ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-13-474457
DATE: Tuesday, October 29, 2015
BETWEEN:
Kamali Design Home Builder Inc.
J. Montgomery for the plaintiff
Fax: 905-430-0878
Plaintiff
- and -
Olga Bondarenko, Vadim Bondarenko, and HSBC Bank of Canada
S. Feinberg, for the Bondarenko defendants
Fax: 905-881-0547
Defendants
HEARD: October 20, 2015
Master C. Albert
I. Introduction
[1] Kamali Design Home Builder Inc. (“Kamali”) claims $85,840.00[^1] in payment for the supply of services and materials to the Bondarenko’s property at 38-40 Bayview Ridge, Toronto (the "Property").
[2] The issues are:
a) Did the parties contract for Kamali to supply construction services and materials?
b) Did Kamali supply services and materials for which he is entitled to payment on a contractual or quantum meruit basis?
[3] For the reasons set out below I find that Kamali is entitled to be reimbursed the amounts actually paid to repair and restore the Property on behalf of the Bondarenko’s, but he is not entitled to be reimbursed amounts he has not paid and is under no legal obligation to pay.
II. Background
[4] The Bondarenko’s purchased the Property in 2006. It is in a well-established residential neighbourhood lined with mature trees. They embarked on a plan to improve the Property by replacing the existing bungalow with a 27,000 square foot home[^2]. On May 15, 2006 they contracted with S.K.R. Unique Homes Limited ("SKR") to act as their construction manager and construction commenced in 2008.
[5] In April 2010, when the project was about 70 percent complete, the Bondarenko’s ran out of funds and were unable to continue. Rami Katsav, principal of SKR, testified as to the state of completion in April 2010. He testified that:
a) 75 percent of the slate roof had been installed, leaving 25% not yet completed;
b) one ply of the proposed two ply waterproof roof membrane had been installed, leaving the other layer of the roof waterproof membrane uninstalled; and
c) 80 percent of the exterior stone work had been completed, leaving 20 percent to be completed.
[6] Thereafter the property sat idle for over almost two years. Because of the incomplete exterior building envelope, the house was not weather tight. The construction site was neglected and between 2010 and 2012 the house fell into disrepair. Water seeped in and accumulated, causing damage to drywall, including mould. Winter weather conditions caused water pipes to freeze. Garbage accumulated. Vermin entered and made the house their final resting place. The exterior grounds were so neglected and overgrown that the City of Toronto issued an order to maintain.
[7] The lender, HSBC, was impatient and the Bondarenko’s knew they had to take steps to prepare the Property for sale but they needed financing. In 2012 their architect introduced them to Mostafa Kamali, principal of Kamali, who told them that he could help them arrange financing to complete the project. According to Mr. Kamali the Bondarenko’s agreed to have Mr. Kamali help them arrange financing to complete the project and then supervise the construction required to complete the project. The Bondarenko’s version of their agreement is different: they claim that Mr. Kamali’s only role was to arrange financing.
[8] In my view the evidence supports Mr. Kamali’s version of the agreement: the actions of the parties is more consistent with an agreement that Mr. Kamali would facilitate financing and then out of the funds advanced he would supervise completion of the project. I find Mr. Kamali more credible on this issue. After denying any discussions with Mr. Kamali about repairs Mr. Bondarenko admitted on cross-examination that he discussed repairing the roof with Mr. Kamali. On the issue of whether the agreement with Kamali extended beyond arranging financing, after denying any agreement other than to arrange financing Mr. Bondarenko admitted on cross-examination that he discussed with Mr. Kamali what had to be done to finish the construction once financing was arranged.
[9] Mr. Kamali suggested to the Bondarenko’s that the property would be more attractive to a lender with a construction contract in place outlining the items and the cost to complete the project. On June 27, 2012 the Bondarenko’s and Kamali executed a written contract.
[10] Over the next few months Mr. Kamali brought several financing proposals to the Bondarenko’s but none of them were acceptable. In his evidence in chief Mr. Bondarenko expressed that the proposed rate of borrowing in each case was excessive. Financing was never arranged and ultimately the bank holding the mortgage repossessed the Property.
[11] Early on in this action the Bonkadero's brought a motion to discharge the lien claim and dismiss the action. Mr. Justice McEwen dismissed the motion to dismiss the action but granted the motion to discharge the construciton lien and vacate registration of the claim for lien and the certificate of action upon the Bonkadero's paying into court security of $100,000.00 for the lien claim plus $25,000.00 for costs[^3]. Mr. Justice McEwen found that the lien claim was grossly excessive, that a trial was required to make findings of fact and that "the overwhelming weight of the evidence demonstrates that the lien is grossly inflated[^4]". He further found that "at its highest, in my view, Kamali may be entitled to $100,000.00[^5]". At trial Kamali heeded Justice McEwen’s warning and reduced the claim to $85,840.00.
[12] Mr. Kamali’s position at trial is that he is entitled to be reimbursed amounts his company paid or is liable to pay to the contractors and trades who supplied services and materials to prepare the property for inspection by potential lenders and purchasers.
III. Analysis
a. The contract
[13] Kamali and the Bondarenko’s entered into a written contract on June 27, 2012 for Mr. Kamali to supply general contracting services to complete the construction project that the Bondarenko’s had started in 2008 and suspended in 2010 for lack of funds. Nothing turns on the different forms of the name of Mr. Kamali’s companies: the completion work to be done under the contract with Kamali did not proceed because financing was never arranged.
[14] The contract was in essence a "cost plus" contract: the Bonkadero's would pay Kamali’s actual costs of services and materials plus a fixed fee to manage and supervise the project.
[15] Mr. Kamali prepared a list in consultation with Mr. Bondarenko outlining the items and costs to complete the Project[^6]. The itemized list estimates completion costs at $3,255,800.00.
[16] I find that the written contract produced at trial is a contract entered into by the parties to facilitate the Bondarenko’s efforts to obtain the financing required to complete the Project. The financing was never secured.
[17] Included in the list of completion items in the contract are several items that pertain to repairing or restoring the Property. Items relevant to the present case are:
(a) $31,800.00 to complete the drywall;
(b) $135,000.00 to complete the roof;
(c) $21,000.00 to complete the outside stone;
(d) $30,000.00 for garbage and general labour; and
(e) $570,000.00 for landscaping.
[18] Mr. Kamali's position is that it was necessary to spend some of the funds in the itemized list before financing was secured to clean up, repair and restore the partially completed house to an acceptable condition for the purpose of inspection by potential lenders and purchasers. The Bondarenko's position is that they did not authorize or know about any of the work Mr. Kamali claims to have carried out to remove garbage and vermin, repair the leaky roof, deal with emergency plumbing repairs, remove and replace mouldy drywall and tidy up the overgrown grounds. On this issue I prefer the evidence of Mr. Kamali as more credible.
[19] Mr. Kamali was charged with the task of securing financing The Property had fallen into a derelict state of disrepair. The parties discussed repairs. It is reasonable to conclude that a minimum amount of cleanup and repair would be required to restore the property to a reasonable condition to attract a lender. The project could not proceed without financing.
[20] On the issue of credibility Mr. Kamali suffers because of his exaggerated lien claim, his reliance on invoices issued by Kamali that appeared after the litigation had commenced but are not supported by evidence that they were delivered at the time the work was undertaken.
[21] Mr. Bondarenko is similarly plagued by lack of credibility. He was caught several times in cross-examination at trial with different versions of events from the versions given when he was cross-examined on his affidavit filed on the summary judgment motion. He denied authorizing any work, he denied that any work took place at the premises, he denied any intention of having Mr. Kamali supervise completion of the Project once financing came through, despite the written contract. Yet he was forced to admit the opposite under cross-examination.
[22] Having heard from tradesmen who worked at the premises, and accepting their corroborating evidence that they actually carried out the work they claim to have done, and hearing the evidence of Mr. Bondarenko that he went to the site a couple of times a week to check up on it, I find it lacking in credibility to accept Mr. Bondarenko’s evidence that no work was done to repair and restore the property during the period from June to October 2012.
[23] The Bondarenko’s called a neighbor from across the street as a witness, Olga Tchetvernykch. She testified that she never saw any construction on the Property in 2012. I find her evidence of little help to the court. The street is lined with mature trees. The properties are large estate properties: given that the Bondarenko’s were building a 27,000 square foot house, it is unlikely that all parts of the house were visible at all times to Ms Tchetvernykch. She testified that she was on the street frequently, driving her children to school when her driver did not take them, and also when she walked her dog. She provided no particulars of dates or times of her observations. While she may be well-intentioned, I find her conclusion that no work was done because she did not see any inconclusive. It is difficult to prove a negative: that nothing happened. It may have happened when she was not looking. On whether or not the work claimed to have been supplied was actually supplied I prefer the evidence of the trades claiming that they were paid for work that they did over that of a neighbor describing what she viewed sporadically behind a construction fence on a large property lined with mature trees.
[24] I find that during this period work was carried out, namely the minimal amount of work required to restore and preserve the house and the grounds for purposes of obtaining financing. I further find that the work was carried out with the knowledge, consent or acquiescence of the Bondarenko’s. On that basis, relying on the cost plus contract signed by the parties as evidence of an implied cost plus agreement to prepare the property for financing, I find that Kamali is entitled to be paid for services and materials actually supplied and for which Kamali can prove he actually paid suppliers of services and materials.
[25] I find that the parties agreed that Mr. Kamali would arrange for a lender to contract with the Bondarenko's to advance the financing required to complete the Project. I find that implicit in that agreement is an agreement that Mr. Kamali would arrange for whatever minimal cleanup was required to render the property presentable to potential lenders and that the "cost plus" arrangement provided for in the written contract would apply. In other words, Kamali would be entitled to recover reasonable costs incurred to preserve the asset and render the property presentable to facilitate securing financing.
b. Services and materials supplied
[26] Kamali claims payment for the following services and materials supplied solely for the purpose of cleaning up and restoring the property and doing what was required to prevent further weather related damage and deterioration:
a) $10,215.00 to dispose of garbage, including mouldy drywall;
b) $35,000.00 to remove mould and replace drywall damaged by water;
c) $25,425.00 to repair the roof;
d) $4,200.00 to repair frozen pipes caused by freezing weather conditions; and
e) $11,000.00 to clean up the grounds.
[27] Mr. Kamali testified that all these expenditures and arrangements were made with Mr. Bondarenko’s knowledge and consent. Mr. Bondarenko denies knowledge and consent but on cross-examination he waivered and I am satisfied that he authorized the repairs claimed in this action.
a) The garbage removal cost claim of $10,215.00
[28] Mr. Kamali testified that he paid $10,215.00 to Ali Ghorbani in cash to remove and dispose of garbage from the site, including mouldy drywall. Mr. Ghorbani testified and explained that he attended at the site on request, usually several days a week for a few hours each day. He removed garbage and debris from the house as required, loaded up his truck and took the garbage to one of two dumps in the city. He confirmed that he was paid $7,800.00 in cash at the time and that $2,415 remains unpaid. He has not sued Kamali for the balance owing.
[29] Mr. Ghorbani had no notes or records to corroborate his evidence. He did not issue invoices at the time, nor did he provide receipts for cash payments. Once the litigation commenced and at Kamali's request, he prepared an invoice (prepared by his girlfriend) listing the amounts charged and paid and showing a balance outstanding of $2,415.00. According to his evidence this statement reflects the state of accounts as between him and Kamali.
[30] Mr. Ghorbani gave his evidence in a simple, straightforward and forthright manner and was not discredited on cross-examination. I accept his evidence as truthful that Kamali paid him $7,800.00 for services and materials supplied to remove and cart away garbage from the Property between June and October 2012.
[31] The limitation period has passed and Ghorbani is no longer in a position to successfully sue for the balance he claims remains unpaid. The maximum amount that Kamali can prove he paid or is legally liable to pay is $7,800.00.
b) The drywall cost claim of $35,000.00
[32] Kamali hired 8163073 Canada Inc. to remove and replace mouldy drywall. The drywall had been damaged by water leaking through the unfinished roof.
[33] Mr. Bondarenko attributes the water leaks to improper installation of two skylights installed by the roofer prior to April 2010. He provided no expert evidence to that effect, nor did he call the roofer as a witness. There is no evidence that he made a claim under the roof warranty or whether such a warranty was given prior to the work stoppage in 2010.
[34] Mr. Katsav, the Bondarenko’s construction manager from 2008 to 2010, testified at trial. He attributes the leaks to an incomplete roof structure. The slate roof was only 75 percent complete leaving the waterproofing membrane exposed. He testified that roof was bound to fail because the waterproofing membrane was not protected by the slate roof because the slate was incomplete. No expert testified about the cause of the roof leaks.
[35] I prefer Mr. Katzav’s evidence over that of Mr. Bondarenko on this issue. He has experience as a construction contractor. He is not a party so his evidence is not tainted with having an interest in the outcome of the litigation. I find that the cause of the leak was the Bondarenko’s failure to complete the roof structure before they interrupted the project in 2010.
[36] Kamali claims $35,000.00 for this item, relying on invoices from 8163073 Canada Inc. Cheung Mei Ping, the principal of the company, was included in Kamali’s list of trial witnesses and deposed an affidavit for use as evidence in chief at trial. The defendant served a notice of intention to cross-examine Mr. Ping at trial but Mr. Ping failed to attend.
[37] Counsel for Kamali advised the court that he interviewed Mr. Ping shortly before trial and the witness was prepared to attend at trial and testify. Kamali did not serve a summons as Mr. Ping was going to testify voluntarily. Then Mr. Ping changed his mind. Between the date Kamali’s counsel interviewed Mr. Ping and ascertained that Mr. Ping was going to attend at trial voluntarily and the date of trial, a period of less than a couple of weeks, the Bondarenko defendants, or one of them, contacted Mr. Ping. They do not deny contacting him. After that contact Mr. Ping changed his mind and refused to attend at trial. Kamali’s counsel attempted to have a summons served on Mr. Ping on the evening of the first day of trial to compel him to attend the second day of trial but they were unsuccessful in their efforts to serve the summons. Counsel for Kamali asks the court to draw an adverse inference against the Bondarenko's alleging that they interfered with one of Kamali’s witnesses. Counsel for the Bondarenko’s asserts that there is no property in a witness and they were not precluded from speaking with Mr. Ping before trial.
[38] While there is no rule precluding a defendant from interviewing a plaintiff's witness, the significant fact in this case is that prior to being contacted by the Bondarenko’s Mr. Ping was prepared to attend at court voluntarily to be cross-examined on his affidavit but after the contact he was no longer willing to do so. I draw an adverse inference that something transpired during the defendants’ communication with Mr. Ping that discouraged Mr. Ping from attending.
[39] Without Mr. Ping's attendance at court he could not be cross-examined on his affidavit. His affidavit speaks to the work his company carried out, the invoices rendered and the payments received for drywall. My pretrial directions provided that a witness who testifies by affidavit need only attend at trial if served with a notice of intent to cross-examine. It is admitted that the Bondarenko’s served a notice of intention to cross-examine Mr. Ping.
[40] I draw the inference from the events described that the reason Mr. Ping did not attend at trial to be cross-examined is because of something that was said in the Bondarenko’s communication with him shortly before trial. His affidavit, if admitted, corroborates the evidence of Mr. Kamali as to the drywall work done and the amounts paid and owing for that work. Without it the evidence on that issue is Mr. Kamali’s evidence alone.
[41] In the absence of Mr. Ping’s attendance to be cross-examined I accept Mr. Kamali’s evidence on the issue of the work he hired Mr. Ping’s company to carry out and the amounts Kamali paid to 8163073 Canada Inc. for drywall services and materials to replace mouldy drywall and related items. I accept Mr. Kamali's evidence as factually correct in the absence of corroboration from Mr. Ping.
[42] Mr. Kamali provided evidence that Kamali paid 8163073 Canada Inc. $28,000.00 and that the company deposited this amount into their bank account. 8163073 Canada Inc. issued two invoices, one for $10,000.00 dated July 18, 2012 and one for $18,000.00 dated September 15, 2012. These invoices were paid and the funds deposited into 8163073 Canada Inc.’s account on July 20, 2012 and September 21, 2012 respectively. There is an additional claim for $7,000.00 but that amount is neither invoiced nor is there proof that it was paid. I am satisfied based on the evidence at trial that the services and materials supplied by 8163073 Canada Inc. was in respect of the Property and that Kamali paid 8163073 Canada Inc. $28,000.00.
c) The roofing cost claim of $25,425.00
[43] Kamali claims that Columbus Aluminum & Roofing Ltd. charged $25,425.00, invoiced October 5, 2012 for roofing supplies and labour for the property. Mr. Kamali admits that Kamali has not paid this invoice. The limitation period has expired. There is no evidence that Columbus has an ongoing lawsuit claiming payment against Kamali issued prior to the expiry of the limitation period.
[44] Kamali has no status to recover this amount of its claim. It is neither out of pocket nor exposed to a lawsuit issued prior to expiry of the limitation period. This portion of Kamali’s claim fails.
d) The plumbing cost claim of $4,200.00
[45] Kamali claims the $4,200.00 it paid to plumber Steve Barasic to deal with a leak caused by freezing weather conditions in the unheated, unfinished house on the Property. I am satisfied that the evidence at trial proves that Kamali paid this amount to the plumber and that it is properly recoverable as an expense incurred to protect the Property and prepare the house for inspection by a potential lender.
e) The groundskeeping cost claim of $11,000
[46] Kamali claims $11,000.00 invoiced by Twelve Oaks Tree Service Inc. (“12 Oaks”) to Kamali on November 15, 2012 to prune overgrown vegetation, including a dead birch tree. Kamali relies on a cheque dated November 6, 2012 and processed on November 13, 2011 as proof of payment. Mr. Kamali explains the conflicting dates as a demand by Twelve Oaks that they receive payment before issuing the invoice. I accept that evidence and find that Kamali paid Twelve Oaks $11,000.00.
[47] The Bondarenko’s dispute this portion of the claim on the basis that the grounds did not need any attention. They denied that there were dead trees on the Property. That evidence is not credible. The photographs filed at trial clearly show a dead birch tree on the property. The defendants also admitted that the City of Toronto had issued an order that the grass on the Property was overgrown to such an extent that they were ordered to cut it failing which sanctions would follow.
[48] By denying the derelict state of the grounds the Bondarenko’s serve merely to discredit their evidence in general.
[49] I accept Kamali’s evidence that Twelve Oaks was called in to supply grounds keeping services to render the property fit for inspection by potential lenders. I also accept that Kamali paid Twelve Oaks $11,000.00 to clean up the grounds of the Property.
IV. Calculation
[50] The following amounts are allowed on the basis that Kamali paid these amounts for the supply of services and materials to the Property and the Bondarenko’s are required to reimburse these amounts:
a) $7,800.00 paid to Mr. Ghorbani for garbage removal and disposal
b) $28,000.00 paid to 8163073 Canada Inc. for drywall
c) $4,200.00 paid to plumber Steve Barasic
d) $11,000.00 to Twelve Oaks Tree Service Inc. for grounds keeping
[51] The total amount proven is $51,000.00.
V. Conclusion
[52] In conclusion the defendants Olga Bondarenko and Vadim Bondarenko, jointly and severally, shall pay to Kamali Design Home Builder Inc. the sum of $51,000.00 plus prejudgment calculated at the rate of 1.3 percent (1.3%) from February 19, 2013 to October 29, 2015 plus post-judgment interest at the Courts of Justice Act rate of 2 percent (2%) from October 30, 2015 to the date of payment.
[53] I will hear submissions on costs at the hearing on October 29, 2015.
Master C. Albert .
Released: October 29, 2015
COURT FILE NO.: CV-13-474457
DATE: October 29, 2015
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Kamali Design Home Builder Inc.
Plaintiff
- and -
Olga Bondarenko, Vadim Bondarenko, and HSBC Bank of Canada
Defendant
REASONS FOR JUDGMENT
Master C. Albert
Released: October 29, 2015
[^1]: Reduced from $250,000.00 claimed in the statement of claim
[^2]: 16,000 square feet plus a basement of 11,000 square feet
[^3]: 2013 ONSC 5506
[^4]: 2013 ONSC 5506, paragraph 31
[^5]: 2013 ONSC 5506, paragraph 36
[^6]: Filed at trial as exhibit 2