COURT FILE NO.: CV-10-0439

DATE: 2014-03-05

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Finn Way General Contractor Inc.,

Roderick W. Johansen, for the Plaintiff

Plaintiff

• and -

S. Ward Construction Inc.,

Guy A. Wainwright, for the Defendant

Defendant

HEARD: April 15, 16 and 17, July 8 and 9, and August 16, 2013, at Thunder Bay, Ontario

Mr. Justice D. C. Shaw

Reasons For Judgment

[1] This is an action for breach of contract brought by a general contractor against one of its subcontractors.

[2] Finn Way General Contractor Inc. (“Finn Way”) was the general contractor on the construction of an addition to McCausland Hospital in Terrace Bay and the renovation of the hospital’s kitchen.

[3] On June 30, 2009, Finn Way and S. Ward Construction Inc. (“Ward”) entered into a subcontract wherein Ward agreed to do the labour for concrete work, framing, roofing, insulation, drywall, plastering, painting and ceiling work. Finn Way agreed to supply the materials. The subcontract price was $400,600, plus G.S.T.

[4] Ward began work under the subcontract in July 2009.

[5] On March 18, 2010, while Ward was still working under the subcontract, it entered into a second, smaller subcontract with Finn Way on the same project for the installation of exterior windows, insulation, strapping, wood siding, trim, soffit and metal capping. This subcontract was also for labour only. The price of the second contract was $50,000, plus GST.

[6] On May 13, 2010, Ward left the jobsite on the grounds that it was owed money for extra work. On May 17, 2010, Finn Way and Ward agreed by telephone that they would meet to resolve outstanding issues and that Ward would return to the jobsite. Ward returned on May 18, 2010.

[7] The parties met on May 28, 2010. Ward continued to work on the jobsite.

[8] Ward alleges that on June 14, 2010, it faxed a letter to Finn Way “cancelling” the second contract. Ward states that this letter was sent in accordance with an agreement it had reached with Finn Way at the meeting on May 28, 2010. Finn Way denies that it received the letter and denies that there was any agreement to “cancel” the subcontract.

[9] Ward continued to work at the jobsite until June 27, 2010. On that date, it left and never returned. Finn Way wrote to Ward on June 28, 2010, asking what Ward intended to do. Ward replied on June 29, 2010, that it left because the plumbing subcontractor had run pipe that interfered with Ward’s installation of drywall. Ward told Finn Way to find another contractor to finish the job and that it had no more funds to continue.

[10] Finn Way subsequently hired various contractors to complete the work that was left to be done under the two subcontracts.

[11] Finn Way brings this action for damages for the costs of completion and damages for delays that it claims were caused by Ward’s breach of the two subcontracts. Ward responds that it was Finn Way that was in breach of contract, beginning with Ward’s first day on the job and continuing until it left the project on June 27, 2010. Ward contends that because of Finn Way’s breach of contract, it was entitled to quit the project. Ward states that it is not responsible for any costs of completion or costs of delay. Ward states that there can be no damages related to the second subcontract because that subcontract had been cancelled. Further, Ward states that Finn Way has failed to prove its claim for damages and that, in any event, the claim grossly exceeds any reasonable costs that Finn Way may have incurred.

[12] There are five issues to be determined:

(1) Did the first subcontract incorporate by reference the terms of the Canadian Construction Association “Stipulated Price Subcontract”, CCA 1-2008 (referred to by the parties as “CCA-1, 2008”)?

(2) Did the first subcontract include both the addition to the hospital and the renovations to the hospital’s kitchen, or did it deal only with the addition?

(3) Did Ward terminate the second subcontract on June 14, 2010, with the consent of Finn Way?

(4) Was Ward in breach of contract when it left the jobsite on June 27, 2010, or was it entitled to leave the project because Finn Way was in breach of contract?

(5) If Ward was in breach of contract on June 27, 2010, to what damages, if any, is Finn Way entitled?

I. Did the first subcontract incorporate by reference the terms of the Canadian Construction Association “Stipulated Price Subcontract”, CCA-1, 2008?

Issue

[13] On March 9, 2009, Ward sent a quote to Finn Way, “Re: McCausland – Terrace Bay Hospital” for $400,600, plus G.S.T.

[14] On June 30, 2009, Finn Way sent Purchase Order #MLTC 03 to Ward. The Purchase Order stated:

This is to confirm that we are entering into our standard sub-contract based on [CCA-1, 2008] with your firm to supply and install all labour and light equipment as per your quote of March 05, 2009. … on the subject project, all in accordance with the Plans and Specifications, including all Addendums.

[15] The Purchase Order was signed by Finn Way and sent to Ward. Ward, in turn, signed the Purchase Order and sent it back to Finn Way.

[16] CCA-1, 2008 is a 29-page standard construction document prepared by the Canadian Construction Association that sets out detailed, comprehensive terms between a construction contractor and a subcontractor. The document also contains several pages with sections to be completed to show the names of the contractor, the subcontractor and the consultant, the project, the work to be performed, the price and contact information for the parties. There is a signing page.

[17] A copy of CCA-1, 2008 did not accompany the Purchase Order. The parties did not sign a copy of CCA-1, 2008.

[18] It is Finn Way’s position that the Purchase Order incorporated by reference the terms of CCA-1, 2008 into the subcontract between it and Ward. Ward takes the position that the terms were not incorporated. Ward contends that the words of the Purchase Order are not sufficiently precise to amount to incorporation by reference.

[19] Ward contrasts the wording of the Purchase Order with the wording of Purchase Order #MLTC 45 dated March 18, 2010, related to the second subcontract:

To the extent that matters are not otherwise provided for in Finn Way’s contract with the Owner, the standard terms and conditions of contract form CCA-1 are incorporated by reference and form part of this contract.

[20] Ward also submits that it did not have a copy of CCA-1, 2008 and that Stephan Ward, the principal of Ward, did not understand the document.

Decision

[21] In my view, the standard terms of CCA-1, 2008 were incorporated into the subcontract evidenced by Purchase Order #MLTC 03. They were also incorporated into the subcontract evidenced by Purchase Order #MLTC 45.

[22] Incorporation by reference is a device of contractual interpretation which essentially incorporates the terms of another document into the main contract. The primary goal of contractual interpretation is to give effect to the intention of the parties at the time the contract was made. See Dunn v. Chubb Insurance Company of Canada, 2009 ONCA 538 at para. 32, 97 O.R. (3d) 701. The factual matrix surrounding the parties’ entry into the contract may be admissible in order to give effect to the intention of the parties as expressed in their written agreement. See Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21 at para. 27, [2006] 1 S.C.R. 744 [Jesuit Fathers].

[23] In my opinion, the words “based on [CCA-1, 2008]” are not ambiguous. “Base” is defined in the Concise Oxford English Dictionary, 11th ed., as “a foundation or starting point”. The phrase “base something on” is defined as “use something as the foundation for”. There could be no misunderstanding that the subcontract was based on the terms of what is a standard construction contract. There is only one reasonable meaning of the phrase “based on [CCA-1, 2008]”.

[24] Those parts of CCA-1, 2008 which are in blank that is, the names of the parties and the architect, the project, the work to be performed, the price and contact information, were all set out in Purchase Order #MLTC 03 and in the accompanying quote from Ward, which was also incorporated by reference in the Purchase Order. There is nothing in the terms of CCA-1, 2008 which contradicts or confuses anything in the Purchase Order. The CCA-1, 2008 document is specifically, precisely identified.

[25] Mr. Ward was familiar with construction. He had been in the business for 20 years. He had run his own company since 2000. The company did commercial construction work. It had been a subcontractor on a school built in Hornepayne the preceding year. It would be reasonable to expect that a subcontractor experienced in construction would be put on inquiry by the phrase and would seek out a copy of this standard construction document. Even someone not in the industry would have been alerted by the Purchase Order to the fact that the contract was based on the terms of CCA-1, 2008. The fact that the document was not attached to the Purchase Order does not prevent its incorporation into the contract. The fact that Mr. Ward may not have understood CCA-1, 2008 does not prevent its incorporation by reference.

[26] Although Mr. Ward testified that he did not understand the terms of CCA-1, 2008, he gave the following answers on his examination for discovery which were read in by Finn Way at trial:

177 Q. Now I meant to ask you sir, on the purchase order which issued here to you, there’s a reference to a CCA-1 2008 subcontract form, do you see that?

A. Up here.

178 Q. Yes that was intended to be part of your contract?

A. Um-hum

179 Q. That standard form.

A. Yeah.

180 Q. Those are the standard construction association documents eh. You’re familiar with those?

A. Yes.

181 Q. And it was part of your contract, right.

A. Yeah.

[27] The Purchase order itself is only three pages long. The terms of CCA-1, 2008 are reasonably required to deal with matters such as administration and execution of the work, payment, changes in the work, default notices, rights of both parties to suspend work or terminate the contract, dispute resolution, protection of persons and property, governing regulations, insurance, indemnification, waiver of claims and warranty, none of which are dealt with in the Purchase Order or Ward’s quote.

[28] I am satisfied from the clear and unambiguous wording of the Purchase Order and from the circumstances surrounding the parties’ entry into the contract that the parties intended CCA-1, 2008 to be part of both subcontracts.

II. Did the first subcontract include both the addition to the hospital and the renovation of the hospital’s kitchen, or did it deal only with the addition?

Issue

[29] Finn Way alleges that the first subcontract was for both the addition to the hospital and the renovation of the hospital’s kitchen. Ward states that the subcontract was for the addition only.

[30] Mr. Ward testified that when he was considering a bid on the project, he was told by Gordon Smith, who was Finn Way’s chief estimator and who prepared Finn Way’s tender for the hospital, not to bid on the renovation.

[31] Ward submits that unlike other trades that had successfully bid on the kitchen renovation, it gave no “take out” price for the kitchen. A “take out” price is included in a quote in the event that the owner decides not to proceed with a part of the project. If the owner chooses not to proceed with that aspect, the contractor takes out of its price tendered for the whole project, an amount for the work that will not be done. The contractor arrives at its take out price after taking into consideration the take out prices of each of the affected subcontractors. Ward submits that the fact that it did not provide a take out price for the kitchen indicates that it did not include the kitchen in its quote.

[32] Ward also points to the testimony of Finn Way’s site supervisor, Kelly Sundell, who said that during construction on the project Mr. Ward told him that he did not include the kitchen in his price. Mr. Sundell testified that he did not know if that was in fact the case.

[33] After Ward left the jobsite on May 13, 2010, Finn Way wrote to Ward on May 14, 2010 advising Ward that its quote included the renovations to the kitchen. Mr. Ward wrote back on May 14, 2010 that he had told Mr. Sundell that the kitchen renovation was not part of his contract because it was a separate bid.

[34] Mr. Smith was called at trial by Finn Way in reply. Mr. Smith retired from Finn Way in December 2011. He said that he had never heard that Mr. Ward was denying responsibility for the kitchen renovation until the trial.

[35] Mr. Smith testified that when Ward was preparing its quote, he had a telephone discussion with Mr. Ward. Mr. Smith said that he told Mr. Ward that Finn Way would do the demolition on the kitchen but that any drywall and painting would be Ward’s work. He said Mr. Ward told him that he was going to tender all concrete, all drywall, all carpentry and siding.

[36] Mr. Smith said that he had prepared a separate take out price for the kitchen renovation, in the event that the owner decided not to proceed with the renovation. He said that before the closing of tenders, he had called Mr. Ward to discuss Ward’s take out price, but received no reply from him. He said that if a subcontractor did not give its own take out price, he would nevertheless be aware of what it should cost and would keep his own take out price vis-à-vis the owner ­­­low enough to protect Finn Way. Mr. Smith said that his take out price for the kitchen would have included Ward’s work.

[37] Mr. Smith testified that the kitchen was part of the one set of specifications and drawings for the project and that the addition and renovation were all one job. He said that Finn Way would not hire two different subcontractors to do the same work.

Decision

[38] In my view, it is reasonable to interpret the subcontract to include the kitchen renovation.

[39] Both Purchase Orders are headed “Project: McCausland LTC Addition & Renovations”.

[40] The project’s specifications, which Ward had reviewed in preparation for its quote, state:

Work is being tendered as a single contract with 2 distinct packages, (1) the LTC addition, (2) the renovations to the existing kitchen/dining area.

[41] There is no separate set of specifications or drawings for the addition and for the kitchen renovation. For example, Section 06100 of the Specifications deals with Rough Carpentry, which is applicable to work in both the addition and the kitchen. The same is true for other sections of the Specifications, including sections on framing, insulation, gypsum board, acoustical suspension and ceilings and interior painting for drywall.

[42] Mr. Smith’s evidence that Finn Way would not hire two different subcontractors to do the same work on different parts of the project is understandable.

[43] The quote from Ward that resulted in Purchase Order #MLTC 03 was accompanied by a covering e-mail from Mr. Ward, dated March 5, 2009, which read, “Sending you the quote by fax and by e-mail for the Terrace Bay Hospital project”. The quote refers, among other items, to “all exterior and interior framing”, “install all drywall and fire tape as per wall schedule”, “plaster, taping and painting as per wall schedule”, “install all drop ceiling, T bar, wall angle and tiles”, followed by the statement on page 2 of the quote, under the heading “Re McCausland – Terrace Bay Hospital”, in bold type – “To provide all labour and light equipment to perform this above work.”

[44] The Purchase Order states:

This is to confirm that we are entering into our standard sub-contract based on [CCCA-1, 2008] with our firm to supply & install all labour & light equipment as per your quote of March 05, 2009 on the subject project, all in accordance with the Plans and Specifications, including all addendums.

(Note that the Specifications and drawings are also incorporated by reference into the contract.)

[45] I am unable to see in any of the relevant documents – the Specifications, the drawings, the quote, the covering e-mail and the Purchase Order – anything that supports the contention that Ward’s quote could reasonably be understood to refer only to the addition. It was one project with one contract.

[46] The telephone discussion between Mr. Ward and Mr. Smith, surrounding Mr. Ward’s quote is parol evidence. Generally, parol evidence is admissible to resolve an ambiguity in a written agreement. In this case, I find no ambiguity. However, even in the absence of ambiguity, parol evidence, as part of the factual matrix surrounding the parties’ entry into the contract may be admissible to determine the intent of the parties and the scope of their understanding. See Jesuit Fathers, supra.

[47] Mr. Ward’s evidence of what was said in his telephone conversation with Mr. Smith is relevant to the parties’ intention only if I accept his version and reject Mr. Smith’s evidence. Although Mr. Ward may sincerely believe that he only quoted on the addition, I have no basis to prefer his evidence to the evidence of Mr. Smith and to find that the parties intended something other than what is expressed in the written documents. I cannot say that Mr. Ward’s evidence, rather than Mr. Smith’s, is more in harmony with the probabilities in the case. I accept that where there was one contract, with one set of Specifications and drawings that it is more likely that Finn Way would want only one subcontractor doing the same carpentry, drywall, acoustic ceiling and painting work rather than two. The evidence is that the kitchen was a relatively small part of the project, perhaps 6% to 6.5% of the cost of the entire project. What reason would there be for Finn Way to parcel out this smaller work to another subcontractor?

[48] Mr. Smith is retired from Finn Way. He has no interest in the outcome of the case. He gave his evidence in a straightforward, matter-of-fact manner. There was nothing in his evidence or his demeanor to raise concerns about his credibility or reliability. He prepared the tender for the hospital project on behalf of Finn Way. If he had known that Ward was not quoting on the kitchen, it would have been necessary for him to seek separate tenders for that work. There is no evidence that other tenders were requested or received, that is, not until well into the project when Mr. Ward, dissatisfied about other aspects of the job, said that he was not doing the kitchen work and that Finn Way had to hire another subcontractor.

[49] After Ward pulled its forces off the jobsite on May 13, 2013, Finn Way wrote to Ward, on May 14, 2010, advising that Ward’s quote included the kitchen; Ward wrote back on May 14, 2010 saying that the kitchen construction was not part of its contract because it was a separate bid. At no time, until he testified at trial, did Mr. Ward say to Finn Way that Mr. Smith had told him not to bid on the kitchen. I can find no documentary evidence supporting Ward’s position that he was told by Mr. Smith not to bid on the kitchen.

[50] It is true that Mr. Sundell, the site supervisor, asked Mr. Ward if he was doing the kitchen and was told by Ward that he was not. However, Mr. Sundell had no part in preparing the tender or the contract documents.

[51] What is left is Mr. Ward’s belief, unconfirmed by documents or by the conduct of Finn Way, that he was not doing the kitchen, in the face of the quote, Purchase Order, Specifications, drawings and probabilities of the case which indicate otherwise.

[52] Ward submits that because the statement of claim alleged that Ward was to perform a component of the work relating to improvements to the hospital, but did not expressly refer to the kitchen in its pleadings, it reflects on the credibility of Finn Way.

[53] Ward concedes that the issue of the kitchen was dealt with on discovery. In addition, in his opening after referring to the two aspects of the project, namely the addition and the renovation to the kitchen, counsel for Ward identified as an issue whether Ward was to do work on both the addition and the kitchen or only the addition. The issue of the kitchen was dealt with at length at trial by both parties, in direct examinations and cross-examinations.

[54] The damages claimed by Finn Way in the statement of claim included the kitchen.

[55] Finn Way’s position was that Ward’s quote included the kitchen, Ward’s position was that it did not. The parties exchanged correspondence about the issue as early as May 2010 when Ward was still on the job. No one was under any misunderstanding that this was an issue.

[56] Ward makes a similar submission relating to Purchase Order #MLTC 45, which was not referred to in the statement of claim. In his closing, counsel for Ward said that he wanted to refer the court to this “because there is obviously a credibility issue to be decided as to whether or not the old hospital was to be included in my client’s sequence of the work”.

[57] The damages claimed in the statement of claim include the work to be done under Purchase Order #MLTC 45. The credits to Ward for amounts not paid under the contracts are referred to in the statement of claim. Ward included Purchase Order #MLTC 45 in its Exhibit Book. As with the kitchen, there was evidence at trial from both sides on the issue. The issue was canvassed at discoveries. No one was under a misunderstanding at trial that this Purchase Order was an issue. At trial, Ward did not seek to preclude evidence about this Purchase Order. The issue was raised in Mr. Ward’s own direct examination.

[58] I draw no adverse inferences from the pleadings about the credibility of Finn Way’s evidence on either the kitchen issue or the issue of the second Purchase Order.

[59] I find that the subcontract evidenced by Purchase Order #MLTC 03 includes the kitchen renovation.

III. Did Ward terminate the second subcontract on June 14, 2010, with the consent of Finn Way?

Issue

[60] Ward sent Finn Way a quote, dated March 10, 2010, received March 18, 2010, for labour for exterior windows, insulation and siding for $50,000, plus GST. On March 30, 2010, Finn Way faxed back Purchase Order #MLTC 45, dated March 18, 2010, as per the quote. Mr. Ward testified that he signed the Purchase Order but was not sure if he returned it. He testified that this second Purchase Order came about because at the time he did not have much work to do, and Mr. Sundell asked him if he wanted to do some extra work. He said that he started the work but that by the time that his drywall work was ready to go, he had too much work.

[61] Mr. Ward said that at the meeting of May 28, 2010, held after he had first left the site on May 13, 2010, he asked David Karimi, the owner and President of Finn Way, if he could cancel the second Purchase Order. He testified that Mr. Karimi said, “yes, just send me a letter and I will cancel it”.

[62] Mr. Ward said that he wrote a letter dated June 14, 2010, to Mr. Karimi, entered as Exhibit 43 at trial, which stated:

This is to confirm you that S. Ward Construction Inc. will be canceling the purchase order #MLTC 45 for the installation of “sm cladmad insolation, strapping, wood siding, trims, soffit and metal capping as per quote [sic].

[63] Mr. Ward said that the letter was sent by fax. A fax cover sheet was entered as Exhibit 44. Mr. Ward said that he received no reply. He said that his company did no further work under this Purchase Order.

[64] Mr. Karimi testified that Finn Way gave this second Purchase Order to Ward because this work would go hand-in-hand with Ward’s other work. He said that Finn Way preferred to give any additional work to whichever subcontractor was already doing the same or similar work on the project rather than give it to a competing subcontractor.

[65] Mr. Karimi testified that at the meeting with Mr. Ward on May 28, 2010, the only topics discussed were that Ward was behind schedule in its work and Mr. Ward’s identification of problems with cashflow and payroll. Mr. Karimi testified that Mr. Ward said that if he received more money, in the form of payment for extras and early release of holdback, he could add more workers. Mr. Karimi denied that Mr. Ward had suggested that the Purchase Order be cancelled. He testified that this work was never discussed. He denied receiving the letter of June 14, 2010. He said that if anyone at Finn Way had received the letter, it would have been brought to his attention. The letter was addressed to Mr. Karimi.

Decision

[66] The onus is on Ward to prove an agreement to cancel this Purchase Order. I can find no evidence, documentary or otherwise, to confirm that the parties agreed to this. The evidence suggests otherwise.

[67] Mr. Ward testified that as of the date of the meeting, May 28, 2010, his company had installed all the windows and 75% of the rigid insulation under the second Purchase Order. He acknowledged that during the next month, until he permanently left the site, there were no other subcontractors on the site completing the work required under the second Purchase Order.

[68] In his letter of June 14, 2010 “cancelling” the second Purchase Order, Mr. Ward made no reference to the May 28, 2010 meeting. He made no reference to any agreement by Finn Way to cancel the Purchase Order. Mr. Ward acknowledged that he received no response from Finn Way to his letter. There is nothing in the evidence to indicate receipt of the letter. I am satisfied that a letter of this significance would have been brought to the attention of Mr. Karimi if it had been received at Finn Way. There are no fax markings on the letter or the cover sheet which would assist on the issue. No fax confirmation sheet was produced.

[69] Counsel for Ward submitted that there is no proof that Mr. Ward returned the second Purchase Order to Finn Way after he signed it, and therefore, because there is no proof of delivery, there is no contract. I disagree. Mr. Ward’s conduct showed that he believed he had a binding agreement. There is no dispute that Ward performed work specific to the Purchase Order, that it billed Finn Way under the terms of this Purchase Order and that it was paid under this Purchase Order.

[70] I find that there was a binding contract related to this Purchase Order and that Ward has not established that the parties agreed to terminate the contract.

IV. Was Ward in breach of contract when it left the jobsite on June 27, 2010, or was it entitled to leave the project because Finn Way was in breach of contract?

Issue

[71] The first documented disagreement between Finn Way and Ward occurred in May 2010.

[72] On May 13, 2010, Ward walked off the jobsite. Finn Way wrote to Ward on May 14, 2010. Finn Way stated that it considered this to be a failure to comply with the requirements of the subcontract and that if the default was not corrected within three days, Finn Way may terminate Ward’s right to continue with the subcontract. Finn Way stated that Ward had been falling behind schedule, needed additional manpower, failed to attend scheduling meetings and that Ward’s scope of work included the kitchen, which it had failed to do, requiring Finn Way to work on the kitchen in Ward’s absence.

[73] Mr. Ward responded by letter on May 14, 2010. Mr. Ward stated that the site supervisor, Mr. Sundell, lacked experience and ambition to keep the project moving. He said that he had been told the project was behind schedule because the architect failed to submit shop drawings on time. He said that he had a representative at the May 11, 2010 scheduling meeting. He said that Finn Way had failed to supply materials, resulting in construction falling behind schedule. He said that the kitchen was not part of his contract. He said that he would not return to the jobsite until all the extra work that he had provided had been paid in full. He said he would like to have a meeting with an experienced site supervisor to explain the extra work he had done and to illustrate his other concerns.

[74] On May 17, 2010, Mr. Ward and Kurtis Piché, Finn Way’s project co-ordinator for the McCausland Hospital project, had a telephone discussion in which they agreed to resolve outstanding issues. In the meantime, Ward agreed to return to the jobsite on May 18, 2010 and to continue working while the issues were addressed. Ward did return to work on May 18, 2010. On May 21, 2010, Mr. Piché wrote to Mr. Ward saying:

I believe we had a good week this week, everything went smooth.

[75] Mr. Piché was on site as a site clerk during this time for two weeks. Mr. Sundell was on vacation and then in Finn Way’s Thunder Bay office during these two weeks.

[76] On May 21, 2010, Mr. Piché wrote to Mr. Ward, requesting him to submit a construction schedule, with milestones and an attainable completion date.

[77] On May 26, 2010, Frank Bisignano, Finn Way’s construction manager, reminded Mr. Ward of Mr. Piché’s request for a schedule. He also told Mr. Ward that he needed to bring in more men and that if he did not, Mr. Bisignano would have no choice but to bring in men to complete certain tasks.

[78] A meeting was held on May 28, 2010. Mr. Ward, Mr. Karimi, Mr. Bisignano and Mr. Smith were in attendance. Mr. Ward testified that Mr. Piché was also there, although Mr. Piché could not recall whether or not he had attended.

[79] Mr. Ward testified that at the meeting the topics discussed were scheduling, payment for extras, sprinklers that had been installed in the basement before Ward had installed the drywall, cancellation of the second Purchase Order, Mr. Ward’s request for release of holdback and replacement of Mr. Sundell as site supervisor.

[80] With respect to scheduling, Mr. Ward said that he wanted to clarify that it was not his fault that the project was behind schedule. He said they discussed a go-forward plan on how to complete his work. He was asked for a schedule and provided one after the meeting.

[81] Mr. Ward said there were four outstanding extras as of the date of the meeting. Ward had been paid in November for two extras, one for $1,134.00, billed August 10, 2009, and one for $2,047.50, billed November 10, 2009. The four outstanding extras of May 13, 2010, were:

March 25, 2010 - $4,743.38

May 10, 2010 - $273.00

May 10, 2010 - $204.75

May 20, 2010 - $614.25.

(I note that the March 25, 2010 invoice from Ward references “McCausland LTC addition & reno.”).

[82] Ward was concerned because sprinklers had been installed by the plumbing subcontractor in the basement before Ward had installed the drywall, making drywall installation more difficult. Mr. Ward testified that Finn Way said that it had labourers on site who would remove the sprinklers and re-install them after the drywall was complete.

[83] Mr. Ward testified that he asked Mr. Karimi if he could cancel the second Purchase Order #MLTC 45. He said Mr. Karimi agreed and told Mr. Ward to write him a letter. Mr. Ward said that is why he wrote his letter of June 14, 2010.

[84] With respect to holdback, Mr. Ward said that because he had only been supplying labour, it was his understanding that the general contractor did not have to hold back the statutory 10% under the Construction Lien Act, R.S.O. 1990, c. C.30. Finn Way told him he was wrong and held back 10% of Ward’s invoices. Mr. Ward said that he wanted the holdback released to give him a couple of extra thousand dollars per month to keep up with his expenses. At the meeting, Finn Way agreed to release the holdback. On June 7, 2010, Ward invoiced Finn Way $27,930 for holdback on eight invoices that it had previously rendered. On June 14, 2010, Finn Way paid the $27,930.

[85] Mr. Ward said that he asked for someone to replace Mr. Sundell as site supervisor. He said that Finn Way did in fact replace Mr. Sundell with Mr. Piché for two weeks.

[86] In cross-examination, Mr. Ward agreed that at the May 28, 2010 meeting “pretty much all issues with Finn Way were resolved”.

[87] Mr. Karimi testified that at the May 28, 2010 meeting there were only two topics discussed: Mr. Ward’s request for money and how Ward could provide a schedule to put the project back on track.

[88] Mr. Karimi said he did not disagree with Ward’s request for payment of the four invoices for extras. He said that Finn Way was not behind in paying those extras. He also agreed to pay the holdback.

[89] Mr. Karimi said that he could not recall discussing the question of sprinklers but that he could be wrong.

[90] Mr. Karimi denied that there was any discussion about cancelling the second Purchase Order. He denied that he had agreed to replace Mr. Sundell with Mr. Piché. He said that Mr. Piché went out from the Thunder Bay offices to supervise the site for two weeks only because Mr. Sundell was on holidays for a week and in the Thunder Bay office for the next week. Mr. Sundell and Mr. Piché confirmed Mr. Karimi’s evidence as to why Mr. Sundell was away from the site for two weeks.

[91] On May 29, 2010, Mr. Ward wrote to Mr. Piché stating that he thought the May 28, 2010 meeting “went very well”. He outlined his schedule for the next two weeks and listed the material he would need. He also said, “will need labor to remove sprinkler as per request”. He concluded by saying, “After this 2 weeks forecast is complete it will give us a better vision for the completion of the schedule”.

[92] At trial, Mr. Ward testified that prior to leaving the jobsite on May 13, 2010, Finn Way had caused a number of problems which resulted in significant delays in completing his work and thereby running up his costs. Mr. Ward testified that Finn Way’s failure to have the excavation work completed before Ward’s men arrived on site resulted in delays of about 2 ½ months. He said that Mr. Sundell failed to provide proper site supervision. He said that materials were not supplied on time. He said that he had to change 40 door frames three times because the original frames were not wheelchair accessible. Mr. Ward acknowledged in cross-examination that Finn Way had paid him extra money to change the door frames, but said that the delay stalled the whole project. There were significant problems with the installation of engineered beams that did not fit properly. Mr. Ward said that there were also beams and brackets, in which the beams sat, that were missing.

[93] Mr. Ward testified as to problems with the roof in the lobby arising from the installation of two 60-foot beams that wobbled, resulting in a letter telling him to stop drywalling until the problem was resolved. He said the beam and roof problems delayed him for 1 ½ to 2 months.

[94] He said that his drywall work in the basement was delayed because the plumber had installed the sprinkler system before he could install his drywall. Mr. Ward said that all those delays, for which he was not responsible, caused him to run out of money and exhausted his line of credit of $150,000.

[95] Finn Way’s evidence was that Ward had seriously underbid the job. Mr. Sundell testified that he looked at all the pricing from other subcontractors and concluded that Ward’s bid was about 50% of what it should have been. Mr. Sundell said that the delays arose because Ward did not have enough men on site. Mr. Sundell said that the building was 15,000 to 16,000 square feet, which for Ward’s scope of work required seven to eight carpenters plus apprentices and labourers. Mr. Sundell said that Mr. Ward had four men with him and two local men from the Terrace Bay area.

[96] Mr. Sundell denied that it was necessary to do all the excavation before Ward started its work. Mr. Sundell said that Ward did good work, but because it did not have enough people, it did not have the flexibility to catch up when there were delays.

[97] Mr. Sundell testified that there were no missing beams. He said that the problem with the roof and beams arose because the trusses that Ward installed were not butting up to the beam. As a result, the supervising architect would not sign off on the work until a structural engineer gave his approval. Mr. Sundell accepted that it took too long – six weeks – for the structural engineer in Toronto, the truss manufacturer from Barrie and the architect in Timmins to get together and resolve the issue.

[98] Mr. Sundell said that Finn Way went to another truss manufacturer in Thunder Bay, had them make new trusses for the area of concern, installed them with the approval of the original truss manufacturer and resolved the problem without back charging Ward. He said that although Ward had been directed by the architect not to do any drywalling while the issue was being resolved during those six weeks, Ward had lots of work to do in other areas of the addition.

[99] Mr. Sundell said that although there may have been some minor materials for Ward’s work missing from time to time, the larger building materials were on site. He said that the delivery of materials sometimes was not on time because he would get last-minute requests from Ward. He acknowledged that Ward sometimes complained about the delivery of materials. However, he would tell Ward to give him the orders earlier because most of the material had to be brought in from Thunder Bay. It was not unusual that suppliers had to be given two to three weeks lead time.

[100] With respect to the sprinklers, the sprinkler supplier, Vipond, wanted to get the lines up in the basement and go on to work in other areas it had to do. Mr. Sundell said that he warned Ward that Vipond was coming in and that the lines had to go up. He said Ward was given the opportunity to complete the drywall before Vipond installed the sprinklers but Ward did not have enough manpower. He said that Mr. Ward was unhappy about this. Mr. Sundell was emphatic that he never suggested to Ward that the sprinkler system was to be taken down to allow Ward to put up the drywall without cutting around the sprinklers.

[101] Shortly after Mr. Ward sent his letter of May 29, 2010, in which he mentioned that he needed labour to remove the sprinkler system in the basement, his men took the sprinkler system down. The plumbing subcontractor wrote to Finn Way on June 2, 2010, to ask what was going on. Vipond wrote Finn Way on June 3, 2010, complaining that the removal of the sprinklers by Ward was unacceptable, that there would be additional charges to re-install and re-test the piping and that the warranty had probably been voided. Mr. Piché wrote back to Vipond to say that the drywallers took it upon themselves to remove the sprinkler system after being told not to by Finn Way. Mr. Sundell testified that the one thing a subcontractor never does in construction is touch somebody else’s work. Mr. Ward testified that he knew that Vipond did not like what he did but that he had told them that they should have known better than to put the sprinklers up before the drywall.

[102] Ward continued to work on the project without further incident until June 27, 2010. On that day, Ward left the job permanently.

[103] Mr. Sundell came to the jobsite on June 28, 2010, found that Ward was not there and immediately faxed Mr. Ward to ask what his intentions were.

[104] Mr. Ward faxed back on June 29, 2010, stating that his workers had gone to the basement to finish the drywall and saw that plumbing had been installed in the area they were going to drywall. Mr. Ward wrote: “Please find another contractor to finish the job, I have no more funds to continue, sorry …”.

[105] Mr. Ward testified that as of Friday, the plumbers were working with his men in the basement and had orally agreed not to get ahead of them. On the Monday, at about 8:00 a.m., he found that the plumbers had gone ahead of them. Plumbing was coming from the ceiling of the basement, which made the drywall more difficult.

[106] Mr. Ward said that the plumbers were not on site when he arrived. He said he did not call the plumbing subcontractor to ask what happened. He did not stay on site to wait for Mr. Sundell’s arrival at 10:00 to 11:00 a.m. He did not call Finn Way.

[107] Mr. Ward said that the plumbing was the last straw, which gave him the right to leave.

[108] Mr. Ward was asked in cross-examination whether he considered asking for an extra for working around the plumbers. He replied “no” as he had trouble getting paid for extras for small amounts, so why ask for a big amount.

[109] Mr. Ward agreed that he had previously invoiced Finn Way for extras, on six occasions, and that all the invoices had been paid (including the four which were the subject matter of the May 28, 2010 meeting).

[110] On July 5, 2010, Mr. Karimi wrote to Mr. Ward. He said that Ward was not excused from his contractual obligations, and that Finn Way would engage whatever sub-trades were needed to complete Ward’s work.

[111] Ward did not respond to this letter.

[112] On July 9, 2010, Mr. Karimi wrote to Mr. Ward, as a follow up to his letter of July 5, 2010. He said that Finn Way would continue to retain third parties to complete the scope of Ward’s work and would back charge Ward for the costs of completion. He stated that Finn Way anticipated that the balance available under Ward’s contract would be insufficient to cover the cost of third-party contractors and that Finn Way would hold Ward responsible for any deficiency. He also said that Ward’s failure to perform the contract had put the project behind schedule by at least one month and that Finn Way would hold Ward responsible for the costs of the delay.

[113] Ward responded through a solicitor who wrote Finn Way on July 9, 2010. The solicitor advised that Ward would not be returning to the jobsite. The solicitor stated that it was Ward’s position that all delays were the result of the inability of Finn Way’s site representative and the architect to properly co-ordinate the jobs to be done by the various tradespersons.

Decision

[114] In my view, Ward was not entitled to abandon the project on June 27, 2010. Ward was in breach of contract.

[115] Ward takes the position that there were a series of breaches by Finn Way that, as of June 27, 2010, amounted to a fundamental breach of contract that entitled Ward to leave, namely, issues surrounding the excavation, the doorframes, the beams, the trusses, the supply of materials, the supervision of the project, the extras, the holdback, the sprinklers and finally the plumbing that had been installed on the weekend before June 27, 2010.

[116] There are several difficulties with this position.

[117] First, Ward testified that at the conclusion of the May 28, 2010 meeting, all issues between him and Finn Way had been resolved. Only two relevant things happened after May 28, 2010. One, on June 2, 2010, Ward took down the sprinklers, which had been installed before the May 28, 2010 meeting and which Ward said he had Finn Way’s agreement to remove. Two, on June 27, 2010, Ward discovered that plumbing had been run into the basement from the floor above, in the area where he was about to install drywall, contrary to what Mr. Ward believed he and the plumbing subcontractor had agreed. There was no complaint from Ward to Finn Way about any matters after the May 28, 2010 meeting up to June 27, 2010, when Mr. Ward saw that the plumbers had installed pipes in the basement and left the job.

[118] In my opinion, if all the issues had been resolved at the May 28, 2010 meeting, the new plumbing issue on June 27, 2010 did not amount to a breach of contract by Finn Way which was so serious that it entitled Ward to terminate the contract.

[119] According to Mr. Ward, the installation of plumbing was contrary to his oral arrangement with the plumbing subcontractor. It was not an arrangement that Finn Way had made. Mr. Ward did not ask Finn Way to rectify the issue, nor did he ask for an extra for the delay that the plumbing may have caused him. The fundamental reason Mr. Ward gave in his letter of June 29, 2010 for leaving was that he had no more funds to continue.

[120] Second, Mr. Ward did not refer to excavation, door frames, beams and trusses in either his letter of May 13, 2010 or in his letter of June 27, 2010, as his reasons for leaving the site. In his letter of May 13, 2010, he said that he had left the site until all extra work that he had provided had been paid in full. He did refer to a failure to supply materials but did so in the context of his understanding that Purchase Order MLTC #03 entitled him to seek compensation.

[121] Third, there are no documented complaints by Ward about excavation, door frames, beams and trusses until Mr. Ward testified at trial.

[122] Fourth, CCA-1, 2008 expressly deals with the issue of a subcontractor being delayed:

6.5.1 If the Subcontractor is delayed in the performance of the Subcontract Work by an action or omission of the Owner, Consultant, Contractor, or anyone employed or engaged by them directly or indirectly, contrary to the provisions of the Subcontract Documents, then the Subcontract Time shall be extended for such reasonable time as the Contractor and Subcontractor shall agree that the Subcontract Work was delayed. The Subcontractor shall be reimbursed by the Contractor for reasonable costs incurred by the Subcontractor as a result of such delay.

[123] If, because of the conduct of Finn Way or the owner, consultants or other subcontractors, Ward was in fact delayed by these issues and in fact incurred costs as a result of the delays, the contract provided a mechanism for compensation.

[124] Mr. Ward did not make any claims to Finn Way at a time when he said that he was being delayed by weeks and months. Mr. Ward said that he did not understand CCA-1, 2008. However, the evidence is that he was familiar with the practice of billing Finn Way for extras, as evidenced by the six invoices for extras rendered between August 2009 and May 2010. Mr. Ward also testified that as regards the doorframes, he was paid extra to change the doors by trading services with Finn Way.

[125] Mr. Ward was asked why he did not claim an extra for the delay. He answered that he was “just trying to be a fair guy. I was just trying to do my job and hoped everything would go right.”

[126] Mr. Sundell testified that if Ward was required to do any extra work, all Mr. Ward had to do was come and tell him that it was extra work. If it was a legitimate extra, Mr. Sundell testified that he would have signed off on it. There was no evidence from Mr. Ward that Mr. Sundell ever denied an extra that Mr. Ward presented to him.

[127] Fifth, I am not persuaded that the issues raised by Ward related to excavation, door frames, beams and trusses were in fact breaches of contract by Finn Way, leaving aside the fact that Ward made no complaint about these issues until trial and did not request any extra payment.

[128] Mr. Ward contended that the entire excavation work should have been completed before he began his foundation work. Mr. Sundell testified that this was incorrect. He said that if the entire site had been excavated, Ward would have had no access to areas that it needed to work in. The site was on a hillside. The soil was sandy. Mr. Sundell testified that the whole excavation could not be done at once because it would cave in. Mr. Sundell explained that the area required Ward and the excavating subcontractor, Biloski, to work in a co-ordinated manner, whereby Biloski would dig an area head of Ward, prepare the soil, Ward would do its foundation work in that area, and Biloski would dig ahead on the next area. Mr. Sundell testified that Ward did good concrete work, but it simply did not have enough manpower to do its work in the timeframe required.

[129] Scott Biloski, who operated the excavator, confirmed that the soil was sand and constantly caved in and that there were access problems. Mr. Biloski testified that it would not have been efficient to do all the excavation at once because of the complexity of elevations and the collapsing sand. He testified that he and Ward worked out a plan whereby they decided on how much of an area would be opened up at any one time to permit Ward to do its work. He said that he always excavated as requested by Ward and that he never told Ward that he could not excavate as requested. He said that it was never the plan to excavate the entire site at once. He said that he never received any complaints from Ward that the excavating was delaying Ward’s work. He said it was normal for the excavating subcontractor to work hand-in-hand with the subcontractor doing the foundation.

[130] Ward contended that it was delayed because there were missing beams and it had to install temporary beams to hold up the structure until the proper beams were delivered. Mr. Sundell testified that there was no shortage of beams and that in fact there were too many beams delivered to the site. He stated that it was Ward’s responsibility to cut the beams to the size required in the specifications. He said that Ward cut certain beams to the wrong length. Mr. Piché testified that there were approximately 400 beams for the project, and that he had to order an additional four or five beams because Ward had cut the original beams too short to be installed.

[131] Ward contended that it was delayed because it was required to stop drywall work until an issue with trusses was resolved. Mr. Sundell testified that the stop-work order was issued because when Ward installed the trusses, a gap was left in the connection between the trusses and the beams which did not meet the approval of the building inspector or the architect. The drywall could not be installed because the areas in question could not be covered up until the issue was resolved. Mr. Sundell acknowledged that it took too long for the engineer, architect and truss manufacturer to solve the issue. However, he said that Ward had plenty of work to do in other areas until the issue was resolved, and Finn Way resolved the issue at no charge to Ward.

[132] Ward contended that it had to change 40 doorframes three times because the original frames were not wheelchair-accessible. Mr. Ward said that it took one worker one week to remove the old frames and put in new ones. Mr. Sundell testified that the only doorframes that had to be changed were on an exit door at the west end. Mr. Piché testified that only two or three frames were too narrow and had to be changed. He said that all the other doorframes were suitable and were installed. Mr. Piché was responsible for ordering materials. He said that he did not order multiple doorframes to replace those on site nor were there multiple doorframes returned. As previously noted, Mr. Ward acknowledged that Finn Way had paid him, by way of an exchange of services, for the additional work that he had done on the doorframes.

[133] In my view, there is no reason to prefer the evidence of Ward over the evidence of Finn Way on these issues. Finn Way’s explanations are reasonable.

[134] The question of whether a breach of contract entitles either party to rescind the contract was discussed by Doherty J. (as he then was) in Sinteris v. 541555 Ontario Ltd., 1988 CarswellOnt 1982 (H. Ct.) (WL), at para. 98:

Where there is a defect in performance by one party, which in the circumstances deprives the “innocent” party of a substantial part of the benefit it was to receive from the contract, so as to make it unfair to expect the “innocent” party to carry out its remaining obligations under the contract, then the “innocent” party is entitled to terminate the contract and sue for damages.

[135] Ward has not satisfied me that Finn Way conducted itself such that Ward was entitled to terminate the contract. To the contrary, I find that Ward’s refusal to complete its work and its abandonment of the contract on June 27, 2010, deprived Finn Way of a substantial part of the benefit it was to have received under its contracts with Ward, which entitled Finn Way to terminate the contracts and to sue Ward for damages. In the words of Master Albert, in Voka Steel Inc. v. Edgecon Construction Inc., 2011 ONSC 1938 at para. 40 (QL), Ward walked away from the contract at its peril.

V. What damages is Finn Way entitled to because of Ward’s breach of contract?

[136] Finn Way is entitled to be compensated by Ward for the costs reasonably incurred by Finn Way to complete Ward’s work under the two Purchase Orders. Damages for breach of contract should place Finn Way in the same position as if Ward had performed the contract. See Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, [2006] 2 S.C.R. 3 (S.C.C.) at para. 27.

[137] Under the first Purchase Order, #MLTC 03, the contract price was $400,600.00. There were six extras, totalling $8,587.50. Finn Way paid Ward $335,787.50. That left a balance available under the first Purchase Order of $73,400:

Purchase Order #MLTC 03 $400,600

Add extras $1,950

$1,080

$260

$195

$585

$4,517 $8,587

Purchase Order plus extras $409,187

Less Amount Paid ($335,787)

Balance available $73,400

[138] Under the second Purchase Order, #MLTC 45, the contract price was $50,000.00. Finn Way paid Ward $5,400.00. That left a balance to be paid under the second Purchase order of $44,600.00:

Purchase Order #MLTC 45 $50,000

Less amount paid ($5,000)

Balance available $44,600

[139] The total balance available under Purchase Order #MLTC 03 and Purchase Order #MLTC 45 was $118,000 ($73,400 + $44,600).

[140] The sum of $118,000 is a credit to be applied to the damages found to be owing by Ward to Finn Way for costs of completion.

[141] Finn Way presented evidence of the monies it had to pay to the following third parties to complete Ward’s work under the following categories:

1. Concrete – Form & Pour

2. Shingles – Triad Exterior

3. Painting – Piero’s Painting

4. Kitchen – B.A. Nelson

5. Flooring Repair – Canadian Commercial Flooring

6. Canopy – Diamond Builders

7. Brackets – Jet Welding

8. Drywall – Nortec Drywall

9. Exterior Siding – Triad Exterior

[142] Finn Way also claims that Ward delayed the project by six weeks, at a cost to Finn Way of $69,653.

[143] Finn Way claims costs of completion and delay of $620,512.40, less credit for $118,000, representing the available contract funds under the two Purchase Orders, for a net claim of $502,512.40.

[144] Finn Way and Ward agreed at trial that the invoices rendered by third parties, related to the costs of completion claimed by Finn Way, were received and paid by Finn Way. Those invoices are contained in Exhibit 9.

[145] Ward takes the position that the costs of completion paid by Finn Way to third parties were excessive, that Ward could have completed its work for much less than what Finn Way paid to third parties and that certain work done by third parties was not required or not within Ward’s scope of work.

[146] I will refer to the categories under which Finn Way makes its claims:

1. Concrete - $49,000

[147] By Purchase Order dated July 13, 2010, Finn Way entered into a subcontract with Form & Pour to complete Ward’s unfinished concrete work on the addition for a price of $49,000. Finn Way sent Ward a letter dated August 10, 2010 advising Ward of its subcontract with Form & Pour, the work to be done and the price of $49,000, plus HST. The Purchase Order followed a quote from Form & Pour dated July 12, 2010, to do the work at that price.

[148] Mr. Ward agreed at trial that he was told by Finn Way that Finn Way would issue a Purchase Order to Form & Pour and that he did not reply. He agreed that this work was part of his contract. He was asked what he expected Finn Way to do. He answered that he did not know and he did not care.

[149] Mr. Ward said that he could have done the work for a lower cost of $10,000 to $15,000.

[150] Mr. Karimi testified that there was no one other than Form & Pour available to do the job at the time required by Finn Way.

[151] There is no dispute that the work was part of Ward’s contract, that it was completed by Form & Pour and that Finn Way paid Form & Pour the fixed price that was quoted. I am satisfied that Finn Way is entitled to damages for this amount. Ward may have been able to do the work for a lower cost, but $49,000 is what Finn Way had to pay to have the work completed.

2. Shingles - $18,500

[152] By Purchase Order dated August 11, 2010, Finn Way entered into a subcontract with Triad Exterior Contracting Specialist to install asphalt shingles on the addition, for a price of $18,500. Triad quoted a fixed price.

[153] There is no dispute that this work was part of Ward’s contract, that it was completed by Triad and that Finn Way paid the fixed price quoted.

[154] Mr. Ward did not take issue with the amount.

[155] Finn Way is entitled to damages for this amount.

3. Painting - $38,825

[156] Finn Way paid Piero’s Painting & Decorating Inc. $21,275 and $17,550 for painting. Mr. Karimi testified that approximately 5% of the painting was in the kitchen, and the balance was in the addition.

[157] Piero’s billed Finn Way $50 per hour, plus $75 per day for living costs out of town. Mr. Sundell signed off on the hours billed.

[158] Mr. Ward testified that he had six to eight men on the job, one or two of whom were labourers whom he paid $14 per hour. The other men were carpenters to whom he paid $26 per hour. The rate that he invoiced Finn Way for extras was $65 per hour.

[159] Mr. Ward testified that he could have completed the painting for $10,000 to $15,000 with two men working for a month.

[160] Piero’s billed a total of 640 hours, plus living costs of $6,825. This work was part of Ward’s contract. (Mr. Ward disputes that the painting in the kitchen was part of his contract, but I have found otherwise.) The work was done by Piero’s. Finn Way paid for the work.

[161] In cross-examination, Mr. Karimi was challenged for giving “open-ended” contracts at $50 per hour where the contracted party would “just go on, and on, and on”. Mr. Karimi’s response strikes me as reasonable. He said that he did not want to throw his money away on open-ended contracts, that Finn Way had a limited amount of money to spend, that it was not a bank and that it had to get the money from other work to pay for this project. There would be no advantage to Finn Way to pay whatever may be charged and hope to collect it from Ward in a lawsuit. The money that Finn Way had to pay out to complete Ward’s work was its own money. There was no financial benefit whatsoever for Finn Way to pay out more than it had to.

[162] Mr. Karimi testified that at $50 per hour, compared to $65 per hour charged by Finn Way, the bids it received to complete unfinished work were competitive.

[163] I find that Finn Way is entitled to damages for the costs of painting.

4. Kitchen - $2,676.10

[164] Finn Way was billed $2,676.10 by B.A. Nelson Contracting, “Re: Doors / Hardware / Closets, etc.”. Mr. Karimi testified that this was work that was within the scope of Ward’s work for the kitchen. The invoice shows that one man was billed out at $30 per hour for 43.5 hours and that one man was billed out for $25 per hour for 43.5 hours.

[165] In cross-examination, Mr. Karimi said that he could not recall what this invoice was for, andthat he did not know the particulars of what B.A. Nelson did under this invoice.

[166] In the circumstances, Finn Way has not proved that it is entitled to damages for this expenditure.

5. Flooring repair - $11,338.00

[167] Finn Way was invoiced a total of $11,338 by Canadian Commercial Flooring to repair a subfloor installed by Ward and to install subfloor.

[168] Mr. Karimi testified that the subfloor installed by Ward was installed incorrectly, that the plywood of the subfloor was loose and squeaked and that there was not proper blocking under the floor. Mr. Karimi said that this was within the scope of Ward’s work on the addition.

[169] Mr. Ward testified that the subfloor had nothing to do with his contract. He said that his company had installed flooring in December 2009 and January 2010. He disagreed that some of the flooring did not rest on joists. He said that before he left the project, no one from Finn Way had brought to his attention that there were problems with the flooring.

[170] I am not satisfied that Finn Way has proved its damages in this category. There is no documented complaint about the subfloor, even if it was part of Ward’s contract. There were no discussions of any problems in this area.

6. Canopy - $9,284.61

[171] Finn Way entered into a Purchase Order with Diamond Builders for completion of the canopy at the front of the addition to the hospital. It contracted for hourly rates ranging between $40 and $60 per hour, plus a living allowance and truck charges. The total amount invoiced was $9,284.61.

[172] Finn Way sent Ward a letter on August 11, 2010 and advised that it had engaged Diamond Builders and the rates that were being charged.

[173] Mr. Karimi testified that he negotiated these hourly rates which he said were very competitive.

[174] Mr. Ward agreed that rough carpentry for the addition was part of his scope of work.

[175] The rates charged by Diamond Builders compare favourably to Ward’s charge-out rate of $65 per hour.

[176] I am satisfied that Finn Way is entitled to these costs as damages.

7. Fabrication of brackets - $1,640.63

[177] Mr. Karimi testified that a pocket on a concrete wall to support a beam was missing and a bracket had to be fabricated as a remedial measure to support the beam.

[178] Mr. Ward testified that this was to replace a missing bracket that Finn Way was required to supply. He said his contract was not to supply the bracket, just to install it.

[179] Again, there was no complaint about this documented by Finn Way prior to Ward leaving the job. There was no evidence of any discussion between Finn Way and Ward about this issue.

[180] Finn Way has not put forward sufficient proof to award damages for this cost.

8. Drywall and related work - $395,695.00

[181] This is the largest component of Finn Way’s damage claim.

[182] Nortec Drywall Systems Ltd. was contracted by Finn Way to do drywall and related work. It charged Finn Way $50.00 per hour. Mr. Karimi testified that Nortec was selected because there were few drywall companies in Thunder Bay able to do this job, in peak season. He said that Nortec was available, but that it had to add staff from Newfoundland to perform the work. Mr. Karimi testified that he negotiated the hourly rate and was able to reduce it from $60, plus 10% for overhead and profit, to $50. The Purchase Order also included a $75.00 per day living allowance and three one-way flights from Newfoundland. He said that he was satisfied that Finn Way got the best value for its money from Nortec.

[183] Mr. Karimi testified that he received Nortec’s invoices as they came in and approved them for payment. Mr. Sundell signed the time sheets to confirm the hours billed.

[184] Mr. Karimi said that all of the Nortec work was within Ward’s scope of work. He estimated that approximately 3% of the Nortec invoices were related to the kitchen.

[185] Mr. Karimi testified that Nortec started work on July 11, 2010 and worked through until February 19, 2011. He said that Nortec hit the project with full force, finishing from room to room. He said Nortec had to deal with deficient work, redoing some of the taping, some of the mudding and some of the bulkheads.

[186] Ward takes the position that the Nortec costs are unreasonably high and that there was no reason for Nortec to be on the project until February 2011. Mr. Ward agreed that installation of drywall, sanding, painting of drywall, bulkheads, firetaping, T-Bar ceiling, insulation, beading, mudding, fire board, backing, RES channel, corner bead work and cleaning were within his scope of work.

[187] In reviewing Nortec’s invoices and time sheets, found at Exhibit 8, Tab 38, Mr. Ward testified that the following items were not within the scope of his work:

1. Invoice – August 17, 2010 (at p. 51)

• p. 56 – caulking and boxing steel frames – 13 hours

• pp. 62 and 64 – casing steel frames – 59 hours

2. Invoice – September 7, 2010 (at p. 78)

• p. 87 – fixing flooring – 20 hours

• pp. 103 and 104 – deck outside – 60 hours

3. Invoice – September 20, 2010 (at p. 114)

• p. 177 – cutting hole for plumber – 10 hours*

• p. 118 – cutting holes for lights – 40 hours*

4. Invoice – October 4, 2010 (at p. 122)

• p. 123 – unloading transport of cabinets – 10 hours

• p. 130 – moving doors – 7.5 hours

• p. 134 – moving doors – 24.5 hours

• p. 135 – moving doors – 17.5 hours

5. Invoice – November 30, 2010 (at p. 165)

• pp. 166 – 168 – staining – 80 hours

6. Invoice – January 25, 2011 (at p. 187)

• pp. 189, 190, 192 – paint doors – 25 hours

7. Invoice – February 23, 2011 (at p. 196)

• pp. 198 and 199 – paint doors / frames – 43 hours

TOTAL 409.5 hours

• Although the hours for cutting holes included other work, I have credited Ward with the full hours shown in the absence of any breakdown of those hours by Finn Way.

[188] Based on Mr. Ward’s evidence, I calculate that the work which he said was not within his scope of work set out in the Nortec time sheets was 409.5 hours. Finn Way did not rebut Mr. Ward’s evidence as to whether this work was within the scope of his contracts. I will therefore credit Ward with 409.5 hours at Nortec’s charging rate of $50.00 per hour, for a credit of $20,475.00.

[189] Mr. Ward also disagreed with other aspects of Nortec’s invoices and time sheets as they related to work done on the kitchen and work that was required under Purchase Order #MLTC 45. However, I have found that the kitchen and Purchase Order #MLTC 45 were within the scope of work that Ward was required to complete.

[190] The amount claimed by Finn Way for Nortec’s work is $395,695. Deducting $20,475, leaves a damage amount for this aspect of costs of completion of $375,220.

[191] Ward submits that this amount is unreasonably high given its estimate that it could have completed its work for approximately $100,000.

[192] However, the measure of damages is not Ward’s costs to complete its contracted work. At common law, the measure of damages is the cost to Finn Way of procuring substitute services in excess of the contract price. See S.M. Waddams, The Law of Damages, loose-leaf ed. (Toronto: Canada Law Book, 2009) at para. 2.240. Finn Way was under an obligation to procure substitute services with reasonable diligence and at a reasonable cost.

[193] The common law measure of damages is expressed in similar terms in CCA-1, 2008. Once Ward was in default by leaving the jobsite, entitling Finn Way to terminate the contract, s. 7.1.5 of CCA-1, 2008 came into play:

7.1.5 If the Contractor terminates the Subcontractor’s right to continue with the Subcontract Work as provided in paragraphs 7.1.1 and 7.1.4, the Contractor shall be entitled to:

.1 take possession of the Subcontract Work and Products at the Place of Work; subject to the rights of third parties, utilize the Construction Equipment at the Place of the Work; finish the Subcontract Work by whatever method the Contractor may consider expedient, but without undue delay or expense; and

.2 withhold further payment to the Subcontractor until a final certificate for payment is issued; and

.3 charge the Subcontractor the amount by which the full cost of finishing the Subcontract Work and a reasonable allowance to cover the cost of corrections to work performed by the Subcontractor that may be required under SCC 12.3 – WARRANTY, exceeds the unpaid balance of the Subcontract Price; however, if such cost of finishing the Subcontract Work is less than the unpaid balance of the Subcontract Price, the Contractor shall pay the Subcontractor the difference; and

.4 on expiry of the warranty period, charge the Subcontractor the amount by which the cost of corrections to the Subcontractor’s work under SCC 12.3 – WARRANTY exceeds the allowance provided for such corrections, or if the cost of such corrections is less than the allowance, pay the Subcontractor the difference.

[194] In particular, s. 7.1.5.1 provided that Finn Way could “finish the Subcontract Work by whatever method the Contractor may consider expedient, but without undue delay or expense”.

[195] Finn Way proceeded with due diligence to obtain substitute subcontractors.

[196] By letter dated July 5, 2010, approximately one week after Ward left the site, Mr. Karimi advised Mr. Ward that Finn Way had hired Nortec at $50.00 per hour to complete a portion of Ward’s scope of work and that Finn Way would back charge Ward in full for this work and the costs of any other trades required to complete the work. Form & Pour was engaged on July 13, 2010, Diamond Builders on August 10, 2010, Triad on August 11, 2010, Piero’s and Canadian Commercial Flooring in August 2010.

[197] Were the Nortec costs reasonable? Finn Way had no notice Ward was going to leave the job. It had to move quickly. It was the peak of construction season. Nortec was the only drywall contractor available with the capacity to do this work. Mr. Karimi negotiated an hourly rate that was $15 less that Ward’s charge-out rate. Nortec and Finn Way were arm’s-length parties. Mr. Sundell signed off on the hours. Mr. Karimi reviewed the invoices before authorizing payment. The work done by Nortec, other than those aspects that I have disallowed, fell within the scope of Ward’s contracts. The costs billed by Nortec were paid by Finn Way. It was in Finn Way’s own financial interest not to overpay. In assessing the reasonableness of the costs, it is of note that Mr. Sundell testified that after he reviewed all of the documents for all of the pricing that Finn Way had received from other contractors, he concluded that Ward’s quoted price of $400,600 for the first Purchase Order was 50% of what he believed the quote should have been.

[198] I am satisfied that Finn Way met its obligations in completing Ward’s work, both at common law and under CCA-1, 2008, and is entitled to the damages for the work done by Nortec as I have found.

9. Exterior Siding - $28,000.00

[199] Finn Way entered into a Purchase Order with Triad Exterior Contracting Specialists to do the labour for installation of siding for a price of $28,000. This was work required under the second Purchase Order #MLTC 45. Mr. Ward disputed this amount on the grounds that he had cancelled this Purchase Order. I have found that Ward has not established that it was cancelled. Finn Way is entitled to this amount as damages.

10. Delay of 6 weeks - $69,653.00

[200] Finn Way submits that it is entitled to damages for delay on the grounds that by December 1, 2009, Ward had been responsible for a delay of six weeks during foundation work done by Ward. Finn Way also submits that there was at least a further two-week delay after Ward quit the job in order to marshall new forces. Ward disputes the claim and, in particular, disputes that it was responsible for any delay before it left the job. Ward submits that Finn Way was responsible for the project being delayed.

[201] I am not prepared to award Finn Way damages for any delay claimed for the time before Ward left the job.

[202] Finn Way’s concern at the meeting of May 28, 2010 was that Ward had fallen behind schedule. The meeting resolved all issues. There was no evidence that following the meeting, Finn Way intended to charge Ward for what it believed was Ward’s delay as of December 1, 2009. I am also not satisfied that the evidence establishes that as of December 1, 2009, Ward was responsible for the delay alleged by Finn Way.

[203] With respect to the delay claim for the period after Ward left the job, I accept that there would likely have been some delay to the project, although Finn Way entered into its Purchase Order with Nortec on July 5, 2010, a week after Ward left the job. I would have awarded Finn Way damages for delay as a result of Ward leaving the job. However, I am not satisfied with Finn Way’s evidence of damages for this delay.

[204] Finn Way submits that its costs for delay were $46,435.58 per month. Mr. Karimi testified that this was a figure that Finn Way arrived at, based on costs as submitted to the owner. However, Mr. Karimi agreed in cross-examination that these costs came from a method used by Finn Way’s comptroller and that he did not know what the comptroller did. The comptroller did not testify.

[205] Finn Way has not satisfied the onus of proving its damages on this issue.

[206] In summary, I find that Finn Way’s costs of completion arising out of Ward’s breach of contract are as follows:

Concrete $49,000.00

Shingles $18,500.00

Painting $38,825.00

Canopy $9,284.61

Drywall and related work: $395,695.00 - $20,475.00 = $375,220.00

Total $490,829.61

Less credit available under Purchase Order #MLTC 03 and

Purchase Order #MLTC 45 ($118,000.00)

Damages net of credit $372,829.61.

Conclusion

[207] For the reasons given, Finn Way shall have judgment against Ward for damages for breach of contract in the sum of $372,829.61.

Costs

[208] If the parties are unable to agree on costs, the plaintiff shall deliver written submissions, not exceeding five pages, exclusive of its bill of costs and any pertinent offers to settle, within 45 days. The defendant shall deliver responding written submissions, not exceeding five pages, exclusive of any bill of costs it may wish to file for comparison purposes and pertinent offers to settle, within 25 days of the receipt of the plaintiff’s submissions. If no submissions are received within the timetable, the issue of costs will be deemed by the court to have been settled as between the parties.

___”original signed by”

The Hon. Mr. Justice D. C. Shaw

Released: March 5, 2014

COURT FILE NO.: CV-10-0439

DATE: 2014-03-05

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Finn Way General Contractor Inc.,

Plaintiff

• and -

S. Ward Construction Inc.,

Defendant

REASONS FOR JUDGMENT

Shaw J.

Released: March 5, 2014

/mls