SUPERIOR COURT OF JUSTICE
CITATION: Cleanol Integrated Services Ltd. v. Johnstone, 2015 ONSC 768
COURT FILE NO.: CV-11-431927
DATE: February 2, 2015
ONTARIO
BETWEEN:
CLEANOL INTEGRATED SERVICES LTD
L. O’Connor, for the plaintiff
Tel: 416-365-1110; Fax: 416-365-1876
Plaintiff (defendant by counterclaim)
- and -
QUINTIN JOHNSTONE
J. Arnold, for the defendant[1]
Tel: 416-640-0508; Fax: 416-848-0200
Defendant (plaintiff by counterclaim)
HEARD: August 7,8,12,19,20,22,26,27,28
and September 2, 3,10 and 12, 2014
Master C. Albert
[1] Quintin Johnstone hired Cleanol to renovate his 1218 square foot, two story condominium apartment at 39 Jarvis Street in downtown Toronto (“unit 806”). Cleanol designed a renovation that transformed a humdrum, ordinary space into a modern apartment in the style of a New York city loft. Mr. Johnstone paid only $62,800.00. Cleanol claimed payment of an additional $68,017.51 for services and materials supplied to renovate the premises and registered a construction lien for that amount on July 15, 2011[2]. Cleanol issued its statement of claim on August 2, 2011 for that amount, but less than a month after receiving Mr. Johnstone's $240,000.00 counterclaim Cleanol increased its claim to $175,656.97[3].
[2] In his counterclaim Mr. Johnstone alleges that Cleanol overcharged him and that Cleanol’s work was deficient and incomplete. At the opening of trial Mr. Johnstone reduced his counterclaim to $50,000.00, made up of $13,500.00 for deficiencies, $28,000.00 for failure to obtain permits and $9,000.00 for delay.
[3] The issues are:
a) Did Cleanol and Mr. Johnstone enter into a contract to renovate unit 806? If so, what are the terms of the contract as to price, timing and scope of work? Did the parties have a “Quid Pro Quo” agreement regarding a markup for profit and overhead (the "markup")?
b) In the absence of a contract is Cleanol entitled to recover on the basis of quantum meruit for unjust enrichment?
c) When and how did the relationship end?
d) Is Mr. Johnstone entitled to recover for deficiencies, permit violations and delay?
e) Did Cleanol register its claim for lien in time?
f) What is the proper accounting as between the parties?
[4] The Construction Lien Act, R.S.O. 1990, c.C.30 (the “Act”) mandates that a construction lien claim shall be of a summary nature to the extent possible. In an effort to achieve efficiency the trial was conducted as a hybrid trial with evidence in chief by affidavit and, in the case of expert witnesses, by way of expert reports. At the request of the party calling the witnesses, four of Cleanol’s witnesses and three of Mr. Johnstone’s witnesses supplemented their affidavit evidence in chief with oral evidence at trial.
[5] Cleanol cross-examined all seven of Mr. Johnstone’s witnesses[4]. Mr. Johnstone limited his cross-examination to five of Cleanol's ten witnesses. The reasonableness and proportionality of the voluminous evidence adduced at trial is relevant to costs of the proceeding.
I. Background
Ms Yueh’s and Mr. Johnstone’s business experience and holdings
[6] Dorothy Yueh is the president of Cleanol. For 20 years prior to acquiring the company in 2010 Ms Yueh was Cleanol’s controller. Cleanol was initially in the business of providing restoration services to properties following fires and floods. Since acquiring Cleanol Ms Yueh expanded its business to include general renovation work.
[7] Francesco Giampietro was Cleanol’s vice-president of operations at the time of Mr. Johnstone’s renovation. He is a talented designer and a perfectionist.
[8] Ms Yueh is also the principal of 360 Restoration (“360”), a division of 360 Emergency Management Inc., which is in the business of providing emergency management and business continuity planning services to businesses devastated by fire and flood.
[9] Mr. Johnstone was a detective sergeant with the Toronto Police Service for 31 years until his retirement in 2009. For the latter 20 years of his service on the police force, and up to the present day, he has also been a real estate broker and a real estate investor. Currently he owns five condominium units in downtown Toronto.
[10] In 2010 Mr. Johnstone was co-owner with Stephen Brash of a private investigation company known as Samsonshield Inc., which is in the business of providing security services to properties, including condominium apartment buildings, as well as investigation services. Mr. Brash is no longer a co-owner but Mr. Johnstone continues as the principal of Samsonshield.
[11] Mr. Johnstone is or has been a member of four condominium boards of directors. He is knowledgeable and experienced in how condominium boards conduct business. Prior to purchasing unit 806 Mr. Johnstone was the first owner of unit 309 in the same building, which he continues to own. This is significant because it shows Mr. Johnstone's connection to the building since its inception.
Ms Yueh and Mr. Johnstone’s relationship
[12] Ms Yueh and Mr. Johnstone met some 15 years ago through a mutual friend. Mr. Johnstone claims that he has provided her with business advice and guidance throughout that period of time. He asserts in his affidavit that he assisted her each time as a “gift of friendship”.
[13] In 2010 Ms Yueh suspected that the general manager of her company, 360, was stealing clients away, preparing to set up his own business. She approached Mr. Johnstone to carry out an investigation through his company Samsonshield which, in turn, sub-contracted with LTD to conduct the investigation. The investigation is relevant and is discussed later in these reasons because Ms Yueh alleges that Cleanol and Mr. Johnstone agreed that Cleanol would provide its services at cost without any markup in exchange for Samsonshield providing its services at cost without any markup. Cleanol refers to this arrangement as a “Quid Pro Quo” agreement. Mr. Johnstone characterizes the absence of a markup as a gift of friendship or a gift of kindness.
[14] At Mr. Johnstone’s request Cleanol designed and renovated unit 806. When Cleanol discovered that Samsonshield had added a markup of 36 percent to the amounts it charged for LTD’s services in the 360 investigation, the relationship between Ms Yueh and Mr. Johnstone soured. Cleanol tacked on a 36 percent markup to the unit 806 renovation project. This markup is reflected in the difference between the amount Cleanol claimed originally ($68,017.51) and the amount of Cleanol's amended claim ($175,656.97).
Mr. Johnstone buys unit 806
[15] On August 16, 2010 Mr. Johnstone entered into an agreement to buy unit 806 for $545,000.00 and renovate it for his own use. Prior to closing the transaction he contacted Ms Yueh to discuss his proposed renovation of unit 806. She introduced him to Mr. Giampietro.
[16] Ms Yueh, Mr. Giampietro and Mr. Johnstone met at the premises on September 1, 2010 to discuss the proposed renovation. They did another walk through on September 21, 2010 after the closing, this time with Mr. Johnstone’s demolition contractor, Joe Manone, in attendance.
[17] On November 20, 2010 Ms Yueh, on behalf of Cleanol, and Mr. Johnstone signed a document titled “Project Proposal”[5]. At trial they both referred to this document as the contract. Whether in law it forms a contract is an issue in this litigation.
[18] Mr. Johnstone instructed Cleanol that he would hire his own demolition contractor, Mr. Manone, directly. Following demolition Cleanol’s forces would take over and restore unit 806 to a renovated condition based on a scope of work to be agreed upon by the parties.
[19] Mr. Johnstone and Mr. Giampietro worked closely with Cleanol’s computer technology employee, Henry Sanchez, to create designs, drawings and three dimensional computer models of the proposed renovation. Mr. Johnstone was “hands on”, meeting with Mr. Giampietro and Mr. Sanchez weekly to review the design and make changes and improvements. Mr. Johnstone attended at unit 806 frequently throughout the renovation.
[20] Mr. Johnstone’s initial concept was for Cleanol to carry out a minimal, cosmetic makeover of the unit. However Mr. Johnstone was intrigued by Mr. Giampietro’s design ideas and he approved many changes and extras as the project progressed. The renovation expanded significantly in scope, quality of materials used and costs.
[21] Mr. Johnstone’s position is that all of these extras and additions fall with the original estimated range in the Project Proposal, such estimate having been based on Mr. Johnstone’s initial concept of a minimal cosmetic renovation as shown in the plans he filed with his condominium board seeking their approval[6].
[22] Mr. Johnstone testified that he did not change the scope of work unless Mr. Giampietro came up with an idea. He blames the additional cost on Mr. Giampietro because the changes arose from Mr. Giampietro's design ideas. As designer, that was Mr. Giampietro’s role. As owner, it was Mr. Johnstone’s role to instruct Cleanol to add a design idea to the project based on factors relevant to him, namely price and timing, or to reject a design idea. It is naive for Mr. Johnstone to expect the court to accept that he, a sophisticated real estate broker and investor, believed that the design ideas presented by Mr. Giampietro would be implemented at no additional cost when the scope of work increased significantly and upgraded materials were to be used. It is not credible that Mr. Johnstone did not know that increasing the scope of work and the quality of materials would also increase the price.
The renovation
[23] After Mr. Manone’s demolition work Cleanol attended the premises to begin the restoration. Cleanol’s evidence is that Mr. Manone failed to complete the demolition, leaving bulkheads and partition walls that were to have been removed and failing to remove and cart away debris, including large items such as a bathtub and other fixtures that were to be discarded. Cleanol carried out the remaining demolition and removed the debris so that the restoration could begin, thereby increasing Cleanol's scope of work and costs.
[24] The evidence regarding the bathtub goes to credibility. Cleanol complains that Mr. Manone failed to carry out the demolition and removal of debris as instructed. The significance is that it added to Cleanol’s costs and delayed the project. One example is that Mr. Manone failed to remove a large triangular bathtub from the master bathroom on the second floor. He disconnected it and removed it from the bathroom but left it in the middle of the apartment. Mr. Johnstone explained that he had intended to have the triangular bathtub reinstalled post-renovation and he instructed Mr. Manone to leave it in the unit. In giving that evidence Mr. Johnstone discredits himself and directly contradicts his September 16, 2010 proposal to the condominium board wherein he requested approval of the proposed renovation[7]. The drawings that Mr. Johnstone prepared and submitted clearly show that he intended to discard the triangular tub. He wrote on the plans that he submitted to the condominium board the words: “Replace tub with rectangular tub” with an arrow pointing to the same triangular tub that Mr. Manone left in the condominium unit and failed to cart away. This example causes me to doubt the veracity of Mr. Johnstone’s evidence in general.
[25] Mr. Johnstone’s position is that the additional demolition carried out by Cleanol was unauthorized. This conflict in the evidence goes to credibility as well as the issue of the scope of work agreed to by the parties.
[26] I accept Cleanol’s evidence over that of Mr. Johnstone. Had Cleanol not completed the demolition that Mr. Manone ought to have finished, and had Cleanol not removed the demolition debris from unit 806, the renovation could not have begun.
[27] Cleanol continued the renovation, with Mr. Johnstone attending the site frequently and meeting with Mr. Giampietro and Mr. Sanchez at Cleanol’s offices at 40 Adesso Drive, Concord weekly on Saturdays to go over design ideas and make changes. Frustrated with the slow pace of the renovation and having expected to move in by the end of December 2010, Mr. Johnstone extended the anticipated completion date from December 1, 2010 to the end of February 2011.
[28] Then Mr. Johnstone and Ms Yueh had a major disagreement. Ms Yueh accused Mr. Johnstone of overcharging her for Samsonshield’s investigation services provided to her company 360. Mr. Johnstone was offended that Ms Yueh had called his integrity into question and decided he could no longer work with her. Their conflict culminated on February 19, 2011 when Mr. Johnstone claims that he fired Cleanol, ejecting Cleanol and Ms Yueh from the site. Mr. Johnstone’s position is that when he terminated Cleanol he contracted directly with Mr. Giampietro personally.
[29] Cleanol’s position is that the services of Cleanol were not terminated, but rather that Ms Yueh, as president of Cleanol stepped away from any direct communications with Mr. Johnstone, and Mr. Giampietro took her place for that purpose as vice president of Cleanol.
[30] Both Ms Yueh and Mr. Johnstone admit that they intended for Mr. Giampietro to remain involved and see his design concept through to fruition. The day to day management of the project changed in that after February 19, 2011 Mr. Giampietro would arrange for the labourers, who were paid in cash by Mr. Johnstone with cash that Mr. Johnstone gave to Mr. Giampietro for that purpose. Mr. Giampietro did not retain any of the cash for himself. The custom cabinetry that was underway at the Cleanol factory continued to be manufactured and was ultimately installed in unit 806. In issue is whether the relationship with Cleanol ended on February 19, 2011 or whether it continued without Ms Yueh’s direct involvement.
[31] With Cleanol’s approval, from February 19, 2011 to June 28, 2011, Mr. Johnstone hired and paid his own general labourer, Jerry Tavares, principal of a business named Keepshine, to carry out some of the general labour such as flooring, tiling and drywall. Mr. Giampietro, while still an employee of Cleanol and providing his services at no additional charge to Mr. Johnstone, coordinated and arranged for additional workers to carry out tasks on the job.
[32] Mr. Giampietro left Cleanol at the end of June 2011 to pursue his own interests. On or about June 28, 2011 Mr. Johnstone asked Ms Yueh to step back in to the project but on July 4, 2011 he changed his mind and instructed Ms Yueh not to continue. Mr. Johnstone contracted directly with Mr. Tavares to complete the job. Unit 806 was ready to occupy in mid-July 2011.
[33] Mr. Johnstone complains that Cleanol carried out the work without the required permits, built an interior staircase that was contrary to the Ontario building code, carried out some of the work deficiently and failed to complete the job. His initial claim of $240,000.00 was reduced significantly at the opening of trial to $13,000.00 for deficiencies plus a claim of $28,000.00 for failing to obtain necessary permits and a claim of $9,000 for delay.
II. Contract or Quantum Meruit?
a. Did the parties enter into a contract and if so what are its terms?
[34] The formation of a contract requires a meeting of the minds of the parties on the issues of price, timing and scope of work. A significant issue in this action is whether the document titled “Project Proposal”[8] forms the contract between Cleanol and Mr. Johnstone and if so whether it is the entire agreement or whether there are collateral documents or verbal agreements that also form part of the contract.
[35] The Project Proposal, drafted by Cleanol, is dated November 17, 2010 and signed by Ms Yueh and Mr. Johnstone on November 20, 2010. It provides as follows:
(Cleanol letterhead)
Project Proposal
Client Name Mr. Johnstone
Project Site 39 Jarvis Street, Suite 806
Project Number CG2010-1028
Date November 17, 2010
Project Objective
o Design and Renovate at 39 Jarvis Street, Suite 806
o Client to supply appliances of choice
o Final scope of work to be sign sic off by December 1, 2010
o Your signature, name, and date constitute approval on revisions, changes and adjustments.
Estimated Value
o $100,000 - $125,000 plus applicable taxes.
Projected Completion Date
o December 1, 2010
Payment Schedule (to be finalized on November 20, 2010)
o $40,000 deposit – payment received on November 17, 2010
o $30,000 interim payment – December 1, 2010[^9]
o $20,000.00 interim payment – December 15, 2010
o Balance due 10 days after project completion.
Price: First issue - Did the parties agree to a price or a formula to determine price?
[36] The contract price is ambiguous. Under the heading “estimated value” the project proposal sets out a range from $100,000.00 to $125,000.00 plus taxes. There were no plans or drawings attached to the document and there is no way to determine from the document the services and materials to be supplied for the price range. Nor is it clear whether that price range applies only to Cleanol's portion of the renovation costs or whether it includes items that Mr. Johnstone was planning to pay for directly to suppliers.
[37] I draw the inference from the range used that pricing was to be fixed once the parties agreed on the scope and allocation of work, with the mutual expectation that the price would not exceed $125,000.00.
[38] Mr. Johnstone’s position is that the parties entered into a contract for the fixed price of $125,000.00 plus taxes, regardless of scope of work and materials used. I reject that assertion because if that were the case there would be no reason to express the price as “100,000 - $125,000 plus taxes” and the portion “$100,000 –” would be superfluous. Contract interpretation requires that every word be given meaning. Mr. Johnstone’s interpretation fails to ascribe meaning to “$100,000 –”.
[39] I also reject Mr. Johnstone’s position because the Project Proposal fails to identify the materials and services to be supplied for the price. There were no drawings or plans attached to the project proposal and on its face it contemplates that the scope of work would be determined and signed off by December 1, 2010, some 10 days later. The parties never signed off on plans or any other scope of work document. Consequently, even if the court were to accept Mr. Johnstone’s assertion that the contract price was capped at $125,000.00 plus HST, there is no ability to determine what services and materials Cleanol was required to supply for that price. As a contract the Project Proposal is void for uncertainty.
[40] Another reason I reject Mr. Johnstone’s position is that the deadline to sign off on the scope of work is the same date as the projected completion date. It would have been impossible for Cleanol to complete a job by that date without knowing the scope of work in sufficient time to perform the contract work.
[41] I find that there was no meeting of the minds on price or a formula to calculate price. An essential element of the contract is missing.
[42] Cleanol pleads in the alternative for recovery on the basis of quantum meruit and unjust enrichment, discussed later in these reasons.
Price: Second issue - Did the parties agree to a Quid Pro Quo arrangement?
[43] Ms Yueh tendered evidence that she, as principal of Cleanol and Mr. Johnstone, as principal of Samsonshield, agreed to an arrangement whereby Ms Yueh’s company and Mr. Johnstone’s company would provide services to each other “at cost” without charging any markup for profit and overhead (the “markup”). The evidence about whether Mr. Johnstone and Ms Yueh agreed to provide services to each other at cost without markup conflicts.
[44] Ms Yueh testified orally that in or about the summer of 2010 she suspected that her manager at 360 had been diverting customers to his own newly formed company. She retained Mr. Johnstone’s company Samsonshield to investigate the extent of this corporate betrayal and met with Mr. Johnstone at a restaurant. She claims that Mr. Brash, co-owner of Samsonshield with Mr. Johnstone, attended the meeting. Mr. Johnstone denies that he was present. Ms Yueh testified that they discussed Cleanol’s need to investigate the activities of the manager of 360.
[45] Ms Yueh's version of the meeting is that when Mr. Brash was away from the table she and Mr. Johnstone discussed Mr. Johnstone’s proposal to renovate unit 806, which he was about to purchase. She claims that she agreed to provide Cleanol’s construction and renovation services to Mr. Johnstone at cost in exchange for Mr. Johnstone providing his investigation services at cost. This is what Ms Yueh refers to as the “Quid Pro Quo” agreement.
[46] Mr. Johnstone denies the meeting, the discussion and the existence of a Quid Pro Quo agreement. His position is that Samsonshield was hired to provide investigation services for 360 and that he charged for providing these services, including a markup. However, he did not charge 360 for his personal time on the investigation. He values those services at $20,000.00.
[47] There is no corroborating evidence in the form of a letter, email or other document or in the form of oral evidence as to the existence of a Quid Pro Quo agreement.
[48] Ms Yueh and Mr. Giampietro's evidence is that Cleanol provided the design services of Mr. Giampietro and Mr. Sanchez as a service included in the price charged for Cleanol’s renovation. Cleanol values its design services at $28,000.00[10].
[49] Ms Yueh discovered that Mr. Johnstone included a markup of 36 percent in Samsonshield’s invoices to 360. She did not add a 36 percent markup to Cleanol's invoices right away. She registered the construction lien for $68,017.51 and issued the claim for that amount, but later, in response to Mr. Johnstone’s counterclaim for $240,000.00, Cleanol added a markup and increased its claim to $175,656.97.
[50] The credibility of Ms Yueh’s assertion that the parties entered into a Quid Pro Quo agreement is compromised by Ms Yueh’s delay in charging a markup after discovering that 360 had been charged a markup by Samsonshield. The increase in Cleanol’s claim is retaliatory and not based on evidence of Cleanol's actual charges for profit and overhead or a reasonable value to ascribe to profit and overhead.
[51] Neither party presented evidence of market percentage rates for profit and overhead in the construction industry. Evidence of rates charged for profit and overhead on other jobs, or expert evidence as to reasonable market rates was not before the court. In the case of Homewood Development Inc. v 2010999 Ontario Inc.[11], relied on by Mr. Johnstone in argument, the court allowed a markup of ten percent for profit based on the evidence tendered at trial.
[52] I find that there was no agreement by the parties for Cleanol to charge a markup of 36 percent and there is no evidence before the court of an agreement between the parties for Cleanol to charge any other rate for profit and overhead. In the absence of an agreement as to the rate of markup, the party claiming it must lead evidence of value. Cleanol called no relevant expert evidence. Cleanol’s calculation is based solely on its theory that “what’s good for the goose is good for the gander[12]”.
[53] In the absence of a contractual entitlement to charge a markup of 36 percent, or expert evidence as to value, I find that Cleanol has failed to prove its claim for profit and overhead. I conclude that Cleanol’s claim for profit and overhead of $107,639.46 must fail.
Scope of Work
[54] According to the Project Proposal the parties were to agree and sign off on a final scope of work by December 1, 2010. Mr. Johnstone never signed off on a scope of work document or any plans presented to him before, on or after December 1, 2010. He asserts that Cleanol never provided plans or a scope of work for him to sign. The evidence is to the contrary.
(i) Plans submitted to condominium board for approval:
[55] The parties agreed that Mr. Johnstone, who had a prior relationship with the property manager and the condominium board by reason of his ownership of unit 309 in the building, would obtain whatever approvals were required from the condominium board. On September 16, 2010 Mr. Johnstone submitted a letter to the condominium board requesting approval for his proposed renovation, together with drawings that he had prepared himself using the original building plans for unit 806, to which he had added his own comments in red ink explaining the proposed renovation[13] (the “Condominium Approval request plans”). The plans depict the proposed scope of the renovation as of September 16, 2010, with explanations in red as follows:
a) "Replace kitchen cabinets and flooring”.
b) Master bathroom: “Replace (triangular) tub with rectangular tub.”
c) Dividing wall between master bedroom and bedroom #2: “Remove non-load bearing wall. It will remain open.”
d) Second floor: “Change location of washer/dryer.”
[56] Cleanol was not asked to sign off on the Condominium Approval request plans as the scope of work referred to in the Project Proposal.
[57] The Condominium Approval request plans provide for a modest renovation compared to the expanded scope of work actually carried out by Cleanol. Some examples are:
a) The Condominium Approval request plans did not call for demolition of the partition wall between the kitchen and living room, or the removal of bulkheads in the kitchen.
b) The master bathroom renovation expanded from the scope of work in the Condominium Approval request plans to include installation of a second sink, the flipping of the locations of the shower stall and tub, new vanities, and removal and replacement of mouldy drywall.
c) The dividing wall between the bedrooms as shown on the Condominium Approval request plans was replaced with a two sided custom made credenza for Mr. Johnstone’s entertainment system, with two pyramid ceilings (bedroom and den).
d) The Condominium Approval request plans do not include changing the design of the staircase which Mr. Johnstone later decided to replace with a New York loft style staircase and industrial style railing.
(ii) Photographs with commentary:
[58] On or about September 1, 2010, prior to Mr. Johnstone closing on his purchase of unit 806, Mr. Giampietro and Mr. Johnstone conducted a walkthrough of the premises. At that time Mr. Giampietro took photographs[14] and wrote a description of the changes Mr. Johnstone’s wanted directly on the photographs. Mr. Johnstone never signed off on these photographs as the scope of work referred to in the Project Proposal.
[59] The scope of work depicted in Mr. Giampietro’s photographs taken on September 1, 2010 is more extensive than the scope of work depicted in the Condominium Approval request plans that Mr. Johnstone submitted to the condominium board for approval on September 16, 2010. The scope of work described in both instances is less than the scope of work actually carried out by Cleanol to renovate unit 806.
(iii) Computer generated plans:
[60] On September 21, 2010, after closing the purchase of unit 806, the parties conducted another walk-through. Cleanol prepared plans[15] depicting the original floor plan of the unit and the proposed floor plan with certain partition walls removed, as well as other changes. Cleanol’s estimate of $125,000.00 was based on the proposed changes according to Mr. Johnstone’s instructions given on September 21, 2010. Mr. Johnstone never signed off on these plans as the scope of work referred to in the Project Proposal.
[61] In December 2010 Cleanol provided computer generated plans to Mr. Johnstone. Cleanol prepared revised plans from time to time and Mr. Johnstone reviewed them weekly with Mr. Giampietro and Mr. Sanchez at Cleanol's offices. The parties did not sign off on any of these plans as the scope of work referred to in the Project Proposal.
[62] As the design developed, even before the work commenced, Mr. Johnstone began changing and adding elements of design, upgraded construction materials and more sophisticated electrical and mechanical requirements. His position at trial is that despite all of these changes the original estimate of $125,000.00 is a fixed, all inclusive price and Cleanol is not entitled to charge for the upgrades, changes and additions to his original proposal.
[63] I find that the various versions of drawings and plans, and the photographs depicting the scope of work Mr. Jonhstone instructed Cleanol to carry out initially, are not the scope of work referred to in the Project Proposal.
(iv) Scope of work statements
[64] Beginning in February 2011 and from time to time thereafter Cleanol prepared and provided to Mr. Johnstone what it calls “scope of work” statements. These are accounting statements that set out itemized details of the cost of the renovation. Mr. Johnstone wanted to know his bottom line cost of the renovation, so in addition to showing the costs of Cleanol's supply of services and materials the statements also reported costs Mr. Johnstone paid or undertook to pay directly to suppliers.
[65] The statements include the value of items for which Mr. Johnstone was not charged, presumably to show that Mr. Johnstone was receiving services of value at no additional charge. One example is the concept consultation, design services, computer generated design drawings and project management costs, valued at $30,670.00 but charged at $5,000.00 plus HST[16].
[66] Cleanol prepared and provided to Mr. Johnstone a total of seven scope of work statements. Ms Yueh prepared a spreadsheet for trial summarizing Cleanol’s actual costs[17] as reflected in the scope of work statements. None of the seven scope of work statements add a markup. In the first five statements the header for the columns reporting costs is "Actual Costs (No Markup)". It is only in the spreadsheet filed as exhibit 1, tab Q that Cleanol adds columns showing a 36 percent markup charged and then backed out of the costs claimed.
[67] Mr. Johnston never signed off on any of the scope of work statements. I find that these statements are not the "scope of work" referred to in the Project Proposal.
[68] In conclusion on the issue of whether the parties agreed on the scope of work I find that the scope of work was a moving target. There was no meeting of the minds on November 20, 2010 when the Project Proposal was signed, or on December 1, 2010 when the scope of work was to be signed off, or on any other date as to the scope of work required for the price range of $100,000.00 to $125,000.00 in the Project Proposal.
[69] The Project Proposal, treated as a contract by the parties, is missing an essential element required in a construction contract: agreement as to the scope of work to be carried out for the agreed upon price. There was no meeting of the minds of the parties as to the scope of work to be undertaken by Cleanol. Nor was there a contractually agreed upon formula for charging for the supply of services and materials on a cost plus basis for an undetermined scope of work.
[70] I find that there is no contract between Cleanol and Mr. Johnstone. The Project Proposal is void for uncertainty as to scope of work.
Timing
[71] The Project Proposal provides a projected completion date of December 1, 2010, an impossibility. By its ordinary meaning a “projected” completion date is an “estimated” completion date.
[72] There are many factors relevant to determining a reasonable completion date. Those that apply to the renovation of unit 806 include:
a) The scope of work expanded and changed dramatically as the project unfolded. Mr. Johnstone's initial concept of a modest renovation (as depicted in the Condominium Approval request plans) changed when he decided to go for a more upscale, sophisticated renovation and requested such items as custom designed cabinetry, exotic woods, doors with leather inserts and tri-partite custom baseboards. The staircase and railing, initially intended to remain in its original form (see exhibit 20), was remodeled and the railing replaced. Custom millwork had to be manufactured. These upgrades increased the amount of time required for the renovation. Custom materials had to be ordered.
b) Unanticipated additional work was required, adding time to the renovation project. One example is the incomplete demolition by Mr. Manone. Unit 806 was not properly prepared for Cleanol to begin its restoration and renovation work on time. Mr. Manone failed to remove partition walls and bulkheads and failed to cart away large pieces of debris, despite having been instructed to do so. Another example of additional work is the mould discovered in the bathroom during the renovation. Remediation was required.
[73] I find that the Project Proposal did not have a fixed, contractually binding completion date. The case law is clear: in the absence of an agreement as to a completion date the contractor shall have a reasonable time to complete the work. I find that the time that Cleanol took to complete its work was reasonable in the circumstances of this case.
[74] In conclusion on the issue of whether the parties entered into a valid contract, I find that the Project Proposal does not form the contract between Cleanol and Mr. Johnstone as there was no meeting of the minds on price or scope of work. The contract is void for uncertainty. There is no other written document relied on as a contract and there is no evidence that the parties reached an oral agreement as to the price and scope of work of the renovation. I conclude that there is no contract between the parties.
b. Alternative claim: Quantum meruit and unjust enrichment (restitution)
[75] In the absence of a contract quantum meruit may apply. It is explained by Justice Gordon in Interpaving Ltd. v. Ng[18] as follows, citing Consulate Ventures Inc. v. Amico Contracting & Engineering[19]:
… a quantum meruit claim is not dependent on the existence of a valid contract but is a discrete cause of action which contemplates a remedy for unjust enrichment or unjust benefit. The Court indicated that there will be two requisites to a successful quantum meruit claim: (1) That the services in question were furnished at the request, or with the encouragement or acquiescence of the opposing party; and (2) That such services have been furnished in circumstances that render it unjust for the opposing party to retain the benefit conferred by the provision of the services.
[76] Cleanol pleads and claims payment in the alternative on the basis of quantum meruit and unjust enrichment. Restitution provides for recovery where one party is unjustly enriched at the expense of another party.
[77] A contractor’s claim in quantum meruit is a claim for reasonable compensation for work actually done. Restitutionary quantum meruit is different from contractual quantum meruit. Contractual quantum meruit applies where services and materials are supplied under a contract but the contract does not expressly provide for how much the contractor is to be paid. That is not the case here because there was never a meeting of the minds as to the contract price or the scope of work and thus there was no contract.
[78] Restitutionary quantum meruit applies where services and materials are supplied with the knowledge and consent of the recipient, but the contract is determined to be void.
[79] Cleanol supplied services and materials at the request of Mr. Johnstone. It would be unjust for Mr. Johnstone to retain the benefit of such services and materials without paying for them. For the reasons that follow I find that Cleanol is entitled to compensation on the basis of restitutionary quantum meruit (or unjust enrichment) for the services and materials supplied.
[80] The evidence shows that Mr. Johnstone requested the work. After the initial site meetings where the overall project was discussed, Mr. Johnstone met with Mr. Giampietro and Henry Sanchez at Cleanol’s premises weekly and attended the site frequently. They discussed design concepts and ideas for unit 806. As the project unfolded Mr. Giampietro made suggestions and Mr. Johnstone gave instructions. Cleanol proceeded with the changes as instructed. Some of the changes were in respect of custom cabinetry and finishes (as an example, the use of upscale Wenge wood) and others involved design items (as an example, the addition of a decorative metal I-beam and industrial style stair railing). As the project progressed the scope of the renovation expanded and Mr. Johnstone approved the changes.
[81] At trial Mr. Johnstone complained that he did not expect that the many upgrades, changes and additions to the scope of work would increase the cost of the renovation and on that basis he should not have to pay for them. Mr. Johnstone’s position is unreasonable and undermines his credibility. Mr. Johnstone is a sophisticated real estate professional. I find that he knew or ought to have known that upgrading materials and expanding the scope of work would increase the cost of the renovation.
[82] I find that Mr. Johnstone requested the services and materials supplied by Cleanol and that Mr. Johnstone accepted and received the benefit of Cleanol’s supply of services and materials. It would be unjust to allow Mr. Johnstone to retain that benefit without paying reasonable compensation to Cleanol.
[83] In quantifying the reasonable recovery to which Cleanol is entitled the court may consider the costs that Mr. Johnstone ought reasonably to have expected to incur for Cleanol’s supply of services and materials. Having received seven scope of work statements from Cleanol beginning February 2, 2011 and throughout the balance of the project, and having had an opportunity to review the charges reflected in the statements, Mr. Johnstone ought to have had a reasonable expectation as to the costs.
c. Calculating the amount owing to Cleanol
What is the period of Cleanol’s supply of services and materials?
[84] Having found that there was no contract between Cleanol and Mr. Johnstone the issue of the time during which Cleanol supplied services and materials to Mr. Johnstone is relevant to quantifying the value of Cleanol’s work on a quantum meruit basis.
[85] Mr. Johnstone’s position is that he ejected Cleanol from the job on February 19, 2011 and entered into a contract with Mr. Giampietro to complete the work. He claims that he rehired Cleanol on or about June 28, 2011 and again ejected Cleanol on July 4, 2011.
[86] Cleanol’s position is that it continued to supply services and materials to Mr. Johnstone until June 28, 2011. According to Cleanol the parties agreed on or about February 19, 2011 that on a forward going basis the labourers would be paid in cash directly by Mr. Johnstone and the contact or “point” person for Cleanol would be Mr. Giampietro instead of Ms Yueh. Cleanol's evidence, primarily through witnesses Ms Yueh and Mr. Giampietro, is that in February 2011 after Ms Yueh and Mr. Johnstone had their disagreement over Samsonshield’s charges for the 360 investigation, the parties agreed that all future communications on the part of Cleanol would go through Mr. Giampietro. They further agreed, in response to Mr. Johnstone’s desire to reduce costs, that Mr. Johnstone would pay the labourers directly in cash at hourly rates that were lower than those charged for labourers paid through Cleanol.
[87] The indicia that Mr. Johnstone's relationship with Cleanol continued are:
a) Mr. Giampietro remained vice-president of Cleanol, paid by Cleanol;
b) Mr. Giampietro continued to supervise the renovation of unit 806;
c) Mr. Johnstone did not pay Mr. Giampietro directly or at all;
d) Mr. Giampietro did not invoice Mr. Johnstone for the labourer’s work;
e) Cleanol proceeded to manufacture and supply the cabinetry for unit 806; and
f) There is no evidence of the formation of a contract between Mr. Johnstone and Mr. Giampietro either personally or through another company.
[88] The indicia that Mr. Johnstone's relationship with Cleanol ended February 19, 2011 are:
a) After February 19, 2011 Mr. Johnstone gave Mr. Giampietro cash to pay labourers;
b) Ms Yueh no longer communicated directly with Mr. Johnstone; and
c) Mr. Johnstone employed his own labourer, Jerry Tavares to carry out some of the work such as tiling and carpentry.
[89] I find that Cleanol continued to supply services and materials to Mr. Johnstone until June 28, 2011. The changes after February 19, 2011 did not terminate that relationship and create a contract between Mr. Johnstone and Mr. Giampietro. The evidence does not support a finding that Mr. Giampietro entered into a contract personally or through another corporate entity with Mr. Johnstone or that Mr. Johnstone paid Mr. Giampietro any monies for the services and materials he supplied. All of the cash that Mr. Johnstone paid to Mr. Giampietro after February 2011 to pay the labourers was, in fact, paid by Mr. Giampietro to the labourers for services and materials supplied by them.
[90] Furthermore, Cleanol continued to manufacture and supply the custom cabinetry in its factory and ultimately installed it in unit 806 after February 19, 2011 while Mr. Giampietro was supervising the job. If the Cleanol relationship had ended then it is unlikely that the cabinetry that Cleanol customized and manufactured for unit 806 would be installed after February 19, 2011.
[91] On June 28, 2011 Mr. Johnstone asked Ms Yueh to resume management of the job. Then, between that date and July 4, 2011, Mr. Johnstone changed his mind and turned to Mr. Tavares to take over as general contractor to complete the few remaining items. Mr. Johnstone moved into unit 806 in mid-July 2011.
[92] I find that Mr. Johnstone terminated the supply of services and materials by Cleanol on June 28, 2011.
Quantifying the reasonable value of the services and materials supplied
[93] In a claim based on quantum meruit the onus is on the party claiming payment to prove value. The value of Cleanol’s supply of services and materials can be proven by Cleanol’s actual costs of the project, or by expert evidence of value. In this case Cleanol did not tender expert evidence in the form of a report of a quantity surveyor or other expert as to the value of services and materials supplied. Nor did Mr. Johnstone.
[94] Cleanol’s scope of work statements, summary spreadsheet and invoices particularize its costs of the various components of the work. Mr. Johnstone did not tender contradictory evidence of value that discredits the amounts charged as reflecting the reasonable value of the services and materials supplied. I accept Cleanol's evidence (other than markup) as proof of its costs in supplying the services and materials to renovate unit 806.
[95] One concern when relying on a contractor’s costs as proof of value is that a contractor may have been inefficient in its performance of the work if not accountable for the costs of carrying out the job. For that reason a contractor’s costs are a starting point to determining value. The next step is to determine whether the contractor’s costs are reasonable. The discovery process and the trial itself are the stages of a civil action where the costs claimed can be tested.
[96] Mr. Johnstone had an opportunity, through the examination for discovery process to explore and test the costs claimed by Cleanol as reasonable and as having been incurred on the project. My order of June 17, 2013 granted leave to the parties to conduct examinations for discovery. Had Mr. Johnstone been dissatisfied with the reasonableness of the costs claimed by Cleanol for the services and materials supplied and reflected in the scope of work statements he had the opportunity to cross-examine on that issue. He also had the opportunity to call other trades or experts as witnesses to testify as to the reasonableness of Cleanol’s costs.
[97] However, Mr. Johnstone’s expert, Mr. Martinovic, was not asked to provide an opinion in his report or testify at trial as to whether the costs claimed for the items listed in Cleanol’s scope of work statements were overstated. Having had an opportunity to adduce evidence to the contrary Mr. Johnstone failed to do so.
[98] I find that Cleanol’s costs, as reflected in the seven scope of work statements, and provided to Mr. Johnstone during the project, and summarized by Ms Yueh in the spreadsheet filed at trial as exhibit 1, tab Q, provide evidence of the reasonable value of the services and materials Cleanol supplied to Mr. Johnstone.
[99] The issues of quantification are:
a) What is the value of the services and materials supplied?
b) Is Cleanol entitled to the 36 percent markup claimed?
c) Is Mr. Johnstone liable to reimburse Cleanol for the $3,828.00 payment to Ignac Blacksmith for metal works (I-Beam, metal racks and custom stair rail)?
d) Is Mr. Johnstone entitled to set off $3,647.00 for the granite backsplash?
Value of services and materials supplied by Cleanol
[100] The scope of work statements that Cleanol prepared while the project was underway include the amounts payable to Cleanol for services and materials supplied and amounts payable or paid directly by Mr. Johnstone to suppliers and labourers. For this reason the statements, filed as exhibit 60, are somewhat confusing at first glance. However, I have reviewed these statements in detail and I am satisfied that they are summarized and the updated costs are reflected in the spreadsheet that Ms Yueh prepared for trial and filed as exhibit 1, tab Q.
[101] The statements and the spreadsheet are useful for the following facts:
a) The statements, and a comparison of the various different statements over time, identify Cleanol's position and evidence on the amounts that Cleanol communicated to Mr Johnstone as the amounts charged for the various components of the work during the project.
b) The summary spreadsheet, backed up by invoices, identifies the items for which Mr. Johnstone was to pay directly, such as metal work and granite.
c) The summary spreadsheet identifies the undisputed credits for payments made to Cleanol of $40,000.00 plus $20,000.00 for a total of $60,000.00 and a payment of $2,800.00 to Tony Giampietro, a labourer, which Cleanol accepts as a credit against Cleanol's outstanding account.
[102] At the end of June, 2011 Cleanol issued statements and invoices to Mr. Johnstone as follows (Exhibit 5, volume 2, tabs 14, 16, 17, 18):
a) June 28, 2011 invoice directing Mr. Johnstone to pay Prestige Granite directly the sum of $4,579.89 for the backsplash. The backsplash was manufactured but never installed because Mr. Johnstone decided to use a different backsplash and arranged for it independently. At trial Cleanol withdrew its claim that Mr. Johnstone pay for the backsplash.
b) June 28, 2011 invoice T-841287 for $34,566.99;
c) June 28, 2011 statement showing $37,737.13 owing to Cleanol and $20,000.00 owing to Prestige Granite;
d) June 28, 2011 invoice T- 841288 for $25,473.31 for granite and stone; and
e) June 28, 2011 invoice T- 841289 for $3,828.00 for metal work: wine rack, I-Beams and metal railing
[103] The statements prepared by Cleanol reflect costs for various items, including amounts Cleanol paid its subcontractors and suppliers. Mr. Johnstone did not file evidence that persuades me that the amounts charged by Cleanol for the services and materials supplied were inflated beyond what should reasonably have been charged for these items. No expert reports were tendered as evidence of the value of the services and materials supplied by Cleanol.
[104] I find that some of the items claimed by Cleanol and included in its charges are not properly chargeable. This applies to charges that Cleanol did not impose until later, on the basis of either the alleged Quid Pro Quo agreement or else in retaliation to the counterclaim.
[105] My findings of value are reflected in the two charts that follow. The first chart sets out my findings of the reasonable value of the various components of the renovation based on the amounts that Cleanol charged Mr. Johnstone for the services and materials supplied as reflected in the scope of work statements, the summary spreadsheet and invoices from suppliers. The second chart lists the items that I find Cleanol is not entitled to recover on a quantum meruit basis, together with my reasons. Items that the parties agreed were to be paid by Mr. Johnstone directly to suppliers are not included in either chart, except where Cleanol paid the supplier because Mr. Johnstone failed to pay the supplier and Cleanol claims reimbursement. The item numbers used are consistent with the item numbers used in Cleanol's summary spreadsheet (exhibit 1, tab Q, carried forward from exhibit 60, tab 6).
[106] The reasonable value of services and materials supplied (first chart) are:
Item
Amount
(includes HST)
1b
Design and fabrication of drawings
$ 5,650.00
Charge of $5,000.00 included from the outset
2a
Demolition and framing
17,604.73
3
Renovation (Cleanol crew)
21,927.62
4
Electrical (CAB) invoice 1st draw
4,082.97
Electrical (CAB) invoice 2nd draw
4,082.97
5
Plumbing (Trio) Invoice 3985
1,554.96
Plumbing (Trio) Invoice 3988
1,069.18
6
Plumbing (Wolsley) - outstanding
554.28
Balance after applying $4,000 deposit
7
Odyssey Gas Fireplace Invoice 4592
5,254.50
8
Conview Ltd. concrete mapping #1055
508.50
9
Install gas spigot for BBQ
150.00
10
Solar Group Inc. install scaffold #8160
508.50
16
Millwork & cabinetry
34,566.99[20]
17
Metal work (T-841287)
3,828.00
Balance owing and paid by Cleanol after applying Johnstone’s $2500.00 deposit
18
Granite and stone (T-841288)
21,826.31
Granite charge reduced by $3,647.00 for the backsplash
Total including HST:
$123,169.31
[107] Items disallowed are:
Item
Amount
Reasons
1
Design consultation (Frank)
$ 5,000.00
Not claimed as payable in Cleanol spreadsheet; Cleanol undertook not to charge extra for design consultation
1a
Project management
37,500.00
Not claimed as payable in Cleanol spreadsheet; Cleanol undertook not to charge extra for project management.
1b
Design and fabrication of drawings
2,409.00
Excess over amount reflected from outset
5
Plumbing (Wolsely)
2,325.54
Mr. Johnstone provided a deposit of $4,000.00 to Wolsely, which ought to have been credited to these two invoices
Plumbing (Wolsely)
2,229.74
18
Granite
3,647.00
Reduction for backsplash not installed
36 percent markup for profit and overhead
[108] Cleanol includes in its summary statement a markup of 36 percent, added to the costs claimed and then backed out of the amount charged. Cleanol did not charge a markup of 36 percent, or any markup at all, until faced with a counterclaim.
[109] Cleanol did not lead evidence of a reasonable percentage that may be charged for profit. In final argument Mr. Johnstone's counsel cited my decision in Homewood Development Inc. v 2010999 Ontario Inc.[21] where I allowed ten percent for profit based on the evidence tendered at trial. There was no such evidence tendered in the present case.
[110] I find that Cleanol has not met its onus of proof and is not entitled to add a markup of 36 percent or any other percentage for profit.
Outstanding amount for metal
[111] Ignac Blacksmith supplied custom metal works on the project, including an I-Beam, metal wine racks and a stair railing. Mr. Johnstone failed to pay Ignac Blacksmith for the balance of the metal works supplied. His position is that Cleanol removed the wine racks and they have not been installed.
[112] The wine racks were custom designed and manufactured to fit the irregularly shaped space under the stairs in unit 806. Towards the end of the project Cleanol returned them to the manufacturer for adjustments as the tools required to do the adjustments were not available on site. During this time the relationship broke down and Mr. Johnstone ejected Cleanol from the project. There was a standoff regarding the installation of the metal racks in that Ignac Blacksmith wanted payment of the rbalance of $3,828.00 before installing the racks and Mr. Johnstone refused to pay. The racks were never installed and Cleanol paid Ignac Blacksmisth.
[113] I find that the metal racks were manufactured at the request of Mr. Johnstone, that they were ready to be installed and it is Mr. Johnstone ‘s conduct that prevented installation of the metal racks.
[114] Mr. Johnstone is required to reimburse Cleanol $3,828.00 for the metal racks. This amount is reflected in the first chart above.
Granite backsplash
[115] Cleanol concedes that Mr. Johnstone is entitled to a credit of $3,647.00 for the granite backsplash that Mr. Johnstone decided he did not want and that was manufactured but never installed. This reduction is reflected in the first chart above.
Conclusion: amount owing for services and materials, before assessing counterclaim
[116] Based on these findings and calculations, the value of the services and materials supplied by Cleanol to Mr. Johnstone is $123,169.31, including HST. Crediting Mr. Johnstone for deposits and payments of $40,000.00, $20,000.00 and $2,800.00, and prior to adjusting for Mr. Johnstone’s counterclaim, the unpaid value of Cleanol's supply of services and materials is $60,369.31.
III. Damages for delay, deficiencies, permit and code violations
a. Mr. Johnstone’s claim for damages for delay
[117] Is Mr. Johnstone entitled to recover $9,000.00 in damages for delay? Mr. Johnstone quantifies his delay claim as the cost of carrying two other properties.
[118] Having found the contract to be void, there is no contractual completion date and consequently there can be no damages arising from breach of a completion date.
[119] Had I found the contract to be valid I would nevertheless have found that there was no breach of the completion date for the reason that follow.
[120] Damages may arise from breach of an agreed upon completion date or, in the absence of a fixed completion date, a reasonable timeframe for completion. The issue is whether the parties agreed to a completion date and if not, whether the services and materials were supplied within a reasonable timeframe.
[121] The completion date in the Project Proposal was fixed at December 1, 2010, only two weeks after the date the Project Proposal was signed. In the absence of a defined scope of work, the completion date is unenforceable. December 1, 2010 was an impossible completion date to meet as the scope of work remained undefined as of that date. Then, after the first very preliminary drawings were provided, the scope of work expanded. Mr. Johnstone imposed an extended completion date of February 28, 2011.
[122] As the project progressed Mr. Johnstone added specialized custom items and materials, such as a custom two-faced credenza style wall unit separating the two upstairs rooms, exotic Wenge wood cabinetry, custom wood doors with leather panel inserts and custom tripartite baseboards. He also requested significantly more electrical wiring for the 40 additional pot lights. All of these items required additional time to order, manufacture and install. Even if the anticipated completion date in the Project Proposal had been contractually binding it was no longer binding once the scope of work expanded so significantly.
[123] Cleanol may have been responsible for some of the delay but Mr. Johnstone also caused delay in completing the project. Some examples of delay caused by Mr. Johnstone are:
a) The Cleanol scope of work did not begin when it was supposed to begin because the demolition contractor hired by Mr. Johnstone failed to complete the scope of demolition work required. This delayed the start of Cleanol’s renovation project because Cleanol had to first complete Mr. Manone’s work.
b) In February 2011 Mr. Johnstone decided to hire his own contractor, Mr. Tavares, to carry out some of the labour, including wood floors and tiling. Mr. Tavares was unavailable until mid-March 2011 due to other commitments, thereby delaying the project by at least two weeks. This delay is attributable to Mr. Johnstone and not to Cleanol.
c) As previously stated, the changes, upgrades and custom work requested by Mr. Johnstone contributed to the additional time required to complete the renovation.
[124] I find that the parties did not have a contractually agreed upon completion date. The amount of time that the project took was a result of the mutually agreed upon changes, upgrades and customizing of the renovation. The amount of time that the project took is reasonable in these circumstances. Had I found a contract to exist I would have found Mr. Johnstone not entitled to damages for delay.
b. Mr. Johnstone’s claim for damages for deficiencies
[125] Is Mr. Johnstone entitled to set off any amount, or to recover damages for deficiencies? Mr. Johnstone admits that deficiency issues arise only if I find that the contract continued after February 19, 2011. Having found that there was no contract but that Cleanol’s supply of services and materials continued after February 19, 2011 and through until June 28, 2011, I address Mr. Johnstone’s claim for deficiencies.
[126] Mr. Johnstone claims that he is entitled damages by way of set off of $13,511.96 for deficiencies and incomplete items, reduced from the $240,000.00 counterclaim asserted initially and maintained until the opening of trial. He quantifies his claim as:
(a) $5,940.96 for fireplace granite, plus
(b) $7,571.00 to bring the stair railing up to code standards.
[127] This is a significant reduction in the quantum and scope of damages claimed by Mr. Johnstone in his pleadings and reflected in the Scott Schedule, up until the opening of trial. I address only the items claimed by Mr. Johnstone at trial. That the vast scope of Mr. Johnstone’s counterclaim remained in issue until trial is relevant to costs of the proceeding.
Fireplace Granite
[128] Mr. Johnstone selected Saturnia granite for the fireplace surround based on what he had seen and liked and in consultation with Mr. Giampietro. Mr. Giampietro, as the designer, approved Saturnia granite as appropriate for the fireplace surround. The design called for mitered edges, which refers to the 45 degree angle of the edge joining two slabs of granite. Unfortunately one edge, some nine feet above the floor, crumbled on installation. Mr. Giampietro arranged for Prestige Granite, the stone supplier, to replace it. The same thing happened again. Concluding that Saturnia is not a suitable stone for a mitred edge, Mr. Giampietro proposed two solutions to Mr. Johnstone:
a) polish the crumbled edge. Given that the crumbled edge was nine feet above ground Mr. Giampietro believed that the crumbling at the joint would not be visible if polished out; or
b) change the mitred edge to a less fragile ninety degree butt joint.
[129] Had the parties entered into an enforceable contract one issue would have been whether Mr. Johnstone acted reasonably in mitigating his damages. In a claim based on restitutional quantum meruit the issue is the value of what was supplied. Rather than deducting deficiencies from the amount charged, the cost of rectify (or some other approach to valuation) is taken into account in valuing the item.
[130] Mr. Johnstone was not prepared to accept either of Mr. Giampietro's proposed solutions. Mr. Giampietro was not prepared to have the stone supplier provide Saturnia with mitred edges a third time because he was concerned that it would crumble a third time.
[131] I find Mr. Johnstone’s refusal to accept either of Mr. Giampietro’s proposed solutions unreasonable. It was impossible to guarantee that Saturnia granite with a mitred edge would not crumble on installation, no matter how careful the installers were with the installation. If polishing was not satisfactory to Mr. Johnstone then the reasonable solution would have been to approve using a butt joint.
[132] Cleanol installed the fireplace surround in 2011. To prove damages for the fireplace granite Mr. Johnstone relies on a 2012 quote from Allset Interiors[22]. The quote provided is not for a fireplace surround but rather for a bathroom vanity. The repair or replacement has not been carried out.
[133] I find that Mr. Johnstone has failed to meet the onus of proving that he acted reasonably in resolving this issue. He also failed to quantify his damages with evidence of the cost to repair or replace the fireplace granite surround. Mr. Johnstone’s claim for set-off and counterclaim for this item fails.
[134] On the supply of granite, Cleanol admits that Prestige Granite did not install the granite backsplash and concedes that the value of the granite claimed should be reduced by $3,647.00. This credit is reflected in the findings previously made as to the value of the granite (see the first chart, item 18).
Stair railing
[135] Consistent with the New York loft design concept for the renovation, Mr. Giampietro provided Mr. Johnstone with design magazines that included photographs of industrial style metal pipe railings for staircases. Mr. Johnstone liked that style of railing and wanted to use it for the staircase railing leading from the main floor to the second floor of unit 806. Such a railing is designed with horizontal rungs. In Ontario this design is in violation of the Ontario Building Code because the railing becomes climbable by reason of the horizontal rungs. The usual solution, in Ontario, is to maintain the design of the railing by using metal rungs, but to clad the metal with glass or Plexiglas to eliminate the ability to climb the railing.
[136] Mr. Johnstone claims $7,571.00, reduced to $5,000.00 at trial, as the cost to retrofit the railing. The invoice from Ignac Metal for all of the metal manufactured for unit 806 was $6,328.00, of which Mr. Johnstone paid a deposit to Ignac Metal of $2,500.00 (for which he has been given credit in my findings regarding the value of Cleanol’s supply of services and materials). The amount Mr. Johnstone claims for the railing is greater than the entire charge for all of the metal works combined: the metal railing, the metal I-Beam and the metal wine racks.
[137] Two questions arise:
a) whether Mr. Johnstone knew of the code violation when he instructed Mr. Giampietro to proceed with this style of railing and if so whether that knowledge impacts the value, and
b) whether the value allowed for the metal works should be reduced from the price charged by Ignac Metal because of the code violation.
[138] Mr. Giampietro testified that he explained the code violation to Mr. Johnstone when he was showing Mr. Johnstone photographs of this railing design. He showed Mr. Johnstone the applicable pages of the code that he had in his design book. Mr. Giampietro testified that he explained to Mr. Johnstone that the railing style that Mr. Johnstone had selected could be modified to meet code by installing glass or Plexiglas panels to close the gaps between the horizontal rungs of the railing. Mr. Giampietro further testified that Mr. Johnstone instructed him to go ahead with the metal railing with horizontal rungs but without the glass or Plexiglas, because the unit would be occupied by adults who would not be at risk of climbing the railing. According to Mr. Giampietro Mr. Johnsone acknowledged that he could install the glass or Plexiglas onto the railing when he was ready to sell the unit. Cleanol did not document Mr. Johnstone’s instructions to install a railing that was contrary to code.
[139] Mr. Johnstone denies the conversation took place. He admits authorizing the style of railing but claims that he did not know that the railing was non-compliant with code, or that he was ever informed of the requirement to clad climbable rungs with glass or Plexiglas to prevent climbing. It was not until after Cleanol had registered its lien claim that Mr. Johnstone complained about the design of the railing.
[140] On the issue of credibility I accept Mr. Giampietro’s evidence over that of Mr. Johnstone and find that Mr. Giampietro advised Mr. Johnstone of the code violation and the glass or Plexiglas solution, and that Mr. Johnstone instructed him to proceed without the glass or Plexiglas panel. For reasons explained earlier, when I gave the example of the conflicting evidence about the bathtub that Mr. Manone failed to remove during demolition, I find that Mr. Johnstone’s evidence is self-serving and his recollection unreliable.
[141] Regardless of whether or not Cleanol cautioned Mr. Johnstone as to the code violation I find it irresponsible of Cleanol to build contrary to a code requirement without any documented assurance from the client of the instructions and undertaking to rectify the code violation at a later date. I find that the value of the supply of metal to which Cleanol is entitled on a quantum meruit basis must take into account the reasonable cost to retrofit the railing to meet code standards.
[142] On the issue of quantification, Mr. Giampietro priced the cost of installing Plexiglas to the railing using metal puck fasteners. He provided evidence that the cost of this “fix” would be $2,000.00 for the Plexiglas (including labour to install) plus $400.00 for the metal pucks plus HST for a total of $2,712.00. At trial Cleanol indicated it is prepared to credit Mr. Johnstone $1,700.00 for the railing retrofit.
[143] Mr. Johnstone’s initial position was that the entire railing should be replaced at Cleanol’s cost for the price of $18,300.00. At trial he reduced his claim to $7,571.00 based on a quote from MAF Industries as the amount required to retrofit the railing to meet code. Later, at trial, he further reduced his claim for this item to $5,000.00.
[144] There is no evidence that Mr. Johnstone has taken any steps since 2011 to retrofit the railing. He has lived with the non-compliant railing for at least three years.
[145] Neither party presented any case law on the issue of liability when an owner instructs a builder to build contrary to code and the builder complies.
[146] I find that the railing as installed by Cleanol fails to comply with building code requirements. I further find that Cleanol, as the builder, is required to build in accordance with the prescribed standards and codes imposed by the legislators. While a builder has the desire to satisfy a customer, and some customers request structures that do not meet standards, the builder is required to meet prescribed standards unless there is clear evidence relieving the builder of the responsibility. There is no such evidence in this case.
[147] I find that the value Cleanol ascribed to the metal works, namely the Ignac Metal invoiced costs, must be reduced by $2,712.00 which I find to be the reasonable cost to retrofit the railing to meet code.
c. Mr. Johnstone’s claim for damages for failure to obtain permits
[148] Mr. Johnstone claims damages of $28,000.00 (inclusive of HST) for Cleanol’s failure to obtain various permits from the City of Toronto for the renovation. He calculates the amount as his anticipated expense to hire a contractor if a building inspector requires him to break open walls to inspect the work performed behind the walls during the renovation of unit 806. He relies on an estimate provided by his contractor, Mr. Tavares, to restore the premises should this hypothetical situation come to pass.
Electrical permit
[149] The parties agree that an electrical permit was required. Cleanol’s evidence that the electrician obtained an electrical permit is not contradicted.
Plumbing permit
[150] Less clear is whether a plumbing permit was required and if so whether it was obtained. Cleanol used experienced, professional plumbers to carry out the plumbing work. The evidence of the plumber, Mr. Jones, was that a plumbing permit was not required because the work did not extend beyond removing and replacing fixtures. The location of two fixtures was swapped, using existing drains and vents. The plumber did not remove or create new drains or vents. Mr. Jones further testified that replacing valves, as was done here, does not require a plumbing permit.
[151] Cleanol called architect Paul Sandori of Revay and Associates Limited as an expert witness. In his report (exhibit 10) he writes “a plumbing permit should have been obtained for the work that involved more than just replacement of plumbing fixtures” and comments on certain repairs outside of unit 806 that were done by the condominium corporation and were not part of Cleanol’s renovation project. He opined that this work was performed “apparently without a permit”.
[152] I find Mr. Sandori’s evidence unhelpful. He speculates. He does not relate the actual work performed by Cleanol to the permit requirements. He comments that a plumbing permit is required if the work is more than replacement but then fails to comment on whether the scope of Cleanol’s work went beyond the replacement of fixtures. He guesses with no factual foundation as to whether the condominium corporation’s plumbers did work outside unit 806 without a permit.
[153] Mr. Johnstone maintains that a plumbing permit was required and that Cleanol failed to get one. He called architect Ivan Martinovic of GRG Building Consultants as an expert witness. Mr. Martinovic opines that a plumbing permit was required. He did not undertake an analysis of what plumbing work undertaken at unit 806 required a permit. When asked to identify the building code provisions that imposed the permit requirements in the circumstances of this case he was unable to do so. I do not find Mr. Marintovic’s evidence on the issue of a plumbing permit reliable.
[154] The best evidence would have been that of a City of Toronto inspector. He or she could have examined the nature of the work done and given evidence as to whether a plumbing permit was required. Despite having listed the City of Toronto inspector as a proposed trial witness Mr. Johnstone did not call the inspector as a witness at trial.
[155] Mr. Johnstone has not met the onus of proving that a plumbing permit was required for the plumbing work that Cleanol undertook in the renovation of unit 806.
Demolition permit
[156] It is not disputed that a demolition permit was required. Mr. Manone, the demolition contractor, was hired directly by Mr. Johnstone. It was the responsibility of either Mr. Manone or Mr. Johnstone to obtain a demolition permit.
Building permit
[157] Cleanol’s expert witness, Mr. Sandori, also opined on the building permit issue. In his report he refers to the City of Toronto website and recites section 8(1) of the Building Code Act. He embarks on an exercise of statutory interpretation, stating that because the word ‘construct’ is broadly defined “in principle a building permit was required”. He does not, however, relate that principle to the facts of this case. There is a line between construction that requires a building permit and construction that does not require a building permit. He provides no opinion on whether the renovation actually undertaken in unit 806 was of the type that requires a building permit. Again, on this issue, I find his evidence unhelpful.
[158] Cleanol called architect Simeon Posen of Morrison Hershfield as an expert witness. He did not address the issue of permits in his report ((exhibit 11)) and on the stand he guessed that perhaps a building permit would be required to reconfigure the stairs. His evidence was unhelpful on the permit issue. Most of his lengthy report addresses the deficiencies alleged by Mr. Johnstone, most of which were withdrawn at the opening of trial.
[159] Mr. Johnstone’s expert witness, Ivan Martinovic prepared a report (exhibit 9), that primarily addresses the deficiencies asserted by Mr. Johnstone but abandoned at trial. Mr. Martinovic quotes section 8(1) of the Building Code Act and text from the City of Toronto website, including the City’s commentary under the heading “When is a building permit required?” According to the website, in many cases contactors will get the permit on behalf of the owner but ultimately “as the building owner, you are responsible for complying with all building requirements”. The website also includes in the list of situations where an owner requires a building permit: “install, change or remove partitions and load bearing walls”.
[160] Mr. Martinovic opines that based on the scope of work undertaken, which he ascertained from a comparison of the before and after layouts of unit 806, a building permit would have been required to demolish existing partitions and erection new partitions. He does not distinguish between a demolition permit and a building permit. His opinion is based on his own statutory interpretation of what he read on the website. It is not based on the wording of the building code itself, or any personal experience applying for building permits for clients.
[161] In the unit 806 renovation two partitions walls were removed: the partition between the two upstairs rooms, and the partition between the kitchen and the living room. The upstairs partition was replaced with a credenza. The downstairs partition was not replaced, leaving the kitchen open to the living room, in the style of a New York City loft. This is relevant to the damages claimed by Mr. Johnstone for Cleanol’s failure to obtain a building permit. Mr. Johnstone's claim is based on the cost of restoring walls if an inspector requires walls to be opened to inspect the renovation work. The two partition walls that were removed were not replaced with walls so there is nothing to restore following an inspection.
[162] The best evidence as to whether a building permit was required would have been the evidence of a City of Toronto building inspector. Despite having placed the inspector on the list of witnesses Mr. Johnstone failed to call this witness at trial. The court draws the inference that the witness would not have helped Mr. Johnstone’s position on this issue at trial.
[163] Mr. Martinovic also opines that a permit was required to install the gas fireplace. In doing so he relies on provisions that apply to the installation of fireplaces in general. He did not take into account that the fireplace installed in unit 806 was a self-contained appliance, treated as an appliance (similar to a stove installation) for purposes of installation, and not subject to the standards that apply to the installation of a gas or wood burning fireplace. When asked to identify the building code provisions that impose a permit requirement for the type of fireplace installed in unit 806 he was unable to do so. I do not find Mr. Marintovic’s evidence on the issue of permits reliable or helpful.
[164] I find that Mr. Johnstone has not met the onus of proving that the scope of Cleanol’s work required a building permit. On that basis Mr. Johnstone’s claim for damages arising from failure to obtain a building permit must fail.
Damages
[165] Even if Cleanol had been required to obtain permits and failed to do so, the damages that Mr. Johnstone claims are remote and unproven. The estimate is based on conjecture as to what a building inspector might require to clear a permit after-the-fact.
[166] Mr. Tavares, the contractor who stood to receive the $25,000.00 plus HST claimed (total of $28,000.00) as the cost to break down walls and restore them for the purpose of inspection, testified that if the building inspector does not require Mr. Johnstone to break open any walls to conduct the inspection then the cost to restore would not be incurred.
[167] Mr. Giampietro testified that he took photographs of the work performed “behind the walls” (primarily plumbing and electrical work) as it progressed. He took photographs that depict the plumbing and wiring. These photographs could be used to show an inspector what was done before closing the walls.
[168] The damages claimed are predicated on the hypothetical situation of an inspector requiring walls to be broken. Over three years have passed and this hypothetical has not come to pass. Mr. Tavares “guestimate” of $28,000.00 is based on a speculative hypothesis.
[169] I conclude that Mr. Johnstone has not met the onus of proving any damages flowing from Cleanol’s failure to obtain permits if required permits were not obtained. The damages claim for $28,000.00 fails.
IV. Timeliness of the lien
[170] Cleanol registered its construction lien on July 15, 2011 as instrument AT2754338 for $68, 017.51 and issued its statement of claim on August 2, 2011. Having found that Cleanol supplied services and materials until June 28, 2011, I find that the lien was preserved and perfected within the time prescribed by the Act. The action was set down for trial by order of Master Polika on April 5, 2012, also within the time prescribed by the Act. The lien has not expired. Mr. Johnstone’s challenged to the timeliness of the lien claim must fail.
V. Calculation
[171] For the reasons given I find that Mr. Johnstone must pay Cleanol $57,657.31. This amount is calculated based on my findings that the balance owing for services and materials supplied by Cleanol, after crediting Mr. Johnstone with amounts paid of $62,800.00 plus a credit of $3,647.00 for the granite backsplash and a credit of $2,712.00 to retrofit the stair railing.
VI. Conclusion
[172] Mr. Johnstone must pay Cleanol $57,657.31 as the amount owing for services and materials supplied after crediting Mr. Johnstone with proven elements of his claim for set-off and his counterclaim. The balance of Cleanol’s claim and Mr. Johnstone’s claim of set-off and counterclaim are dismissed.
[173] In resolving costs or making submissions on costs the issue of proportionality applies. The parties resisted the court’s attempts to narrow the scope of the trial through several hearings for directions convened for that purpose. Efforts to reduce trial time through the use of affidavit evidence in chief failed because of the voluminous, lengthy affidavits filed, lengthy examinations in chief conducted at trial and multiple volumes of additional document books filed at trial. Significant issues were abandoned on the eve of trial, after the parties had incurred the expense of trial preparation. The process was disproportionate to the amounts in issue.
[174] The parties should attempt to resolve the issue of costs themselves. If the parties cannot resolve the issue of costs, they may file brief written submissions of no more than three pages[23], to which they may attach only relevant offers to settle, a Bill of Costs if different from the one already filed at the end of trial, and a leading case or cases[24] if required. The deadline to file written submissions on costs is February 20, 2015 with a right of reply to each other’s submissions in writing (no more than two pages) by February 27, 2015.
Master C. Albert .
Released: February 2, 2015
c:\users\albertc\documents\trials\decisions\cleanol v johnstone\cleanol.v.johnstone.fin.feb2.15.docx
CITATION: Cleanol Integrated Services Ltd. v. Quintin Johnstone, 2015 ONSC 768
COURT FILE NO.: 11-CV-431927
DATE: February 2, 2015
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Cleanol Integrated Services Ltd.
Plaintiff (defendant by counterclaim)
- and -
Quintin Johnstone
Defendant (plaintiff by counterclaim)
REASONS FOR JUDGMENT
Master C. Albert
Released: February 2, 2015
[^1]: A. Zweig also appeared as counsel for the defendant to present submissions at the end of trial
[^2]: Registered as instrument AT2754338.
[^3]: At trial Cleanol reduced the lien portion of its claim to $67,038.43. The remaining $107,639.46 claimed is for profit and overhead.
[^4]: Mr. Johnstone withdrew the affidavits of evidence in chief of another seven defence witnesses at trial.
[^5]: I note that Cleanol did not initial Mr. Johnstone’s unilateral amendment deleting the December 1, 2010 instalment payment.
[^6]: Exhibit 53
[^7]: Exhibit 6, volume 1, tab N and exhibit 53.
[^8]: Exhibit 1, tab C
[^9]: Crossed out and initialed by Mr. Johnstone but not initialed by Cleanol
[^10]: This refers to amounts stated in the scope of work spreadsheets filed as exhibits 1 (tab Q), 60 and 69.
[^11]: [2013] O.J. No. 3018 at paragraph 127
[^12]: Quoting from the final argument of Cleanol’s counsel.
[^13]: Exhibit 53
[^14]: Exhibit 5, volume 1, tab 1
[^15]: Exhibit 1, tab B
[^16]: Exhibit 60, tab 1, February 2, 2011 scope of work statement
[^17]: Exhibit 1, tab Q
[^18]: [2011] O.J. No. 286
[^19]: (1992) Inc. 2007 ONCA 324, [2007] O.J. No. 1663
[^20]: Lesser of amounts reflected in exhibit 1, tab Q and exhibit 60, tab 7.
[^21]: [2013] O.J. No. 3018 at paragraph 127
[^22]: Referred to at page 6 of QJ’s written argument; exhibit 6, volume 2, tab PPP, page 220.
[^23]: Three pages based on the spacing and font requirements as provided for in the Rules of Civil Practice
[^24]: It is counsel’s responsibility to prioritize and submit only the leading case or cases on an issue