CITATION: Beta & Associates v City of Toronto, 2015 ONSC 328
COURT FILE NO.: CV-14-502697
DATE: January 16, 2015
SUPERIOR COURT OF JUSTICE - ONTARIO
Title: Beta & Associates v City of Toronto
BEFORE: Master C. Albert
COUNSEL: S. Crocco for plaintiff (moving), tel: 416-364-4900; fax: 416-364-3865
R. Baldwin for defendant (responding), tel: 416-392-8046; fax: 416-397-5624
MASTER C. ALBERT
ENDORSEMENT
Master C. Albert
[1] Torontonians have enjoyed the fountain in the median at University Avenue and Queen Street for some fifty years, up to two years ago when it was shut down for repairs. It has been out of service since then. The evidence filed on this motion suggests that the City of Toronto (“Toronto”) is largely responsible for the delay, having postponed and deferred inspections to sign off on minor repairs at the end of 2013 and again at the end of 2014. The minor deficiencies identified by the project consultant could have been rectified by now had Toronto co-operated on issues of site access and approvals.
[2] The repair contractor, Beta & Associates (“Beta”), asks the court to declare substantial completion as defined in section 2 of the Construction Lien Act, R.S.O. 1990, c.C.30 (the “Act”). The significance of a declaration of substantial performance is that it would allow Toronto to release holdback to Beta.
[3] Beta also asks the court to grant partial summary judgment and order payment of the portion of its claim that Beta contends is not in dispute or, alternatively, can be determined without a full trial. Beta asks the court to award payment for the unpaid balance of the contract price plus approved change orders, in the total amount of $251,672.43 or, in the alternative, in the lesser amount of $138,324.20. The higher amount includes change orders 7 and 8, issued but in dispute. The lower of the amounts excludes change orders 7 and 8. Entitlement to pending change order amounts is not before the court on this motion.
[4] Toronto’s position on the first issue is that the contract has not been substantially completed because of an unresolved leak. On the second issue Toronto disputes the unpaid balance of the contract price as well as change orders 7 and 8 and maintains that there are genuine issues that require a trial.
[5] For the reasons set out below I find and declare that the Beta contract has been substantially completed within the meaning of section 2 of the Act. I further find that Toronto is required to pay to Beta the sum of $188,342.56 for contract work that has been completed (including undisputed change orders and change orders 7 and (i)) plus interest at the prejudgment interest rate of 1.3% from March 6, 2014[1] to January 16, 2015 plus post judgment interest on the total amount payable thereafter at the rate of 3 percent.
I. Background
[6] By purchase order dated April 4, 2012 Toronto contracted with Beta to repair the fountain. Toronto retained Accent Building Sciences Inc. (“Accent”) as payment certifier on the project. Accent issued 11 payment certificates, as follows:
Cert. No./
Date
Total Contract Price
(excl HST)
Payment period
Items CO = change order
Certified payable (excl holdback, incl HST)
Cert #1
Aug.30, 2012
$734,800.00
Up to August 30, 2012
22% of rehabilitation
$148,742.35
Cert #2
Sept.17, 2012
$734,800.00
Up to August 30, 2012
CO #1
$1,815.35
Cert #3
Oct. 2, 2012
$734,800.00
Aug. 30, 2012 - Sept. 15, 2012
10% of rehabilitation
$67,610.16
Cert #4
Jan. 18’13
$734,800.00
Up to Jan. 10 2013
18% of rehabilitation 73% of testing 8% of contingency CO #2 and CO #3
$132,483.57
Cert #5
April 11,2013
$734,800.00
Up to Jan. 31, 2013
5% of rehabilitation
$33,805.08
Cert #6
May 3, 2013
$734,800.00
Up to April 19, 2013
10% of rehabilitation 100% site materials
$89,296.67
Cert #7
June 13, 2013
$734,800.00
Up to June 7, 2013
10.5% rehabilitation
$55,990.57
Cert #8
June 28, 2013
$734,800.00
Up to June 28, 2013
8.4% rehabilitation 100% electrical
$77,190.30
Cert #9
July 24, 2013
$969,273.07
Up to July 17, 2013
6% rehabilitation 9% testing 92% contingency 7% PO amendment CO #4, CO#5, CO#6
CO#9 revision 2
CO#10 revision 2
CO#11 revision 1
CO#12 revision 1
CO#13 revision 1
$96,060.28
Cert #10
Oct. 4, 2013
$969,273.07
July 17, 2012 to
Oct. 4, 2013
3% rehabilitation
18.4% PO amendment
CO#14 revision 1
CO#15 revision 4
$64,132.04
Cert #11
Nov. 6, 2013
$969,273.07
Oct. 4, 2013 to
Nov. 6, 2013
29% PO amendment
CO#16, CO#17
CO#18, CO#20
$68,724.05
Add HST: $1,095,278.50
[7] The parties entered into a base contract. Twenty change orders were issued thereafter, some of them the result of unforeseen site conditions. There are additional pending change orders that are not part of this motion.
[8] The site is complex for several reasons. It is in the middle of a very busy urban intersection, surrounded by high volume vehicular and pedestrian traffic. It sits atop the aging subway transit system. Upon opening up the infrastructure Beta discovered mould contamination that required government regulated environmental contamination safety measures for removal to ensure the safety of workers and passers-by in the vicinity of the site.
[9] Toronto’s explanation for not paying Beta the amounts claimed in this motion for partial summary judgment is that in Toronto’s view Beta has not substantially performed the contract work. Beta disagrees and asserts that the items that remain to be completed are minor.
[10] Beta is frustrated because of the significant delay that Toronto has caused in failing or refusing to conduct the final testing to sign off on the project, or to otherwise resolve the outstanding issues. Beta claims that $469,951.25 of the contract work has not yet been paid, despite the issuance of payment certificates. Beta claims a lien for this amount. On this motion for summary judgment Beta seeks payment of what in its view are the parts of its lien claim that do not raise genuine issues that require a trial. Beta states that the reason for the motion is its need for cash flow to carry on its business.
II. Issues
[11] The issues are:
a. Is leave warranted under section 67 of the Act?
b. Has the contract been substantially performed?
c. Do the amounts claimed raise genuine issues that require a trial?
III. Leave under the Act
[12] Pursuant to section 67 of the Act leave may be granted to bring interlocutory proceedings that are necessary or that would expedite resolution of the issues in dispute.
[13] In my view, resolving the issue of substantial performance would narrow the issues in dispute and expedite resolution of the issue of the release of holdback funds. Further, if partial payment of the lien claim amount does not raise issues that require a trial then the motion meets the test of expediting resolution of the contract issues in dispute. For these reasons I find that Beta as moving party meets the test and leave is granted to proceed with the motion,
IV. Analysis
a. The First Issue: Substantial Performance
[14] Section 2 of the Act provides:
- (1) For the purposes of this Act, a contract is substantially performed,
(a) when the improvement to be made under that contract or a substantial part thereof is ready for use or is being used for the purposes intended; and
(b) when the improvement to be made under that contract is capable of completion or, where there is a known defect, correction, at a cost of not more than ,
(i) 3 per cent of the first $500,000.00 of the contract price
(ii) 2 per cent of the next $500,000.00 of the contract price, and
(iii) 1 per cent of the balance of the contract price.
[15] Beta’s position is that the fountain is ready for use and that the cost of the minor corrections required is less than the threshold amount prescribed by section 2(b) of the Act. Beta calculates the threshold amount as $25,952.79, as follows:
Amended contract price[2]: $1,095,278.57
3% of the first $500,000.00 = $ 15,000.00
2% of the next $500,000.00 = $ 10,000.00
1% of the remaining $952.79 = $ 952.79
$ 25,952.79
[16] I have reviewed and agree with Beta’s calculations of the threshold amount. If the cost of completing the work or correcting any deficiencies is less than $25,952.79 then the contract has been substantially performed for purposes of the Act.
[17] The evidence relied on to support Beta’s contention that the improvement, in this case the fountain, is ready for use is set out in the initial affidavit of Mario Di Vincenzo sworn November 7, 2014 and his reply affidavit sworn November 28, 2014, summarized in Beta’s factum. Mr. Di Vincenzo is the president of Beta and has specialized in the construction and rehabilitation of treated water facilities, including water fountains, for more than 18 years.
[18] The evidence shows that Accent, the project consultant and payment certifier, inspected the site for completion. On May 16, 2014 Accent recorded 11 deficiencies. Several of the items listed were very minor items, or “clean up” items. Accent’s final inspection report dated May 16, 2014 is in Beta’s motion record at Tab 56. Items 2, 5, 6, 8 and 9 are very minor, listing as deficiencies or items remaining to be completed: clean and demobilize site, install rubber gasket caps, install labels, replace a defective light and hand over software manuals.
[19] Beta took the position that some of the items listed were not part of their contract, and that the other items have been completed. Beta asked Toronto to retest the fountain so that the contract could be closed off.
[20] The only significant items listed in the May 16, 2014 Accent report are item 7: “repairs to the leak at the damaged solenoid; the backflow preventer was leaking water” and item 10: testing automatic mode was not done. Beta and Toronto disagree as to how to complete the repair for item 7. Beta’s position is that the design using a solenoid is flawed and should be changed to a hammer arrest system, which would be an extra to the contract, but the City declined to take Beta’s recommendation. Beta purchased a replacement solenoid valve ready for installation ut was prevented from doing so by Toronto’s actions. To carry out the replacement the electrical service had to be shut off. Toronto had changed the locks to the electrical cabinet on site without providing Beta with the new access key. Beta could not carry out the replacement without coordinating access with Toronto. Toronto’s position is that Beta merely needed to ask for access. Despite Toronto’s protestations, I find that Toronto is largely responsible for Beta’s inability to gain access to the electrical cabinet on site to replace the solenoid valve.
[21] After many requests (many emails and letters were exchanged) and much delay on the part of Toronto, Accent conducted its next inspection on October 23, 2014 and issued a further report. Some of the minor items noted in the May 16, 2014 report remained in Accent’s October 23/24, 2014 report, such as handing over software manuals, removing the perimeter fence, repairing cracks and spalling concrete. I find, based on the evidence, that the only remaining items of significance are item 7, the leak attributed to the damaged solenoid valve, and item 10, stating that the automatic mode was not tested.
[22] As to item 7, Accent attaches to its report a report of engineer, Mike Fairey of TS Engineering Inc., which states in part:
“Due to the congested nature of the equipment “pit”, it was not possible to get closer than 4 ft to the solenoid and 8ft to the backflow preventer. As such, a detailed inspection was not possible…From the vantage point I had, no visible leaking was observed from the solenoid valve or the backflow preventer and both components appeared to be free of damage. However, if the water service was valved off upstream of the backflow preventer, leaks would not be detected.”
[23] Toronto, in taking the position that the leak has not been resolved, relies on the engineer’s hypothetical posed in the last sentence of Mr. Fairey’s report. However, there is no evidence to support the hypothetical of the water having been valved off upstream, and for purposes of this litigation I rely on the portions of the report that are based on the engineer’s observations and findings.
[24] I find that for the purpose of determining whether the Beta contract project has been substantially completed the leak has been resolved, or will be resolved upon Toronto providing Beta with access to replace the solenoid valve.
[25] Beta lead evidence that the replacement solenoid valve has been purchased and is on site, and the cost of labour to install it is $1,500.00. Toronto submitted no evidence to the contrary. The repair cost is well below the threshold prescribed by section 2(b) of the Act.
[26] Regarding item #10 in Accent’s October 23/24, 2014 report, specifying that Beta has not yet conducted a demonstration of the fountain in automatic mode, Beta lead evidence of its attempts to schedule demonstrations and tests and Toronto’s failure to respond, failure to attend scheduled inspections, most recently an inspection where Beta asserts that Toronto failed to show up and Toronto asserts that Beta unilaterally changed the time from 10:00am to early afternoon. Having acknowledged that Beta changed the time scheduled to test the automatic mode, Mr. Bright fails to explain why he left the site 15 minutes prior to the later time.
[27] I understand the frustration of both parties. However, scheduling an inspection ought not require the court’s intervention. Sophisticated parties such as the parties before the court in this case should have been able to work out a time to conduct the test and close off the contract before the current winter set in, precluding the testing until next spring.
[28] In cross-examination Mr. Bright, Toronto’s deponent, admitted that Toronto conducted its own tests in July 2014 without notice to Beta. Toronto has not provided any evidence that tests conducted on that date demonstrated that the fountain’s automatic mode does not function. It follows that if the test had demonstrated a problem with the automatic function then Beta would have been notified. In my view Toronto has not raised a genuine issue for trial as to whether Beta’s failure to demonstrate automatic mode gives rise to a defect or correction that would bring the total of the rectification costs above the threshold of $25,952.79.
[29] For all of these reasons I find that the fountain is ready for use with these minor rectifications and that the contract has been substantially performed.
b. The Second Issue: Unpaid Contract Price and Approved Change Orders
[30] Beta asserts that the unpaid portion of the contract price is $251,672.47. Beta calculates this amount as follows[3]:
Original contract price: $751,224.00 (includes HST of $86,424.00)
Add 20 issued change orders: $351,299.00 (includes HST of $40,414.93)
Add pending change orders: $306,927.47 (includes HST of $35,310.24)
Total: $1,409,450.47 (includes HST)
Deduct payments by Toronto: ($850,850.53[4])
Balance owing: $558,599.94 (includes HST)
Deduct pending change orders: $306,927.47 (includes HST)
Amount claimed on SJ motion: $251,672.47 (includes HST)
[31] Toronto does not dispute Beta’s calculation up to the point of the line showing the balance owing of $558,599.94. One of the areas of disagreement appears to be over whether the change orders include or exclude HST. Because the pending change orders are added into the calculation and then deducted back out of it, and because Beta does not seek payment at this stage for pending change orders, I prefer to simplify the calculation as follows:
Original contract price: $751,224.00 (includes HST of $86,424.00)
Add 20 change orders: $351,299.00 (includes HST of $40,414.93)
Total: $1,102,523.00 (includes HST)
Deduct payments made: ($836,626.83[5])
Balance unpaid, contract and CO’s: $265,896.17 (includes HST)
[32] Beta’s position is that a trial is not required for the court to make findings that result in an award of the balance claimed as owing on the original contract plus the completed change orders.
[33] Toronto, by letter of April 16, 2014[6], acknowledged that the outstanding balance on the base contract is $132,645.22. Beta takes issue with this calculation as failing to take into account HST on the amended contract price.
[34] Another way to calculate the amount claimed as owing for the purpose of this summary judgment motion is to take the unpaid balance of the contract price of $138,324.20 plus the unpaid balance of approved change orders 7, 8, 17, 18 and 19[7] in the amount of $113,348.23. These amounts add up to the same amount as Toronto claims on the motion.
[35] Beta also asks the court to add to the amount claimed the sum of $2,396.69 for pending change order (i) for electrical disconnects (State Group) on the basis that Toronto admits that this amount is owing.
[36] Toronto does not dispute change orders 17, 18 and 19. Toronto concedes change order 7 on the basis that the quantum of disagreement is minimal ($1,300.00) but disputes Beta’s entitlement to payment for change order 8 ($71,028.10 + 13% = $80,261.75) at this stage of the action. Toronto calculates the amount payable on the unpaid balance of the contract price as $123,589.27 including HST. Toronto provided no comprehensible breakdown of its calculation.
c. Change Order 7 (CO7)
[37] Beta claims payment for CO7 in the amount of $23,437.00, acknowledging that there is a dispute over $1,300.00 of the amount claimed. Toronto’s dispute over this item rests with its concern that the hours claimed as worked by Beta are inflated. The basis of that concern is that when Toronto sent people to the site to count the number of workers it did not seem to match the hours reported by Beta. The number of hours in dispute is 19 hours.
[38] Beta submitted its time sheets. Beta’s evidence is that the time sheets include time spent doing project related work but workers may not have been readily visible on site. The consultant signed off on the change order and accepted the amount claimed for change order 7.
[39] I find that Beta’s entitlement to payment for CO7 does not raise a genuine issue that requires a trial. Beta is entitled to summary judgment for the $23,437.00 plus HST = $26,483.81 claimed for this item.
d. Change Order 8 (“CO8”)
[40] Beta claims payment of CO8 of $71,028.10 + HST for mould abatement and contamination control arising from unanticipated site conditions. At the very early stages of the project Beta discovered that there were areas uncovered that were rife with toxic mould. Work could not continue without putting proper safety measures in place together with a plan to eliminate the toxic mould. The result was CO8, based largely on the quantification provided by Beta’s environmental subcontractor CHDS. Toronto does not dispute that contamination remediation is a valid extra but disputes the price.
[41] CO8 was issued for $94,465.10 based to a large extent on the invoice of the environmental contractor CHDS dated December 31, 2012[8]. That document, although labeled “invoice”, was an estimate provided prior to commencing mould abatement work. The CHDS portion of the mould abatement and contamination protection work actually charged and paid was much less: $39,911.04. Beta claims that additional charges for other items pertaining to mould abatement and contamination protection were incurred such that the amount approved in the change order, even though it was not all paid to CHDS, should nevertheless be ordered paid on the basis that the work was approved and done, and on that basis it does not raise a triable issue.
[42] Toronto challenges the amount claimed for CO8 on the basis that the CHDS invoice/ estimate was rendered in an amount much higher than the amount ultimately charged by CHDS for the work actually undertaken. Toronto asserts that this discredits Beta and renders all of their evidence suspect.
[43] By CHDS labelling their estimate of anticipated costs for the mould abatement and contamination protection work as an invoice CHDS was imprecise and somewhat misleading. However the document was clearly an estimate and not an invoice for work completed and its label does not elevate it to a payable invoice. Beta is not claiming payment of the amount of the CHDS estimate. Rather, it has provided a calculation of all of the costs it has incurred in this area under the category of work required pursuant to CO8. It adds up to significantly more than was approved in CO8 and Beta caps the amount claimed on the motion at the amount approved in CO8, presumably leaving the balance for trial on the issue of extras.
[44] Nevertheless, Beta’s argument the court should award the amount approved in CO8 at this stage of the action is not convincing. Beta will have to prove the costs that it claims for items outside the CHDS estimate that formed the basis of CO8.
[45] Beta asks the court to order Toronto to pay $71,028.10 + HST = $80,261.75 for CO8 on the basis that this claim does not raise a genuine issue for trial. Beta relies on a letter from Mr. Bright of Toronto to Toronto’s purchasing department referring to CO8 and asking for approval of an additional $234,473.07, but without any breakdown as to what is included in the additional amount requested. In answer to an undertaking given on the cross-examination of his affidavit Mr. Bright requested the amounts required to “carry” (which I interpret as pay) CO7 and CO8.
[46] In my view the evidence on the amounts properly due and owing in respect of CO8 have not been clearly established. The onus is on the moving party to prove the amounts claimed and I am not satisfied that Beta has done that at this summary stage in respect of CO8. I find that CO8 raises a genuine issue for trial.
[47] On that basis the amount for which partial summary judgment will issue will not include any amount for CO8.
e. Calculation
[48] Based on my finding that the contract has been substantially performed the balance owing for the base contract plus the value of change order #7 of $26,483.81[9] plus the amount admitted by Toronto as owing for change order (i) of $2,708.15[10] plus the amount that Toronto admits as owing for change orders 17, 18, 19 is calculated as follows:
Contract price: $751,224.00[11]
Plus 20 CO’s $351,298.99[12]
Total (includes HST): $1,102,523.00
Less payments made: ($836,626.83[13])
Less CO8: ($80,261.75[14])
Balance (includes HST): $185,634.45
Plus CO (i) (includes HST) $ 2,708.15
Amount payable on SJ: $188,342.56
[49] I find that the calculation of the amount payable by Toronto to Beta, made up of amounts admitted as owing plus amounts which I have determined are owing without requiring a trial, is $188,342.56.
V. Conclusion
[50] THIS COURT ORDERS that partial judgment shall issue requiring Toronto pay to Beta the sum of $188,342.56.
[51] THIS COURT DECLARES that the contract between Beta and Toronto has been substantially performed.
[52] The parties shall attend before me to speak to costs on February 3, 2015 at 11:00 a.m.
Master C. Albert .
Released: January 16, 2015
CITATION: Beta & Associates v City of Toronto, 2015 ONSC 328
COURT FILE NO.: CV-14-502697
DATE: January 16, 2015
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Beta & Associates
Plaintiff (moving party)
- and -
City of Toronto
Defendant (responding party)
ENDORSEMENT
Master C. Albert
Released: January 16, 2015
[1] Beta served the lien claim on Toronto on March 6, 2014.
[2] For the purpose of the calculation Beta uses the lower contract price asserted by Toronto. Beta’s position is that the contract price is $1,409,450.47. For purposes of calculating the substantial completion threshold the calculation is based on the contract price most favourable to the responding defendant.
[3] Plus or minus a few pennies in some of the amounts when HST is added or removed
[4] Beta’s evidence: Toronto paid $850,850.52. Toronto’s evidence: Toronto paid $836,626.83.
[5] Affidavit of S. O’Bright, paragraph 9and Toronto’s motion record, tab 4, page 27.
[6] Beta’s motion record, tab 43
[7] Beta’s motion record, page 23, para.42.
[8] Beta’s motion record, tab 28, page 358
[9] $23,437.00 + HST
[10] $2,396.60 + HST
[11] $664,800.00 + HST
[12] $310,884.07 + HST
[13] Affidavit of S. O’Bright, paragraph 9 and Toronto’s motion record, tab 4, page 27.
[14] $71,028.10 + HST