COURT FILE NO.: 4277/12 (Welland)

DATE: 2014/04/28

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

V.I.E.W. Systems Inc.

Christopher R. Durdan, for the Plaintiff

Plaintiff

- and -

Mansions of Forest Glen Inc.

Harry Korosis and Luciano Butera, for the Defendant

Defendant

R. A. Lococo, J.

HEARD: February 18, 19, 20, 21, 24, 25 and 26, 2014

REASONS FOR JUDGMENT

I. Introduction

[1] This construction lien action arose from a contract to supply and install drywall for a residential condominium project. The drywall contractor seeks the balance claimed as owing under the contract. The owner denies there is any amount owing, alleging incomplete and deficient work by the contractor. The owner seeks set off of the amount it claims was expended to complete the contract work and remedy the contractor’s deficiencies. The owner also claims that the construction lien is not valid because it was not filed within the required time.

[2] The work to be performed by the drywall contractor was initially outlined in a quote that the contractor provided to the owner. Marco Vukovic, the owner and operator of V.I.E.W. Systems Inc., provided a quote dated June 28, 2010 to Fred Procopio, who was responsible for finance, administration and sales for Mansions of Forest Glen Inc. Mansions was the owner, developer and general contractor for a five-story multi-unit residential condominium project in Niagara Falls. The quote was for the supply and installation of drywall, steel studs and insulation for the project, and was based on architectural drawings provided by Mr. Procopio. The quote was also reviewed by Albert Varejao, who was responsible for construction matters for Mansions.

[3] After discussions between Mr. Vukovic, Mr. Procopio and Mr Varejao, VIEW was awarded the contract. The contract price was $929,000 plus harmonized sales tax (HST), as set out in the quote. The parties did not enter into a formal written agreement at that time.

[4] VIEW commenced work under the drywall contract in or about August 2010. By January 2011, disputes had arisen between the parties with respect to the scope of work under the project. According to VIEW, certain work it was being asked to perform constituted “extras” that were not included in the contract, entitling VIEW to payments beyond the fixed contract price. Mansions’ position was that the disputed work was within the scope of the contract, and was included in the contract price.

[5] Discussions relating to these disputes also included representatives of Meridian Credit Union, Mansions’ lender for the project, and Hallex Engineering Ltd., the project monitor retained by Meridian. James Halucha of Hallex played an intermediary role in discussions between VIEW and Mansions to resolve the areas of dispute.

[6] VIEW and Mansions ultimately agreed to enter into a written agreement dated April 8, 2011 entitled Steel Stud, Insulation, Drywall and Ceiling Finish Contract. According to the limited Agreed Statement of Fact filed at trial, this agreement was the contract under which VIEW’s work on the project was ultimately carried out. The April 2011 agreement was intended to clarify the scope of work covered by the contract. Under that agreement, the contract price was increased to $979,000 plus HST, $50,000 more than the price specified in the June 2010 quote. The agreement also provided that it covered “all changes which have been performed to date.” In this regard, it was common ground between the parties that any amount that VIEW had previously claimed for extras was included in the contract price.

[7] VIEW continued to supply materials and services under the agreement through the summer of 2011, but disputes continued to arise as to the scope of work covered by the contract. On October 6, 2011, Mr. Vukovic sent an email to Mr. Procopio stating his position that VIEW’s work was “100% complete” with certain stated exceptions relating principally to drywall work that could not be completed until further work was done by other trades. Mansions’ position was that there were significant areas of contract work that had not been performed, and that there were also deficiencies in the drywall work performed by VIEW that needed to be remediated. On October 7, 2011 and November 25, 2011, Mansions provided VIEW with lists of items to be addressed. VIEW or its subcontractor was on site to address certain of these issues during that period, although the extent work done during that period was contested by Mansions.

[8] Matters came to a head on November 30, 2011, when Mr. Vukovic advised Mr. Procopio, both by email and in person on the project site, that unless Mansions paid VIEW’s previously rendered invoices by December 2, 2011, VIEW would have no choice but to register a construction lien against the project. Mr. Procopio told Mr. Vukovic to leave the project site and not to come back. No further work was performed by VIEW on the project after that date, except for some minor drywall finishing work that VIEW claims was performed by a subcontractor of VIEW in the day or two following November 30.

[9] On December 2, 2011, VIEW registered a claim for a construction lien against the project property, claiming that $143,946.44 was owing under the drywall contract. The lien was vacated by order of this court dated December 19, 2011 following the posting of a letter of credit by Mansions. VIEW subsequently commenced this action by Statement of Claim dated January 6, 2012 claiming $143,946.44.

[10] Mansions disputes that there is any amount owing to VIEW under the contract, alleging incomplete and deficient work by VIEW. Mansions claims set off in the amount of $77,250.77 from VIEW for material and services to complete the contract work and remedy VIEW’s deficiencies. Mansions also claims that VIEW failed to preserve its construction lien by registering it within the time required by the Construction Lien Act.[^1]

[11] The issues to be determined are therefore as follows:

1. Performance of contract work – Did VIEW fail to perform work required to be performed under the drywall contract?

2. Contract deficiencies – Was any drywall work performed by VIEW under the contract deficient?

3. Costs incurred by Mansions – To what extent did Mansions incur costs to remedy incomplete or deficient work by VIEW under the drywall contract?

4. Validity of construction lien – Did VIEW register the construction lien in a timely manner, thereby insuring the validity of the lien?

[12] I will deal with each of these issues in turn below.

II. Performance of contract work

[13] Did VIEW fail to perform work required to be performed under the drywall contract?

[14] As previously noted, Mansions claimed that there were significant areas of contract work that VIEW had not performed. In this regard, there were three principal areas of dispute: (a) corridor ceilings, (b) balcony ceilings, and (c) bathtub walls. These three areas are dealt with in turn below.

(a) Corridor ceilings

[15] Mansions claimed that VIEW was required to complete the corridor ceilings for each of the five floors of the project by installing drywall bulkheads on either side of the hallway as well as an acoustical tile ceiling between the bulkheads suspended on a metal grid. VIEW’s position was that the contract required VIEW to supply and install either a drywall ceiling or a suspended acoustical tile ceiling, but not a combination of the two, which would involve greater expense to install than one or the other.

[16] By way of background, it was common ground between the parties that various mechanical services such as duct work, gas lines and electrical cables were to run along the top of the corridors beneath the ceiling. The ceiling had to be constructed in a manner that would provide access to these services should the need arise. According to the testimony of witnesses from both VIEW (Mr. Vukovic) and Mansions (Richard Ramos, the project manager), both types of ceilings were capable of providing the functionality/access requirements for the corridors. In the case of an acoustical ceiling, the acoustical tiles could easily be removed from the metal frame to provide access. In the case of a drywall ceiling, access could be provided by periodic hatches in the drywall.

[17] According to VIEW, the agreement permitted Mansions to choose either an acoustical tile ceiling or a drywall ceiling, with either being capable of providing the required access. However, in VIEW’s submission, Mansions was not entitled to require a combination of the two. In support of its position, VIEW relied on what it considered to be the clear wording of the April 2011 agreement, under “Scope of Work”, as follows: “Corridor to receive acoustic ceiling (CGC Donn grid & Radar Tiles) or drywall ceiling.” This wording had been carried over without substantive change from VIEW’s June 2010 quote.

[18] According to Mr. Vukovic’s testimony, at the time of both the June 2010 quote and the April 2011 agreement, Mansions had not yet decided how it wanted the corridor ceiling to be constructed. Mr. Valejao denied that Mansions had not made this decision prior to the April 2011 agreement, but it was unclear from his testimony when he claimed Mansions’ decision was communicated to VIEW.

[19] Mansions’ position was that under the contract, it was entitled to require VIEW to construct bulkheads, finished with drywall and ready for paint, on either side of the hallway, and to install an acoustical tile ceiling suspended on a metal grid between the bulkheads. In this regard, Mansions’ counsel argued that the April 2011 agreement had to be read in light of the wording of the June 2010 quote. Mansions’ counsel also argued that I should take into account the circumstances surrounding the changes that were made between the two documents, the goal of the April 2011 agreement being to wrap up all extras to date and to eliminate any future extras, in his submission.

[20] In particular, Mansions’ counsel noted that the quote specified that 2,500 linear feet of bulkheads and 23,000 square feet of drywall ceiling were included in the contract price, with an additional charge for any bulkheads or drywall ceiling beyond that limit. One of the areas of dispute between the parties prior to the April 2011 agreement related to VIEW’s claims for extras for bulkheads and drywall ceilings that, according to VIEW, were not contemplated by the June 2010 quote. In the April 2011 agreement, the numerical limitations on these items that had been included in the quote were omitted. In Mansions’ submission, this sequence of events supported its position that a corridor ceiling consisting of both bulkheads and suspended acoustical tiles came within the scope of the contract.

[21] Mansions’ position on the appropriate interpretation of the April 2011 agreement raises the question of the extent to which evidence beyond the words of a contract can be used to determine its meaning. This issue was recently considered by the Ontario Court of Appeal in SeaWorld Parks & Entertainment LLC v. Marineland of Canada Inc.,[^2] in the following terms:

There is no dispute between the parties that where the words of a contract are clear and unambiguous, extrinsic evidence cannot be used to alter their meaning. Ambiguity is required before that is permitted. See: Eli Lily and Co. v. Novopharm Ltd., [1998] 2 S.C.R. 129, at para. 55. At the same time, consideration of the circumstances in which the contract was made is part of the interpretive process. This factual matrix is relevant not to alter the meaning of clear and unambiguous language but to assist the court "to determine the meaning of the contract against its objective contextual scene", in the words of Lord Justice Steyn as adopted in this court in Dumbrell v. Regional Group of Companies (2007), 2007 ONCA 59, 85 O.R. (3d) 616 (Ont. C.A.).

[22] In this case, having considered the wording of the April 2011 agreement in the context of the surrounding circumstances, including VIEW’s prior quote, I have concluded that the contract required VIEW to supply and install either a drywall ceiling or a suspended acoustical tile ceiling in the corridors of each of the five floors of the project. However, the contract did not require VIEW to install a ceiling that was a combination of the two, as contended by Mansions.

[23] In my view, the wording of the April 2011 agreement unambiguously requires VIEW to supply and install either a suspended acoustical tile ceiling or a drywall ceiling, but not a ceiling consisting of both components. In this regard, I did not find the terms of the prior quote relating to numerical limits for bulkheads and drywall ceilings and the elimination of these limits in the final agreement to be of any assistance, nor did they support a contrary interpretation of the agreement. As well, I note that the only reference to bulkheads in the April 2011 agreement requires “All bulkheads in units to be framed and finished with drywall, ready for paint.”[^3] There is no reference in the agreement to bulkheads in other locations. This requirement also corresponds to the only other reference to bulkheads in the quote, which states “All Bulkheads in Units which are required to cover mechanical are included.”[^4] In all the circumstances, I do not see how consideration of the changes from the previous quote assists Mansions in supporting its interpretation of the contract relating to corridor ceilings.

[24] I also agree with VIEW that the evidence supports VIEW’s position that the issue of how Mansions wanted the corridor ceilings to be finished remained outstanding at the time the April 2011 agreement was entered into. In this regard, I accept the testimony of Mr. Vukovic that this decision was not communicated to him prior to that date. His testimony was supported by his emails to Mr. Procopio of August 1, 2011 and August 4, 2011, some four months later, in which he asks for a decision on the corridor ceilings. As well, in an email dated August 8, 2011 to Mr. Procopio, Mr. Vukovic stated his position that the agreement requires either an acoustical tile ceiling or a drywall ceiling, but also references oral discussions in which he suggested other options to address Mansions’ request for a combination of the two, some of which would involve additional cost. In my view, these emails clearly support VIEW’s position that Mansions had not made a decision on this issue until sometime after the April 2011 agreement was entered into.

[25] I also accept Mr. Vukovic’s testimony that a combination ceiling, as requested by Mansions, would be more labour and material intensive than a ceiling of either acoustical tiles or drywall, but not both. That evidence was also supported by the expert report of Belanger Engineering, consulting engineers retained by VIEW, which was filed on consent as part of the evidence at trial. The contents of that report support VIEW’s position that its interpretation of the agreement is reasonable since it makes sense from a business perspective. In this regard, I note in passing that the cost estimated by Belanger Engineering for a ceiling of either drywall or acoustical tiles (but not both) is consistent with the amount by which VIEW reduced its October 29, 2011 invoice (being $15,500) in order to recognize the fact that Mansions made alternative arrangements with Ryan Drywall for completion of the corridor ceilings.

[26] In reaching my conclusion on this issue, I also took into account Mansions’ argument that I should interpret the April 2011 agreement to give effect to the goal of the parties to wrap up all extras to date and to eliminate any future extras. While I agree with Mansions’ counsel that the April 2011 agreement accomplished the goal of settling VIEW’s claims for extras up to that date, I cannot see how the parties reasonably expected to eliminate all future extras, given the terms of the April 2011 agreement, which were apparently settled without legal advice. Clearly, the agreement provided ample opportunity for ongoing areas of dispute, as demonstrated by the outstanding issues in this case.

[27] Accordingly, I find that the drywall contract required VIEW to supply and install either a drywall ceiling or a suspended acoustical tile ceiling in the corridors on each floor of the project. The contract did not require VIEW to install a ceiling consisting of bulkheads on either side of the corridor and a suspended acoustical tile ceiling in between, as contended by Mansions.

(b) Balcony ceilings

[28] With respect to the balcony ceilings, Mansions claimed that VIEW was required to supply and install exterior grade gypsum board on the ceilings of the unit balconies that were finished and ready for paint. VIEW agreed that it was required to install exterior grade gypsum board on the ceiling, but did not agree that the surface was required to be finished and ready for paint.

[29] In support of its position, VIEW once again relied on the wording of the April 2011 agreement, under “Scope of Work”, as follows: “Balconies on second to fifth floor to receive drop ceiling with ½” exterior grade gypsum board (Densglass Gold or equivalent).” VIEW’s counsel contrasted this provision to wording elsewhere in the contract, which required drywall to be “finished and ready for paint.” These words were not included when referring to exterior gypsum board.

[30] In his testimony, Mr. Vukovic stated that VIEW installed Densglass Gold (a brand of exterior gypsum board) on the balcony ceilings from the centre beam to the building wall, with the expectation that it would be covered by another product such as stucco or siding, as would often be the case with that material. Accordingly, the exterior gypsum board would not need to be finished and ready for paint. I also note that according to the witnesses called by Mansions, Mansions subsequently covered the exterior gypsum board on the balcony ceilings with siding rather than having it painted, although Mansions had no choice since it was too late in the season to apply exterior paint.

[31] By way of contrast to Mr. Vukovic’s testimony, Mr. Varejao testified that it was Mansions’ intention that the balcony ceilings be painted to match the paint on the exposed concrete on the outer side of the balconies beyond the centre beam. Therefore, it was his reasonable expectation that the exterior gypsum board be finished and ready for paint, which would have required the application of a finishing compound, sanding and taping.

[32] As was the case with the corridor ceiling, I have concluded that the wording of the contract, in the context of the surrounding circumstances, support VIEW’s interpretation of the contract with respect to the balcony ceilings. Accordingly, I find that the exterior gypsum board to be installed by VIEW on the balcony ceilings was not required to be finished and ready for paint, as contended by Mansions.

[33] In this regard, I agree with VIEW’s position that the requirement to install exterior grade gypsum board on the balcony ceilings should be read in the context of the requirement elsewhere in the agreement that drywall be finished and ready for paint. I accept Mr. Vukovic’s testimony to the effect that drywall is a form of gypsum board, but it would not be correct to say that drywall includes exterior gypsum board. The exterior gypsum board would therefore not be covered by the requirement that drywall be finished and ready for paint. I also accept his testimony that it is often the case that exterior gypsum board would be covered by a material such as stucco or siding that would not require the surface to be finished and ready for paint. In these circumstances, if it was intended that the exterior gypsum board on the balcony ceilings be finished and ready for paint in this case, it would have been necessary for the agreement to state that explicitly.

[34] Support for VIEW’s position is also found elsewhere in the April 2011 agreement. The first bullet point under “Scope of Work” reads in part: “Supply and install steel stud framing, gypsum board and acoustic ceiling as per architectural drawings issued for permit. Drywall to be finished and ready for paint.”[^5] By way of contrast, the corresponding bullet point in the June 2010 quote concluded with the words “All gypsum to be ready for paint.”[^6] By implication, it is reasonable to conclude that a distinction was being drawn as between gypsum and drywall, and that the same requirements did not necessarily apply in each case.

[35] Accordingly, I find that that the exterior grade gypsum board to be installed by VIEW on the ceilings of the unit balconies were not required to be finished and ready for paint.

(c) Bathtub walls

[36] The final significant area of alleged non-performance related to the walls enclosing the bathtubs. VIEW installed waterproof tile-backer gypsum board on the three walls enclosing the bathtubs in each unit bathroom. For bathrooms containing both a bathtub and a separate shower stall, Mansions claimed that VIEW was required to finish the gypsum board on the bathtub walls ready for paint, since tile was going to be installed for only 24 inches above the bathtub. VIEW’s position was that it was not required by the contract to finish the bathtub walls ready for paint.

[37] By way of background, it was common ground between the parties that in the bathrooms in each unit, there was a rough-in for a showerhead on the wall at the end of the bathtub. On that basis, Mr. Vukovic testified that it was VIEW’s expectation that the area would be used as a combination shower and bathtub, with the three walls enclosing the bathtub being tiled to the ceiling. On those walls, VIEW installed waterproof tile-backer gypsum board, which was more expensive than regular drywall.

[38] For its part, Mansions claimed that for bathrooms containing both a bathtub and a separate shower stall, VIEW was required to finish the gypsum board on the bathtub walls ready for paint, since tile was going to be installed for only 24 inches above the bathtub. To finish the gypsum board would have required the application of finishing compound, taping and sanding. According to Mansions, there was no need to have both a combination bathtub/shower and a separate shower stall in the same bathroom. Therefore, it should have been obvious that the walls would not be covered by tiles up to the ceiling.

[39] The question of how the walls enclosing the bathtubs were to be finished was not dealt with explicitly in either the April 2011 agreement or the June 2010 quote, nor was it the subject of dispute between the parties prior to the entering into of the April 2011 agreement. According to Mansions, the requirement to do so is encompassed in the general requirement in the agreement that drywall be finished and ready for paint. However, if that is correct, Mansions could have required VIEW to finish the tile-backer ready for paint on all bathtub walls, including those with no separate shower stall, which Mansions did not do.

[40] In his testimony, Mr. Varejao stated that he had on more than one occasion told one of VIEW’s subcontracted workers, Isko, not to install tile-backer over the bathtubs in those units and that the walls needed to be finished and ready for paint. According to Mr. Vukovic and other witnesses, Isko was the VIEW worker to whom others went for direction when Mr. Vukovic was not on site. However, the timing of these conversations with Isko was not clear from Mr. Varejao’s testimony. Mansions’ counsel argued that an adverse inference should be drawn from VIEW’s failure to call Isko as a witness, lending support to Mr. Varejao’s testimony about his conversations with Isko about the bathtub walls.

[41] Having considered the evidence and submissions of counsel on this point, I have concluded that the contract did not require that the tile backer gypsum board installed by VIEW on the bathtub walls be finished and ready for paint. Had VIEW complied with Mansions’ request to do so for bathrooms with both a bathtub and a separate shower stall, the additional work would have constituted an “extra” that was not included in the contract price.

[42] In reaching that conclusion, I took into account the wording of the April 2011 agreement, which did not explicitly address the question of how the walls above the bathtubs were to be finished. I also considered the general requirement in the April 2011 agreement that drywall be finished and ready for paint, but concluded that those words could not reasonably be read as requiring the finishing of bathtub walls only in those bathrooms with a bathtub and a separate shower stall.

[43] In this regard, I accept Mr. Vukovic’s evidence that based on the presence of rough-ins for a showerhead in all bathrooms, it was reasonable for him to install tile-backer gypsum board on the bathtub walls, with the expectation that they would be covered with tiles to the ceiling. I also accept Mr. Vukovic’s evidence that he was not aware that the bathtub walls were an issue until October 2011 when the issue was raised by Mansions in the context of outstanding issues of non-performance and deficiencies under the contract. I also took into account Mr. Varejao’s testimony that he had told Isko that the bathtub walls needed to be finished and ready for paint, and considered whether I should draw an adverse inference from the fact that VIEW did not call Isko as a witness. However, it was clear from the evidence that the question of how the bathtub walls were to be finished was not an issue at the time the April 2011 agreement was entered into, and that the tile-backer gypsum board had been installed well before Mr. Vukovic became aware of the issue in October 2011. In these circumstances, I concluded that Isko’s testimony as to conversations he may have had with Mr. Varejao were not likely to be of any significant assistance in resolving the issue of whether the contract required VIEW to finish the bathtub walls as contended by Mansions.

[44] Accordingly, I find that the contract did not require that the tile-backer gypsum board installed by VIEW on the bathtub walls be finished and ready for paint.

III. Contract deficiencies

[45] Was any drywall work performed by VIEW under the contract deficient?

(a) Background

[46] As previously noted, in addition to the alleged areas of non-performance under the contract, Mansions also claimed that certain of the drywall work performed by VIEW was deficient, and that these deficiencies were not remedied when drawn to VIEW’s attention. VIEW denied that its work was deficient, claiming that any issues drawn to its attention were remedied to the extent that VIEW was able to do so before being barred from the project site on November 30, 2011.

[47] By way of background, as noted previously, on October 6, 2011, Mr. Vukovic sent an email to Mr. Procopio stating his position that VIEW’s work was “100% complete” with certain stated exceptions where VIEW was unable to complete the work due to unfinished work by other trades. Based on the state of completion of VIEW’s work, Mr. Vukovic requested payment of his previously rendered invoice dated August 29, 2011.

[48] On October 8, 2011, Mr. Vukovic received an email from Richard Ramos, Mansions’ project manager, with an attached letter dated October 7, 2011. That letter set out a list of items to be completed under contract, and instructed VIEW to complete the items commencing by October 11, 2011. According to the testimony of Mr. Ramos, this list was compiled following a detailed walk-through of the building by Mr. Ramos on October 7, 2011. Mr. Ramos and Mr. Vukovic conducted a further walk through of the project on November 21, 2011, following which Mr. Vukovic sent on email to Mr. Procopio on November 24, 2011, setting out a list of items that remained to be completed by VIEW, according to Mr. Vukovic. On November 25, 2011, Mr. Ramos sent an email to Mr. Vukovic, with an attached letter dated November 23, 2011, setting out Mr. Ramos’ list of outstanding items. A further list of alleged deficiencies was contained in document dated December 8, 2011 entitled General Field Report, prepared by Michael Fraser of Raimondo + Associates Architects Inc. Raimondo was a third party assessor retained by Mansions to provide a report on the quality of workmanship for installed gypsum board for the Mansions project.

[49] In order to support its claim for set off based on deficiencies in the drywall work performed by VIEW, Mansions relied on the testimony of Mr. Ramos, Mr. Varejao and Mr. Fraser as well as the incomplete/deficiency lists prepared by Mr. Ramos and Mr. Fraser. With respect to alleged deficiencies arising from the size of gaps in drywall at floor level and around pipe penetrations, Mansions also relied on the engineering expert report of Morrison Hershfield, which was filed in evidence on consent. In response to the latter report, VIEW filed on consent the expert engineering report of Belanger Engineering.

[50] In support of its position that VIEW remedied any deficiencies to the extent it was permitted to do so, it relied on the testimony of Mr. Vukocic as well as the testimony of two of VIEW’s subcontracted workers, Don Casey and Kandzic (Dean) Hajrudin, who testified that they had addressed various items that appeared on Mansions’ lists of deficiencies. VIEW also relied on the fact that many of the items that Mansions now claims as being deficient did not appear on either Mr. Ramos’ October 7, 2011 list or in his November 23, 2011 list, with Mr. Ramos admitting under cross examination that these lists were intended to be comprehensive. VIEW also relied on the fact that some of the items appeared on the earlier list but not the later list, implying that the items had been addressed in the interim in VIEW’s submission.

[51] Mr. Ramos testified in chief that to the extent any items had been addressed before November 30, it was not VIEW who addressed them. However, he admitted under cross-examination that in making that statement he was relying on what he had been told by Mr. Vareijao or Mr. Procopio rather than personal observation. He also stated that he did not know and would not recognize Mr. Casey, and would therefore not have known whether Mr. Casey carried out remedial work during October or November 2011. Mr. Ramos also characterized the October 7 list as relating to required contract work that had not been performed, as distinguished from November 23 list, which he characterized as relating to deficiencies in completed work, which in his view negated the implication that VIEW had addressed items that appeared on the first list but not the second list. However, this distinction did not stand up under cross-examination, with Mr. Ramos conceding that the items on each list did not clearly fall into one category or the other.

[52] While Mr. Vukovic conceded that there were limited items that VIEW was not able to address, his evidence was that it would have cost only about $3,000 to complete those items. In any case, in VIEW’s submission, VIEW could not be held responsible for items it was not able to complete before being barred from the project on November 30, 2011.

[53] For its part, Mansions claimed that it was entitled to bar VIEW from the project, since Mr. Vukovic had acted in a rude and disruptive manner on the project site, and in his confrontation with Mr. Procopio on November 30, 2011, had not only threatened to “lien the project” if his invoices were not paid, but also physically threatened Mr. Procopio, stating that he “could kick his ass.” Mr. Vukovic admitted threatening to lien the project, but denied physically threatening Mr. Procopio or otherwise being rude or disruptive, and that it was Mr. Procopio that had been rude and profane when he told him not to return to the job site. Mr. Procopio in fact called the police after Mr. Vukovic left the site, and asked that Marco be advised not to return. As set out in a police occurrence report filed in evidence, a policeman spoke to both Mr. Procopio (in person) and Mr. Vukovic (by telephone), but decided that no further police action was required.

(b) Overall conclusions

[54] Having considered the evidence and counsel’s submission relating to alleged deficiencies in VIEW’s work under the drywall contract, I have concluded that with the limited exceptions referred to below, VIEW’s work did not contain deficiencies that would have entitled Mansion to a right of set off with respect to amounts owed to VIEW under the contract. However, I have also concluded that to the limited extent that there were any deficiencies, Mansion is entitled to a right of set off with respect to the cost to Mansions to remediate those deficiencies. In this regard, the appropriate amount for the set off would be the greater of $3,000 (the amount conceded by VIEW) and the amount that Mansions was able to establish it has incurred to remedy any deficiency that was the responsibility of VIEW under the drywall contract. As detailed further below under “Costs incurred by Mansions”, I have concluded that Mansions has not established that it incurred costs greater than $3,000 to remedy any such deficiency. Accordingly, Mansions is entitled to a right of set off of $3,000 against the amount otherwise payable to VIEW under the drywall contract.

[55] In reaching my conclusion that Mansions was entitled to a right of set off to the extent that there were any deficiencies, I was sympathetic to VIEW’s contention that it should not be held responsible for any deficient work that it was not able to remedy after VIEW was banned from the project site on November 30, 2011. While I have no doubt that there was an unpleasant confrontation between Mr. Vukovic and Mr. Procopio on that date, I was not satisfied on the evidence that Mr. Vukovic engaged in conduct that would have justified banning VIEW workers from remedying deficiencies or otherwise completing contract work. However, VIEW has conceded that there were in fact some deficiencies, although minor in nature, that were left to be remediated as of November 30, 2011. In my view, to the extent that there were any deficiencies that should have corrected by VIEW in accordance with its obligations under the Drywall Agreement, VIEW should be responsible for the cost of doing so by way of set off, notwithstanding Mansions’ unjustified action barring VIEW from the project site. Otherwise, VIEW would enjoy a financial windfall (albeit limited) that would not be warranted in the circumstances.

[56] In reaching my conclusions with respect to the existence and extent of any deficiencies, I found the witnesses called on behalf each of VIEW and Mansions to be generally reliable in the sense that they were providing their honest recollection of events without attempting to unduly colour their testimony. However, I generally found the evidence of Mr. Vukovic of events as they unfolded, and as to the timing of those events, to be more reliable than that of Messrs. Procopio, Varejao and Ramos, and more consistent with the documentary evidence, including correspondence and other documents that were contemporaneous with the events in question.

(c) Deficiencies alleged by Mansions

[57] In his closing submissions, Mansions’ counsel outlined a number of aspects of VIEW’s work that Mansions considered to be deficient. Perhaps the most significant of these alleged deficiencies related to gaps in the drywall at floor level and around pipes. According to Mansions, VIEW failed to complete the drywalling of demising walls (being walls dividing a unit from another unit or common area) and interior walls (within units) by leaving the bottom unfinished from one inch to two inches from the floor, with the result that the unit could not be properly fire sealed and/or finished with baseboard trim. Similarly, Mansions also alleged that VIEW failed to reduce the size of gaps in the drywall that had been cut overlarge around pipe penetrations in demising walls, with the result that the affected units could not be properly fire sealed. In addition, according to Mansions, VIEW did not install ceilings in many of the units’ closets. As well, Mansions alleged that VIEW failed to properly complete the returns on all exterior windows, which required Mansions to perform extra work by to installing wood sills.

[58] Based on the evidence before me, I was satisfied that VIEW addressed and remedied deficiencies of the foregoing nature of any significance that had been identified prior to November 30, 2011, to the extent VIEW was able to do so by that date. In any case, as discussed further below under “Costs incurred by Mansions”, I am not satisfied on the evidence that Mansions incurred additional costs in order to address any such deficiencies beyond the $3,000 amount conceded by VIEW.

[59] Mansions also alleged that VIEW failed to supply and install acoustical tiles in the mechanical/laundry rooms. However, I accept Mr. Vukovic’s testimony that VIEW did in fact supply the acoustical tiles for those areas, which in some cases were not installed in the metal grid at the request of Mansions pending completion of required work by other trades.

[60] As well, Mansions alleged that VIEW failed to properly collect and dispose of their refuse, with the result that Mansions incurred additional cost to do so. However, the testimony of Mansions’ witnesses on this subject, in my view, did not rise above the level of a generalized allegation and did not provide a sufficient basis to find that VIEW was in breach of its contractual obligations. In any case, as discussed further below under “Costs incurred by Mansions”, I was not satisfied that Mansions provided adequate evidence to quantify any resulting costs it may have incurred.

IV. Costs incurred by Mansions

[61] To what extent did Mansions incur costs to remedy incomplete or deficient work by VIEW under the drywall contract?

[62] Mansions claimed a total of $77,250.52 by way of set off for costs incurred to remedy incomplete or deficient work by VIEW. The particulars of that claim are summarized in a document entitled Defendant’s Summary of Costs to Date, filed as Exhibit 7 at the trial. As noted further below, I am making findings of fact with respect to the amount claimed for each item listed in the defence summary. Where applicable, these findings have been made on the assumption that Mansions is entitled to a right of set off for expenses in that category, including where I actually reached the opposite conclusion.

(a) Drywall supplied by Altieri Building Supplies

[63] Mansions claimed set off of $1,593.94 for drywall, supported by three invoices from Altieri Building Supplies dated November 1, 2011, January 5, 2012 and August 7, 2012. In his testimony, Mr. Varejao stated that this material was used by Mansions’ workers to complete work and remediate deficiencies that were the responsibility of VIEW under the drywall contract.

[64] To the extent that Mansions has established it was entitled to set off amounts it paid for the supply of drywall, I find the amount payable under this item to be zero. On cross-examination, Mr. Varejao was unable to explain why in response to undertakings given during examinations for discovery, VIEW’s counsel was advised that according to Mr. Procopio, the Altieri invoices should be disregarded since they did not apply to rectifying work performed by VIEW. As well, he was unable to explain adequately certain items in the invoices or provide an adequate explanation as to how the timing of the invoices related to alleged remedial work. In all the circumstances, I was not satisfied on the evidence that the material was used for the stated purpose.

(b) Bulkheads – invoices from Ryan’s Drywall

[65] Mansions claimed set off of $30,673.09 for the supply and installation of bulkheads in the corridors and kitchen bulkheads in Units 123 and 423. To support this claim, Mansions relied on five invoices from Ryan’s Drywall dated from August 2, 2011 to October 3, 2011. On the face of the invoices, two of them (totaling $452.00) related to the kitchen bulkheads and the other three (totaling $30,221.09) related to the corridor bulkheads. This breakdown accords with the testimony of Mr. Varejao, who testified that most of the amount claimed related to the supply and installation of bulkheads in the corridors, as a result of VIEW’s refusal to supply and install ceilings in the corridor’s in accordance with Mansions’ specifications.

[66] Based on these invoices and Mr. Varejao’s testimony, I find that Mansions paid a total of $452.00 to Ryan’s Drywall to install kitchen bulkheads in Units 123 and 423 and a total of $30,221.09 to install the corridor bulkheads. Under the April 2011 agreement VIEW is responsible for supplying all bulkheads in units. Accordingly, Mansions would be entitled to a right of set off in the amount of $452.00.

[67] Conversely, consistent with my conclusions above under “Performance of contract work – Corridor ceilings”, Mansions did not have a right of set off with respect to the supply and installation of corridor bulkheads. Had I found a right of set off for the corridor bulkheads, I would have found that the amount of the set off for this item would have been $30,221.09.

(c) Drywall repairs by Keith Macklem and Jim Nicholson

[68] Mansions claimed set off of $21,998.50 for drywall repairs by Keith Macklem and $15,000.00 for 600 hours of labour (at $25.00 per hour) by Jim Nicholson in performing drywall repairs. According to the testimony of Mr. Varejao, this work was necessary to complete drywall work and remediate deficiencies that were the responsibility of VIEW under the drywall contract. The Macklem claim was for labour and supplies in January and February 2012. The Nicholson claim was for labour performed by Jim Nicholson commencing in April 2012 when Keith Macklem was no longer available. Filed in support of these claims were printed statements totaling $21,998.50 for the Macklem claim and a handwritten note dated December 5, 2012, signed by Jim Nicholson.

[69] Having considered the relevant evidence, to the extent that Mansions has established it was entitled to set off amounts it paid for the installation of drywall, I would set the amount recoverable by Mansions for these items to be nil. In my view, the documentary evidence supplied is woefully inadequate to support the amounts claimed. As well, I found the testimony of Mr. Varejao as to these claims to be sufficiently vague so as not to provide an adequate basis for finding any amount to be payable by way of set off in the absence of adequate documentary support. In this regard, I note that the first of the printed statements supporting the Macklem claim has nothing on the face of the statement indicating who it is from or who it is to, and the second statement has a number of handwritten notations and amendments, with “Mansions” hand-printed at the top and “Keith Mackem” hand-printed at the bottom. The Nicholson note was evidently prepared sometime after the work was actually done, and does not contain any statement of the amount charged or the hours spent, whether in total or by task. As well, in the case of both claims, the supporting invoices and handwritten note do not provide further information to support the claims being made. Given that this action had already been commenced at the time these documents were rendered, it was reasonable to expect them to contain further particulars of this nature.

(d) Remedial work by Mansions’ workforce

[70] Mansions claimed set off of $8,040.00 for remedial work performed by its own workforce, including cleaning up refuse that Mansions alleged VIEW failed to clean up itself during the course of its contract. According to the testimony of Mr. Varejao, this amount constituted a total of 201 hours spent by Mansions’ workforce for this purpose, charged at $40.00 per hour. Mr. Varejao testified that he considered this hourly rate to be fair taking into account that Mansions pays its workers an average of $30.00 per hour as well as other associated labour costs. Handwritten columns of figures prepared by Mr. Varejao were provided in support of this claim, which Mr. Varejao stated were derived from a diary he maintained of the work performed on the project. -

[71] Having considered the relevant evidence, to the extent if any that Mansions had a right of set off for this item, I would set the amount recoverable by Mansions to be nil. Similar to be reasoning relating to the items referred to in the immediately preceding section, I did not consider Mr. Varejao’s oral testimony to provide an adequate basis for finding any amount to be payable by way of set off, given the lack of detail as to the nature, scope and timing of the work carried out. As well, the documentary evidence provided was not of significant assistance by way of support for his testimony.

(e) Soffit material for balconies

[72] Mansions claimed set off of $2,898.31 for aluminum soffit material used to complete balcony bulkheads and ceiling returns. This claim is supported by three invoices dated December 13, 2011 to December 20, 2011.

[73] Consistent with my finding above under “Performance of contract work – Balcony ceilings”, Mansions did not have a right of set off for this item. Had I found that Mansions had a right of set off for this item, I would have accepted Mansions’ set off claim for aluminum soffit material in the amount of $2,898.31. I accept the testimony of Mansions’ witnesses that because of the time of year that the balconies were being finished, it would not have been open to Mansions to paint the balcony ceilings or to apply stucco as an alternative. Therefore, soffit material was the only reasonable alternative to complete the balcony ceilings in a timely manner.

(f) Acoustical tiles

[74] Mansions claimed set off of $2,302.84 for the supply of acoustical tile and material for the corridors and mechanical/laundry rooms. This claim was supported by three invoices from Ontario Acoustic Supply Inc. The first two invoices were dated in November 2011 and totaled $2,005.37. The third invoice was dated January 18, 2012 in the amount of $297.47.

[75] According to the testimony of Mr. Varejao, the first two invoices totaling $2,005.37 related to tiles (each measuring two feet by two feet) for use in the corridor ceilings. He also testified that Ryan Drywall’s contract for the corridor ceilings did not include the supply of ceiling tiles. As well, he testified that the third invoice in the amount of $297.47 was for tiles (measuring two feet by four feet) used in mechanical/laundry rooms and a service access hallway.

[76] Consistent with my conclusions above under “Performance of contract work – Corridor ceilings”, Mansions did not have a right of set off with respect to the supply of acoustical tiles for the corridor ceilings. Had I found that Mansions had a right of set off for this item. I would have allowed Mansions’ set of claim in the amount of $2,005.37. I accept Mr. Varejao’s testimony that Mansions spent $2,005.37 for acoustical tiles for the corridors.

[77] Consistent with my conclusions above under “Contract deficiencies – Deficiencies alleged by Mansions”, Mansions did not have a right of set off with respect to the supply of acoustical tiles for the ceilings in the mechanical/laundry rooms. Had I found that Mansions had a right of set off with respect to this item, I would have found that Mansions would be entitled to a set off in the amount of $297.47.

(g) Drywall work by Franc Zakrayseu

[78] Mansions claimed a total of $7,243.84 for drywall work performed by Franc Zakrayseu. This claim was supported by four invoices. The first invoice in the amount of $2,373.00 was undated and indicated that it related to taping drywall in Unit 137. The other three invoices totaling $4,870.84 were dated in March and June 2012 and indicated that they related to framing, installing and taping drywall.

[79] According to the testimony of Mr. Varejao, the undated invoice referred to Unit 137 in error, and that the work performed was actually in Unit 127. He was unable to state with any precision when this work was performed, although he knew it was prior to the closing date for the sale of that unit in December 2013, more than two years after VIEW was last on the project site. He was also unable to say with any precision what work was performed with respect to the other invoices, although he stated that he knew it was work that should have been performed by VIEW.

[80] Having considered the relevant evidence, to the extent that Mansions has established that it had a right of set off for the drywall work performed by Franc Zakrayseu, I would set the amount recoverable by Mansions to be nil. As with Mansions’ claims in respect of drywall work already referred to, I did not consider Mr. Varejao’s oral testimony to provide an adequate basis for finding any amount to be payable by way of set off, given the lack of detail as to the nature, scope and timing of the work carried out. As well, the documentary evidence provided was not of significant assistance by way of support for his testimony.

(h) Completion of Unit 127 by Mansions’ workforce

[81] Mansions claimed $2,500.00 for work done by its workforce to complete Unit 127. Mansions provided no documentary evidence to support this claim, other than in Exhibit 7 entitled “Defendant’s Summary of Costs to Date”, which indicated $5,000.00 for this item.

[82] In his testimony in chief, Mr. Varejao indicated that the amount of $5,000.00 for this item as stated in Exhibit 7 was excessive, and that he considered $2,500.00 to be a fair allocation of the work done to complete Unit 127 that should have been performed by VIEW under the drywall contract. On cross-examination, he agreed that the amount in question would have been for spraying a “popcorn ceiling”, given his testimony that Franc Zakrayseu billed separately for the drywall work. He was unable to say who did the work or how long it took.

[83] Having considered the relevant evidence, to the extent that Mansions has established it was entitled to a right of set off amount for this item, I would set the amount recoverable by Mansions to be nil. The reasoning that led me to this conclusion is the same as for the previous item.

V. Validity of construction lien

[84] Did VIEW register the construction lien in a timely manner, thereby insuring the validity of the lien? If VIEW did not do so, it would not be entitled to use funds drawn down under the letter of credit filed with the court in order to satisfy a judgment for any unpaid amount under the drywall contract.

[85] The requirements relating to the expiry of a construction lien are set out in section 31 of the Construction Lien Act. Under paragraph 31(2)(b) of that Act, where there is no certification or declaration of the substantial performance of a contract, a contractor’s construction lien rights expires 45 days after the earlier of the date the contract is completed or the date it is abandoned.

[86] Mansions’ position was that VIEW has not established that its construction lien was registered within the time required by the Construction Lien Act. Mansions’ counsel noted in particular the position taken by Mr. Vukovic in his October 6, 2011 email to Fred Procopio that his work was “100% complete” with certain stated exceptions that VIEW did not consider to be major items. VIEW did not register the construction lien until December 2, 2011, which was more than 45 days after October 6. According to Mansions’ counsel, it was inconsistent for VIEW to claim that the construction lien was registered within the required time, given the position it took as to the state of completion on October 6.

[87] On the evidence before me, I am satisfied that VIEW did in fact register the construction lien within the time required by the Construction Lien Act. VIEW was a contractor as defined in subsection 1(1) of the Construction Lien Act, since it contracted directly with the owner, Mansions. There was no certification or declaration of the substantial performance of the drywall contract. Accordingly, paragraph 31(2)(b) of the Construction Lien Act applied, with the result that the construction lien would not have expired in this case until 45 days after the drywall contract was completed.

[88] Under subsection 2(3) of the Construction Lien Act, a contract shall be deemed to be completed when the price of completion, correction of a known defect or last supply is not more than the lesser of (a) one per cent of the contract price, and (b) $1,000. In this case, on the evidence before me, I am satisfied that the drywall contract was not completed within the meaning of that statute until sometime in November 2011. Material and services were still being supplied under the drywall contract during that month, including drywall finishing work performed by VIEW’s subcontractor, Don Casey, and work on balcony ceilings performed by Kandzic (Dean) Hajrudin, another of VIEW’s workers/subcontractors. As well, based on the level of work performed, I am satisfied that the monetary test for deemed completion in subsection 2(3) of the Construction Lien Act was not satisfied until sometime during November 2011. Accordingly, the construction lien was filed within the time required by the Construction Lien Act, thereby insuring the validity of the lien.

VI. Conclusion

[89] For the foregoing reasons, judgment will issue in the Plaintiff’s favour in the amount of $140,946.44, plus pre-judgment and post-judgment interest calculated in accordance with the Courts of Justice Act.[^7] The amount of $140,946.44 was calculated as follows:

Unpaid invoices Invoice No. 56 (extras) $ 2,427.24 Invoice No. 63 (contract work) 37,730.70 Invoice No. 64 (holdback) 108,875.50 $149,033.04

Deductions Overpayments on previous invoices 5,086.60 Set off for deficiencies 3,000.00 8,086.60

Amount due to VIEW $140,946.44

[90] The judgment will also include the following:

1. A declaration that the Claim for Lien of VIEW has attached to the letter of credit posted in this action by Mansions, being Letter of Credit 2013-006N of FirstOntario Credit Union (Accountant of the Superior Court of Justice File No. 520861, FirstOntario Credit Union Letter of Credit 2013-006N, reference no. 520861-170-60-T00001).

2. An order directing the Accountant of the Superior Court of Justice to make a demand of FirstOntario Credit Union on the letter of credit posted in this action by Mansions (Accountant of the Superior Court of Justice File No. 520861, First Ontario Credit Union Letter of Credit 2013-006N, reference no. 520861-170-60-T00001) in the amount of $140,946.44 plus pre-judgment and post-judgment interest and costs.

3. A direction that the Accountant of the Superior Court of Justice to make payment from the proceeds of the Letter of Credit in that amount (with interest and costs) to “McBurney, Durdan, Henderson & Corbett, in trust”, the lawyers for VIEW.

4. An order that upon payment of that amount to McBurney, Durdan, Henderson & Corbett, the Letter of Credit may be returned Mansions for cancellation.

[91] If the parties cannot agree on costs, the Plaintiff may make brief written submissions (not to exceed five pages) together with a bill of costs and any pertinent offers within 21 days. The Defendant will have 21 days after receipt of the Plaintiff’s submissions to respond by brief written submissions. All such submissions are to be forwarded to me at my chambers at 45 Main Street East, Suite 626, Hamilton L8N 2B7. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs.

The Honourable Mr. Justice R.A. Lococo

Released: April 28, 2014

of Forest Glen Inc., 2014 ONSC 2616

COURT FILE NO.: 4277/12 (Welland)

DATE: 2014/04/28

SUPERIOR COURT OF JUSTICE - ONTARIO

BETWEEN:

V.I.E.W. Systems Inc.

Plaintiff

- and -

Mansions of Forest Glen Inc.

Defendant

REASONS FOR JUDGMENT

R. A. Lococo, J.

Released: April 28, 2014

[^1]: R.S.O. 1990, c. C.30. [^2]: 2011 ONCA 616 at para. 16. [^3]: Emphasis added. [^4]: Ibid. [^5]: Ibid. [^6]: Ibid. [^7]: R.S.O. 1990, c. C-43.