2013 ONSC 7228

NEWMARKET COURT FILE NO.: CV-09-097426-0000T

DATE: 20131128

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Johnny Esho, carrying on business as Commander Construction, Plaintiff

and

The Sovereign General Insurance Company, Defendant

BEFORE: The Honourable Madam Justice C.A. Gilmore

COUNSEL: Patrick DiMonte, for the Plaintiff

Jonathan Goode, for the Defendant

HEARD: November 18, 2013

ENDORSEMENT

Overview

[1] This is a rule 76 summary trial. The plaintiff claims certain amounts with respect to renovation work done on two different work projects, namely the renovation of a social services building on Wilson Avenue in Toronto (the “Wilson project”) and renovations to the Grafton municipal offices in Haldimand, Ontario (the “Grafton project”).

[2] Prior to trial, the plaintiff brought a motion to amend its claim. My ruling on that motion was released on November 18, 2013. The plaintiff sought to correct an error in the Wilson project claim with respect to the type of bond and the bond number recited in the statement of claim. That relief was dismissed for reasons given in the ruling[^1].

[3] The plaintiff also sought to increase the monetary amount of the claim for both the Wilson and Grafton projects. That relief was allowed and as such, the Wilson claim was increased from $10,000 to $20,560 and the Grafton claim was increased from $10,000 to $11,647.50. Both claims request prejudgment interest and costs.

[4] Finally, the plaintiff sought a claim for relief from forfeiture pursuant to the Courts of Justice Act and the Insurance Act on both projects. That relief was also dismissed[^2].

[5] At the commencement of trial, the parties agreed that the name of the plaintiff in the title of proceedings should be amended, given that the plaintiff is a sole proprietor. The title of proceedings was therefore amended on consent from “Commander Construction” to “Johnny Esho, carrying on business as Commander Construction”.

[6] Two witnesses were called at trial, Johnny Esho for the plaintiff, who is the owner and sole proprietor of Commander Construction, and Mr. Edouard Chassé who was called on behalf of the defendant. Mr. Chassé is a senior surety and fidelity bonds claim adjuster with BBCG Claim Services Limited (“BBCG”), which is a company of independent adjusters for surety bonds. Mr. Chassé has been in the surety bond business for thirty years. BBCG was the claims adjuster for the defendant with respect to the within action.

[7] Given that this matter was heard pursuant to rule 76.12 of the Rules of Civil Procedure, the parties relied on two affidavits from Mr. Esho and two from Mr. Chassé as the parties’ evidence in chief. The affidavits of Mr. Esho were sworn March 29, 2011 and November 11, 2013 and the affidavits of Mr. Chassé were sworn October 18, 2011 and November 15, 2013.

Background Facts

[8] Commander commenced two small claims court actions in 2002 naming Cortrad Construction (1999) (“Cortrad”) and Sovereign General Insurance Company (“Sovereign”) as the defendants with respect to two separate construction projects, the Wilson project and the Grafton project. The small claims court action which related to the Wilson project was claim number 49725/02 and the one related to the Grafton project was 49724/02.

[9] Sovereign issued a Labour and Materials bond (an “L & M Bond”) for each project naming Cortrad as the principal and Sovereign as the surety for each bond.

[10] At the time of issuing the small claims court claims, the jurisdiction of small claims court was limited to $10,000. As Cortrad did not defend either action, Commander obtained default judgment for $10,000 against Cortrad in both actions.

[11] In November 2003, Commander amended its claim with respect to the Wilson project claiming that its outstanding invoice for that project exceeded $20,000 but that it had limited its claim to $10,000 due to the small claims court limit. The claim referenced Cortrad entering into a performance bond with Sovereign, being bond number 44-17526. Sovereign defended by claiming that no such performance bond existed on that project.

[12] Pursuant to the pretrial ruling on this matter, dated November 18, 2013, Commander was not permitted to amend its claim to reflect the bond number for the proper L & M bond on the Wilson project given the prejudice arising from the late date of the request for leave to amend.

[13] Both actions were consolidated and transferred to the Superior Court in Newmarket on November 16, 2009. The parties agreed that the matter would proceed under the simplified rules, given the amounts claimed.

[14] In August 2011, Commander brought a motion for summary judgment against Sovereign seeking partial summary judgment of $20,000. That motion was dismissed. Mulligan J. felt that there were too many factual issues in dispute to grant summary judgment for the amount sought, which included limitation period issues and whether the L & M bond provided coverage for Commander. Costs of $6,000 plus HST were ordered to be paid by Commander. Those costs have been paid.

Issue # 1 -The Wilson Project

Evidence

[15] The plaintiff, Johnny Esho, was educated as a civil engineer in Baghdad and has worked in construction since coming to Canada. At the relevant time, he owned and operated a renovation business (Commander) which did drywall, painting, framing and insulation. He started the business in 2000. Mr. Esho was familiar with the general contractor, Cortrad, as he had worked for them on other government projects. Mr. Esho preferred working on government projects, as the L & M bonds which were required ensured that subcontractors, such as Commander, would be paid.

[16] Cortrad and Commander entered into a contract for the Wilson project on September 13, 2001. The total price of the contract was $52,000 plus GST. Once the project was under way, it became clear that extras would be required. Mr. Esho’s testimony was that this was not unusual in the renovation business, as unanticipated issues and work arise depending on the on the state of the building being renovated. As such, a contemplated change order was required. Mr. Esho was not able to give the exact amount of the change work, but estimated it at $8,000. Mr. Esho’s evidence was that he completed the Wilson work and signed a completion list, although he did not have a copy of the completion list.

[17] Mr. Esho referred to a document dated February 20, 2002, which was an invoice history for the Wilson project. Mr. Esho’s evidence was that by February 20, 2002, there was $20,560 plus GST still owing on the Wilson project. There were no deficiencies in relation to the Wilson project. He had not been paid by Cortrad, as Cortrad had informed him that they, in turn, had not yet been paid by the City of Toronto.

[18] Although he was owed over $20,000 on the Wilson project, he proceeded to work on Grafton because he had worked on government projects as a subcontractor for Cortrad before and had always been paid. Mr. Esho first became aware of the possibility that he would not be paid outstanding amounts owing on both the Wilson or Grafton projects when he spoke with the former Cortrad site supervisor sometime after finishing the Grafton project. That individual told him that Cortrad had shut down.

[19] Mr. Esho contacted the City of Toronto in an attempt to obtain payment for his outstanding invoice on the Wilson project. He was told there was no money left on that project. Mr. Esho felt he had no choice but to commence an action against Cortrad and the defendant in small claims court. Given the small claims court jurisdiction at the time, he commenced an action on the Wilson project against Cortrad and the defendant for $10,000 and an action on the Grafton project against Cortrad and the defendant for $10,000. He obtained default judgment in the amount of $10,000 plus costs against Cortrad on both claims, but was unable to collect.

[20] Mr. Esho told the court that he never received any notice or request to repair deficiencies on the Wilson project. His position was the Wilson project was completed on time, in full, and he was entitled to be paid. The date of the original claim on the Wilson project was June 6, 2002. Both Cortrad and the defendant were named as defendants in that action. The claim references Commander entering into a contract with Cortrad, who failed to pay within the required thirty days. There is no mention of any claim against the defendant, other than the reciting of an L & M bond number in the title of proceedings under the name of the defendant.

[21] The plaintiff’s claim on the Wilson project was subsequently amended on November 25, 2003. In that claim, both Cortrad and the defendant were named defendants; however, the body of the claim was changed significantly and referenced a performance bond between Cortrad and Sovereign identified by number 4417526. Unfortunately, the bond number referenced in the amended claim is incorrect. Performance bond number 4417526 was in fact a performance bond in relation to the Grafton project. There was no dispute during the course of evidence or submissions that Commander could not claim under the performance bond, only the L & M bond.

[22] The defence to the original claim was that the plaintiff had not filed a claim against the defendant’s L & M payment bond, had provided no evidence to support the amount claimed, and no evidence that the plaintiff had a contract with Cortrad. The defendant filed a defence to the amended claim, in which they denied knowledge of the performance bond cited in the amended claim and pleaded that the plaintiff had not demonstrated that it had a valid contract with Cortrad in respect of the project, they denied that there was any default of the alleged contract by Cortrad and finally that it had failed to demonstrate that Commander suffered any losses or damages.

[23] Mr. Esho admitted that the invoice produced at page 71 of the trial record was the only available invoice for the Wilson project. The document at page 44 of the trial record was a statement of account. He testified that he prepared both documents, and that he did not keep site journals or site logs of the Wilson project. He did not have copies of any cheques he received on the project, other than a cheque from Cortrad Construction, stamped “stop payment” and dated August 3, 2001. Mr. Esho was unable to say which project this cheque related to.

[24] The defendant’s L & M bond in relation to the Wilson project (bond number 44-17549) was produced at page 98 of the trial record. As explained by Mr. Chassé on behalf of the defendant, the L & M bond insured Contrad’s obligation under the project. The surety (the defendant) does not have any obligation to make payment unless Cortrad defaults on its payment to a claimant. A claimant is a person or entity who has a contract with Cortrad for labour, services and materials. A claimant can only be paid if they are not paid by Cortrad. A condition precedent to the defendant’s liability is that the claimant must give notice in writing within one-hundred and twenty days of completing its work. That notice is to be given to the surety, Cortrad and the obligee (in this case, the City of Toronto). Any court action against the defendant must be commenced within one year of the principal (Cortrad) completing its work.

[25] The defendant’s position is that the plaintiff did not make a claim in relation to the L & M bond on the Wilson project and it has not complied with the condition precedent terms of the L & M bond for the Wilson project. That is, it has not given proper written notice within one-hundred and twenty days of completing its work, nor did it commence its claim against the defendant within a year of Cortrad completing its work. The last day of work by Cortrad, according to the certificate of substantial completion, was February 13, 2002.

[26] The defendant has an obligation to make investigations with respect to any claim. It must ensure that there is a valid contract, that there has been default, and that there is evidence to show compliance with the requirements of the bond. While the plaintiff did provide some documents to the defendant in 2004, many of those documents did not relate to the Wilson project. In fact, only one letter in the documents provided makes reference to the Wilson project and that was an invoice prepared by the plaintiff.

[27] The opinion of Mr. Chassé, with respect to the document submitted by the plaintiff, was that it did not confirm any contract or establish a debt owing to the plaintiff. His view was that anyone can create an invoice and his job was to establish a contractual relationship between the party making the claim and the principal, and to confirm there was evidence of a debt. The one document provided by the plaintiff did not establish any of those criteria.

[28] Mr. Chassé conceded that the amended statement of defence acknowledged issuing certain bonds with respect to the Wilson project, namely a performance bond and an L & M bond. Mr. Chassé was shown the one page contract between Cortrad and the plaintiff with respect to the Wilson project. His view was he was not one-hundred per cent certain as to whether it was a valid contract. He agreed that he was not aware of any deficiencies claimed by the City with respect to the plaintiff’s work. He also conceded he had no knowledge of whether or not the plaintiff had suffered any loss or damages as between Cortrad and the plaintiff.

Positions of the Parties

The Plaintiff

[29] The plaintiff concedes that there are some difficulties with respect to the pleadings in relation to the Wilson project. However, he points out to the court that he has provided evidence showing he entered into a contract with Cortrad, invoiced the project on a fixed price basis and that there was no evidence of any deficiencies at the Wilson project.

[30] The plaintiff asked the court to accept the he had entered into a contract with Cortrad for the Wilson project, performed the work and extras under the scope of that contract, and is still owed $20,560 plus prejudgment interest from June 6, 2002 and costs. The plaintiff seeks to have the court confirm the outstanding amount, but understands that enforceability of the crystallized debt may be an issue. The plaintiff urges the court to make this finding because it is clear the work was done without deficiencies and the sole issue is whether or not the plaintiff is entitled to collect.

[31] The plaintiff argues that the court should treat his original statement of claim as notice under the bond. The claim was issued and then served shortly after June 6, 2002, and while that claim was amended, the fact that it was issued cannot be ignored. As the defendant was named as a co-defendant in the claim and the subsequent amended claim, and then defended both claims, it cannot argue that it did not receive notice. While the notice related to only $10,000 of the plaintiff’s claim, it cannot be ignored that the defendant knew of the plaintiff’s position that outstanding monies over and above the $10,000.00 were owed on the Wilson project. Further, June 6, 2002, is within the one-hundred and twenty day period with respect to the date of the last work done by the plaintiff and within the one year time limit with respect to the last work done by the principal.

[32] While the error with respect to the performance bond on the wrong project cannot be undone, the amended statement of defence acknowledges having issued both the performance bond and L & M bond on the Wilson project. There is an admission therefore by the defendant that both bonds exist. The defendant has never withdrawn that admission. Further, with respect to the amended statement of defence, the plaintiff has proven a valid contract without deficiencies and that he is owed $20,560.

The Defendant

[33] As no leave was granted to allow the plaintiff to amend its pleadings in relation to the Wilson project (other than increasing the claim), the pleadings do not advance a claim against an L & M bond. It is accepted by all parties that the plaintiff is not entitled to claim against the performance bond. This court should not and cannot award judgment on an L & M bond where there is no pleading in relation to that bond.

[34] With respect to whether or not the June 2002 claim can be considered notice under the bond, the defendant submits that notice is different from suing under the bond. Notice must go to the surety, to Cortrad and to the City. There is no evidence of proper written notice with respect to that requirement. It also cannot be ignored that the original defence by the defendant was that the plaintiff had not pleaded a cause of action. However, the plaintiff never took steps to rectify that until November 2003, when it amended its claim and pleaded the wrong bond on a different project.

[35] Addressing the plaintiff’s argument that there is an admission in the defence that entitles him to claim under the L & M bond, the fact that the defendant mentions the existence of bonds in its statement of defence does not mean that it has somehow admitted that the plaintiff has a right to claim against the L & M bond.

[36] There is also the issue of actual notice. It was not until the summer of 2004 that the plaintiff delivered its documents with respect to the amount owed, the contract and the issue of default. However, the documents were clearly deficient. Even in the face of the defendant’s lawyers writing to the plaintiff’s lawyers and indicating that the documents were insufficient, the plaintiff did nothing.

[37] The defendant reiterates that an invoice can be created by anyone. The defendant has an obligation to determine if there was a contract, if default existed, and the amount that is in default. In summary, therefore, the plaintiff has failed to prove that he has made a claim on the bond in the Wilson case. Alternatively, there is no evidence to prove the quantum of the claim, as an invoice summary and an invoice prepared by the plaintiff on its own is insufficient.

Analysis and Ruling on the Wilson Project

[38] There can be no doubt that the plaintiff’s pleadings in this matter were deficient at the time they were issued and remained deficient given that leave to amend was not granted. I do not find that the issuing of the claim by the plaintiff in 2002 was sufficient notice under the L & M bond, as the claim was not issued in the context of notice under the L & M bond, nor was the claim sent to the City of Toronto.

[39] The sole remaining issue in this court’s view is whether there is sufficient evidence to crystallize the amount owed by the plaintiff, on the understanding that the debt cannot be enforced against the defendant.

[40] I found that Mr. Esho was a credible witness. It is clear that he completed the work on the Wilson project and there was no evidence of deficiencies.

[41] While the invoice and account summary prepared by Mr. Esho are rudimentary documents, Mr. Esho never wavered from his position about what he was owed on Wilson. He took steps to collect on the Wilson project within a short time after finding out that Cortrad was no longer operating. Unfortunately, the manner in which he approached collection of the outstanding amount was deficient and has now resulted in serious problems with respect to enforceability. Notwithstanding the difficulties with enforcement, I accept Mr. Esho’s evidence that he is owed money on the Wilson project.

[42] Clearly, however, any amount owed to Mr. Esho amount cannot be enforced as against the defendant, as the defendant would be put in an impossible position if it was forced to underwrite bonds where parties did not comply with conditions precedent. The bond risk is assessed based on strict compliance with those conditions and the plaintiff cannot be treated differently from any other claimant in that regard.

[43] Given all of the above, I find that the plaintiff is owed $20,560 in relation to the Wilson project. The plaintiff is not entitled to make any claim under the L & M bond in relation to the Wilson project, given that it has not complied with the condition precedent terms of that bond and therefore cannot look to the defendant for compensation.

Issue # 2 – The Grafton Project

Evidence

[44] There is no issue in relation to the Grafton project that proper notice was given to the defendant under the L & M bond.

[45] Mr. Esho referred to a document at page 123 of the trial record, which was a contract between Commander and Cortrad for the Grafton project, dated September 12, 2001. The contract was for a renovation involving drywall and paint. The contract price was $26,000, excluding GST. As is often the case with renovations, there were extras. The extras with respect to the Grafton project related to a renovation of a home in a separate location called Immel House. The contract for this extra was at page 39 of the trial record and dated May 14, 2001. The cost for drywall and paint for Immel House was $9,000.

[46] Mr. Esho was asked about an extra for Immel House relating to a fire rated ceiling. He testified that this issue came about at the end of the work. According to Cortrad, there was a ceiling in the basement of the house that required fire rated insulation. Cortrad asked Commander to do the work, but they never arrived at an agreement on price. Mr. Esho felt that Cortrad’s price of $3,500 was too low. This was because the insulation required installation by a specially licensed individual who would need to be hired solely for that job.

[47] Mr. Esho referred to a summary of work at the Grafton project, including extras, which totaled $35,042, including taxes. A payment record at page 45 of the trial record showed that the last payment received on the Grafton project was $2,500 on February 8, 2002 and that the sum of $11,647.50 plus GST remained outstanding. The plaintiff has not received payment for this amount.

[48] After Mr. Esho completed his work on the Grafton project, he was requested to return and repair certain deficiencies with respect to drywall and paint, and to complete the fire rated ceiling in the basement, all for the sum of $9,000. Mr. Esho refused to return to the project on the basis that he was still owed over $11,000, that the deficiencies were not his (that is, they were for repairs to damage done by others), and finally, that he could not do the fire rated ceiling for the amount quoted, as it was not enough.

[49] Mr. Esho was referred to a letter from BBCG, dated April 16, 2002. He acknowledged receipt of that correspondence. In that letter, BBCG makes reference to a fax transmission from Cortrad, dated April 10, 2002. Cortrad had agreed that $9,000 inclusive of GST should be paid to Commander upon completion of the contract and deficiencies. The price was to include the fire rated ceiling in Immel House. It was BBCG’s view that none of the $9,000 mentioned by Cortrad would be payable to Commander until completion of the painting and drywall deficiencies and the Immel House fire rated ceiling.

[50] Commander was reminded that a ten per cent holdback was still in place. It was invited to return to the site to complete their obligations as soon as possible. Mr. Esho did not agree with the concerns that the architect had with respect to the drywall and painting deficiencies. Mr. Esho’s answer on discovery, when asked if there were deficiencies in his painting and drywall, was that there are always deficiencies, which mostly include marks made by other contractors doing their work. Normally, he fixes those marks for free to maintain his relationship with other contractors. However, in this case, he refused to do so because he was still owed over $11,000 on the project. He reiterated that in his industry the word “deficiency” includes minor work such as paint and dry wall touch ups at the end of a project.

[51] Mr. Esho was referred to a letter that he prepared, dated April 17, 2002 and sent to Mr. Chassé. In that correspondence, he agrees to go back and complete the interior work, including the fire rated ceiling for $9,000. However, a condition of his return was that he receive the outstanding invoiced amount.

[52] He advised Mr. Chassé that if the outstanding account was not paid by April 22, 2002, he would commence legal action against Cortrad and the defendant, and that any agreement made with respect to the $9,000 would be invalid. Mr. Esho is clear that although he agreed to the $9,000 arrangement, it was contingent on him being paid for his outstanding invoice.

[53] Mr. Chassé’s evidence was that originally Cortrad did not agree that the plaintiff was owed more money on the Grafton project. However, later, Cortrad did agree that the plaintiff should be paid $9,000 to repair its deficiencies, and included in that $9,000 would be the cost of the fire rated ceiling.

[54] The position of the defendant was that no amounts were owing to the plaintiff at the time they negotiated the agreement and that he was to return and complete his obligations for $9,000. Since contractors are never paid in advance, they refused to accept the plaintiff’s position that he wanted to be paid in advance of returning to the worksite. As a result of the plaintiff and defendant not being able to come to an agreement on the remaining work on the Grafton project, the defendant arranged for another contractor to complete the work. The certificate of substantial completion was signed on June 25, 2002. At that point, all deficiencies had been rectified.

[55] While Mr. Esho conceded that he was aware of the architect’s position that there were deficiencies with respect to both drywall and paint, he disagreed that the deficiencies were of the magnitude described by the defendant.

[56] Mr. Chassé testified that he was the only adjuster working on the Grafton and Wilson projects. His evidence was that he attended the Grafton site on or about March 2002 to determine the status of the project, level of completeness and determine what work remained to be completed. By that time, he had notice of the plaintiff’s claim and was attempting to establish the value of it. In the end, nothing was paid by the defendant to the plaintiff on the Grafton L & M bond because of deficiencies which had not yet been certified by the owner’s architect for payment. As the plaintiff did not complete the work, the defendant became the completion contractor under the bond (as is their option). Mr. Chassé testified that he hired a local contractor to complete the paint and drywall because some of the plaintiff’s work was inadequate. He conceded that some of the rectification work may have been related to damage done by other contractors after the plaintiff completed the original work.

[57] Unfortunately, all records in relation to that rectification have been lost. Mr. Chassé was unable to give the name of the owner’s architect, nor how he received information from Cortrad regarding their position. He had no documents which set out what needed to be done and what was wrong with the painting and drywall, such that they were labeled deficiencies. There was no copy of any cheque issued by the defendant to pay the finishing contractor for the drywall and paint work. There is also no statement from the architect regarding the actual deficiencies or details of those deficiencies.

[58] Mr. Chassé’s position was that the plaintiff, in fact, accepted their offer for a final settlement of $9,000, but the settlement fell through when the plaintiff insisted on being paid in advance of re-attending at the site. Mr. Chassé denies that there were any further amounts owing to the plaintiff.

[59] Mr. Chassé confirmed that no legal action was taken against the plaintiff for money that was paid to rectify the Grafton project.

Position of the Parties

The Plaintiff

[60] The plaintiff submits that the L & M bond was properly pleaded, and that the claim and action were within the stipulated time limits of the bond. The only issue is whether the defendant has any bona fide defences to the claim on its merits. It was clear that there were negotiations between the plaintiff, defendant and Cortrad but there is no documentary evidence to support the deficiencies, the cost to rectify or any proof of payment with respect to the rectification.

[61] As Cortrad was not summonsed by the defendant, there was no evidence as to their view regarding what was owed to the plaintiff. The plaintiff’s evidence was that he completed the work, wanted to receive the outstanding amounts owing, and then he would rectify and do the extra work in relation to the ceiling. There was nothing to indicate that the plaintiff had forgiven the outstanding amounts which he said were owed to him. It is not realistic that he would agree to do more work and get less than his original claim. Although the letters between the plaintiff and defendant are somewhat confusing, this should be resolved in favour of the plaintiff as he made it clear he would not return to the jobsite until he was paid what he was owed.

[62] The plaintiff reminds the court that he was the one who started the action and Cortrad did not defend. If there had been deficiency defences, they should have been pleaded in 2002 or 2003, but they were not. The plaintiff did the work on the understanding that the jobs were bonded. The plaintiff was a credible witness and there is no evidence that he has inflated his claim. The court should not rely on the defendant’s recollection as it is deficient and without corroboration. The plaintiff seeks judgment on the amount sought in the Grafton claim, plus prejudgment interest since the date of completion of the job.

The Defendant

[63] The defendant submits that it is improper for the plaintiff to include the holdback in his claim, since the certificate of substantial completion was published on June 27, 2002 and the lien expiration date would be forty-six days after that or sometime in August 2002. The plaintiff’s claim commenced in June 2002, when the holdback was not owing. Therefore it does not properly form part of his claim.

[64] The plaintiff has clearly admitted, both in discovery and through his correspondence, that he understood there were claims related to deficiencies with respect to the work on the Grafton project. Although he said the deficiencies were caused by others, he never went back to the site after April 2002 to confirm this was the case.

[65] The defendant relies on the fact that it was the architect’s view that there were deficiencies. He also points to the plaintiff’s own correspondence in which he agreed to receive $9,000 to rectify the deficiencies and complete the work on the fire rated ceiling. The money was on the table and available to be paid to the plaintiff, if he had simply gone back and completed the work. In doing so he would have properly mitigated his damages with the adjuster. However, he abandoned the project and is not entitled to be paid.

[66] The defendant relies on the case of Interprovincial Concrete Ltd. v. Great West Construction Ltd.[^3] for the proposition that any amount owing to the plaintiff should be reduced by its failure to mitigate. In the event there are any amounts found to be owing to the plaintiff, the plaintiff’s failure to mitigate should be considered with respect to the reduction in those damages. The defendant also relies on V.K. Mason Construction Ltd. v. Canadian General Insurance Group Ltd.[^4] for the proposition that a claim on a bond is a claim for damages and therefore subject to the ordinary rules related to damages and mitigation of damages.

[67] The rectification cost to the defendant was more than any amounts which may be owing to the plaintiff. In terms of evidence with respect to any claim by the plaintiff, it is clear that the certificate of substantial completion named the defendant as the finishing contractor. The letters between the plaintiff and defendant are a record of negotiations, and there is no disagreement about the content of the letters. Therefore the plaintiff’s claim should be dismissed because it has failed to mitigate its damages and the cost to rectify the deficiencies as a result of the plaintiff abandoning the project exceeded any amounts which may have been owing to the plaintiff.

Analysis and Ruling on the Grafton Project

[68] It is common ground that with respect to the Grafton project, the plaintiff submitted its claim under the surety L & M bond in accordance with the conditions precedent. The main issue, therefore, is whether the plaintiff is entitled to be paid in the face of what are alleged to be deficiencies and an abandonment of the project.

[69] The difficulty with the position of the defendant is that the evidence of the alleged deficiencies and payment for rectification of those deficiencies is based on correspondence between the parties, which the defendant admits is only as a record of negotiations. There is no evidence from the architect certifying what the deficiencies were, nor is there evidence from the contractor hired by the defendant setting out what the cost was to rectify the deficiencies. It is possible that rectification of the deficiencies related only to damage done by contractors working on the project after the plaintiff completed his work. Indeed, Mr. Chassé adverted to that very possibility in his evidence.

[70] In my view, it would be inequitable to completely ignore the plaintiff’s claim when there is little or no evidence of (a) exactly what the deficiencies were; or (b) if the deficiencies were the responsibility of the plaintiff.

[71] Without further evidence from Cortrad, the architect or the file documents (now lost) related to the cost of rectification, I rely on the plaintiff’s evidence with respect to the work that was completed at the Grafton project. While it is true that the invoice for Grafton could have been “created” by the plaintiff, I believed his evidence with respect to the work performed at Grafton.

[72] As for mitigation, I do not see that issue is relevant given my findings regarding the lack of evidence to corroborate any deficiencies.

[73] I therefore find the plaintiff is owed $11,647.50 plus prejudgment interest from the date of completion of the work at Grafton.

Orders

[74] The plaintiff is owed the sum of $20,560 plus prejudgment interest for work completed on the Wilson project. The amount owing to the plaintiff is not enforceable as against the L & M bond issued by the defendant in relation to the Wilson project, as the plaintiff has failed to provide proper notice under the conditions precedent terms of that bond.

[75] The plaintiff is owed the sum of $11,647.50 by the defendant for the Grafton project, plus prejudgment interest from the date of completion of the Grafton contract.

Costs

[76] Neither party had complete success. In my view, the plaintiff had little or no success in relation to the Wilson project and the defendant had no success on the Grafton project.

[77] With respect to the pretrial motion, the plaintiff had success with respect to the amendments to increase his claim amounts, but no success on the leave to amend in relation to the Wilson claim or the relief of forfeiture in either claim.

[78] If the parties do not agree that success was divided, I will entertain written submissions commencing with the plaintiff on a seven day turn around, starting 14 days from the release date of this endorsement. Costs submissions shall be no more than two pages in length, exclusive of any costs outline or offers to settle. All costs submissions shall be delivered via email through my assistant at jennifer.beattie@ontario.ca. If no submissions are received by within 35 days of the first day submissions are due, the issue of costs will be deemed to have been settled as between the parties.

Justice C.A. Gilmore

Released: November 28, 2013

[^1]: 2013 ONSC 7104, paragraphs 30 - 33.

[^2]: Ibid, paragraphs 34 – 41.

[^3]: [1987] SJ No. 23 (SASKQB).

[^4]: (1998) 40 C.L.R. (2d)237.