COURT FILE AND PARTIES

COURT FILE NO.: CV-06-217 (Brantford)
DATE: 2013-11-22

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

Progressive Building Systems Inc.

Plaintiff

– and –

5084 Shaver Inc.

Defendant

A. Giles, for the Plaintiff

G. Sheppard, for the Defendant

HEARD: October 23 and 24, 2013

REASONS FOR DECISION

THE HONOURABLE MR. JUSTICE D.J. GORDON

[1] This consolidated action involves two claims advanced pursuant to the Construction Lien Act. The construction project commenced in 2005 and was completed in 2006. The actions were commenced in 2006. The defendant paid the requisite funds into court to vacate the liens from title. The trial took place in 2013.

Background

[2] Progressive Building Systems Inc. (“Progressive”) is involved in the design and installation of roofing systems. David Seberras is the principal of Progressive. He is a professional engineer.

[3] 5084 Shaver Inc. (“5084 Shaver”) is the owner of the real property, on which is located an industrial building, that is the subject matter of this action. There are several principals involved in 5084 Shaver, including Barry Herring.

[4] The parties entered into a written agreement on February 17, 2005. Progressive was to design and install a metal roof on the building owned by 5084 Shaver. The contract price was $1,605,000.

[5] Mr. Seberras prepared the engineering drawings, stamped March 29, 2005. A building permit was issued by the County of Brant on April 14, 2005.

[6] Progressive retained KMCR Inc. (“KMCR”) as a sub-contractor to install the roofing system.

[7] Work on the project commenced in June 2005. On or about July 16, 2005, a significant water leak occurred through the existing roof following a storm. Corrective work followed that would become part of the dispute between the parties.

[8] The installation work continued. On February 3, 2006, Mr. Seberras issued a certificate of substantial completion. On the same day, Progressive delivered its final invoice to 5084 Shaver for $166,881.48, said to represent the statutory holdback on the project. Further invoices were delivered regarding purported extras, all dated April 26, 2006. Most of the claim is in dispute.

[9] When payment was not received on the invoices, Progressive caused a Claim for Lien to be registered on title to the property on March 17, 2006, for $166,882.48. A further Claim for Lien was registered on title on May 9, 2006, for $8,686.30 regarding the extras.

[10] 5084 Shaver paid $128,081.48 to Progressive on April 21, 2006, holding back $38,800, said to represent the cost of a warranty. The warranty dispute would become a primary focus of the trial.

Agreement

[11] As previously stated, the agreement between the parties is dated February 17, 2005. This brief agreement, prepared by Progressive, identifies the “Scope of Work” to be provided as follows:

(i) Provide P. Eng. stamped drawings to detail truss system, roof and securing of roof to building and provide a Letter of Conformance upon completion of project.

(ii) Supply and install Rib Roof system as per attached sketches (Details “A”, “B” and “C”).

(iii) Roof specifications (Details “D” and “E”).

concealed clip fastener
heavy duty, high capacity gutters (7”) and downspouts (5” x 5”)
26 gauge painted siding gable ends complete with ventilation and access doors
trim and flashings
24 gauge “Rib Roof” re-roof system (20 year warranty – per Rib Roof)

Note: Price will include labour and materials to construct a wall (4” steel studs, 4” top and bottom channels, 26 gauge galvalume siding, 4” thick insulation and 8’ high, 26 gauge galvalume liner panel, wall dimensions are approximately 200’ x 15’ high).

BY OTHERS: (i) double row of 6” concrete block is required at the base of the steel wall, (ii) removal/disposal of existing overhead doors.

[12] The price for the project was $1,605,000, including the then goods and services tax. A payment schedule set out six draws at various stages of the work.

[13] Schedules “D” and “E” are referred to as providing the roof specifications. These two pages are photocopies from the manufacturer, Rib-Roof Metal Systems, a company located in the United States of America, having an office in the State of Tennessee, in terms of this project. Schedule “D” is titled “Standing Seam Roof Panel”. This page provides a sketch of the panel and the clip fastener system. Features of the product are listed, including the words “All Galvalume products carry 20 year material warranties”.

[14] As hereafter discussed, the difference in the description of the warranty, between the body of the contract and the roof specification schedule, is an issue in this case.

[15] There was no reference to the “Letter of Conformance” in the evidence of the witnesses for Progressive. No such document is provided in its Document Brief.

The Building

[16] The property that is the subject of this lawsuit is known for municipal purposes as 84 Shaver Road, Brantford, Ontario. On this property is a large older industrial building of approximately 188,400 square feet. The property is owned by 5084 Shaver and occupied by two tenants, one of which is LEC Steel Inc. (“LEC”), a fabricating company.

[17] The building had a flat roof. The existing roof was of some unknown age, consisting of a traditional tar and gravel surface over a roof membrane. Drains were located at various sites in the roof to take away rainwater.

[18] One side of the flat roof had been redone in or about 2000. The other side covered the business premises occupied by LEC. As hereafter discussed, the water leak occurring during and following the storm on July 16, 2005, caused significant damage to the equipment and business of LEC.

The Project

[19] The project involved the installation of a steel gable roof over the existing flat roof. Channels were attached to that roof by way of twelve inch screws secured to the building joists. Posts were then connected to the channels – purlins were joined to the posts. The roofing panels were then attached to the purlins.

[20] Progressive retained KMCR as a sub-contractor to install the roofing system. Its employees commenced working on site in June 2005. There was little commentary by witnesses regarding workmanship or materials with respect to the new roofing system, save for the water leak occurring as a result of a storm on July 16, 2005. As to this event, there is an evidentiary dispute.

[21] At the outset, installers were attaching the channels without caulking the screw holes. Mr. Carducci, the foreman of the KMCR crew, reported the screws running into water, said to be trapped under the existing roof. This lead to a complaint from Mr. Herring. On July 6, 2005, he delivered an email to Mr. Seberras expressing “serious concern with the leaks happening as a result of holes being drilled into the existing roof” and directed the use of caulking of the screw holes and fastening of the roof panels as the work proceeded.

[22] The installers would thereafter apply caulking to the screw holes. Mr. Carducci said the caulking did not eliminate water leakage but did slow it down.

[23] The water leak, more in the nature of a flood into the building, during and after the storm on July 16, 2005 was a different matter. The rainfall was described as substantial.

[24] Roger White has been the building manager for 5084 Shaver for many years. He described his job as to look after the outside of the building and “maintain everything” in connection to the building.

[25] The storm occurred on a Saturday. Mr. White decided to check the building. He initially observed a large volume of water coming into the building from the roof. He started to cover the tenant’s computers and equipment with tarps and called his employer for assistance. A number of LEC employees and others were called in to help with protecting equipment and clean up following the storm.

[26] Mr. White reported the water leakage as coming through the screw holes created during the installation process. He said there was some water leakage from the screw holes prior to the storm but indicated there were no water leaks in that area prior to the project.

[27] Mr. White checked the roof. The drains, he said, were taking water away but with a flat roof such never achieves perfection. He reported water sitting in the channels and entering the building through the screw holes as the installers were not sealing as they proceeded with the work.

[28] Mr. White advised his employer to have tar applied to the existing roof and the channels. Leo Cole, owner of Cole’s Roofing, was on site the next day. He had been involved in the past, repairing the roof from time to time as a result of leakage.

[29] The Cole’s Roofing crew cleaned out the loose gravel and applied tar and gravel to the existing flat roof. This was a large undertaking involving 50,000 gallons of tar. A deposit of $30,000 was provided by LEC. On July 28, 2005, Mr. Seberras instructed Mr. Cole to stop work. The crew left the job site. Cole’s Roofing were owed money for the work involved, the balance being $5,721.95, after applying the deposit. Progressive paid the latter amount, the $30,000 having been deducted from the final draw by 5084 Shaver and has claimed $35,721.95 in its amended statement of claim.

[30] Mr. White indicated the water leakage stopped after Cole’s Roofing installed the tar.

[31] Mr. Herring acknowledged that there had been water leaks in the past but said such were never to the point of inconveniencing or disrupting the business operations of the tenants.

[32] After receiving a call from Mr. White, Mr. Herring contacted Mr. Seberras. Both attended the site immediately thereafter. Mr. Herring described water “running like a tap” from the ceiling in multiple spots, wherever the work was being done.

[33] After speaking to his insurance representative on the following Monday, Mr. Herring decided to have Cole’s Roofing install hot tar. He felt Progressive was responsible for the problem and the Cole invoice. The water leak, he said, was corrected by Cole’s Roofing within several days.

[34] Mr. Carducci was on site the day after the storm. He observed standing water on the existing roof. Pumps were used to remove the water. Mr. Carducci indicated some water was going down the drains but several drains were higher than normal and, therefore, did not function properly. Mr. Carducci could not recall being inside the building to observe the water leakage.

[35] Mr. Seberras also observed the standing water on the roof. He said the existing roof had been leaking for some time.

[36] Although Progressive paid the Cole’s Roofing invoice, Mr. Seberras said he was made to do so by Mr. Herring. Mr. Seberras felt the payment would be reimbursed by the insurance company. The claim was denied.

[37] Neither party retained an independent engineer or other qualified person to investigate and opine on the roof and water leakage.

The Insurance Claim

[38] After the water problem, LEC submitted a claim on its business interruption insurance policy. Although the productions were incomplete, it appears the insurer pursued a subrogated claim against Progressive and KMCR.

[39] Ultimately $102,500 was paid on this claim by the insurers of Progressive and KMCR, $35,000 by the former and $67,500 by the latter. The details of the claim were not produced; however, from the documents that were, it is likely the payment was to cover the income loss and some remedial work pertaining to LEC. The Cole’s Roofing invoice was not covered or paid by the insurer.

[40] Progressive’s insurance policy was with The Dominion of Canada General Insurance Company. Following notification of the claim, the insurer retained Brown and Beattie Ltd. to conduct an investigation and provide an opinion as to the cause of the water leakage. A report was subsequently prepared by Tim Beattie, P.Eng., dated December 5, 2005. The report was presented in evidence in the plaintiff’s document brief.

[41] Mr. Beattie visited the site on July 25, 2005. He inspected the existing flat roof and the recent installation work. A detailed report was provided. Mr. Beattie offered this conclusion:

Based on the available information it is our opinion that leakage that forms the subject of this report was the result of unsealed holes and potential punctures in the existing flat roof assembly present in relation to the construction of the new roof on top of it when exposed to a substantial rainfall prior to the new roof being made watertight.

[42] Mr. Seberras disagrees with this conclusion in total and denies liability for the water leak and the corrective work provided by Cole’s Roofing.

[43] Nevertheless, the insurers of Progressive did contribute to payment of LEC’s loss resultant from water leakage.

Inspection

[44] During and after the installation of the roofing system, the parties were in discussion regarding the intended warranty, as hereafter discussed.

[45] On March 28, 2006, Kevin Gagnon, a field maintenance supervisor with Rib Roof, attended the site for a post construction meeting. Mr. Seberras indicated the inspection was requested by 5084 Shaver and that such was a requirement for an extended weather tight warranty. Mr. Herring could not recall who requested the inspection.

[46] Mr. Gagnon, in his post construction meeting report, dated March 29, 2006, identified several deficiencies in the roof installation. There was a discussion amongst the persons attending the meeting with respect to the movement of rainwater from the upper roof to the lower roof. In result, Mr. Gagnon referred to a mutual agreement for the installation of scuppers, to be done by KMCR.

[47] Mr. Gagnon then concluded:

After the repairs are complete, the 5084 Shaver Inc. recover project will meet Rib Roof installation specifications and the Rib Roof warranties signed by Rick Dodge dated 2/1/06 will be honoured.

[48] The scuppers were installed. Progressive forwarded an invoice to 5084 Shaver for $1,621.05 for the cost involved. 5084 Shaver, until trial, took the position that Progressive was responsible for this expense. During the trial, it was conceded this was a legitimate extra.

[49] Rib Roof invoiced Progressive for Mr. Gagnon’s on site inspection and travel from Tennessee for $3,500 U.S. The invoice was dated April 26, 2006. Progressive submitted an invoice, the same day, to 5084 Shaver for that expense.

[50] Mr. Seberras also charged Progressive, for engineering services regarding the inspection, by invoice dated April 25, 2006, in the amount of $3,210. The next day, Progressive submitted an invoice to 5084 Shaver for this expense.

[51] Mr. Seberras stated the invoices represent extras for the project as the items charged were not included in the scope of work set out in the agreement. Mr. Herring felt otherwise and said he was never informed in advance that there would be an expense for the inspection. Mr. Herring understood the purported extras to be included in the agreement.

Warranty

[52] The parties disagree as to the warranty required for the project. No doubt, this results from the wording in their agreement. A proposed warranty was not attached as a schedule to the agreement.

[53] Mr. Seberras was of the view only a 20 year “material” warranty from Rib Roof was required, as referenced in Schedule “A” of the agreement.

[54] Mr. Herring was expecting a “system” warranty as referred to in the body of the agreement. Such a warranty, he said, should cover labour and material. In other words, he felt the warranty would apply to the whole of the installation.

[55] Rib Roof would provide two material warranties, both dated February 1, 2006.

[56] There was some discussion between various individuals during the construction project, likely in December 2005. In result, Mr. Seberras delivered copies of sample warranties to 5084 Shaver taken, he said, from his Rib Roof Manual. The samples included:

(a) standard installation warranty for one year;
(b) standard material substrate against perforation and rupture for 20 years;
(c) standard painted steel products warranty for 20 years; and
(d) standard 20 year extended labour and material warranty.

[57] The warranties ultimately delivered by Rib Roof are comparable to samples (b) and (c).

[58] Mr. Seberras would explain that the installation warranty was not provided as Rib Roof did not install the roof system. He also said the extended warranty had to be purchased by the owner, the cost being $38,800, but invoiced annually.

[59] Mr. Seberras refused to be involved with the extended warranty as Progressive would have some liability as the roofing contractor and because of the expense. Neither Progressive nor KMCR offered to provide any warranty regarding the installation. Mr. Seberras acknowledged a “system” warranty would cover any defect in installation.

[60] Mr. Herring made numerous requests to Mr. Sebarras as to completing the extended weather tight warranty form. He thought such a warranty was required by the agreement, although acknowledging that terminology was not used. 5084 Shaver, Mr. Herring said, was willing to pay the cost of the warranty but Mr. Seberras would not sign.

[61] Mr. Seberras advised that Rib Roof made an assignment in bankruptcy in 2009 and re-surfaced under a different corporate name.

Litigation History

[62] The two actions proceeded at a slow pace as follows:

(i) Statement of Claim in court file 06-217 issued on April 28, 2006 seeking payment of $38,800.92, plus prejudgment interest, with a reference to a separate claim for roof tarring of $35,721.95, currently in the hands of the parties’ insurers. Amendment of the statement of claim permitted by order granted at the first pre-trial conference by Taylor J. on February 2, 2009. The amended claim was for $74,522.87, plus prejudgment interest, as the insurer had denied the roof tarring claim;

(ii) Statement of Claim in court file 06-284 issued on June 8, 2006, seeking payment of $8,686.30, plus prejudgment interest, with respect to the invoices for extras;

(iii) Statement of defence in court file 06-217, dated August 9, 2006, denies liability, alleges breach of contract by plaintiff for failure to deliver a warranty and claiming a set off for the cost of same;

(iv) Statement of defence in court file 06-284, dated August 9, 2006, alleges all changes claimed by plaintiff were covered in original agreement or were to be paid by the plaintiff;

(v) Order granted in court file 06-217 on August 28, 2006, by Reilly J., vacating the claim for lien and certificate of action as $48,501.15 had been paid into court;

(vi) Order granted in court file 06-284 on August 28, 2006, by Reilly J., vacating the claim for lien and certificate of action as $10,857.88 had been paid into court;

(vii) Trial record served April 28, 2008 and first attendance in Assignment Court was July 4, 2008. On September 4, 2008, trial scheduled for the sittings commencing April 20, 2009;

(viii) Pre-trial conference held in both actions on February 11, 2009. Order signed by Taylor J. consolidated the actions, removed them from trial sittings, adjourned to Assignment Court for September 4, 2009, and directed a further pre-trial conference once the pleadings were amended;

(ix) Statement of claim in court file 06-217 amended as noted previously on an unspecified date;

(x) Actions struck from trial list on September 4, 2009;

(xi) Amended trial record served September 28, 2012;

(xii) Second pre-trial conference held on January 9, 2013. Nightingale J. directed completion of examinations for discovery by February 15, 2013 and that the trial be scheduled for the sittings commencing June 10, 2013;

(xiii) On June 10, 2013, trial adjourned to sittings commencing October 21, 2013; and

(xiv) Trial takes place on October 23 and 24, 2013.

Issues

[63] The issues raised in the pleadings and the evidence at trial may be summarized as follows:

(a) What was the intended warranty and is the defendant entitled to a set off for same?

(b) Which party is liable for the roof tarring expense invoiced by Cole’s Roofing? And

Analysis

(i) Warranty

[64] As is often the case, disagreement regarding a contractual provision results from a poor choice of words. What is a “24 gauge “Rib Roof” re-roof system (20 year warranty per Rib Roof)” warranty as stated in the agreement? Is it the same or different than a “20 year material warranty” as referred to in the schedule of the agreement?

[65] The positions of the parties were clearly advanced in the evidence of their principals. Mr. Seberras says only a “material” warranty was required and such was delivered. Mr. Herring wanted a “system” warranty, to cover labour and material.

[66] The analysis requires the application of general contract law principles, as follows:

(a) The purpose of interpretation of contracts is to determine the intentions of the parties by examining the whole of the Agreement, interpreting each term, if possible, harmoniously with the other terms while avoiding a commercially unreasonable outcome.

See: Consolidated-Bathurst Export Ltd. v. Mutual Boiler & Machinery Insurance Co. (1979), 1979 10 (SCC), 112 D.L.R. (3d) 49 (S.C.C.)

(b) The purpose is to protect the reasonable expectation of the parties, an objective approach, the subjective intent of a party being irrelevant, with vagueness or ambiguity of words necessitating the court to supplement the words used.

See: H.W. Liebig & Co. Ltd. v. Leading Investments Ltd. (1981), 1981 1700 (ON CA), 34 O.R. (2d) 175 (Ont.C.A.); affirmed (1986), 1986 45 (SCC), 1 S.C.R. 70

(c) Ambiguity in a contract may be construed against the interest of the person who drafted the same, the “contra proferentum” rule.

See: McClelland & Stewart Ltd. v. Mutual Life Assurance Co. of Canada, 1981 53 (SCC), [1981] 2 S.C.R. 6

(d) Preference is accorded to the earlier of two inconsistent terms.

See: Cotter v. General Petroleums Ltd., 1950 50 (SCC), [1951] S.C.R. 154; and Hassard v. Peace River Co-operative Seed Growers Association, 1953 402 (SCC), [1954] 2 D.L.R. 50 (S.C.C.)

[67] The agreement is less than clear and there is a potential conflict in terminology. In my view the phrase used in the body of the agreement applies. The attached schedule was intended to provide roofing specifications and, as it is a Rib Roof document, speaks only about the product.

[68] Progressive agreed to design and install the roof system. It is responsible for its sub-contractor, KMCR. It makes no sense whatsoever for there to be no warranty regarding installation. Indeed, I conclude such would be commercially unreasonable. Yet that is what Progressive attempted to do.

[69] When the body of the agreement uses the phrase “re-roof system”, I interpret that to mean a warranty for the system; that is labour and material. That is the only objective interpretation available. To restrict a warranty to material only would have necessitated such wording. The reasonable expectation of the parties had to include the installation and any labour expense resulting from defect in workmanship.

[70] Further, the agreement form was prepared for Progressive. If necessary, I would apply the contra proferentum rule against the plaintiff.

[71] But what is a “system” warranty and what compensation is the defendant entitled to by way of set-off? There is a good argument that the extended weather tight warranty meets the requisite system warranty. At least, that is the best fit in terms of Rib Roof warranties. I am not persuaded that was necessarily the intent when the agreement was signed. I can only conclude the defendant did not receive the warranty contemplated.

[72] I, therefore, reject the amount claimed by way of set-off, namely $38,800. The defendant is entitled to some compensation and the best I can do on this evidence is assess such in the amount of $20,000.

[73] In result, the plaintiff is entitled to be paid the balance, namely $18,800.

(ii) Cole’s Roofing Invoice

[74] The amount involved is $35,721.95, $30,000 having been deducted by 5084 Shaver from the draw and Progressive paying the balance.

[75] There is an evidentiary dispute, at least to some extent. What was not challenged, however, was the evidence of Mr. Herring and Mr. White that prior water leaks had not been problematic and did not disrupt the business operations of the tenants.

[76] While the storm was described as significant, many storms had occurred in the past. It appears, therefore, that the magnitude of this water leak on and after July 16, 2005, had never been experienced before the commencement of the roofing project. I so find.

[77] The water was coming into the building through the screw holes. The volume of water cannot be allocated to trapped water in the old roof. It had to be rainwater entering the building due to the improper installation of the channels. I describe the installation as improper for the simple reason a contractor must accept the condition of the existing structure and, in this case, it was only reasonable to protect the existing roof given the obvious likelihood of rain during the lengthy installation project.

[78] The engineering report by Mr. Beattie and the subsequent payment by the insurers of Progressive and KMCR are of some interest. The report does not meet the standard for admission as opinion evidence. Indeed, it was presented in the plaintiff’s document brief even though it does not assist that party.

[79] In my view, this is factual evidence and can be used to corroborate the evidence of Mr. Herring and Mr. White.

[80] In result, I find that Progressive is liable for the invoice from Cole’s Roofing. Given the situation at hand, something had to be done to correct the water leakage. Roof tarring was a reasonable solution.

[81] Therefore, that part of the plaintiff’s claim on this expense is denied.

(iii) The Extras

[82] 5084 Shaver acknowledges the invoice for the scuppers, in the amount of $1,621.05 is a legitimate extra. That leaves the Rib Roof inspection expense of $3,500 U.S. and Mr. Seberras’ invoice for engineering expense of $3,210.

[83] In a project of this size and nature, it is only reasonable and appropriate to have an inspection. It is not sufficient, in my view, to simply rely on the inspection by the municipal building official.

[84] An inspection by Rib Roof was an obvious solution, particularly when a system warranty was required. An inspection was a reasonable expectation and must be part of the contract price. It is not appropriate to charge the customer for the cost of the inspector or the time of the installer’s representative.

[85] Accordingly, the plaintiff is entitled to payment only in the amount of $1,621.05.

Summary

[86] Some years ago, the defendant paid money into court so as to obtain an order vacating the claims for lien and certificates of action. As a result of this decision, monies can and will be paid out to each of the parties.

[87] Progressive is entitled to judgment in the consolidated action for $20,421.05 ($18,800 plus $1,621.05) and to payment out of court in the same amount. 5084 Shaver is entitled to receive the balance of funds on deposit.

[88] There remains the issue of prejudgment interest and costs, both of which I anticipate counsel can resolve; failing which brief written submissions shall be delivered to my chambers in Cayuga within 45 days.

D.J. Gordon J.

Released: November 22, 2013