| 18 | Replacing all washroom faucets (original supplied by owner all leaking) | $275.00 | Faucets supplied by owners not closing properly. Eva and Leanne instructed Balkan to replace. | Allow at $275.00 |
| 19 | Electrical over $50,000 allowance (including fire and emergency exits) | $34,615.68 | Not properly characterized as an “extra” as no detailed specifications given for electrical work or set price agreed to. Electrical allowance of $50,000 agreed to verbally during walk-through. Total electrical cost including tax $89,319.11. Amount over allowance $34,615.68, exclusive of taxes. No mark-up applied. Includes fire alarm system required by City. |
Allow at $34,615.68 |
| 20 | Security and card entry | $22,658.03 | Original quotation specifically excluded security. See Statement of Defence para. 7 by which Defendant admits agreeing to extra for security system. Balkan provided quotation for security system dated February 24, 2006 in the sum of $24,455.70 inclusive of taxes. Quotation submitted to and approved by owners. |
Allow at $22,658.03 |
| 21 | Paint stripping back hall, men’s washroom door, woodwork inside of washroom and finishing with 2 coats of stain/varnish in one | $2,880.00 | Original instructions were to paint over existing painted surfaces. Tony requested paint to be stripped off surfaces and stained. Balkan advised that not part of original quote and would be extra. Ms. Duscio did not question extra in testimony, but questioned number of hours. Painting contractor Galaxy charged 96 hours @ $25.00/hour. Charge at $30.00 per hour including mark-up. | Allow at $2,880.00 |
| 22 | Framing, drywall, door trim for rear stair fire separation | $750.00 | Representative from fire department required new fire-rated door in corridor 113. Required to obtain occupancy permit. Quotation from Diamond Interiors $1,087.00 for steel studs and drywall, bulkhead and corridor T-bar ceiling system plus Riverside Door and Trim $499.46 for door. Balkan only seeking $750.00 for this item (less than actual cost). | Allow at $750.00 |
| 23 | Exterior window cleaning | $550.00 | Requested by Tony Duscio . Cost $428.00 including taxes plus mark-up. Exterior work excluded from scope by Quotation | Allow at $550.00 |
| SUB TOTAL | $86,491.28 | $81,149.02 | ||
| GST | $6,054.37 | $5,680.43 | ||
| TOTAL | $92,545.65 | $86,829.45 |
[43] Except where otherwise noted above, I find that the cost of the allowed items was established by Balkan on a balance of probabilities in the evidence. Catan did not take issue with respect to the proof of the cost of the specific claimed extras, except to argue that in a number of cases they were not sufficiently broken out in the invoices submitted by the sub-trades, or it had not been provided with quotes or estimates prior to the work being carried out.
Catan’s Claim of Set-off for Deficiencies
[44] With respect to Catan’s claim for set-off, it relies upon the following alleged deficiencies:
(a) painting repairs performed by David Wicks, firstly from April 19, 2007 to July 31, 2007 totaling $4904.37, and secondly from August 9, 2007 to June 3, 2008 in the sum of $17,709.38;
(b) unperformed corrective painting work to the decorative crown moulding on the second floor estimated by David Wicks on February 17, 2009 at $14,000 plus HST;
(c) work performed and materials supplied by Delta Air Systems Ltd. to replace steam traps on various radiators on the first, second and third floors of the building in the fall of 2007 in the sum of $11,977.65;
(d) repair of patched holes in the floor on the third level of the building which has not been carried out in respect of which no estimate was provided;
(e) replacement of a section of carpet, relating to gradations in colour, which has not been carried out, in an unspecified amount (but in respect of which the manufacturer offered to provide a credit in the sum of $1,561.97); and
(f) repairs to doors (excluding work on the vault) carried out from September 2006 to April 2007, in the apparent sum of $3,864.70 (based upon invoices presented) in respect of which no evidence was given on behalf of the contractor Andy’s Lock Service Inc..
[45] The only express warranty in the Quotation the respecting the quality of the workmanship and materials to be supplied by Balkan was the stipulation that "all the work to be performed to Owners [sic] satisfaction."
[46] In my view, an additional qualification on this warranty should be implied, under the "officious bystander" test, namely that the work was to be performed to the Owner’s satisfaction acting reasonably. It cannot be expected that the parties would have agreed, if asked, that the owner would be permitted to insist upon an unreasonable or arbitrary standard of satisfaction.
[47] There is authority for the proposition that if there are defects in a contractor's workmanship, but not enough to amount to a fundamental breach entitling the owner to rescind the contract, the contractor should be permitted to remedy the defects and failure by the owner to permit such corrections should disentitle or reduce the amount of damages the owner can claim to remedy the defects as a result of its failure to mitigate (see Nichol v. Horner 2012 BCPC 164 (B.C. Prov. Ct.) at para. 66). A similar proposition was stated in CED – Building Contracts XIII 3, para. 350 as follows: "a contractor has a right to be notified of defects and to be given an opportunity to correct them, but this right arises only in contract and not under common law." Although there is no express contractual provision in this case that Balkan had the right to be notified of defects and to be given an opportunity to correct them, in my view, such a provision should be implied by the nature of the express warranty itself, namely that the work was to be performed to the owner’s satisfaction. A breach of this warranty would not be triggered until Catan expressed its lack of satisfaction with the work to Balkan. Balkan would only be able to determine whether such lack of satisfaction was reasonable and justified if it was afforded an opportunity to inspect the alleged defects before corrective work was carried out.
[48] In this case, it was acknowledged by Catan’s counsel in final submissions that, with the exception of the colour gradations in the section of carpet and the patched holes in the floor on the third level, no communication was made on behalf of Catan to representatives of Balkan relating to the deficiencies prior to the corrective work being carried out.
Painting
[49] With respect to the painting work actually performed by Mr. Wicks, he testified that he was called upon to resurface certain areas of wall that had voids, blemishes, runs and uneven coats, and that in some areas the paint was not adhering properly to the plaster surface. However, the evidence relating to deficiencies in the painting work was less than satisfactory in that no expert was called to provide an objective and comprehensive opinion that the workmanship of Balkan fell short of generally accepted industry standards, and to what extent. It was not clear as to what extent the problems described by Mr. Wicks could be attributed to the condition of the underlying plaster rather than the workmanship of the painters retained by Balkan. These factors, coupled with the failure of Catan to give timely notice of the alleged defects in the painting work to Balkan before carrying out corrective work, disentitles Catan from claiming set-off for this item.
Estimate for Corrections to Painting of Crown Mouldings
[50] Regarding the quotation provided by Mr. Wicks for corrective work to the crown mouldings on the second floor, relating to voids in the mouldings being filled with paint, there was no detailed evidence led with respect to the condition of the crown mouldings prior to commencement of the work, given the historical nature of the building and the number of times they would have received coats of paint over the years. Mr. Duscio and Ms. Lewis each commented on the beauty of the crown mouldings in their evidence, however, no detailed assessment of their condition was offered. There was no expert evidence led that the painting work performed by Balkan on the crown mouldings fell short of industry standards. Moreover there was no evidence that Catan has any intention of carrying out the work quoted by Mr. Wicks. Indeed, Mr. Wicks, in his testimony, expressed doubt that he would be able to perform the work to the expectation of Mr. Duscio and he had deep concerns about whether it could even be carried out at all, given the anticipated difficulties in working with plaster mouldings of this nature. Given the indication that the corrective work will likely never be carried out, there was no evidence that the condition of the crown mouldings has had a detrimental effect on the value of the property. Accordingly, even had a breach of warranty been proven, there is no evidence of any damages having been suffered by Catan as a result.
Replacement of the Traps on the Radiators
[51] Regarding the work performed on the radiators by Delta Air Systems Ltd., Mr. Kelvin Wood, the owner and chief engineer of Delta testified that he was called in by the owner to look at the heating system in September 2007, as it was not possible to get steam to the radiators when the boiler was being fired up at that time. Delta had not previously been involved in service or maintenance at the building. He described the radiators as “old”, estimating their age at approximately 30 years. On examination at the scene he found the condensate traps on a number of the radiators to be either leaking or plugged such that steam was not passing through them and they required replacement. Delta replaced the traps on twenty-one radiators, of which ten were located on the third level.
[52] Mr. Wood testified that specialized training or experience is required in order to fire up the boiler in the building and to activate the heating system, such that a very specific type of mechanic or licensed steam-fitter would be required to carry out the procedure. He also stated that regular maintenance is required on a mechanical system of the type found on the subject premises and that a qualified mechanic or steam-fitter, when firing up the system, would be able to tell whether repair or replacement work was required.
[53] There was no evidence from a qualified technician involved in firing up the heating system in the fall of 2006 that any difficulty was encountered in doing so. The problem was not encountered until some 14 to 15 months following completion of Balkan's work and after an entire heating season from the fall of 2006 to the spring of 2007 had passed. There was no evidence with respect to any maintenance on the heating system having being carried out during that period.
[54] As indicated above, the Quotation called for Balkan to "check and repair all radiators if possible (replacing not included)". Assuming that Balkan was required by this provision to have this work carried out by a qualified mechanic or steam-fitter, there was no expert evidence led that would indicate that such a technician should have been able to detect problems in the radiators which would not manifest themselves until approximately 14 to 18 months later, and following a full heating season without any apparent problems. As indicated above, Balkan did carry out replacement of numerous valves and traps on the radiators in order to permit the heating system to function, at the direction of Mr. Duscio. Given the lack of evidence linking the problems with the heating system encountered in the fall of 2007 with the work carried out by Balkan in the spring of 2006, and in the absence of notice being given to Balkan of the alleged deficiency with an opportunity to inspect, I would not give effect to Catan’s claim in relation to this item.
Patched Holes in Third Level Floor
[55] Regarding the holes in the floor on the third level, the evidence between the parties conflicted. The representatives of Balkan testified that they approached Catan regarding difficulties in running electrical wires to the chandeliers to be installed on the second floor without damaging the crown moulding. They stated that they were instructed by Catan to obtain access to the ceiling on the second level for that purpose through the floor of the third level above, as Catan did not propose to renovate that space in the near term. Mr. and Mrs. Duscio stated that they never gave that permission and were shocked to find that Balkan had cut openings in what was a well preserved and attractive hardwood floor. Balkan denies that it was a well preserved hardwood floor, but rather it was a plywood floor under carpeting.
[56] It is not necessary to make a finding of credibility to resolve the conflict on the evidence described above, as Catan has changed the use of the space by installing flooring on top of the patched holes in the floor to create a dance studio, and on the evidence, there is no indication of any intention to carry out any rectification work. In any event, no evidence has been led with respect to the cost of any such work. I would therefore not give effect to this deficiency claim.
Gradations in the Colour of the Carpet
[57] Respecting the claim for the carpeting, the evidence indicated that a section of the wall-to-wall carpeting had uneven colouration which was noted by Catan and was brought to Balkan’s attention. Balkan's evidence was that they approached the manufacturer which offered a credit towards replacement carpet in the sum of $1,561.97. Mr. Filipovic indicated that this proposal was passed on to Catan but no response was ever received from it. Mr. and Mrs. Duscio denied any knowledge of the manufacturer’s offer. However, the evidence indicated that they did not replace the carpet, but rather it was covered by flooring to create another dance studio on the second floor. There was no evidence that Catan has any intention of replacing the carpeting and, in any event, it presented no evidence of the cost to do so. I would not give effect to this deficiency claim for these reasons.
Repairs to Lock System
[58] No expert evidence was led in respect of the deficiency claim for work to the lock systems performed by Andy’s Lock Service Inc., and indeed, as indicated above, no one from that company testified to give particulars of the nature, extent and purpose of the work which it performed. There was similarly no notice given to Balkan and no opportunity to given to it to inspect the alleged deficiencies prior to the corrective work being carried out. I would therefore not give effect to Catan’s claim for this item.
[59] For the reasons set forth above, Catan’s claim for set-off against Balkan’s claim is not allowed.
Disposition
[60] The parties were in agreement that Balkan’s claim for payment, including all claimed extras and subject to Catan’s claim for set-off, is calculated as follows:
| Amount invoiced to Balkan (inclusive of tax) | $386,795.65 |
| Amount paid by Catan to Balkan | ($283,110.00) |
| Amount paid by Catan directly to subtrade | ($15,783.62 |
| Balance of Claim (including tax) | $87,902.03 |
[61] Deducting the disallowed extras, as set forth above, I find that the balance owing to Balkan by Catan is as follows:
| Disallowed, or reduced, extras | ($5,342.26) |
| GST | ($373.95) |
| Total deduction | ($5,716.21) |
| Balance owing by Catan to Balkan | $82,185.82 |
[62] For the reasons set forth above, Balkan shall have a lien judgment against Catan, and against the lands and premises described in Balkan’s registered Claim for Lien and in the Statement of Claim in the sum of $82,185.82. Catan’s counterclaim is dismissed.
[63] The form of the Judgment shall be in accordance with Form 19 of Ont. Reg 175 under the CLA, with all necessary revisions. Catan shall have 30 days following final disposition on the question of costs to make payment into court of the full amount owing, including any applicable costs, as provided for in the said form. If there is any difficulty in settling the terms of the Judgment I may be spoken to.
[64] The parties may make written submissions with respect to costs. The Plaintiff Balkan shall deliver its submissions within 30 days of release of these Reasons, and the Defendant Catan within 20 days of delivery of the Plaintiff’s submissions. Balkan may submit reply submissions within 7 days following delivery of Catan’s submissions.
[65] I wish to thank and commend counsel for their preparation and helpful submissions, and the very professional manner in which they conducted the trial.
D. A. Broad J.
Released: July 12, 2013
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
2016637 ONTARIO INC. operating as BALKAN CONSTRUCTION
Plaintiff
– and –
CATAN CANADA INC. and ANTONIO DUSCIO also known as TONY DUSCIO
Defendant
REASONS FOR JUDGMENT
D. A. Broad J.
Released: July 12, 2013