ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-10-0100891
DATE: 20130207
In the matter of The Construction Lien Act, R.S.O. 1990, c. C.30, as amended
BETWEEN:
I. Young & Co. Ltd.
Plaintiff
– and –
Anna Christine Sgro
Defendant
Karey Anne Dhirani, for the Plaintiff
Gregory Hemsworth, for the Defendant
HEARD: November 20, 21, 22, 23, 26, and 27, 2012
REASONS FOR DECISION
lauwerS j.:
[1] This is a construction lien action brought by the plaintiff for landscaping work done for the defendant at 18 Hearthside Avenue in the Town of Richmond Hill. The plaintiff seeks the payment of the balance of the contract in the amount of about $47,000, plus interest.
[2] The defendant does not challenge the validity of the lien or its registration, but seeks the dismissal of the plaintiff’s action and counterclaims for the sum of about $47,000 to correct the deficiencies in the plaintiff’s work, repair the damage to neighbouring properties, and complete the contracted work.
[3] The essential issue in this case is whether the contract between the plaintiff and the defendant was for a lump sum to provide a set list of landscaping items and services, or whether the contract was a more open-ended arrangement in which the final price would not be set until the defendant had made all of the selections required as the work progressed.
[4] For the reasons that follow, I find that the plaintiff and the defendant did not enter into a lump-sum all-inclusive contract. Their arrangement was more open-ended and informal. The logical consequences are explored below.
Factual Overview
[5] In their evidence, Issa Young, the principal of the plaintiff, and Anna Sgro referred to each other by their first names and I will do so in these reasons.
[6] Issa is proud of his more than 35 successful years in the landscape business and of his work and expertise, particularly in stone work. He is a passionate man and gave his evidence forcefully.
[7] At the time of the work in issue, Anna was Vice President of Sales, Marketing and Customer Support at Strongco Equipment, a division of Strongco Limited Partnership. She testified that that she was coming out of a failed marriage and had a limited budget with which to re-establish a family home with her children. Her goal was to replicate to the extent possible the amenities of her old family home. She wanted a well-designed and installed landscape plan, but within reasonable budgetary limits.
[8] Anna was good friends with Richard Parry, with whom she had become acquainted through their respective children. He was Issa’s twice-satisfied customer and they had become friends. When Mr. Parry learned from Anna that she had moved and wanted her new property to be better landscaped, he connected her and Issa.
[9] The origin of the arrangement between Issa and Anna is important. Because the introduction was through a mutual friend, the arrangement did not take on the ordinary contractual discipline of a business deal. Issa testified that he considered Anna to be a friend. They were in fairly frequent contact throughout the process. There was no written contract. The arrangements were much looser, and more informal and relaxed than Issa’s usual landscaping contracts.
[10] Issa met with Anna on March 28, 2010. They discussed ideas about landscaping the property. Issa told Anna that her ideas would cost about $90,000. She told him that she had about $50,000 to do a number of things around the house, and that her budget for landscaping was about $15,000. Issa advised her that she would need a landscape design. He put two options to her: the more expensive one was to hire a landscape architect, and the less expensive one was to hire a landscape designer; Anna chose the latter. Issa recommended Annie Kwok, who met with Anna on March 30, 2010.
[11] Issa then went to a tradeshow in China for two weeks. He testified that upon his return he spoke to Anna and told her that he could not do the project for $15,000. He suggested that she could either wait until her budget permitted her to spend more or do the project in stages. Anna did not want to wait.
[12] Annie Kwok’s design was dated April 19, 2010. For the backyard, it called for too much patio and no grass, which would have been a problem for Anna’s dog. Issa did not like the proposed stonework for the front and redesigned it himself. Annie’s design for the backyard was not pursued because she was not available to complete revisions. Later in May Issa brought in Paula McGraw, another designer. She prepared another design that eventually became the conceptual basis for the backyard work.
[13] On May 3, 2010, Issa and Anna met to go over an estimate. It will be discussed below. Anna paid a deposit of $10,500. Issa received authority to proceed with construction. Issa and his employees and subcontractors were on the site from about May 4, 2010 until June 23, 2010; Issa asked for more money but did not demand a specific figure (although he said that he was “in for $52,000”), and because Anna would not make an additional payment, the plaintiff left the job. The plaintiff returned to the site on another occasion to clean up some loose ends but otherwise did no further work.
[14] Thereafter, Anna retained another contractor to repair the deficiencies in the plaintiff’s work and to complete the landscaping at a cost, she asserts, of about $47,000.
Did the Parties Agree to a Lump Sum Contract?
[15] The parties met on May 3, 2010 to discuss the written “landscape estimate” of the same date prepared by Issa. The estimate set out a number of elements and the prices of most but not all of them. In addition, it expressly stated that “the above prices do not include: taxes, gazebo, plant material, triple mix, labour, irrigation & lights” (emphasis in original).
[16] Issa testified that at the meeting on May 3, 2010 Anna authorized him to start work. The projected cost would have been about $28,000–$30,000 based on the estimate if Anna stuck with the lower-priced items listed on it.
[17] Anna testified, by contrast, that at the meeting she negotiated a lump-sum fixed-price contract with Issa for a price of between $38,000 and $40,000 for all of the items in the estimate including: the front yard and the backyard; all of the elements of the landscape estimate that were expressly excluded in the estimate, including taxes, gazebo, plant material, triple mix, labour, irrigation and lights; and additional elements being a fire pit and a water feature. Michael Paric, her neighbour and long-time close friend, testified that he was present at about half the meeting, and assisted Anna in the negotiations with Issa. He largely corroborated the details she provided about the lump-sum contract.
[18] I accept Issa’s evidence that there was no lump-sum agreement for a number of reasons. First, there was no written contract that established Issa’s work in final form. Both Issa and Anna are business people used to working with contracts and both, in my view, knew that this contract was informal and was subject to refinement and change. Had there been a final commitment to a price, a landscape plan and all of the included elements, in my view these parties would have come up with better documentation.
[19] Second, and this point may not be very flattering to Issa, in my view he thought that Anna had more money than she said she had and could be persuaded to spend it. Issa drew inferences about the defendant’s financial status from the expense and style of her house and its furnishings, and from her position as an executive at Strongco. He visited her at her office, uninvited in my view, as part of his assessment of her ability to pay, although ostensibly the visit was to discuss his purchase of construction equipment. His goal was to provide the defendant with an excellent landscaping job and he believed that she could afford it. Issa concluded, in my view, that Anna could afford a more expensive installation.
[20] Issa testified that he worked the project as a design–build exercise in which each element was priced separately. He noticed that when she was asked to choose, Anna picked the higher priced options for example, square-cut stone rather than random flagstone for the front walkway. As he put it, he understood that she could afford it, relying on “body language almost,” and there being no contrary instructions. Bluntly stated, in my view Issa would not have committed to a fixed price in this situation where he saw the opportunity to do better.
[21] Third, Issa’s version is simply more plausible in the context. He was an experienced landscape contractor who would not have committed himself to a fixed price to provide supplies and perform services that he had not costed.
[22] The May 3 estimate contained a number of optional elements on which Anna had to make a choice, and Issa had to set a price. There were items on which the eventual cost was simply unknown. For example, the cost of disposal of excavated material was estimated at $450 a box, but the number of boxes was not specified since that would depend on actual usage. Although the property was irrigated, since it had been the model home for the subdivision, Issa’s work would have required the irrigation system to be re-installed in some places in order to accommodate the landscape plan. The actual cost for doing so was not set. The plan would also need new lighting to be priced by an electrician. The air conditioner had to be removed and relocated, but that element was not priced. While the installation of vegetation was an important element, it could not be priced without actual plant selection.
[23] Fourth, the progress of the work was consistent with the open-ended nature of the arrangement, not with a lump-sum contract. The developing plan required Anna to make final choices and to approve Issa’s work from time to time. In the estimate Issa proposed to replace the interlock on the front walkway and to build the patio with “random flag, dry lay” (that is, flagstone laid on gravel or soil base). The option of interlock for the patio for approximately $2,000 less was given. But when it came time to choose the stone, she selected the Wiarton stone for installation by Issa, and also chose the “square cut” format (that is, flagstones sawn square) rather than the random stones for the front and the back, even though it was more expensive. I find that she also chose the considerably more expensive “wet lay” form of installation (that is, flagstone laid on concrete) for the front and the back rather than the “dry lay” set out on the May 3, 2010 estimate, because Issa persuaded her that it was the superior approach. I accept Issa’s evidence that he has never and would never install concrete without a client’s approval because doing so is expensive, as would be its removal. These were all upgrades chosen by Anna.
[24] I do not accept the evidence of Anna and Mr. Paric about the May 3 meeting for a number of reasons. While the parties agree that Mr. Paric and his family were in the house at some point during the meeting, Issa’s evidence is that the Parics were in the kitchen, which he described as a “couple of stairways away”. I find that Issa and Mr. Paric met that night, but that Mr. Paric’s evidence about his involvement in the discussions is overstated.
[25] In my view, the evidence of Anna and Mr. Paric that Issa agreed to a lump-sum price of $38,500–$40,000 was suspiciously too consistent. My sense is that Mr. Paric and Anna have conversed so often about the situation after the meeting on May 3 that they sincerely believe the evidence they gave as to the particulars; they have constructed a memory of it that has some small basis in reality. They were both in the house with Issa at some point that evening, there was a discussion about the landscape plan, there was agreement to proceed, and there were some obvious basic elements in play. But the level of detail that they now recall did not exist. In fact, the current level of detail may be more the product of litigation preparation than active memory. In my view, Mr. Paric and Anna were and are close friends who have aligned their interests and are motivated to ensure that Anna does well in this litigation.
[26] I find that the contract price was not set at the May 3 meeting as both Anna and Mr. Paric testified. The internal cost of the May 3 estimate was about $28,000. The increase of $10,500 to bring it to $38,500 did not occur until later in May as the result of Issa’s fruitless search for a reasonably priced gazebo. Issa testified that he asked Anna to identify a gazebo of the sort she liked so that he could then source and price it. It turned out that gazebos were far more expensive than Anna was prepared to pay. Issa then proposed a pergola as a lower-cost substitute, and there was a good deal of activity around sourcing a suitably priced pergola. It bears noting that if the cost of a gazebo had really been included in the lump-sum price of May 3, there would have been no reason for Anna to accept a lower cost pergola as a substitute. But she did.
The Falling Out
[27] At some point Anna lost faith in Issa and their relationship turned adversarial. They had agreed to a target completion date of mid-June 2010, in time for Anna’s daughter’s “Sweet Sixteen” party. Anna testified that she became unhappy with the plaintiff’s rate of progress in June as the date of the “Sweet Sixteen” party approached, and also with the behaviour of some of the plaintiff’s employees or subcontractors. She testified that the major rift only occurred when the plaintiff installed a large concrete patio in the backyard without her authorization.
[28] I accept Anna’s evidence that she was frustrated by the lack of progress. I accept her evidence that Mr. Paric called her when she was on her way back from Montreal to warn her about the size of the patio. His apparent disapproval may have influenced Anna, but things turned then and never recovered.
[29] As noted earlier, I accept Issa’s evidence that Anna authorized the use of concrete in the front and in the back. That said, I accept Anna’s evidence that she found the patio to be oversized: “huge” and “a dance floor,” as she testified. I so find even though Issa testified that he and Anna had marked out the edge of the backyard patio before it was installed so that she could see the dimensions. He also noted that the backyard patio was specified in the estimate as “approximately 480 square feet, random flag stone, dry lay with gap between stones,” which is more or less its actual installed size. He added that the presence of gravel in the backyard for a period of time and the framing for the base should have alerted her to the size of it. Anna, as an executive and a single mother, was busy and distracted. I am not convinced that she paid much attention to the size or was able to really visualize the final product in the chaos of the backyard under construction until it was installed.
[30] The actual breakdown of the parties’ working arrangement came with Anna’s refusal to advance Issa more funds on June 23, 2010.
Discussion
[31] I have found that the plaintiff and the defendant did not enter into a lump-sum all-inclusive contract and that their arrangement was more open-ended and informal.
[32] What was the contract?
[33] In my view, the May 3 meeting identified an approximate budget for the project as far as Issa was then able to forecast. They agreed to a completion target date of mid-June 2010 for the “Sweet Sixteen” party, but Issa did not commit to the date because of the contingencies of the business and his other jobs. The design and other elements of the project were then in flux and only came into focus over time. Although Anna denied in cross-examination that there was agreement to stage payments, in discovery she agreed that she expected Issa would come back for more money before the project was complete. This is confirmed by Anna’s evidence that at their meeting on July 13 or 14, 2010 (there is a dispute over the date of the meeting that is not material), she asked Issa if he needed more money but he did not make a request.
[34] What about the price discussions? Only two prices were identified: about $28,000 as of the May 3 estimate, and about $38,500 sometime later in May. What is their effect? Should the $38,500 be seen as some sort of upset price inclusive of the cost of the pergola?
[35] In my view such a finding would be unreasonable and inconsistent with the ongoing discussions between the parties. It would be fair in these ragged circumstances to consider the price discussions in two categories. The two figures of $28,000 and $38,500 can be seen as the “headline numbers,” and there is no doubt that the larger figure included a pergola. But the second category of prices was built into the estimate and into the iterative process by which Anna made choices with cost consequences. I find that Anna knew that her choices had cost consequences and that she would be financially responsible for them; these choices drove the cost of the project past the headline numbers. There was no agreement that the plaintiff was to absorb the increased installation costs.
[36] It follows from these findings that the plaintiff is entitled to be paid for the work that it did and the defendant is entitled to be compensated for deficiencies in the plaintiff’s work. But any work done beyond the point when the plaintiff stopped work, apart from the correction of deficiencies, is the defendant’s financial responsibility.
What is the plaintiff owed under the contract?
[37] As is customary in construction lien actions, the parties filed a “Scott Schedule”. However, the defendant chose not to respond on an item-by-item basis, as would normally be expected by the court, because doing so would have conflicted with her theory of the case that this was a lump-sum contract. Once that theory is set aside, however, the court is left with virtually no contrary defence evidence on the pricing of the individual items on the Scott Schedule. The defendant’s conduct frustrates the purpose of the Scott Schedule. I draw the inference that the defendant does not quarrel materially with the plaintiff’s prices.
[38] I have considered the matters listed in the plaintiff’s Scott schedule. They are cross-referenced to some exhibits and do have sufficient support in Issa’s testimony. Some of the items are directly from the May 3 estimate. I set out below a list of the items, the amounts claimed by the plaintiff and my awards:
Description of Claim
Claimed by Contractor
Allowed to Contractor
(a) Design of landscaping for the front and rear of the house
$1,200.00
$577.50
(b) Pergola design
$405.00
_
(c) Front main door landing steps, raiser
$3,850.00
$3,850.00
(d) Electrician and relocation of the air-conditioner
$785.00
$785.00
(e) Removal of sod
$1,900.00
$1,900.00
(f) Railing removal
$0.00
_
(g) Disposal of waste and debris
$1,100.00
$1,100.00
(h) Backyard excavation, equipment, labour, fuel, insurance
$2,259.00
_
(i) Backyard gravel compaction, equipment, labour
$1,647.28
$1,647.28
(j) Backyard triple mix, equipment, labour and truck
$990.00
$990.00
(k) Backyard retaining wall, excavation, gravel, concrete, material, mixer and labour
$370.00
_
(l) Delivery and driver for sand Portland and equipment
$500.00
$500.00
(m) Excavation for trees
$50.00
_
(n) Front yard excavation
$371.41
_
(o) Front yard gravel and compaction
$288.87
$288.87
(p) Backyard forming including wood and labour
$950.00
$950.00
(q) Front yard removing shrubs, asphalt and sleeves;
$490.00
_
(r) Front yard forming
$475.00
$475.00
(s) Front and back concrete waiting time
$2,780.00
$2,780.00
(t) Concrete labour
$1,400.00
$1,400.00
(u) Irrigation system
$0.00
_
(v) Removing forming, front and back
$350.00
$350.00
(w) Backyard Wiarton 2” square cut (stone only)
$6,919.81
$6,919.81
(x) Backyard Coping 2” bush hammer (stone only)
$3,423.17
$3,423.17
(y) Front yard Wiarton square cut (stone only)
$2,871.20
$2,871.20
(aa)Front yard coping (stone only)
$249.55
$249.55
(bb) Labour for entire installation of square cut and coping
$16,843.70
$16,843.70
(cc)Wiarton Steps in the back along the kitchen sliding door (not including labour)
$250.00
$250.00
(dd) Wiarton Step across front sidewalk, (not including labour)
$150.00
$150.00
(ee)Coursing, random flagstone, coping & delivery
$2,165.00
_
(ff) Three Skids
$75.00
_
TOTAL
$48,301.08 + HST
[39] I have not included certain amounts claimed by the contractor. The amount for pergola design is excluded; it is not clear to me that the design used by the defendant was the one prepared by the plaintiff. Since it was not installed by the plaintiff no credit should be given. I have not included an amount for backyard excavation, equipment, labour, fuel, and insurance on the basis that the evidence did not make it clear what this additional cost was in the relation to the figures for the removal of sod and the disposal of waste and debris that are included. I have excluded the claim for front yard excavation on the same basis.
[40] I have not allowed for a claim for “front yard removing shrubs, asphalt and sleeves”; Anna’s evidence was that the shrubs would be removed at no cost to the defendant and the other items fall under the general heading of excavation.
[41] I have not included the amount claimed for the backyard retaining wall, excavation, gravel, concrete, material, mixer and labour in the amount of $370. That work was not useful to the defendant. I have excluded the amount claimed for the excavation for trees on the same basis.
[42] Finally, I have excluded the value of three skids of material identified as “coursing, random flagstone, coping & delivery” and the value of the three skids; I am not persuaded on the evidence that there were three skids left on the property. There is one skid left there and the plaintiff is entitled to attend at the property to retrieve it without hindrance by the defendant.
[43] The total owed to the plaintiff for the work done and the material supplied under the contract is $48,301.08. From this must be deducted the deposit of $10,500. The balance is $37,801.08 plus HST. I therefore find that the plaintiff is entitled to be paid $37,801.08 plus HST on account of the work performed, less deductions relating to deficiencies in the work.
Deficiencies in the plaintiff’s work
[44] There were a number of deficiencies in the plaintiff’s work, most relating to the patio, based on the evidence particularly of Keith Bailey, the representative of Infinite Possibilities Inc., the landscape design and contracting company that repaired the deficiencies and completed the landscaping job for the defendant.
[45] The large size of patio created a conflict in the design between the area reserved for the pergola and the northeast corner of the patio. In order to make the design elements congruent, the contractor had to cut that corner off of the patio. This required a concrete cut, the disposal of the debris and additional stone work on the new edge.
[46] All of the grouting for the patio surface had to be done. The workers who did the repair work noted that when they were cleaning the patio with a power-washer some of the stones came loose. These were defectively installed and needed to be re-installed.
[47] It was not clear to the repairing contractor that an expansion joint had been installed between the edge of the patio and the house. In order to investigate the issue, the contractor cut down into the edge of the patio and was unable to find an expansion joint, although Issa testified that one was installed. Mr. Bailey noted, however, that the top edge of the patio was installed over the breathing holes for the brick. An expansion joint was installed along with flashing, and the new gap was caulked to permit movement. Further, the window wells needed to be trimmed. Finally, a patio would normally be sloped away from the foundation of the building to move water away, but this patio was not so sloped which will give rise to problems in the future and the need to squeegee the patio after a rainfall to prevent water ponding. No figure was put by the defence to discount for this deficiency.
[48] The defendant bargained hard with the remedial contractor on a number of items. The repairs to the patio in the backyard, according to Mr. Bailey, cost $2,500 plus HST.
[49] The second problem with the patio is that it was located in such a way that it blocked the main swale in the backyard, which ran east-west across the backyards of the subdivision. Individual swales also ran between the houses to guide the water from the main swale out to the street. The photographs demonstrate the encroachment of the patio on the main swale. As one witness described it, the patio became a “cork” in the swale. To permit proper water flow to be restored across the backyard, a French drain was constructed out of weeping tile, cloth and gravel and was installed below the surface across the end of the patio. The drain was directed to the swales on either side of the house. The cost of this remedial work was $1,200 plus HST.
[50] The third deficiency was the incomplete work at the front of the house. The stone was not all properly placed, the margin along the driveway was problematic and the steps were not properly cut, among other difficulties. The cost of remediating the work at the front and completing it was $3,125 plus HST.
[51] I find that the sum total of remedial costs of $6,825 represents the cost of repairing the deficiencies in the plaintiff’s work and must be deducted from any amount owing to the plaintiff. The amount owed to the plaintiff of $37,801.08 must be reduced by $6,825 leaving the sum to be paid to the plaintiff of $30,976.08 plus HST. The plaintiff is also entitled to pre-judgment and post-judgment interest, pursuant to the provisions of the Courts of Justice Act, R.S.O. 1990, c. C.43, from the date of filing of the construction lien.
[52] In the result, I order and declare that the plaintiff is entitled to a lien upon the defendant’s lands and premises described in the registered lien in the amount of $30,976.08 plus HST to be paid within 30 days. Should the defendant default in the payment of the said sum of $30,976.08 plus HST and should such default continue for a period of 30 days, the defendant’s interest in the said premises shall be sold to satisfy the judgment.
[53] Counsel for the plaintiff is directed to prepare a form of judgment in accordance with Form 19 of the Construction Lien Act, R.S.O. 1990, c. C.30, subject to approval as to form and content by counsel for the defendant. In the event that the parties cannot agree on the form and content of the Judgment, an appointment can be made to speak to the issue through the trial co-ordinator's office at Newmarket.
[54] If the parties cannot agree on costs, then the plaintiff shall file a costs outline and brief submissions as to costs, not exceeding five pages apart from a bill of costs and any offers, within 10 days of the date of this judgment. The defendant will then have a further 10 days to respond and the plaintiff will have another 10 days to reply.
Justice P.D. Lauwers
Released: February 7, 2013