ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-11-4709-00
DATE: 20140618
B E T W E E N:
Duplex Electrical Ltd.
Alistair Riswick, for the Plaintiff
Plaintiff
- and -
Rafat General Contractor Inc.; 2109347 Ontario Limited; and the Bank of Nova Scotia
Maura Marchioni, for Rafat General Contractor Inc.; and 2109347 Ontario Limited
Defendants
HEARD: May 16, 20, 21, 22, 26, 27, 28 and 30, 2014
REASONS FOR JUDGMENT
Justice D.L. Edwards
Introduction
[1] The plaintiff, Duplex Electrical Ltd., claims the sum of $84,567.78 for services provided to the defendant, Rafat General Contractor Inc., at 8850 George Bolton Parkway, Caledon, Ontario (the “Property”). Rafat counterclaims for the sum of $42,074.76 that it paid to either complete the work that Duplex did not complete, or to repair Duplex’s deficient work.
[2] Duplex registered a Claim for Lien as Instrument No. PR2112253 in the Registry Office for the Land Registry Division of Peel. It subsequently commenced this action and registered a Certificate of Action as Instrument No. PR2118470. Both instruments were vacated in December 2011, by the Order of Justice Seppi upon the payment into court of $105,809.72.
[3] The Bank of Nova Scotia was noted in default; however, Duplex does not seek any relief against the Bank.
[4] 2109347 Ontario Limited was the owner of the Property at the time of the work.
Background
[5] Certain facts are not disputed.
[6] Duplex Electrical Ltd. has been in business of providing the services of licenced electricians for 28 years. Until April 2011, Remo Capretta (“Ray”) and Joe D’Alessandro (“Joe”) were equal shareholders of Duplex. Each could separately bind Duplex.
[7] Rafat General Contractor Inc. has been in the business of demotion and large road projects since 1987. The sole owner of Rafat is Layth Salim (“Carlo”).
[8] Joe and Carlo have been friends since 1983.
[9] In 2010, Carlo decided to build on the Property a building to house his office, showroom, and equipment service area. Rafat acted as the general contractor. On November 3, 2010, he contacted Joe to discuss retaining Duplex to do certain electrical wiring work for the building. As Joe was away hunting, he suggested that Carlo contact his partner, Ray.
[10] Ray and Carlo spoke on the phone and, as a result, Michael Capretta (“Michael”), who is Ray’s son and a licenced electrician, met Carlo on November 3, 2010. He discussed the building with Carlo and picked up the plans, marked as Exhibit 1, Tabs 3, 4 and 5. These plans were not stamped electrical drawings.
[11] Based upon the plans and the discussions with Carlo, Ray prepared a proposal dated November 4, 2010, marked as Exhibit 1, Tab 1. This proposal was faxed to Carlo. The proposal was divided into two parts: the first part described certain electrical services that were internal to the site for a total of $108,000 plus HST. The second part was a quote to install a new electrical service from the roadway for a cost of $36,000 plus HST.
[12] After Joe returned from hunting, he and Carlo met to discuss the proposal. Carlo advised Joe that he had two other quotes and that the low quote with respect to the work described in the first part of the proposal was $85,000. Joe and Carlo both testified that they agreed to alter the scope of work from what was described in the proposal, and agreed to a price of $95,000. None of the changes to the scope of work were reduced to writing. That decision, coupled with Joe’s subsequent departure from Duplex, is the primary reason that the parties find themselves in court. Both parties were extremely seasoned business entities, and yet, consistently they failed to fully document their dealings.
[13] I will refer to the contractual obligations arising from the November 4, 2010 proposal, as amended by subsequent discussions, as the “Main Contract”.
[14] Carlo decided to not hire Duplex to install the new electrical service from the roadway. However, they agreed that, as part of the work under the Main Contract, Duplex would relocate the existing main electrical service from an old building on the site to the new building, and it would reuse Rafat’s existing equipment.
[15] Later, Joe determined that all of Rafat’s equipment was not usable. He discussed this with Carlo, and there was an agreement that Duplex would purchase some additional equipment, and Rafat would pay an extra $10,000 for this new equipment. The new equipment, plus Rafat’s existing equipment, was utilized to install the main switch in the electrical room of the new building. This switch was the main disconnect for the power. The wires running underground from the street through conduit, called a ductbank, connected to this main disconnect switch. Duplex utilized the existing ductbank and wires. It connected the new and used equipment. This work was inspected and Hydro One ultimately energized the building. This part of the work was complete in May 2011 and operated without issue until September 12, 2011, when a fire occurred in the electrical room.
[16] Until Joe’s departure from Duplex on April 1 2011, he was the main contact between Duplex and Rafat regarding this job. Thereafter, Michael replaced Joe in this capacity.
[17] Michael presented Carlo with a Proposal, dated April 28, 2011, regarding wiring in the office and showroom. After some discussion, Carlo accepted this proposal for an amended total amount of $12,000. I will refer to this contractual arrangement as the “Office/Showroom Contract”.
[18] On November 16, 2011, a meeting occurred on the property. Ray, Michael, Carlo and George were present. There is disagreement regarding what transpired at the meeting, but the final result was that Duplex left the site and did no further work on the building.
[19] Rafat retained e-Lumen to determine the unfinished electrical work. Jerry Mobilio of e-Lumen did a site visit on November 28, 2011 and issued a report on November 29, 2011, marked Exhibit 11.
[20] Rafat retained Denver Electrical Services to complete the electrical work on the Property and paid it $42,074.76 for that work. Denver’s final invoices were dated February 8, 2012.
[21] There is no dispute that Duplex’s lien was validly preserved and perfected, and that in December 2011, by the Order of Justice Seppi $105,809.72 was paid into court to vacate the lien.
Conclusion
[22] For the reasons that follow, I grant Duplex judgment in the amount of $84,567.78 and I dismiss the defendant’s counterclaim.
Issues
[23] I must determine the following issues:
a. What was the scope of work for the Main Contract?
b. What was the scope of work for the Office/Showroom Contract?
c. Did Duplex complete its work under the two contracts?
d. Was the work done after the fire on the new service in September 2011 an extra or covered by Duplex’s warranty?
e. If Duplex did not complete its obligations under the two contracts, did it repudiate the contracts by leaving the jobsite and by refusing to complete the required work, or did Rafat repudiate the contracts by refusing to pay any further amounts to Duplex until the contracts were complete and by ordering Duplex to leave the jobsite on November 16, 2011?
f. Was Rafat required to give Duplex a reasonable opportunity to correct the deficiencies before it can recover the cost of correcting the deficiencies by another contractor? If so, did Rafat fail to mitigate its damages?
g. What amount, if any, does Rafat owe to Duplex on their claim?
h. What amount, if any, does Duplex owe to Rafat on its counterclaim?
Witnesses
[24] There were nine witnesses. I will refer in more detail to them as I deal with each issue. However, my general comments with respect to the major witnesses follow.
[25] Ray has held a master electrician’s licence since 1978. I found that he testified in a straightforward, consistent manner. His answers were logical and consistent. I found his evidence to be credible.
[26] Michael is a licenced electrician and has worked with Duplex for twenty years. His testimony was logical and consistent, and was of assistance to me.
[27] I found Marco Gugelili has been an employee of Duplex for fifteen years. His testimony was clear, consistent and straightforward.
[28] Carlo has been in the business as a general contractor since 1987. Several aspects of his testimony were concerning to me. Some of his testimony lacked internal consistency; it was not logical; and it did not make commercial sense.
[29] George Gianopoulos is related to Carlo and has worked for him for six years. He was described as the gopher for Carlo on the construction site, and also as the go between. I accept that he was the person who communicated Carlo’s instructions to the trades on site, including Duplex. Some of his evidence was not believable.
[30] Joe’s testimony contained some of the same internal inconsistencies, as did Carlo’s testimony. Some of his testimony simply did not make sense.
[31] Due to my concerns with the testimony of Joe, George and Carlo, when that testimony conflicts with the evidence of Ray and Michael, I prefer Ray and Michael’s evidence.
Lien
[32] There is no dispute that the lien was preserved and perfected, and that the money paid into court pursuant to Justice Seppi’s order stands in the place of the lien.
[33] I will now examine the scope of work for the Main Contract.
Scope of Work for Main Contract
[34] The proposal, dated November 4, 2010, Exhibit 1, Tab 1, is very clear and specific regarding the scope of work. However, Joe and Carlo both testified that verbally they agreed to change the scope of work, and they did not reduce these changes to writing.
[35] Joe testified that, in the fall of 2011, after Duplex was no longer working on the site, at Carlo’s request he did a walk through to determine the outstanding items as compared to the agreed scope of work. Eventually, he prepared a list that detailed the unfinished work and sent an email to George and Carlo, dated June 19, 2012, marked as Exhibit 10. That list is identical to a list prepared by Emidio Monti and sent by him to Carlo by email seven months earlier, on November 24, 2011, marked as Exhibit 13. When confronted with this fact, Joe testified that the list was his own work, but perhaps the date on the email was incorrect. I do not accept this evidence. I find that the email was sent on June 19, 2012 and that it was copied from Emidio Monti’s email.
[36] Joe testified that the Main Contract included work in the office and showroom. For that reason, he included in his list of unfinished work, work in the office and showroom area. He had no explanation as to why, on April 28 2011, the parties would agree to the Office/Showroom Contract, if the Main Contract included work in the office and showroom. He acknowledged that he was unaware of the Office/Showroom Contract.
[37] I do not accept Joe’s evidence that the Main Contract’s scope of work included work within the office and showroom area. It is inconsistent with Rafat’s acknowledgement that it entered into a separate contract for work in the office and showroom area.
[38] Further, it is illogical that Joe would know what work was unfinished in the office and showroom area, if he was unaware of the Office/Showroom Contract
[39] Carlo’s evidence is not helpful on this issue. He testified that Joe and he discussed the November 4, 2010 proposal; agreed to vary the scope of work and the price; and never again discussed the scope of work. His evidence did not help clarify what was the agreed scope of work on the Main Contract. It is also inconsistent with the agreement reached in April 2011 regarding extras (discussed below) whereby the parties agreed that certain items were extras. If the parties discussed whether an item was an extra or not, the scope of work necessarily was discussed; otherwise how could they determine whether an item was an extra or not.
[40] The meetings in April 2011 are instructive as to the parties’ intentions as to the scope of work in the Main Contract.
April Meetings
[41] The parties agree that there was a meeting on April 1, 2011 and that Ray, Joe, Carlo, Michael and George were present.
[42] Ray and Michael testified that the primary reason for the meeting was to discuss the extras with Carlo. They both testified that, from time to time, Duplex’s men on site received instructions from George to do certain extra work. Based upon those instructions, after receiving authorization from Duplex head office, the work was done.
[43] Michael stated that he instructed the foreman on site to list the extras to date. Those extras are set out on Exhibit 1, Tab 11. Ray and Michael testified that these extras were discussed at this meeting. Joe suggested a settlement figure of $30,000. Ray wrote that number on Exhibit 1, Tab 11 at the meeting. Ray and Michael stated that they wanted to review their costs before agreeing to that figure.
[44] George and Carlo testified that the main reason for the meeting was to discuss the fact that Joe was leaving Duplex. In cross examination, Carlo acknowledged that the extras shown on a hand written list, marked as Exhibit 1, Tab 11, were discussed, but no numbers were discussed.
[45] Joe gave no evidence on this issue.
[46] I accept Ray’s and Michael’s testimonies that the extras were discussed at the April 1 2011 meeting; that Joe suggested a settlement figure of $30,000; and that they left the meeting to consider this suggestion.
[47] The parties agree that there was a subsequent meeting a week or so later. At that meeting, Ray, Michael, Carlo and George were present. Ray and Michael presented a summary of extras, marked Exhibit 1, Tab 12. Both parties agree that there was an agreement to settle these extras for the sum of $30,000. All parties testified that the meeting was positive; it was not tense; the working relationship was a good one.
[48] I find that this evidence supports Duplex’s position that the Main Contract was for specific work, and that the scope of work did not include all electrical wiring within the building. This evidence also corroborates Ray’s and Michael’s testimonies that Duplex’s men on site received instructions from George to do certain work; Duplex did that work, expecting that eventually there would be a discussion of the cost of that work.
[49] There is some work performed under the Main Contract that Rafat alleges required remedying. However, there were only two items under the Main Contract that Rafat alleges where not installed, or were installed, but not in accordance with the Main Contract: namely the installation of the GFI receptacles and the exterior light poles.
Block Heater Receptacles (GFI Receptacles)
[50] Considerable testimony involved the placement of GFI outdoor receptacles that were to be used to plug in block heaters, and whether Duplex had performed its obligations under Main Contract.
[51] Joe testified that Duplex agreed to install 60 GFI receptacles, and that they would be installed along the east side of the building, the east fence and the north fence. The exact location was not determined prior to his departure. However, he caused Duplex to install underground conduit from the building to the east fence and to the middle of the north fence in preparation for the installation of the GFI receptacles along both fences. He also instructed Rafat to install a 2 x 10 board horizontally along the north and east fence, approximately, half way up so that Duplex would have a solid surface to attach the conduit and GFI receptacles.
[52] Carlo testified that the agreement required the GFI receptacles to be installed along the north and east fence, as well as the east side of the building.
[53] Seven double receptacles, or 14 GFI receptacles, were installed along the east side of the building.
[54] Marco Gugelili testified that he received instruction from George to place the remaining GFI receptacles along the east fence 12 to 13 feet apart and with two GFI receptacles in each electrical box. He stated that he was told that the machinery would be parked in a piggyback fashion: one in front of the other. In this manner two pieces of machinery could utilize the two GFI receptacles in each electrical box. He completed the installation of the GFI receptacles by the end of September 2011.
[55] Marco, Ray and Michael testified that Duplex installed 23 electrical boxes, each containing two GFI receptacles, along the east fence. By combining the 14 GFI receptacles installed along the east side of the building, Duplex installed 60 GFI receptacles in total.
[56] George denied giving Marco the instructions to install the GFI receptacles in that fashion.
[57] Michael testified that, on September 6, 2011, when he met on site with George, he confirmed George’s instructions to Marco to install the GFI receptacles two to an electrical box and 11’ 6” apart.
[58] Michael testified that, at that time George requested that, he provided a proposal to install 48 GFI receptacles along the north fence. He stated that he hand-delivered to George that proposal, dated September 6, 2011, marked Exhibit 1, Tab 26, on the same day. He never received a response from Rafat regarding that proposal.
[59] George denied that he discussed the GFI receptacles as Michael testified and he denied requesting such a proposal. George and Carlo denied receiving that proposal.
[60] Both George and Carlo testified that they did not advise Duplex that they would park the vehicles or machinery in a piggyback fashion. The photographs, marked Exhibit 8, demonstrate that certain size vehicles parked one in front of the other would block the through traffic to the east exit.
[61] Ray testified that, when he performed a walk-through of the property on May 23, 2104, each GFI receptacle box on the east side had an electrical extension cord wrapped around the base. In his opinion, this allows the vehicle parked behind the first one to access the GFI receptacle.
[62] George testified that the additional extension cord was there in case a driver drove away with the extension cord.
[63] Ray and Michael both testified that it did not matter to them where the GFI receptacles were installed. Had instructions been received to place some of them on the north fence, they would have done so.
[64] Marco stated that the installation of the GFI receptacles took approximately one week. During that time George was on site and he spoke with George daily. George observed the GFI receptacles being installed and never stated that they were being installed contrary to instructions. Ray and Michael both testified that, until the meeting of November 16, 2011, Duplex was never asked to move them or told that they were installed in the wrong location.
[65] George acknowledged that he was on site and he did converse daily with Marco, but that he did not monitor their work.
[66] Emidio testified that Denver was retained after November 16, 2012 to install GFI receptacles along the north fence, and that he installed 54 of them, together with an electrical panel.
[67] Ray and Michael testified that the electrical panel that Duplex installed along the east fence had a capacity of 60 separate circuits for 60 GFI receptacles. Ray gave un-contradicted evidence that the extra panel on the north fence was required because, 114 GFI receptacles required 114 separate circuits. This was beyond the capacity of the panel that Duplex installed.
[68] The Main Contract: Joe and Carlo’s evidence is consistent on one point; Duplex was to install 60 GFI receptacles, each on a separate circuit. The initial plan was a general one: the GFI receptacles would be installed along the east side of the building, the east fence and the north fence; to facilitate this, a conduit was placed underground from the building to the east and north fence. However, the exact placement was to be determined as the job progressed.
[69] I accept Marco’s evidence that he received instructions from George to place the GFI receptacles doubled up every 12 to 13 feet apart along the east fence. Receiving instructions from George was consistent with the pattern that had developed on the job site. George was on site throughout the installation of the GFI receptacles. It is clearly evident that two GFI receptacles were installed in each electrical box. If the installation was not in accordance with George’s instructions, George could clearly have seen that, and advised Duplex. Until the November meeting Rafat made no objection to the way Duplex had installed the GFI receptacles.
[70] I find that the installation by Denver of an additional 54 GFI receptacles is consistent with Michael’s evidence that Rafat wanted to install more than 60 GFI receptacles, and that George requested Michael to provide a quote.
[71] I accept Michael’s evidence that he confirmed with George the placement of the GIF receptacles on September 6, 2011; that he was asked to provide a proposal for an additional 48 GFI receptacles to be located along the north fence; and that he delivered the proposal to George the same day.
I find that, under the Main Contract, Duplex was obligated to install 60 GFI receptacles, and that it installed them in accordance with the specific instructions of George, an authorized representative of Rafat. Those instructions clarified and amended any general agreement previously reached between Rafat and Duplex through discussions between Joe and Carlo. Duplex completed its obligation under the Main Contract regarding the installation of GFI receptacles.
Outdoor Light Poles
[72] The second major area of dispute regarding the scope of work of the Main Contract is the exterior light poles.
[73] The written proposal for the Main Contract, Exhibit 1, Tab 1, states: “bring power to 20 light poles”.
[74] Joe testified that verbally this provision was altered. Rafat was to do the civil work, meaning that Rafat would install the concrete base. Duplex would run conduit underground to the light base; pull wire to the base; wire the poles themselves; and install the light head. Rafat would provide the equipment and men to lift the pole in base. Duplex would energize and confirm that the lights worked.
[75] Item 29 of Exhibit 1, Tab 11, which is the handwritten note of extras, states “13 pole lights”.
[76] Exhibit 1, Tab 12, which is the typed document of extras prepared by Duplex, speaks to light poles in item 11: “we installed 7 extra wall packs in exchange for 7 less light poles.
[77] The parties agree that rather than 20 light poles, Rafat ultimately decided to only erect 13.
[78] Ray and Michael both testified that they never agreed to wire the light poles themselves; that the reference to “13 pole lights” on Exhibit 1, Tab 11 was there because the issue had to be discussed; that Duplex gave Rafat credit for not bringing power to seven light poles and installed seven extra wall packs for no charge as an offset.
[79] There is no further documentation to help clarify this issue. It is reduced to a credibility issue between Joe and Carlo on the one hand, and Ray and Michael. I have found reason to doubt the credibility of Joe and Carlo on other matters, and therefore accept the testimony of Michael and Ray on this issue. Under the terms of the Main Contract, Duplex was only required to bring wire to the base of the light poles.
[80] I find that Duplex satisfied its obligation under the Main Contract with respect to the light poles, by bringing power to the light bases.
[81] For the sake of completeness, I will deal with the cost of wiring the light poles themselves.
[82] Duplex’s evidence was that it would have wired the light poles themselves as an extra, but that the installation of the light poles was stalled, awaiting the presence of the person who was also installing a security camera on the light pole. Carlo confirmed that this was the case. In fact, when Denver erected the light poles, the security camera person was present.
[83] Ray testified that the actual installation of the light poles should not take more than one hour each. Joe testified that he could not estimate exactly how long the installation would take, but that it would proceed “quickly”. Denver installed the light poles, but did not break down how long it took or what was charged for this work.
[84] I find that, considering Denver was on site performing other electrical work, the installation of the 13 light poles should not have taken more than 15 hours for a licenced electrician. According to Joe and Carlo’s testimony, the lifting of the poles was to be completed by Rafat’s men using its equipment. At an hourly rate of $60 for an electrician the total cost to wire the poles and light head for 13 poles would be $900, which I adjust upward for miscellaneous matters to $1,000.
Conclusion on Scope of Work of Main Contract
[85] Subject to my discussion below regarding deficiencies, I find that, on November 16, 2012, Duplex had completed the Main Contract, being the items described in the proposal, Exhibit 1, Tab 1, as amended by oral discussions between Joe and Carlo, and subsequently between Carlo, Ray and Michael.
[86] In the undisputed facts I referred to the Office/Showroom Contract. I will now analyze that contractual arrangement.
Office/Showroom Contract
[87] The parties agree that Duplex prepared a proposal for work in the office and showroom areas on the first and second floors, dated April 28, 2011, Exhibit 1, Tab 17, and that Rafat accepted that proposal for the sum of $12,000. I have referred to that contractual arrangement as the Office/Showroom Contract.
[88] That document states:
Description: To install 2x2 fixtures and pot lights to 1st and 2nd floor and valence lighting. 1st floor (106) fixtures (wiring only). 2nd floor (152) fixtures (wiring only).
Total $7,880.00 + HST
Description: To supply all telephone and power outlets on 1st and 2nd floor
1st floor (20) receptacles
2nd floor (86) receptacles
2nd floor (22) Telephone outlets
Total $5,400.00 + HST
Please Note:
-Pot light not included
-Hand dryers not included
-2x2 fixtures are part of original order
[89] The parties agree that originally Rafat agreed to purchase at its expense the actual fixtures. At Rafat’s request, in order to obtain the benefit of Duplex’s discount, Duplex agreed to purchase the fixtures, and then charge Rafat its cost price plus 10%. The invoice from Sesco, marked as Exhibit 1, Tab 54, described the fixtures and other equipment purchased on this basis.
[90] Carlo testified that he agreed with Duplex that Duplex would supply the labour to install all light fixtures and all receptacles on the first and second floor of the office and showroom. He testified that he spoke to Joe about this when they discussed the Main Contract, and that he had the same conversation with Michael when they discussed the Office/Showroom Contract.
[91] Michael testified that he inserted a specific number of light fixtures and receptacles into the Office/Showroom Contract, as the plans that he had did not specify the exact number to be installed. In his testimony, he referred to telephone outlets and receptacles collectively as devices. He testified that any device or fixture installed above the number specified in the Office/Showroom Contract would be considered an extra, and charged for accordingly. He acknowledged that the proposal did not specify a cost per extra device or fixture.
[92] Michael testified that, on November 16, 2011, he did a count of the installed fixtures and devices. He wrote the number on his copy of the Office/Showroom Contract, Exhibit 1, Tab 17. This shows that on the first floor 146 fixtures were installed, compared to the contracted number of 106. On the second floor 172 light fixtures were installed compared to the contracted number of 152. Duplex had installed 195 devices on the second floor compared to a contracted number of 108. The number of devices on the first floor is listed as 20 and the handwritten note is “?”.
[93] It was agreed that Duplex did not install the trims for the pot lights prior to leaving the job site. Rafat was obligated to purchase the trims. The trims were not on site while Duplex was there. In fact, Denver ultimately purchased the trims at Rafat’s expense and installed 176 pot light trims.
[94] Rafat did not provide evidence as to the actual number of fixtures and devices installed in the office and showroom area on the first and second floors. Although a document containing information about installed fixtures and devices was marked Exhibit D for identification, this document was never proven and admitted into evidence as a numbered exhibit.
[95] Carlo acknowledged that Duplex may have installed more light fixtures and devices than the numbers specified in the Office/Showroom Contract; however, he maintained his position that he verbally agreed with Joe at the time that they discussed the scope of work for the Main Contract that Duplex would install all of the fixtures and devices for the set price, and that this conversation was repeated with Michael.
[96] I do not accept this evidence. It is illogical that Joe and Carlo would agree to this term in the absence of the balance of the terms of the Office/Showroom Contract. Further, if such an agreement was reached, it was amended months later when the parties agreed to the Office/Showroom Contract that contains specific terms that are inconsistent with the prior verbal understanding. Carlo testified that he negotiated this contract; that he had a copy of the proposal; and that the parties agreed upon the amended price of $12,000.
Conclusion on Scope of Work of Office/Showroom Contract
[97] I find that the terms of Exhibit 1, Tab 17 are the terms that the parties agreed to, and form the Office/Showroom Contract, and that these terms were not later amended.
[98] I find that Duplex installed more than the contracted number of fixtures and devices
[99] Subject to my discussion below about deficiencies, I find Duplex satisfied its obligations under the Office/Showroom Contract. Any unfinished electrical work in the office and showroom areas related to extra work undertaken by Duplex at Rafat’s instruction.
Extras
[100] The parties agree that the only extra in dispute relates to the work performed following a fire in September 2011. I will now turn to that issue.
New Service
Work under Main Contract
[101] As noted above, under the terms of the Main Contract, Duplex was obligated to install the main switch in the electrical room (“new service”). At the commencement of the Main Contract, there was a small building on the Property to which electricity was connected to the street. The original intention was that Duplex would move all of the existing equipment owned by Rafat into the electrical room of the new building to establish the new service. There was an existing underground conduit through which wires ran from the hydro-pole on the street into the electrical room. Joe ultimately determined that, in addition to the used equipment, some new equipment was required. Carlo agreed to pay the sum of $10,000 for this new equipment.
[102] Duplex installed the used and new equipment in the electrical room. This installation was inspected, authorization to connect obtained on May 17, 2011 and Hydro One energized the new service.
Draws
[103] An analysis of the draws and the documents that accompanied a request for a draw is helpful in reaching a conclusion regarding the new service.
[104] The parties agree that this was a progress draw contract; as work proceeded, Duplex would bill Rafat; and Rafat would pay theses invoices.
[105] Carlo acknowledges receiving Draws #1 thru #4 inclusive, marked as Exhibit 1, Tabs 7, 8, 9, and 10 for the Main Contract. However, he testified that he did not receive pages 1 and 2 of each exhibit. He further stated that the contract breakdown contained on page 1 would mean nothing to him as he is not an electrician. I do not accept this evidence for two reasons.
[106] First, I accept Ray’s testimony that each draw and every page of each draw shown at each tab was sent to Rafat. The first page shows the percentage work of the Main Contract. Page 2 is a summary of the Change Orders. Page 3 is a financial running balance with respect to the contract. It shows the balance owing as of the draw. It also lists the balance of the contract in dollars remaining to be completed. Page 4 is the Statutory Declaration required under the Construction Lien Act and page 5 is the WSIB Certificate of Clearance.
[107] Second, Carlo is a seasoned contractor. He would be very familiar with progress draw contracts and understand the concept of percentage of work completed versus percentage of work left to complete on construction contracts. Although he may not be an electrician, he would understand that concept. He would be aware, either directly, or through George, how work was proceeding on site. He could relate the draw document stating percentage of work complete to the actual work on site.
[108] Page 2 of the Draw document is particularly important. It lists any Change Orders; the extras.
[109] Draw #4, Exhibit 1, Tab 10, is the first draw that lists extras. This Change Order lists extra lighting of $6,767.20 and extra distribution equipment $10,000. These are two extras for which there is no dispute.
[110] However, Carlo denies that Rafat ever received this page of the draws. Ray testified that all clients receive the entire package for each draw. As already noted, I accept Ray’s evidence on this point and find that Duplex sent to Rafat all of the documents of each draw.
[111] Draw #5, Exhibit 1, Tab 13, page 2, Change Order, adds two further items: lighting—Extra #2 for $85,052 and all extras up to April 11 2011 for $30,000. There is no dispute about lighting – Extra #2. The $30,000 amount represents the amount the parties, in early April 2011, agreed upon to settle all extras up to that point; it is not in dispute.
[112] These amounts are not contentious; what is disputed is whether Rafat ever received a copy of this page of the draw.
[113] Draw #6, Exhibit 1, Tab 21, page 2 Change Orders lists four additional items. Office work is listed for $12,000 and is shown as partially complete. This represents the price agreed to for the Office/Showroom Contract. Broken wall pack for $400, outside lighting for $1,017.30 and strip lighting for $3,420 are the remaining three additional extras. Although Rafat disputes whether the outside lighting was properly installed, there is no dispute about these extras, or the amounts charged.
[114] Draw #7, Exhibit 1, Tab 23 was rendered June 20, 2011. There are no additional items on the Change Order page. The third page showed a payment due for that draw and a declining balance to finish.
[115] Draw #8, Exhibit 1, Tab 31, was rendered September 21, 2011. The Change Order page added one item: Showroom Potlights $1,960. This extra corresponded to Change Order Exhibit 1, Tab 25 for 56 four inch line voltage pot lights. Michael testified that he received approval for this item. I accept that evidence.
[116] Draw #9 Exhibit 1, Tab 33 is dated November 21, 2011. The Change Order page lists one additional extra: New Service $12,921.41. This relates to Change Order dated September 28, 2011 for the new service required as a result of the fire that is referred to below.
[117] This draw shows a payment due for work to date of $16,323.81 together with a balance to finish (including Retainage) of $25,853.81.
[118] Draw #10, Exhibit 1, Tab 34 is dated the same date. Primarily, it accounts for the holdback and shows a payment owing for that draw of $29,214.81.
[119] As of November 16, 2011, Rafat had paid $207,580.07 to Duplex. Draws #1 thru #8 inclusive totalled $246,609.23.
[120] When the parties met on November 16, 2011, there was a balance owing by Rafat to Duplex in the amount of $39,029.16. In addition, from Duplex’s point of view, the cost for the new service was outstanding, as well as other items that it considered were extras for which it had not yet invoiced Rafat.
[121] From the date of the first invoice of December 20, 2010, there had been a balance outstanding. For the period April 18, 2011 to August 19, 2011 the balance ranged from a high of $191,037.60 to a low of $134,605.75, primarily due to an invoice of $124,228.58, dated April 18, 2011, that reflected the purchase of fixtures by Duplex at Rafat’s request.
[122] From this analysis, three points emerge. First, the contract was a draw or progress contract; payments were expected to be made as work progressed. Throughout the job, Rafat had been slow to pay; indeed, there had been a significant amount due from the date of the first invoice. Second, when the parties met on November 16, 2011 there was a balance owing on the account; the payment for the new service needed to be discussed; agreement was needed on the cost of the extra work that Duplex had undertaken. Finally, Rafat had received the Change Order that detailed the work performed for the new service and the charges for that work.
Fire September 12, 2011 in New Service
[123] George’s and Michael’s evidence was very similar regarding what transpired on September 12, 2011 and the next few days.
[124] In the evening of September 12, 2014, George noticed smoke coming from the electrical room. He called Michael, who came immediately.
[125] Michael called Hydro One, but when there was not a quick response Mike called the fire department, who in turn called Hydro One.
[126] Hydro One arrived and disconnected the power from the street.
[127] Once the power was disconnected, the smoking stopped. The fire department was not required to take any further action.
[128] Michael testified that he saw sparks coming from the transformer on the street; George did not see this.
[129] George told Michael to do whatever it took to get the building “up and running”.
[130] George and Michael agree that there was no further discussion regarding the cost of performing this service, nor who would be charged. George did not tell Michael that, in his view, the problem was caused by work completed by Duplex and that this job should be covered by warranty; Michael did not tell George that Duplex would be sending Rafat a bill for the services.
[131] The next day, Duplex had a number of men on site. Michael stated five men. Duplex obtain the necessary permits to proceed with the work. Rafat obtained a temporary generator and Duplex connected this to the building to provide it with electrical power.
[132] Duplex removed the wires that ran through the conduit underground from the hydro-pole on the street to the electrical room; it pulled new wire through that conduit; it installed a new switch and fuses.
[133] Duplex had the installation inspected and approved, and the building was energized within three days of the fire.
[134] Duplex left the items that it had removed on-site. Michael stated that he did that to allow either Rafat or Hydro One to examine the equipment and determine the cause. In a portion of Carlo’s discovery that was read into evidence, Carlo stated that he believed that Hydro One had investigated the fire, but that he never did receive a report as to the cause of the fire. The only fact that Carlo knew was that the cause of the fire was electrical in nature; he had no further specifics. He had no evidence that equipment supplied by Duplex, or any work performed by it, caused the fire.
[135] Exhibit 3 is a photograph of the main switch installed by Duplex. Joe, Ray and Michael all testified that there was a water problem at the Property. To combat that issue, a special product - a type of foam - was sprayed around the wires coming from the underground conduit. They all testified that this was not unusual, nor unsafe.
[136] The new service installation was inspected by the Electrical Safety Authority on May 17, 2011 and was approved for connection.
[137] Rafat’s position is that the fire was caused by Duplex’s defective work or the equipment installed by Duplex, and, therefore, was repaired under its warranty. That is the reason that he was not concerned with pursuing what was the exact cause. In his mind, it was an electrical issue; Duplex installed the new service; it was Duplex’s obligation to remedy the problem.
[138] Ray and Michael testified that, although they did not know what the exact cause of the fire was, there was no evidence that it was caused by any work that they had performed or equipment purchased by them
[139] Joe testified that Duplex did not warrant any of the used equipment that was used in the new service.
[140] I find that Rafat asked Duplex to do whatever it took to get power back to the building. Receiving instructions such as this from George; proceeding to do the work; and then later agreeing upon a price for the extra was consistent with their past practices.
[141] Ray and Michael both testified that Change Order dated September 28, 2011 was sent to Rafat. Rafat denies receiving it until the November 16, 2011 meeting. I accept Ray’s and Michael’s evidence that the Change Order was sent to Rafat.
[142] I find that Rafat has the burden of proving that the fire was caused by the defective work or new equipment supplied by Duplex, and it has failed to do so. In fact, Carlo testified that he made no inquiries into the cause of the fire.
[143] Duplex was instructed to fix the problem; it did. I accept Ray’s and Michael’s evidence that Duplex submitted the Change Order detailing the charge for that work. Rafat has not provided any evidence that the charge is inappropriate for the work rendered. I find that Duplex was entitled to charge Rafat for this work, and that the charge of $12,921.41 is an appropriate charge for that work.
[144] Jerry Mobilio undertook a site examination on November 29, 2011. In his site report he noted in bold “Incoming ductbank within main electrical room has water leakage. This is hazardous and requires immediate attention to correct the water entering the ducts and electrical room”.
[145] Rafat did not replace the new service and it is not alleging that it is required to change the new service installed by Duplex. Therefore, this evidence is not relevant to the issues before me.
[146] In any event, I do not accept this evidence. It may be that there was water entering the ductbank and electrical room. However, I accept the testimony of three other licenced electricians, Ray, Joe and Michael, that water in the ductbanks is neither unusual nor unsafe. Emdio, who is also a licenced electrician and who worked on the building, gave no evidence about the service being a safety hazard. In addition, prior to the main switch being energized, it was inspected by ESA and they approved the installation.
Conclusion on Extras
[147] I find that the charge of $12, 9212.41 for the new service is a proper extra and one that Rafat is obligated to pay.
[148] No other extra charged by Duplex is in dispute.
[149] I have already found that Duplex did extra work beyond the scope of work required under that contract. However, as Duplex did not invoice Rafat for that work, nor is that work subject to a claim by Duplex, I need not assign a value to that work or make any order with respect thereto.
Balance Outstanding to Duplex
[150] Duplex invoiced Rafat a total of $292,147.85. Rafat made eight payments that total $207,580.07.
[151] The balance outstanding to Duplex is $84,567.78, which is the amount of its claim.
[152] I will next deal with the culminating event that resulted in Duplex leaving the Property.
November 16, 2011 Meeting
[153] A fateful meeting occurred on November 16, 2011 at the property. Ray, Michael, Carlo and George were present.
[154] Ray testified that he attempted three times to arrange the meeting. He described it as a “day of reckoning”. There had been an outstanding balance on this job since May 2011. This was to be a progress draw situation; the customer was to be billed as the job progressed; he expected to be paid. There was the outstanding invoice for the repair following the fire in the electrical room. Finally, he wanted a response to the proposal to install GFI receptacles along the north fence. He expected that the meeting would be similar to the April 2011 meetings where the extras were discussed and a price agreed to. At this point, there was no ill will or disputes between the parties.
[155] Ray and Michael both testified that Carlo acted surprised when they presented him with the Change Order for the new service installed following the fire. They told him that Duplex had done much more work in the office and showroom area than the Office/Showroom Contract required, and they wanted to discuss payment for the extras. Carlo told them that he would not pay any further money until all of the work on the site was complete. He stormed out of the meeting and told the Duplex workmen in the presence of Ray and Michael to “get the fuck out of here”.
[156] Carlo and George testified that Michael and Ray demanded more money. Carlo stated that he told them that when the work was done that he would pay what he owed. In response, Ray said that he would not do any further work until he was paid. Carlo then told the Duplex men to “get the fuck out of here”.
[157] There was no independent party present at this meeting. For me to determine what occurred, I must make findings of credibility. I have previously found that where the testimony of Carlo and George conflicted with that of Ray and Michael, I prefer the testimony of Ray and Michael.
[158] I have also found that, at the time of the meeting, Duplex was owed money by Rafat and that the Change Order regarding the new service had been sent to Rafat.
[159] I find that Carlo stated that he would not make any further payments until all of the work that he wanted completed at the jobsite was finished, and then he would pay what he owed. He made this statement without clarifying what he was prepared to pay. This is consistent with his view that the scope of work for the Main Contract and the Office/Showroom Contracts encompassed all electrical work on the site that he determined he wished to have completed.
[160] I find that Carlo’s refusal to pay the outstanding balance owing to Duplex until all of the work was complete was a breach of the contractual agreements between Rafat and Duplex.
[161] I accept that Carlo stormed out of the meeting and ordered Duplex off of the site. This is a further breach of the contract.
[162] On the same day as the meeting, Duplex’s legal counsel sent a letter to Rafat, putting it on notice that Duplex considered Rafat’s action in ordering Duplex off the site was a breach of the contract. The letter requested Rafat’s permission for Duplex to return to the job site to finish work. Rafat did not respond to that letter.
[163] I find that, in refusing to allow Duplex to return to the job site, Rafat failed to reasonably mitigate its damages.
Events after November 16 2012
[164] After Duplex was removed from the job site, Rafat retained Gerry Mobilio of E-Lumin to examine the job site and to provide his view of the incomplete electrical work.
[165] His site report dated November 29, 2011, marked Exhibit 11, listed his assessment of work to be completed and stated that 65% of the electrical installation was complete; in other words 35% of the electrical installation was incomplete.
[166] I find that his evidence is unhelpful to me in determining what work remained outstanding under the contracts for those two reasons.
[167] First, in cross-examination he stated that he was unaware of the terms of any contractual relationship between Duplex and Rafat. He did not have a copy of the Main Contract or the Office/Showroom Contract. His opinion that only 65% of the electrical installation was complete is not related in any way to the work that Duplex contracted to do.
[168] Second, in his opinion, part of the 35% of the work to be completed was the replacement of the ductbank for the main service into the building. Replacement of the ductbank is not an issue before me.
[169] The placement of switch and receptacle covers is included in the incomplete work. The evidence is clear that there were painters and other trades working on site when Duplex was told to leave. Normally, covers are not installed until painting or tile work is complete. Ray and Michael testified that they would have installed the covers once the finishing of the walls had been completed had they been given the opportunity.
[170] Subsequently, Rafat hired Denver Electric to complete the electrical work on site. Emidio Monti, the owner of Denver, testified that he did work on site and that he charged Rafat a total of $42,074.76. Rafat acknowledged that Invoice #1835 in the amount of $1,939.08 should be deducted from that amount as this invoice was for the purchase of 176 pot light trims. All parties agree that it was Rafat’s obligation to purchase the pot light trims.
[171] Emidio testified that he was contacted by Joe to come to the site in November 2011. He walked through the site with Joe, Carlo and Joe’s new partner, Mark. After the meeting, Mark typed up a list of work to be completed and then sent it to Emidio.
[172] Carlo and Emido reached agreement on the work that he would do. Emidio sent an email to Carlo with those details in it on November 24, 2011, marked Exhibit 13. This email included the agreed price of $30,000.
[173] Emidio commenced work on December 3 or 4, 2011. As the job progressed, he discovered other work that required remedying. He received approval to proceed. He did the work and invoiced for it.
[174] Emidio’s mandate was to finish all electrical work required on the site. His work was not determined in relation to the Main Contract or the Office/Showroom Contract.
[175] Further, he was unable to testify as to the amount of time that he spent or the amount that he charged for various aspects of his work.
[176] I accept that Emidio worked on the site and undertook electrical work there. However, I have previously found that Duplex completed the work required under the two contracts. I find that the incomplete work, other than finishing aspects that Duplex would have completed once the walls were ready, related to extra work.
[177] I have found that Duplex completed the work required under the scope of work in both contracts; what was unfinished related to extras.
[178] Although Emidio testified with respect to remedial work that he undertook, Rafat has not proven that this work was part of the Main Contract or the Office/Showroom Contract. It may have been part of the extra work performed by Duplex. Rafat has not proven what portion of this work was with defective work of Duplex.
[179] I accept Duplex’s evidence that it would have completed any finishing aspects, such as placement of switch and receptacles covers, when the time was appropriate.
[180] Finally, I find that Rafat failed to mitigate its damages when it did not permit Duplex to return to the site. In addition, it has failed to prove its damages.
[181] I dismiss Rafat’s counterclaim.
Summary
[182] For the reasons stated above, I grant judgment to Duplex in the amount of $84,567.78, and dismiss Rafat’s counterclaim.
[183] There is no dispute that Duplex validly preserved and perfected its lien, and that money was paid into court pursuant to Justice Seppi’s order to vacate the lien. I order that the sum of $84,567.78 be paid to Duplex from those monies.
[184] The parties may provide cost submissions not to exceed three pages (not including any offers to settle or bill of costs). Counsel for the plaintiff shall provide his submissions within 15 days. Counsel for the defendants shall provide his submissions within 15 days thereafter, with reply submissions, if any, within seven days thereafter.
Edwards J.
Released: June 18, 2014
COURT FILE NO.: CV-11-4709-00
DATE: 20140618
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Duplex Electrical Ltd.
Plaintiff
- and –
Rafat General Contractor Inc.; 2109347 Ontario Limited; and the Bank of Nova Scotia
Defendants
REASONS FOR JUDGMENT
Edwards J.
Released: June 18, 2014