ONTARIO

SUPERIOR COURT OF JUSTICE

Court File No.: 2965/09
Date: 2013-10-16

B E T W E E N:

Royal Oak Railing and Stair Ltd.

Mark Wainberg, for the Plaintiff

Plaintiff

• and -

Quality Engineered Homes Ltd., Kirsteen Dies and David William Dies

Robert Dowhan, for Quality Engineered Homes
Kenneth Watts for Kirsteen Dies and David William Dies

Defendants

Heard: September 24, 2013

REASONS FOR JUDGMENT

D.L. EDWARDS J.

Table of Contents

OVERVIEW.. 3
FACTS. 3
ISSUES. 7
STAIN ON REAR STAIRS. 7
REAR CONCRETE AND DRAIN. 8
HVAC ISSUES. 10
ON DEMAND HOT WATER SYSTEM.. 13
UV UNITS. 14
COPPER FLASHING.. 15
COPPER AND CEDAR. 16
ROOF. 17
HUG GUARANTEE. 17
ORDER. 25
CONCLUSION. 25
COSTS. 26

OVERVIEW

1On April 17, 2009, Royal Oak Railing and Stair Ltd. commenced an action against Kirsteen Dies and David William Dies (the “Dies”), and Quality Engineered Homes Ltd. (“Quality”), claiming that monies were outstanding with respect to three staircases provided by Royal Oak to the Dies’ home pursuant to a contract with Quality.

2The Dies defended the action and cross-claimed against Quality, alleging that the home constructed by Quality contained defects and deficiencies.

3On February 15, 2011, the main action was dismissed and the cross-claim was ordered to continue as a regular action.

FACTS

4Certain facts are not in dispute. The Dies and Quality entered into an Agreement of Purchase and Sale, dated July14, 2008, (“Agreement of Purchase and Sale”). Pursuant to that agreement, Quality agreed to build the home in its factory in modules; to deliver the modules to the property; and to perform certain finishing work. The Dies agreed that certain work, such as the installation of plumbing fixtures, would be their responsibility.

5The parties completed and signed a Tarion Pre-Delivery Inspection Form (“PDI”) on January 26, 2009. This form is mandated by the Ontario Homeowner warranty program and contains a list of damaged, incomplete, or missing items. It states that the date of possession of the home was January 26, 2009.

6The parties executed two agreements that amended the terms of the Agreement of Purchase and Sale. The first agreement was signed on February 11, 2009, (“Amending Agreement”) and the second was signed on March 16, 2009, (“Revised Amending Agreement”). They both provide an update as to outstanding items from the PDI and deal with the release of certain holdback funds. Paragraph 2 deals with ductwork and dampers, as well as wiring thermostats and sensors. Finally, paragraph 4 speaks to the HUG certificate (“Homeowner Ultimate Guarantee”).

7The Dies allege that there are deficiencies that Quality did not remedy, and which they, at their expense, have completed.

8Quality contends that the deficiencies do not exist, or that they were remedied.

9There were two witnesses during the trial. David Dies testified on behalf of himself and Kirsteen Dies. Mr. Dies is a 46-year-old retired computer programmer. He testified that because of his parents’ experience with modular homes he decided to have a modular homebuilder build their new home. They met many times with Quality, ultimately entering in to the Agreement of Purchase and Sale that required Quality to provide the home to the property owned by the Dies. The agreement was negotiated over three months.

10John Combe testified for Quality. Mr. Combe is the Vice President of Operations for Quality. He is responsible for construction, for the factory, and for technical services. He has worked with Quality since 1996. He has been in the construction industry for over 25 years. He holds an architectural technologist certificate from a three-year college program. Each year Quality builds approximately 100 homes. He personally has overseen the construction of approximately 1,500 homes during his time working with Quality.

11I am satisfied that Mr. Combe testified in an honest and forthright way. He spoke clearly and plainly about the issues. He was not reluctant to acknowledge that he could not confirm whether his instructions to two subcontracts to compete or remedy certain deficiencies were followed, or whether those two items had been rectified.

12With respect to certain issues, Mr. Dies’ testimony was inconsistent and his “corroborating” evidence did not, in fact, corroborate his testimony. In many circumstances, he provided his opinion regarding whether something was appropriately matched or functioning correctly. He is not an expert and cannot give opinion evidence. On many issues Mr. Dies testified that the issue had not been completed or resolved to his satisfaction.

13The issue before me is whether the Dies have proven on a balance of probabilities that Quality did not provide what the contract specified.

14Paragraph 10 of Appendix E of the Agreement of Purchase and Sale is bolded and underlined. It states that the Agreement of Purchase and Sale constitutes the entire agreement between the parties and that there are no other representations, warranty or collateral agreements. It also states: “For greater clarity, this means that QUALITY will not entertain any verbal agreements” (bold and underlining original).

15Therefore, the basis of the contractual obligations must be found in the Agreement of Purchase and Sale and the amending agreements.

16Both parties submitted a document brief; both of which became exhibits.

17With respect to a number of the allegations the issue turns upon whether I accept the testimony of Mr. Dies or Mr. Combe. However, for certain allegations there is paper documentation that is of assistance to me.

ISSUES

18I will deal with each of the allegations raised by the Dies.

STAIN ON REAR STAIRS

19The Dies allege that the stain on the staircase at the rear of the home was improperly applied and did not match the hardwood floor.

20Mr. Combe testified that he has had previous experience in attempting to match stain on natural wood with machine applied finish on flooring. In fact, Quality was concerned about this issue to the extent that, on November 1, 2008, it provided a stain sample to the customer for approval and a document for the Dies to sign.

21The document is entitled “After Delivery Revision”, and is located at Tab 2 of Exhibit 1. It states:

Stain sample to be approved by customer. Sample to be supplied by North End Interiors and approved by the customer by signature of this change order. It is to be understood that ‘Hand Applied’ stain and verithain will never match 100% to the machine applied finish on hardwood floor sample.

22Kirsteen Dies and Quality signed this document.

23I am satisfied that Quality made it clear to the Dies that the stain on the stairs might not match the hardwood floor; that the Dies accepted that fact; and that on that basis the Dies instructed Quality to proceed.

24I have reviewed the photographs of the stairs and am satisfied that the lighter and darker areas are the result of the varying grain of the wood. No expert evidence was provided to confirm that the stain was improperly applied. I have Mr. Dies’ opinion that the result was not satisfactory.

25I am satisfied that Quality worked with the Dies to attempt to resolve the issue for the purpose of attempting to achieve customer satisfaction, but did so without any legal obligation. Paragraph 1(d) of the Revised Amending Agreement reflects that understanding.

26I find that the Dies have not proven on the balance of probabilities that the stain was improperly applied to the staircase.

REAR CONCRETE AND DRAIN

27The Dies allege that the concrete at the rear of the home was improperly sloped and that the drain was placed in the wrong place. Quality acknowledges that there was some pooling of water and that the slope of the concrete pad needed to be altered. It denies that the drain was in the wrong location. Mr. Combe testified that he gave instructions to a sub-trade to fix the problem, but he had no confirmation as to whether that work had been completed or not.

28I find that the slope of the concrete was a deficiency; both parties acknowledge this. On the evidence before me, I am satisfied that the deficiency was not corrected by Quality.

29The Dies’ solution to the problem involved the removal of all of the concrete and the stairs at substantial cost. Quality contends that simply etching and resurfacing the concrete pad could resolve the matter and alter the slope. Mr. Combe testified that the cost to resolve the deficiency would be approximately $500. Further, in Mr. Combe’s view, the drain must remain where it is. I accept Mr. Combe’s evidence.

30Had I found that the solution selected by the Dies was an appropriate solution, I would have found that the evidence to support the cost of such repair is unclear. Mr. Dies testified that five per cent of the concrete invoice was attributed to this issue. I have no evidence as to how this percentage was selected, and I have no corroborating evidence on this issue. With respect to the labour and equipment for this repair, the only evidence that I have is a handwritten document that is not on letterhead.

31Had I found that the Dies’ solution was an appropriate solution, I would have found that the Dies have failed to prove on a balance of probabilities the cost of resolving the deficiency in the manner selected by them.

32I accept Mr. Combe’s evidence that, based upon his 25 years of experience in the construction industry, in his opinion, etching and re-servicing the concrete pad was a viable, effective and cost-effective solution to the issue.

33The Dies have an obligation to mitigate their damages and may not select a very costly solution when a much more cost-effective solution was available.

34I find that the cost of correcting the slope was approximately $500.

35I order that Quality pay to the Dies the sum of $500.

HVAC ISSUES

36The Dies allege that Quality:

a. failed to install the Carrier air-conditioning units that were required to match the furnaces;

b. did not zone the home properly;

c. installed dampers of inferior quality and did not work with the Carrier heating system; and

d. did not properly wire the furnace system.

37Quality contends that it provided two air conditioning units as required by the contract, and that it zoned the home by creating four zones in the home.

38The Amending Agreement and the Revised Amending Agreement contain an identical paragraph 2 that states:

Quality will arrange for Bryan’s Fuels to rework the ductwork to allow each furnace to be “zoned” for half of the first floor and half of the second floor and to supply and install zone dampers to accommodate this zoning. Dies acknowledge that Quality has no legal obligation to perform this work and that Quality is doing so as a gesture of goodwill. This gesture will used to settle other matters. Dies agree to arrange for their Building Automation Contractor to supply and install, at the expense of the Dies, all wiring, thermostats and sensors.

39The original Agreement of Purchase and Sale states "zoned". It did not specify a number of zones. The two amending agreements reduce to writing the issue of zoning and settle the matter as to the number of zones.

40There is no dispute that Quality installed dampers to zone the house into four zones. Mr. Dies alleges that the dampers were not compatible with the Carrier furnace and presented an invoice from Broom’s Heating and Air Conditioning for the supply and installation of seven dampers. He testified that the invoice was in error and Broom’s did not supply seven dampers; they simply wired the dampers, which work he contends was Quality’s obligation.

41I find that, on a clear reading of that paragraph 2 of the Revised Amending Agreement, Quality was obligated to install four dampers. No expert testified as to the incompatibility of the dampers supplied by Quality with the Carrier furnaces; Mr. Dies was not qualified to give expert opinion on this issue.

42The Dies have not proved on a balance of probabilities that Quality failed to complete its contractual obligation with respect to the dampers.

43The Dies have alleged that it was Quality’s obligation to wire and set up the thermostats for the heating system; that it did not; and due to its failure the Dies were required to wire the system and to install a control panel. Quality submits that the home automation system that the Dies were installing was also intended to control heating and air-conditioning.

44I am satisfied on a reading of paragraph 2 of the two amending agreements that it was clear that wiring, thermostats and sensors were all to be installed by the Dies at their expense.

45The Dies have failed to prove on a balance of probabilities this allegation.

46With respect to the issue of the air conditioning units, Mr. Dies states that the units were not appropriate for the furnace and Mr. Combe testifies that they were. No expert testified on this issue. Both parties acknowledge that the air conditioning units functioned from 2009 until 2012.

47Based upon that evidence, I find that the Dies have failed to prove on a balance of probabilities that Quality did not provide the air conditioning units that it obligated to provide under the Agreement of Purchase and Sale.

ON DEMAND HOT WATER SYSTEM

48The Dies allege that the on demand hot water system was not installed appropriately. They allege that they could not receive water that was hot quickly enough in the upstairs.

49Quality asserts that the contract required "dual on-demand hot water tanks with re-circulator's for second-floor”. Mr. Combe testified that Quality installed the units as per the contract and that there was hot water, just not instantaneous hot water.

50Mr. Combe testified that, following a complaint by the Dies that the re-circulators were operating continuously, Quality replaced them with timed re-circulators.

51The Dies hired a contractor who installed two six gallon hot water tanks. Mr. Dies testified that this solved the problem. Mr. Combe agreed that the presence of those tanks created a reservoir of hot water that allowed for instant hot water; however, that is not what the contract required. He testified that they have installed at least six other on demand hot water systems without small hot water tanks.

52I received no expert testimony that the hot water tanks were required for on demand hot water systems.

53I find that the Dies have failed to prove on a balance of probabilities that Quality failed to complete its obligations under the Agreement of Purchase and Sale on this issue.

UV UNITS

54The Dies allege that the UV units were improperly installed. Mr. Combe testified that Quality installed two units, each with a 13 GPM capacity. Notwithstanding that the Agreement of Purchase and Sale required the supply of two units, each with a 13 GPM capacity, following a complaint from the Dies, Quality replaced these units with units each having a 26 GPM capacity.

55Mr. Dies testified that the units were tested and bacteria remained in the water. No reports were filed to this effect; no expert witnesses testified.

56Mr. Dies had Crystal Flow re-plumb the units to change the order of the UV and the water softener and presented a bill of $430. That invoice included salt for $160 and labour of $250.

57Mr. Combe testified that the order of the units can change depending upon the hardness of water, but that in his view the installation by Quality was appropriate.

58I have no evidence before me other than the testimony of Mr. Dies that the order of the UV units and the soft water unit was incorrect.

59I find that the Dies have not proven on a balance of probabilities that the UV system was improperly installed, or that it was not functioning properly, or that they did not receive what the Agreement of Purchase and Sale required.

COPPER FLASHING

60The Dies allege that the copper flashing was not complete under the bay window. Both parties acknowledge that it could not be complete until the stonework was complete. Mr. Combe testified that, once he was advised that the stonework was complete, he requested a sub-trade to complete the work, but cannot state whether it was completed or not.

61The Dies produced an invoice showing the cost of completing that flashing was $820.

62I am satisfied that the Dies have proven that the flashing was not completed by Quality, and that they hired and paid a third party to complete the flashing.

63I order that Quality pay to the Dies the sum of $820.

COPPER AND CEDAR

64The Dies allege that Quality did not complete all of the aluminum soffits and fascia at the front, and that they agreed to give them a credit. Further, they allege that the cost of the cedar facing should be paid by Quality.

65Quality states that it completed the aluminum on the arch to a good and workman like state, but that the Dies did not like it and wanted to replace it with copper. They agreed to discuss a credit, but they had no legal obligation.

66Finally, Quality refers me to the Revised Amending Agreement, paragraph 1(c), that states:

Quality provided Dies with options for the work referred to in item 13. Dies have decided to arrange for the Contractor to supply and install a copper face on the front with a cedar face underneath at the expense of Dies.

67On a plain reading of this paragraph the Dies agreed to install a copper face on front and cedar face underneath at their expense.

68I find that the Dies have not proven on a balance of probabilities this allegation.

ROOF

69The Dies allege that due to improper workmanship parts of the front roof were rotting. He presented an invoice from Custom Cupola with respect to work done by it. No expert evidence was called on this issue. No photographs were provided. There is no other evidence before me to establish that the roof was rotten, and that it was caused by improper workmanship by Quality.

70The Dies have failed to prove this issue on a balance of probabilities.

HUG GUARANTEE

71Finally, the Dies allege that Quality defaulted on its HUG Guarantee and state that they are entitled to the sum of $250 per day for the period between April 16, 2009, and July 13, 2009. Counsel for the Dies advises that is 68 days at $250 or $17,000.

72The HUG Guarantee is described in Appendix C of the Agreement of Purchase and Sale. The Appendix defines three terms:

Price: Quality guarantees the contracted price. Subsequent prices resulting from unusual site conditions, if required, are also guaranteed.

Quality: Quality guarantees that the quality of building materials and workmanship meets or exceeds the Ontario Building Code and the Construction Performance Guidelines of Tarion. In addition, Quality further extends the structural guarantee of your home from Tarion’s seven years to a full 10 years.

Timing: Quality guarantees a completion date for the major items within your agreement of purchase and sale agreement. The date will be determined as soon as possible once Quality has received purchaser’s building permit and final color and upgrade selections. Should Quality fail to meet this date, a penalty of $250 per day will be paid to the purchaser for each day major items remain incomplete (emphasis added).

73The parties signed a HUG certificate dated March 10, 2009. It contains the following endorsement:

Replaces HUG certificate executed September 25, 2008. Includes all items listed on Tarion Pre-Delivery Inspection Form signed on January 26, 2009, except for items 13, 27, 33, 35, 36 and installation of the air conditioner condensing units.

74The certificate also contains definitions of Price, Quality and Timing. The definitions for “Price” and “Quality” are identical to those contained in Appendix C of the Agreement of Purchase and Sale.

75The definition of “Timing” is different:

We guarantee a completion date for your home when you provide us with your building permit. Should Quality Homes fail to meet this completion date, a penalty of $250 per day will be paid to the purchaser for each day your home remain incomplete (emphasis added).

76On March 16, 2009, the parties signed the Revised Amending Agreement. Paragraph 4 of that agreement the states:

Quality and Dies agreed to replace all of certificates issued to date canceling all related rights and responsibilities thereof with a HUG certificate indicating the completion date of ‘within 30 days of completion of stonework’.

77Paragraph 1(b) of the Revised Amending Agreement states:

Items 33, 35, 36 and installation of the air conditioner condenser units are seasonal work and will be completed by Quality within 30 days of the Dies contractor completing the stonework. Dies is to provide Quality with two weeks notice as to when the stonework is to be completed and as much advance warning as possible should there be any delay from that point. (emphasis added).

78There is a further HUG certificate dated 16 March 2009. It contains the following endorsement:

Replaces HUG certificates executed September 25, 2008 and February 11, 2009. Includes items 33, 35, 36 and installation of the air conditioner condenser unit as listed on Tarion Pre-Delivery Inspection form signed January 26, 2009.

79The definitions of “Price”, “Quality” and “Timing” on this certificate are identical to the previous certificate.

80The Dies allege that the March 16, 2009, HUG certificate is clear; until the house is complete, meaning all of the contractual obligations of Quality have been completed, there is a penalty of $250 per day from the date that is 30 days after the date when Quality was advised that the stonework was complete.

81Counsel for the Dies directs me to an email from Mr. Dies to Mr. Combe, dated April 16, 2009, that states that the copper above the bay window should be completed now as the stonework has been completed. He submits that the 30 day period should commence on April 16, 2009, and the penalty period should begin on May 16, 2009.

82He acknowledges that, when Quality failed to complete the outstanding issues, the owners had an obligation to mitigate and to complete the work themselves. He points to an entry on July 13 for a bobcat on a handwritten document that Mr. Dies testified was an invoice from M & M Bobcat Service and Excavating. He asserts that this equipment was required for the correction of the improperly sloped concrete. He asserts that this should be the last date for a claim that the home is incomplete.

83On that basis, the Dies claim $250 per day from May 16, 2009, until July 13, 2009, or 68 days for a total of $17,000.

84The HUG certificate is a document drafted by Quality. In the last HUG certificate under the definition of “Timing” the guarantee refers to “a completion date for your home”. This is not defined; nor does the certificate refer back to incorporate terms of the Agreement of Purchase and Sale in which the HUG guarantee was limited to major items.

85The last certificate, dated March 16, 2009, specifically states:

Replaces HUG certificates executed Sept 25, 2008 and Feb. 11, 2009. Includes items 33, 35, 36 and installation of the air conditioning condenser as listed on the Tarion Pre Delivery Inspection form signed Jan. 26 2009.

86Item 33 refers to the slope of the concrete in the walkout area at the rear of the home that I have found to be a deficiency and that the Dies corrected. Item 35 is the soffits and Item 36 is evestrough.

87This certificate was issued pursuant to the Revised Amending Agreement, which amended the Agreement of Purchase and Sale, and for which consideration passed between the parties.

88Had Quality wished to restrict the definition of the “Timing” in the guarantee to major items it should have stated that on the certificate, or incorporated by reference, the terms of the Agreement of Purchase and Sale. It should not have added the specific deficiencies from the PDI on the HUG certificate.

89To assert that the HUG certificate only applies to major items, but then to specifically add these deficiencies to the HUG certificate is not logical.

90The Pre-Delivery Inspection is undertaken and the PDI form is completed because it is a Tarion requirement. There is no obligation under Tarion to include on the HUG guarantee outstanding items from the PDI. Had Quality desired to restrict the HUG guarantee to major items, it should have so stated, and it should not have included on the HUG certificate deficiencies from the PDI which were not major items.

91I find that on a plain reading of the HUG certificate, completion date means completion of the home, and specifically includes those items described on the certificate as outstanding. Item 33, being the concrete deficiency at the rear of the dwelling, is one such deficiency.

92The next consideration is the start date for the penalty.

93The HUG certificate states that the penalty period begins if the home completion date does not occur within 30 days of completion of the stonework. However, this must be read in conjunction with the Revised Amending Agreement which imposes an obligation upon the Dies to advise Quality two weeks prior to when the stonework will be complete.

94The evidence before me is that on April 16, 2009, Mr. Dies sent to Mr. Combe an email advising him that the stonework was complete. There is no evidence before me that the two week notice prior to the completion of the stone work required by paragraph 1(b) of the Revised Amending Agreement was given.

95I find that the Dies failed to give this notice and that Quality’s obligation to complete the deficiencies within 30 days of completion of stonework must be read in conjunction with this obligation.

96Accordingly, I find that the deemed notice that the stonework was complete is April 30, 2009, which is two weeks after the Dies provided notice to Quality of the completion of the stonework. The start date for the penalty is 30 days thereafter, namely, May 30, 2009.

97The next issue is when was the completion date of the home. The evidence before me is that the only items to be completed or remedied on the home are those specified on the HUG certificate dated March 16, 2009.

98The Dies contend that the appropriate date is July 13, 2009, the date when the concrete work was complete. As corroborating evidence to Mr. Dies testimony, I am directed to Tab 14 of Exhibit 2 which contains the handwritten document identified by Mr. Dies as an invoice from M&M Bobcat Service and Excavating.

99Mr. Combe testified that he gave instructions for the improperly sloped concrete to be fixed, but he does not know when or if it was completed.

100Based upon the evidence before me, I find that the Dies have proven on a balance of probabilities that the concrete deficiency was remedied on July 13, 2009.

101As counsel for the Dies have acknowledged, the Dies had an obligation to mitigate their damages. The question arises as to whether they have done so with respect to the penalty period.

102During this time period, communications had broken down between the Dies and Quality. Mr. Dies’ email to Mr. Combe on April 28, 2009, underlines this fact. In that email he notes that the HUG date is set, and if Quality ignores things covered by the contract, “we’ll leave it up to the lawyers to deal with”.

103The last date that Quality’s workers attended on the site was May 7, 2009, as shown by Exhibit 1 Tab 9.

104Given my finding that the solution to the improperly sloped concrete was a relatively inexpensive and simple solution, a delay of 44 days from the beginning of the penalty period and a delay of 68 days from the date of last work by Quality is an inordinate delay in remedying the deficiency.

105I find that the Dies have not mitigated their damages on this issue and find that 30 days from the commencement of the penalty is a reasonable mitigation period.

ORDER

106I order that Quality pay to the Dies the sum of $7,500, being 30 days of a penalty of $250 per day under the HUG certificate.

CONCLUSION

107In conclusion, I order that Quality pay to the Dies:

a. $500 with respect to the concrete deficiency;

b. $820 with respect to the flashing deficiency; and

c. $7,500 for the HUG penalty,

being a total sum of $8,820.

COSTS

108Unless the parties agree upon the issue of costs, they may provide cost submissions not to exceed three pages (not including any offers to settle or bill of costs). Counsel for the Dies shall provide his submissions within 15 days. Counsel for Quality shall provide his submissions within 15 days thereafter, with reply submissions, if any, within seven days thereafter.

D.L. Edwards J.

Released: October 16, 2013

COURT FILE NO.: 2965/09
DATE: 2013-10-16

ONTARIO
SUPERIOR COURT OF JUSTICE

B E T W E E N:

Royal Oak Railing and Stair Ltd.

Plaintiff

• and –

Quality Engineered Homes Ltd., Kirsteen Dies and David William Dies

Defendants