CITATION: D & M Steel Ltd. v. 51 Construction Ltd. and Jing Yin Temple, 2016 ONSC 1335
COURT FILE NO.: CV-11-437166
DATE: March 9, 2016[^1]
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
D & M STEEL LTD.
A. Wainstock, for the plaintiff Fax: 905-850-9146
Plaintiff (defendant by counterclaim)
- and -
51 CONSTRUCTION LTD. and JING YIN TEMPLE
Mr. Qu Leo, for defendant 51 Construction[^2] Fax: 416-352-1447 F. Wong for defendant Jing Yin Temple Fax: 905-305-1739
Defendants (plaintiffs by counterclaim)
HEARD: June 9, 11, 12, 16, 17, 18, 19, 23, 24 and 26, 2015
Master C. Albert
[1] The Jing Yin Temple (the “Temple”) embarked upon a project to design and construct a new building at 722 Brimley Road, Toronto (the “Project”). Difficulties ensued and D & M Steel Ltd. (“D & M”), the structural steel sub-contractor, launched this action claiming $153,411.66[^3] for services and materials supplied or, alternatively, construction lien remedies against the property. The general contractor, 51 Construction Ltd. (“51C”), counterclaims for completion costs, damages and lost opportunity. The Temple counterclaims against D&M and crossclaims against 51C for deficiencies, completion costs and delay.
I. BACKGROUND
[2] The Temple called for tenders in the summer of 2010. D&M learned of the Project through a contractor contemplating bidding on the job. That contractor did not win the bid.
[3] On September 27, 2010 the Temple contracted with 51C as its general contractor for the Project, executing a CCDC2 stipulated price contract for the fixed price of $2,588,566.00 plus HST. 51C budgeted $493,250[^4] for the structural steel component of the Project.
[4] 51C invited bids from structural steel subcontractors and posted the Project drawings on its website. D&M submitted its bid to 51C on October 4, 2010 for $515,000.00 plus HST as its fixed price “to supply and install all structural steel and trusses as per dwgs”. The same day 51C signed and returned D&M’s bid by facsimile transmission, accepting and contracting with D&M as its structural steel subcontractor for the fixed price of $515,000.00 plus HST.
[5] Mr. Qu, principal of 51C, explained that he knowingly agreed to pay D&M $21,750.00 more than 51C had budgeted for steel in its contract with the Temple because of D&M’s reputation and the complexity of the Project. He testified that as general contractor he expected to recoup the shortfall at a later stage of the Project where profit margins would be higher.
[6] 51C and D&M disagree over whether four steel decks were included in the contract price. The four decks are for the main floor, the mezzanine, the roof and the canopy. D&M claims that its bid did not include these metal decks and asserts that it entered into a second contract with 51C on October 15, 2010 to supply and install the four decks for the additional fixed price of $44,000.00. 51C denies executing a second contract, alleging that Mr. Qu’s signature was forged.
[7] Shortly after executing the October 4, 2010 contract D&M discovered that the structural drawings prepared by the Project’s structural engineer were not consistent with the Project’s architectural drawings. The structural engineer had not incorporated into the structural drawings two essential elements of the architectural design, namely:
a) eight trusses requiring an additional 1500 millimeters of length to conform to the architect’s design wherein a wall extended beyond what was depicted in the structural drawings; and
b) the structure to support a pagoda style up-turn at the four corners of each of the upper and lower roofs.
[8] D&M claims that its fixed price in the October 4, 2010 quote did not include the additional structural steel required to reconcile these differences and build the structure that the architect had designed. D&M claims that it is entitled to charge extra for these items. D&M first invoiced for these extras after leaving the job in August 2011.
[9] D&M was paid for its first two progress invoices but not for its third progress invoice. D&M refused to supply the next shipment of structural steel unless it was paid. The Temple wanted to meet its date for the grand opening of the new temple building and in an effort to keep the Project moving forward the Temple agreed to pay D&M the amounts it invoiced to 51C and deduct those amounts from 51C’s invoices to the Temple. In issue is whether this agreement created a direct contractual relationship between D&M and the Temple or whether the Temple made these payments to D&M as agent for and under the direction of 51C. The quantum of holdback turns on this issue.
[10] It is not in dispute that D&M’s last day on site was August 8, 2011. D&M left the job for non-payment. The Temple terminated the structural steel portion of 51C’s general contract by letter dated August 12, 2011. D&M registered its claim for lien as instrument AT2815803 on September 16, 2011 and its certificate of action on October 17, 2011. If D&M was a subcontractor then section 31(3) of the Construction Lien Act, R.S.O. 1990, c.C.30 (the “Act”) requires that the lien be registered within 45 days of last supply. If D&M was a direct contractor then the Act requires that the lien be registered within 45 days of completion or abandonment. Either way, D&M registered and perfected its claim for lien in time.
[11] On September 8, 2011 a piece of steel detached from an unfinished canopy and fell to the ground. Fortunately no one was injured. The Temple claims damages for this event.
[12] On December 1, 2011 the Temple terminated the general contract with 51C and hired Henry Yang, a member of the Temple, to act as general contractor to complete the Project. Mr. Yang incorporated a company on the same date that it provided a quote to the Temple to complete the Project. The Temple claims rectification and completion costs. The Temple did not tender the job or receive quotes from competing contractors. This raises the issue of whether the Temple mitigated its damages reasonably.
[13] The total amount paid by the Temple to 51C as general contractor is $2,706,000.00[^5]. 51C claims that it was terminated because of D&M’s breach of contract and holds D&M responsible for 51C losing the opportunity to recoup its losses from the steel subcontract at a later stage of the general contract that would have provided greater profit margins for the general contractor.
[14] 51C counterclaims for deficiencies and losses but failed to provide evidence of the deficiencies and losses claimed.
II. ISSUES
[15] This reference raises many issues, as follows:
a) What are the terms of the contract between D&M and 51C?
b) Who breached the contract?
c) Which party is responsible for delay? What is the quantum of delay damages?
d) Is D&M entitled to payment for extras?
e) Is 51 C entitled to damages for deficiencies and completion costs?
f) Is Jing Yin Temple entitled to damages for deficiencies and completion costs?
g) Is D&M liable for damages arising from the piece of falling steel?
h) What is Jing Yin Temple’s holdback obligation?
i) What is the accounting as between the three parties?
III. ANALYSIS
a. The contracts between D&M Steel Ltd. and 51 Construction Ltd.
[16] The essential elements of a construction contract are price, scope of work and timing. The evidence discloses three documents: two purporting to be contracts between D&M and 51C and a third where D&M, 51C and the Temple are parties. Issues include whether steel decks were included in the price of the first contract, whether the parties entered into a separate contract for steel decks, whether certain items of work were within the scope of work of the first contract or chargeable as extras, responsibility for the cost of the failure of the inconsistencies between the engineer’s structural drawings and the architect’s design, and whether there was a direct contractual relationship between D&M and the Temple.
The October 4, 2010 contract (The “Main Contract”)
[17] D&M entered into a contract with 51C on October 4, 2010 (the “Main Contract”) “to supply and install all structural steel and trusses as per dwgs[^6]” for the price of $515,000.00 plus HST. The Main Contract was formed when D&M sent its quote by facsimile transmission to 51C on October 4, 2010 and Leo Qu, principal of 51C, signed the quote and returned it by facsimile transmission to D&M. According to the fax banner 51C’s transmission occurred at 4:03pm on October 4, 2010. At trial neither party filed an original version of the contract with original signatures.
[18] Silvestro Manini, principal of D&M, asserts that the Main Contract includes a second page with pre-printed terms and conditions, referred to on the first page in the statement “This quotation … is subject to the conditions on the reverse. Your acceptance will constitute your agreement thereto.” One of the terms and conditions on the second page on which D&M seeks to rely pertains to terms of payment. Mr. Qu states that he did not receive a page of terms and conditions with the October 4, 2010 quote sent by facsimile transmission by D&M.
[19] There is no evidence of the number of pages D&M sent by facsimile transmission to 51C as part of its quote. The return fax banner from 51C does not specify how many pages were faxed back to D&M. The onus lies with the party asserting that the contract included the second page to prove it. D&M has not met that onus. The principle of contra preferentem provides that ambiguity in a contract will be construed against the drafter. D&M drafted the contract. The condition cited from page one of the Main Contract creates an ambiguity. I find that the Main Contract is a one page document that was executed by both parties on October 4, 2010. I further find that the conditions referred to on that page were not provided to 51C and do not form part of the Main Contract.
[20] The Main Contract provides:
“We quote on the D&M Steel Ltd. Products mentioned below, subject to the conditions and the terms hereinafter set out. Our quotation is based on plans and specifications as follows:
STRUCTURAL DRAWINGS: Specification section(s): AS PER DRAWING
Date: May 2010 Addendum: NO
Prepared by: Architects/Engineers: K.O.Partners Ltd.
Products:
- TO SUPPLY AND INSTALL ALL STRUCTURAL STEEL AND TRUSSES AS PER DWGS.
The following price is based on the above-mentioned products being:
HST: EXTRA F.O.B.: SITE
Supplied Only ___ Supplied and installed XX Installed Only _____
Price:
- $515,000.00 + HST (FIVE HUNDRED FIFTEEN THOUSAND DOLLARS AND ZERO CENTS)
Notes:
STEEL IS ???? PAINTED 1-73A.
REGULAR WORKINGHOURS ARE COSIDERED IN QUOTE.
PRICE VALID 30 DAYS ONLY. MATERIAL PRICE SUBJECT TO CHANGE BASED ON MARKET VALUE.
LATERAL SUPPORTS FOR MASONRY WALL ARE NOT INCLUDED.
This quotation is firm for acceptance for 30 Days only from this date and is subject to the conditions on the reverse. Your acceptance will constitute your agreement thereto.
[21] Mr. Qu acknowledges accepting the D&M quote for $515,000.00 plus HST knowing that it exceeded the amount he had budgeted for steel in his general contract with the Temple. He explained that he accepted the D&M quote knowing that he would lose money because: (i) D&M promised to complete the work quickly and a fast turnaround time was crucial, and (ii) 51C expected to recoup the shortfall at a later stage of the project where the profit margin for the interior of the building and interior finishings would be significant. Mr. Qu testified that he had no choice but to accept D&M as the structural steel supplier because of the need to complete the Project in time for the Temple’s grand opening.
[22] I conclude from this evidence that Mr. Qu intentionally contracted with D&M knowing from the outset that 51C would lose money on the D&M subcontract. The events that followed are rooted in Mr. Qu’s efforts to curtail his losses.
[23] Several issues arise from the Main Contract, as follows:
a) Which drawings apply? Is 51C or the Temple liable for D&M’s increased costs attributable to achieving the architectural design? (see: “Extras”)
b) Is D&M entitled to charge extra for an increase in the price of steel over the duration of the contract? If so has D&M proven its claim? (see: “Extras”)
c) Does the Main Contract include non-structural steel for staircases and decks? If not, did the parties enter into a second contract on October 15, 2010?
The October 15, 2010 quote
[24] D&M asserts that steel decks were not included in the scope of work or price of the Main Contract and that the parties entered into a second written contract on October 15, 2010 for D&M to supply and install four steel decks, one each on the ground floor, the mezzanine, the roof and the canopy. Mr. Manini testified that on October 15, 2010 D&M quoted $44,000.00 plus HST to 51C to supply and install the four steel decks.
[25] At trial D&M produced a document dated October 15, 2010, purportedly signed by both parties. The October 15, 2010 quote reads as follows:
“We quote on the D&M Steel Ltd. Products mentioned below, subject to the conditions and the terms hereinafter set out. Our quotation is based on plans and specifications as follows:
STRUCTURAL DRAWINGS: Specification section(s): AS PER DRAWING
Date: May 2010 Addendum: NO
Prepared by: Architects/Engineers: K.O.Partners Ltd.
Products:
- TO SUPPLY AND INSTALL P2432-3” 20 GA COMPOSITE SATIN, P3615-1½”-22 GA COMPOSITE SATIN, P3615-1½” – 20 & 22 GA SATIN DECK AS PER DWGS.
The following price is based on the above-mentioned products being:
HST: EXTRA F.O.B.: SITE
Supplied Only ___ Supplied and installed XX Installed Only _____
Price:
- $44,000.00 + HST (FOURTY FOUR THOUSAND DOLLARS AND ZERO CENTS)
Notes:
STEEL DECK IS BASED ON L2C ???? IF REQUIRED GALV PRICE IS SUBJECT TO CHANGE.
REGULAR WORKINGHOURS ARE COSIDERED IN QUOTE.
PRICE VALID 30 DAYS ONLY. MATERIAL PRICE SUBJECT TO CHANGE BASED ON MARKET VALUE.
This quotation is firm for acceptance for 30 Days only from this date and is subject to the conditions on the reverse. Your acceptance will constitute your agreement thereto.
[26] Mr. Manini and his job estimator Jessie Sun testified that the Main Contract did not include non-structural steel items such as staircases, railings and steel decks in either the scope of work or the price. Ms Sun explained that D&M submitted a written quote on October 15, 2010 for $44,000.00 to supply and install four steel decks, based on $30,900.00 for materials as quoted by Canam Group Inc. (“Canam”) to supply the steel, plus installation by D&M’s installer, delivery and profit. Mr. Qu denied receiving and signing the October 15, 2010 quote and asserted that the signature for 51C was forged. 51C did not lead evidence of a handwriting expert. In the absence of an admission or of expert evidence I am unable to make findings regarding whether the document was forged.
[27] Mr. Qu testified initially that the Main Contract for $515,000.00 included all of the steel required for the Project, including decks. He later admitted that decks were not included in the price of the Main Contract and conceded that he had agreed with D&M to pay extra for decks. Mr. Qu testified that he had received a verbal quote of $44,000.00 from D&M for the decks and had asked Ms Sun to reduce the price.
[28] When cross-examined about transmission of the signed October 15, 2010 quote Ms Sun could not recall how she had received it from 51C, whether by facsimile transmission or by email. D&M did not produce a version of the October 15, 2010 document with a facsimile transmission banner showing transmission particulars. The top of the document produced by D&M at trial appears to have been obliterated. Nor did D&M produce an email transmission of the document identifying 51C as the sending party. No original of the October 15, 2010 quote signed by the parties was produced at trial. The photocopy submitted in evidence is of poor quality.
[29] Corroborating that the October 15, 2010 quote had been provided to 51C is the Temple’s evidence through Ben Law, a director, that 51C had provided to the Temple a copy of the October 15, 2010 quote with the line regarding price hidden but showing signatures for D&M and for 51C[^7]. The document was delivered to the Temple in the context of negotiations surrounding a subsequent agreement entered into by D&M, 51C and the Temple in April 2011 regarding payment to D&M in the face of 51C’s cash flow difficulties.
[30] I do not need to find that Mr. Qu’s signature was forged to reject the October 15, 2010 quote as forming a binding written contract between D&M and 51C. D&M has not met its onus of proving that the October 15, 2010 document was executed by both parties. I find that D&M’s October 15, 2010 quote does not constitute a binding written contract between the parties.
[31] Nevertheless, the quote to supply and install the deck resulted in a verbal or implied contract to supply the decks as an extra. The language describing the scope of work in the Main Contract is clear: “to supply and install all structural steel and trusses as per dwgs.” The decks are neither structural steel nor trusses and therefore fall outside the scope of work of the Main Contract. I find that after receiving the October 15, 2010 quote 51C instructed D&M to proceed to install the decks and D&M partially installed the decks. I find that there is an implied contract to pay D&M an additional amount for the steel decks as an extra to the Main Contract.
[32] As to the price of the extra, I find that the price quoted is the starting point and reflects the understanding as between D&M and 51C that the price to supply the four decks was $44,000.00 plus HST.
[33] Subsequently 51C contracted directly with Canam to supply the steel required for the decks for $30,900.00 plus HST. On November 25, 2010 D&M executed an irrevocable direction to 51C to pay Canam in priority to D&M the amount of $35,391.60 out of draws otherwise payable by 51C to D&M[^8].
[34] This reflects the price Canam had quoted to D&M to supply the steel decks. The direction is executed by D&M but not by 51C. Nevertheless, the parties followed the direction with 51C (or the Temple on its behalf) paying Canam directly and deducting it from the price quoted by D&M for the decks as an extra, leaving only the balance of $13,100 plus HST as the price of the extra to install the decks supplied directly by Canam.
[35] D&M’s position is that it is entitled to be paid the price quoted of $44,000.00 less the $30,900.00 assigned to Canam, for a balance of $13,100.00 plus HST to install the decks. 51C’s position is that because the steel decks were included in the price of the Main Contract the $30,900.00 paid to Canam should be deducted from the $515,000.00 price of the Main Contract.
[36] Having found that the Main Contract did not include the steel decks in the price I reject 51C’s position on this issue. The $30,900.00 paid to Canam is not deductible from the Main Contract price. It is deductible from the price quoted to supply and install the decks as an extra to the Main Contract. I find that D&M and 51C agreed to the decks as an extra to be installed by D&M for $13,100.00 plus HST. Mario Philippe, the subcontractor D&M hired to install the decks, testified that he left the job before installing all of the decks.
The April 4, 2011 “three party agreement”
[37] The parties testified about a third document, referred to by them as the “three party agreement”, executed by D&M, 51C and the Temple. The three party agreement is dated April 4, 2011 and provides s follows:
Pursuant to a contract dated 4 Oct 2010 for the supply and installation of structural steel for the construction of a new temple at 722 Brimley Road (the Project) for a contract price of $515,000 + HST between the Contractor (51 Construction Ltd. of 100 Dynamic Drive, Unit 27, Toronto, Ontario) and the Vendor (D&M Steel Ltd. of 1285 Ringwell Drive, Newmarket, Ontario), this Supplemental Agreement is made on ______ between the Contractor, the Vendor and the Owner (Jing Yin Temple of 722 Brimley Road, Toronto, Ontario).
The Contractor, the Vendor and the Owner acknowledge and agree as follows:
The Contractor has paid $160,000.00 and HST of $20,800 to the Vendor for Progress Payment #1 for all materials for the ground floor and partial installation.
The Contractor requested the Owner to make payments on behalf of the Contractor to the Vendor for the supply and complete installation of the materials for the remaining structural steel for the Project.
The Contractor acknowledges that the payments made by the Owner to the Vendor are advances to the Contractor by the Owner and agrees that these advance payments will be deducted from the Contractor’s future progress payments for the Project in the manner as the Owner sees fit and at the sole discretion of the Owner.
The Vendor will accept progress payments from the Owner made on behalf of the Contractor.
The Vendor agrees to complete the fabrication and installation of the roof truss within 4 weeks from the day of signing of this Supplemental Agreement and the Contractor can begin to lay bricks for the Project upon installation of the roof truss.
The Vendor further agrees to complete the lower canopy roof and other necessary work within 8 weeks from the day of signing of this Supplemental Agreement.
[38] Several versions of the three party agreement were submitted in evidence. The version in D&M’s document book is a photocopy with paragraphs 5 and 6 crossed out, but that change is not initialed by any of the parties. Exhibit 20 is one of the three original signed versions of the document, submitted in evidence by Mr. Qu as the version that he signed. There are no cross-outs or additions on that version. I accept exhibit 20 as the version of the contract that accurately reflects the three party agreement signed by the three parties. Paragraphs 5 and 6 form part of the contract.
[39] The Temple and 51C take the position that the three party agreement transformed the relationship between the Temple and D&M from that of owner and subcontractor to that of owner and direct contractor. This is relevant to the issue of holdback. They also take the position that the deadlines imposed by the three party agreement are contractual completion dates for the two items specified in paragraphs 5 and 6.
[40] D&M's position is that the three party agreement did not change the relationship as between D&M and the Temple because it was merely a payment guarantee, with the Temple making payments to D&M on behalf of 51C. I note with interest that the three party agreement provides a payment guarantee only for the Main Contract and not for the deck extra.
[41] After the three party agreement was signed D&M addressed its next progress invoice on May 11, 2011 to the Temple. In response the Temple insisted that D&M reissue the invoice and address it to 51C[^9]. In doing so the Temple clearly acted in a manner inconsistent with having a direct contractual relationship with D&M.
[42] I find that the three party agreement maintained the relationship of the parties as owner, general contract and subcontractor. It is a guarantee whereby the Temple guaranteed payment of 51C’s obligations to D&M pursuant to the Main Contract, with a corresponding deduction from monies otherwise payable by the Temple to 51C. D&M agreed to accept payments from the Temple as payments made on behalf of 51C.
[43] The three party agreement did not create a direct contractual relationship between D&M and the Temple for the supply of construction services and materials.
b. Breach of Contract
[44] In issue is whether D&M breached the Main Contract by leaving the job prior to completion for non-payment before payments were due, or whether 51C breached the Main Contract by failing to pay D&M for services and materials that D&M had supplied when payments were due and payable.
[45] It is not in dispute that D&M left the Project on August 8, 2011 prior to completion because interim invoices had not been paid. With the steel erector gone, the Temple terminated the steel component of the general contract on August 12, 2011 and subsequently terminated 51C as general contractor for all purposes on December 1, 2011.
[46] The Temple's theory is that D&M determined that it was not economical to continue working on the Project. The evidence of the steel installer Mario Philippe was that D&M had paid him only a fraction of what he was owed. According to Mr. Philippe D&M owed him over $100,000.00 but only $65,000.00 remained as the unpaid portion of the Main Contract plus $13,100.00 for the deck extra. Had D&M continued to work on the Project it would have incurred more unrecoverable costs. The Temple argues that this is the reason that D&M left the Project prior to completion.
[47] To determine which party breached the Main Contract I turn first to its payment terms. Did the parties agree to progress payments and if so, were progress payments payable monthly, or upon completion of specified stages? Alternatively did the Main Contract provide for payment only upon completion of the entire contract?
[48] D&M seeks to rely on the ill-fated second page of the document that Mr. Manini had intended to send to 51C as part of its quote, but which was never sent to 51C. That page sets out payment terms and conditions, including monthly progress billings. D&M failed to prove that the second page of the document was delivered to 51C as part of the October 4, 2010 quote, signed back and accepted by 51C as part of the Main Contract. Consequently the payment terms on the pre-printed second page permitting monthly progress billings are not included in the Main Contract.
[49] In the absence of agreed upon payment terms for monthly progress billings and payments, the issue is whether there was an implied agreement to pay progress billings discernable from the conduct of the parties.
[50] The evidence of Mr. Manini, installer Mario Phillipe and Temple director Ben Law was that the project was to proceed in four phases: the ground floor, the mezzanine floor, the roof trusses and then the roof canopies. Mr. Manini testified that the contract provided for progress payments at each phase so that he could buy materials for the next phase.
[51] The onus lies with D&M to prove that it was entitled to issue interim invoices prior to completing the Main Contract. D&M issued several interim invoices and received payments on the dates and in the amounts shown in the following chart:
| Invoice date | Amount Invoiced | Payment date | Amount Paid |
|---|---|---|---|
| Invoice 6113 Progress #1 Dec. 14, 2010 “Ground floor” |
$180,000.00 + HST | Dec. 13, 2010 | $180,000.00 Paid by 51C |
| Invoice 6141 Progress #2 January 28, 2011 reissued on March 15, 2011 “Structural steel fabricated below roof trusses, all columns on site” |
$158,200.00 + HST | April 3, 2011 | $158,200.00 Paid by Temple |
| Invoice 6154 Progress #3 May 10, 2011 “Roof trusses and purlins for 3rd phase” |
$169,500.00 + HST | May 15, 2011 | $169,500.00 Paid by Temple |
| Invoice 6172 Extra May 17, 2011 “Additional cost…loaded flatbeds…one month” |
$1,113.53 + HST | Not paid | |
| Invoice 6224 Progress #4 July 14, 2011 “Canopy frames and roof deck” |
$73,450.00 + HST | Not paid | |
| Invoice 6242 Extras August 25, 2011 (includes August 12, 2011 list of items) [^10] |
$72,058.97 + HST | Not paid |
[52] The evidence tendered at trial regarding invoicing and payments corresponds to the phases described by the witnesses. Mr. Qu’s initial position was that the project was not to be done in phases and that the unpaid invoices were not payable prior to final completion. However, in cross-examination Mr. Qu admitted that he paid the first invoice after the first phase and that he asked the Temple to pay the second and third invoices on behalf of 51C after the corresponding second and third phases. I accept this evidence as an admission by Mr. Qu of an implied agreement as between D&M and 51C that progress billings were payable as D&M completed each of the four phases. I also accept Mr. Qu’s evidence that the final payment was not due until the last phase had been completed.
[53] It follows from the conduct of the parties that D&M and 51C had impliedly agreed that progress payments would be made based on stages of completion. I accept the evidence of Mr. Philippe regarding the dates on which the various phases were completed: the first phase being the ground floor was completed on December 10, 2010, the second phase being the mezzanine floor was completed on May 3, 2011 and the third phase being the roof trusses was completed on May 9, 2011.
[54] As to the fourth phase and the deck extra, Mr. Philippe testified initially that the fourth phase, being the lower canopy roof, was complete as of July 4, 2011 but he later contradicted himself and gave evidence that the work remaining to be completed on the roof canopy had a value of $5,000.00 for three days of work by four or five workers. Mr. Law, Mr. Yang and others testified that the roof canopy had only been tack welded and in fact a piece broke away and fell to the ground. Mr. Philippe also testified that $2,000.00 worth of work was left to be done to install the decks.
[55] I conclude that at the time D&M issued its Progress Invoice #4 on July 14, 2011 for the roof canopy and the deck extra neither of these items had been completed and they were not completed prior to Mr. Philippe and D&M leaving the job.
[56] The position taken by 51C and the Temple is that D&M was not entitled to be paid for Progress Invoice #4 until all of the work within the scope of the Main Contract and the deck extra had been completed. Yet D&M invoiced for these items and left the job for non-payment.
[57] 51C’s failure to pay Progress Invoice #4 was not a breach by 51C of the Main Contract or the agreement for the deck extra. Rather, 51C was justified in refusing to pay the invoice prior to completion of the roof canopy and the decks. I find that D&M breached the Main Contract and the contract for the deck extra by abandoning the job on August 8, 2011 without completing the work.
[58] A contractor who abandons a project prior to completion is in breach of the contract. When the contract is for a fixed price the contractor abandons at his own peril.
[59] In Gokdenz Construction Ltd. v. Dalakis[^11], relied on by the Temple, I made the following observations beginning at paragraph 32:
“32. There has been ample case law dealing with situations where a contractor demands payment and refuses to proceed unless paid. In facts similar to those in the present case the court found that such conduct amounts to repudiation of the contract by the contractor. Master Sandler describes the test for repudiation in Kaplan v Mihhailelnko (2005), 43 C.L.R. (3d) 223 at paragraph 115, referring to Heyday Homes Ltd. v Gunraj, (2004), 31 C.L.R. (3d) 66:
“…where each party to a contract is alleging fundamental breach and repudiation by the other, the court must determine which party committed a substantial breach which amounts to a repudiation, i.e. evidencing an intention no longer to be bound by the terms of the contract. In making this assessment, the test is an objective one, and even a direct or indirect intention by a party allegedly in breach that it wished to continue the contract is not necessarily conclusive in rebutting a finding of a repudiation of the contract. A party may have been found to have repudiated a contract even where the party honestly believes it wants to continue with the contract to completion.”
“33. In the Kaplan case the court found that a demand for immediate payment before it was due constituted repudiation of the contract. Similarly I find that Mr. Sonmez’ demand for payment on July 27, 2009 and his threat to halt delivery of the concrete if not paid constituted repudiation of the contract.”
[60] In Voka Steel Inc. v. Edgecon Construction Inc.[^12], also , relied on by the Temple, I made the following findings beginning at paragraph 38:
“38. In the face of a payment dispute was Voka required to continue to supply services and materials to complete the contract or was Voka entitled to treat the contract as breached by Edgecon?
“39. The Construction Lien Act is and its predecessor the Mechanic’s Lien Act was designed to protect contractors' accounts in these circumstances while allowing a construction project to proceed. When one contractor stops work an entire project can be brought to an abrupt standstill. A contractor engaged in a payment dispute has lien rights and remedies with payment of amounts owing secured by the lands. There was no issue in this case as to whether the value of the lands was sufficient to cover the quantum of a lien claim for the value of Voka’s unpaid services and materials.
“40. I find that Voka’s proper course of action in this case if its payment dispute could not be resolved was to register a lien and continue the work. Voka breached the contract by refusing to complete the work. Voka walked away from the contract at its peril. Edgecon is entitled to rely on the “pay when paid” condition in the contract. Voka is liable for the completion costs reasonably incurred by Edgecon to finish the contract work.”
[61] D&M walked away from the job at its own peril. The Act provides a remedy whereby D&M could have secured its claim for payment and complete the scope of work contractually required. In this case the fourth phase, requiring completion of the roof canopy structure, and installation of the deck extra, were incomplete when D&M abandoned the job for non-payment. D&M was not entitled to payment prior to completion of the final phase of the fixed price Main Contract and the fixed price deck extra.
[62] As the party in breach, D&M is not entitled to any further payment for services supplied pursuant to the Main Contract or the deck extra.
c. Delay
[63] It is not in dispute that the Project took longer than 51C and the Temple expected. The issues related to delay are whether D&M was contractually bound to a fixed completion date or timeframe, whether D&M was responsible for delay and if so the quantum of damages.
(i) Was there a contractual completion date?
[64] Evidence of the expected completion date was given by Mr. Manini, Mr. Green, Mr. Qu, and Mr. Law. Witnesses for 51C and the Temple stressed that time was of the essence. Mr. Qu gave his evidence in a clear and forthright manner. He testified that he selected and contracted with D&M for structural steel because of D&M’s reputation and the need to have the structural steel completed within two months. He testified that he was prepared to have his company suffer a loss on the structural steel component of the general contract budget because D&M had the expertise and resources to meet an expedited schedule and thus allow 51C to complete the Project on time for the Temple. That he knowingly subcontracted with a steel contract for an amount above his budget for structural steel corroborates that he was compelled by a factor other than budget to contract with D&M. That factor was the ability of the structural steel subcontractor to complete the steel component of the job on time. I accept that as of October 2010, Mr. Qu (and therefore 51C) expected that the structural steel component of the new Buddhist temple would be completed by December 2010.
[65] Mr. Ron Green, the steel detailer hired by D&M to prepare the detailed erection drawings, testified that in early October 2010 Mr. Manini told him it was a rush job and asked him for his timeline to prepare the erection drawings. On October 6, 2010 Mr. Manini instructed Mr. Green to proceed. This corroborates the evidence of Mr. Qu that Mr. Manini knew (and as the principal of 51C, Mr. Manini’s knowledge is also 51C’s knowledge) it was a rush job.
[66] Mr. Law, a director of the Temple and its main witness, testified that the Temple expected the entire Project to be completed by July 31, 2011 in time for the anticipated grand opening of the new Buddhist Temple. I accept that the Temple expected to have the entire Project completed in time for the grand opening. His evidence corroborates that of Mr. Qu regarding the deadline for completing of the Temple.
[67] Mr. Manini’s evidence is that there was no specific deadline for completing the structural steel contract and if there was, delay was not D&M’s fault.
[68] The Main Contract, signed on October 4, 2010, is silent as to a completion date. In the absence of a fixed completion date the law imputes into the contract a reasonable time to complete the work. I accept the evidence of Mr. Qu, Mr. Green and Mr. Law over that of Mr. Manini. There was no specified completion date in the written contract of October 4, 2010, but the parties had discussed and their actions are consistent with an agreement to complete the structural steel work by December 2010. I conclude that D&M had agreed to complete the job on an expedited basis to meet this deadline.
[69] If there was no specified completion date when the parties entered into the Main Contract, the three party agreement executed on April 4, 2011 fixed completion dates for the two remaining items as May 4, 2011 for the roof truss and June 4, 2011 for the lower roof. If there was an earlier contractual completion date then it was similarly extended to June 4, 2011. I find that the parties agreed to a fixed completion date of June 4, 2011 for the structural steel.
[70] The structural steel was incomplete when D&M’s installer left the site in July 2011 and D&M abandoned the job on August 8, 2011 for non-payment.
(ii) Was D&M responsible for delay?
[71] The issue is whether D&M was responsible for any of the delay. Mr. Philippe, the installer hired by D&M, testified that he expected installation to require eight to ten weeks. It took longer than he expected. He started in December 2010 and the work was not yet complete when he left the job seven months later.
[72] D&M's position is that it was not responsible for delay because of discrepancies in the drawings and site conditions.
[73] Regarding the drawings, it is not in dispute that the structural drawings prepared by John Kwan were inconsistent with the architectural drawings prepared by Mr. Szeto in two significant aspects: the length of trusses and eight roof corner up-turns. The increased length of structural steel trusses had an impact on preparing the erection drawings, ordering the steel and installation. The eight roof up-turns (turning up the roof corners of the lower and the upper roofs pagoda-style) similarly delayed the erection drawings and installation.
[74] Mr. Szeto, as the Temple’s architect and Project consultant, could have required John Kwan, the structural engineer on the Project, to update the structural steel drawings when these two aspects of the design were changed. Mr. Szeto admitted that he did not require Mr. Kwan to update the structural steel drawings because the Project was at the permit stage and he was waiting for all changes to be finalized before requiring Mr. Kwan to prepare another version of the structural drawings. Mr. Szeto wanted to avoid multiple revisions.
[75] This posed a difficulty for D&M as the structural steel subcontractor. The process for translating an architect’s design concept into a completed structure is for the engineer to prepare structural drawings that will allow for the design to be transformed into an actual building. Then the steel subcontractor (D&M in this case) instructs its detailer to prepare detailed erection drawings based on the structural steel drawings. Once the erection drawings are prepared and approved the steel subcontractor’s installer installs the structural steel.
[76] In the case of this Project the inconsistency between the architectural and structural drawings caused two problems: delay in preparing the erection drawings and extra cost associated with revising the erection drawings (extras are discussed later in these reasons).
[77] Witness Ron Green, a structural steel draftsman of 48 years’ experience, is an engineer certified in the United Kingdom and he is certified in Canada as an engineering technician. D&M contracted with Mr. Green to prepare the detailed erection drawings. Mr. Green discovered the discrepancy between the architectural drawings and the structural engineering drawings. He explained that the architectural drawings depicted a 1500 millimeter extension of one wall and up-turns on eight roof corners, none of which were shown in the engineer’s structural drawings. He explained that if he prepared the detailed erection drawings based on the approved structural drawings then it would not result in the architect’s design for the Temple.
[78] Mr. Green testified that he discussed the discrepancies with the architect, Mr. Szeto, who instructed him to make the changes to the detailed erection drawings necessary to conform to the architectural drawings and not to rely on the structural drawings for the wall extension and the roof up-turns. Mr. Green proceeded as instructed, pointing out that it gave rise to an extra in his contract. He explained that he required the approval of Mr. Kwan, the engineer, before he could proceed with the detailing. He sent his drawings for approval on October 17, 2010 and received approval on November 3, 2010.
[79] I find that three weeks of delay is attributable to the design discrepancy. D&M is not liable for this delay. The Temple is responsible for this delay as it is the Temple’s architect who was responsible to ensure that the structural drawings conformed to the architect’s design.
[80] D&M also blames site conditions as a cause of delay. D&M’s position is that wet and muddy site conditions prevented D&M from bringing its equipment and loads of steel to the site. In particular Mr. Manini testified that one load of steel that was to be delivered to the site on April 4, 2011 could not be delivered until May 2, 2011 due to muddy site conditions. The load was stored on a flatbed truck awaiting improved site conditions. To corroborate this evidence D&M produced invoice #5 dated May 17, 2011 for $1,258.29, issued by D&M to 51C, for the flatbed rental as an extra. The description on the invoice reads: “for cost of having loaded flatbeds at our shop for approximately one month April 4 – May 2, 2011 unable to deliver due to site conditions”.
[81] The flaw in D&M's position is that when the load of steel was ultimately dropped on site in May 2011 the site conditions had not changed. Mr. Manini and Mr. Philippe testified that the site was too muddy in April 2011 to deliver the load of steel but Mr. Philippe admitted that site conditions did not change between April and May 2011: the site remained muddy. Mr. Qu agreed that site conditions were poor due to weather but in his view the site conditions should not have delayed D&M’s work. His point is that the site was as muddy in May 2011 when the steel was finally delivered as it was in April 2011 when it was supposed to be delivered. Ben Law, the Temple’s main witness, also testified that site conditions had not changed from April 2011 to May 2011 when the steel was delivered. The photographs tendered in evidence at trial corroborate his evidence. I accept the evidence of Mr. Philippe, Mr. Qu and Mr. Law over that of Mr. Manini on this issue and find that muddy site conditions were not a reason to delay the progress of D&M’s contract work.
[82] Two stop work orders were issued by the provincial Ministry of Labour during the structural steel phase of the Project. The first is dated July 8, 2011[^13], requiring 51C as general contractor to stop work until the site problems identified in the work order were rectified. Mr. Qu’s evidence is that the project was stopped for several days. The second stop work order is dated August 11, 2011[^14], after D&M had left the job.
[83] The evidence discloses that another reason for delay was that Mario Philippe, the installer hired by D&M, had other jobs in progress at the same time. On at least two occasions he was delayed in returning to the Temple Project because of other commitments. Mr. Philippe testified that he was asked to begin phase 2, the mezzanine floor, on January 12, 2011 but he had other commitments that prevented him from starting phase 2 before January 26, 2011, roughly a two week delay. This delay is overridden by the April 4, 2011 agreement whereby the parties agreed to extend completion to June 4, 2011.
[84] Mr. Philippe further testified that he left the job on or July 12, 2011 when the first stop work order was issued. He did not return on July 20, 2011 when the order was vacated because he had another job. He never returned to the job. This delay is D&M’s responsibility.
[85] I find that although D&M was responsible for three weeks of delay in January 2011 this delay is non-compensable due to the parties’ agreement to extend completion to June 4, 2011. D&M was then responsible for delay after July 20, 2011 when its installer should have returned but failed to return to complete the job.
(iii) Quantifying delay damages
[86] While much trial time was taken up with the issue of delay, evidence quantifying delay damages was thin.
[87] 51C claims delay damages but provided no evidence to quantify the claim. 51C pleaded in its statement of defence and counterclaim:
“The Plaintiff by counterclaim, 51CL, claims against the Defendant by Counterclaim, D&M, for damages in an amount, particulars of which are not presently known but will be specified at or before trial, pursuant to D&M’s unfulfilled obligations to 51CL under the Steel Work Contract”
[88] 51C’s theory is that delay in completing the structural steel contract caused 51C to be terminated from the Project, thus losing the balance of the general contract including any opportunity to make up at the end of the Project for losses in underpricing the structural steel contract. The evidence suggests that there were other reasons for the Temple terminating the balance of the general contract. The Temple terminated only the structural steel component of 51C’s general contract by letter of August 12, 2011 but it did not terminate the balance of the general contract until almost four months later, on December 1, 2011.
[89] 51C did not lead evidence to quantify its claim for damages for delay based on losing the contract. I find that 51C has not proven any damages for delay.
[90] In its statement of defence, counterclaim against D&M and crossclaim against 51C, the Temple makes no specific claim for damages for delay against either D&M or 51C. In its crossclaim against 51C the Temple pleads:
“The Defendant, Jin Yin, Plaintiff by Counterclaim, claims against the Defendant, 51 Construction, for:
a. damages in an amount to be determined prior to trial for supplies and services to complete the Steel Work[^15];
b. consequential damages in an amount to be determined prior to trial;
c. full contribution and indemnity for the amount of any judgment, including interest and costs, that the Plaintiff may obtain against the Defendant Jin Yin;
d. (interest, costs, other)…”
[91] At trial the Temple argues that it is entitled to $135,000.00 for delay, this being the amount that the Temple claims it paid its completion contractor to complete the steel component of the work. Even if I were to accept that $135,000.00 is the correct quantification of the Temple’s completion costs for structural steel I would reject that it constitutes delay damages.
[92] Typically delay damages include items such as carrying costs, rental costs for an alternate premises, stand by charges to other trades waiting to begin their phases of the Project, and other such costs that the party claiming damages has experienced.
[93] The Temple particularized its counterclaim and crossclaim in its Scott Schedule, supplemented at trial by viva voce evidence on the items listed in the Scott Schedule. The only item that pertains to delay is the second item, claiming $7,912.80 as the cost to store roof tiles.
[94] The Temple claims $7,912.80 including HST for six months of storage costs for roof tiles for the lower canopy roof on the basis that roof tiles had to be stored offsite because the lower canopy roof was not ready for tiles to be installed. In support of this claim the Temple relies on invoices from Gundar Cartage and Express including one dated March 8, 2012 summarizing six invoices that add up to $10,356.54, but deducting from the total storage costs amounts allocated to items other than steel. To ascertain the storage amount for the roof tiles alone the Temple relies on the invoice for December 2011 because it applied only to the storage of roof tiles. Mr. Law’s evidence is that after that date the storage costs included items other than just the roof tiles, so only the portion allocated to the roof tiles is claimed in this action. Mr. Law calculates the storage amount pertaining to roof tiles as $1,318.80 per month for six months for a total of $1,318.80 including HST. I accept his calculation as ascribing the correct value to storage costs for the tiles.
[95] On the issue of liability, installation of roof tiles is not within the scope of D&M’s contract. However, certain items required sequencing. Roof tiles cannot be installed before the roof is installed. There is no evidence of a contractual completion date prior to the April 4, 2011 three party agreement. The completion date for the roof pursuant to the three party agreement was eight weeks following April 4, 2011, being May 30, 2011.
[96] D&M’s position is that the Temple failed to mitigate its storage costs reasonably. Mr. Law admitted that after it retained CanTrust as its replacement general contractor on November 28, 2011, CanTrust concentrated its resources on other parts of the exterior and interior work such that completion of the roof canopy did not start until May 2012. On that basis, D&M argues, the Temple ought to bear the cost of its own delay.
[97] When D&M left the job and 51C was terminated the Temple found itself in the position of an overwhelmed victim. It had a membership that was expecting a completed temple within a specific timeframe, the project was delayed and they were struggling to complete both the exterior and the interior work simultaneously. Decisions had to be made as to what work would be started and completed in what sequence. Even if the Temple could have allocated its resources to completing the canopy structure first, CanTrust was not on the job until December 2011 and by then the lower canopy roof was six months past due according to the deadline in the three party agreement. The Temple is only claiming storage for six months. In the circumstances it is advancing a reasonable delay claim given the conduct of its contractor and the sub-contractor.
[98] I find that the Temple’s delay claim for tile storage is reasonable and ought to have been anticipated by 51C and by D&M when they failed to complete the lower canopy roof by the contractual completion date of May 30, 2011.
[99] The only delay costs proven by the Temple attributable to D&M’s failure to complete the lower canopy roof by May 30, 2011 are six months of storage costs for roof tiles. I find that 51C is liable to the Temple for $7,912.80 and that D&M is liable to indemnify 51C for that amount.
d. Extras
[100] For reasons expressed previously I found that the October 15, 2010 quote became an agreement between D&M and 51C for the installation of four decks as an extra for the fixed price of $13,100.00 plus HST (the “deck extra”).
[101] On August 12, 2011, four days after leaving the job, D&M issued an invoice to 51C for ten extras for $60,649.00 + HST, plus an eleventh extra (rolling roof corners) for $1,000.00 plus HST[^16]. D&M also claims as an extra the earlier invoice for the trailer rental for $1,113.53 plus HST[^17].
[102] D&M tendered in evidence a breakdown of the value of its claim for extras, referred to in these reasons as the “extras spreadsheet”[^18]. The breakdown is D&M's own calculation of values for unit costs, taking into account weight, materials, hours, fabrication costs, installation costs and profit at 10 per cent. No time sheets or evidence of actual costs incurred was tendered. Nor did D&M tender any independent evidence of value of the extras claimed.
[103] The defendants rely on the decision of the Supreme Court of Canada in [^19] wherein the court found that a contractor who sued for payment after completing a job under protest when asked to do more work than was called for in the contract was not entitled to be paid for the additional work. The basis for the decision was that there was no agreement, express or implied, to pay for the additional work. The court determined that the contractor’s options were to either refuse to continue except on the basis of the contractor’s interpretation of the contract or, if that was unacceptable to the other party, to treat the contract as repudiated and sue for damages. Absent a contractual provision allowing the contractor to continue to work under protest he could not do so and claim payment after-the-fact.
[104] D&M argues that the Peter Kiewit case no longer applies. Subsequent case law from the Ontario Court of Appeal has interpreted such situations as giving rise to an implied agreement to pay reasonable compensation for extras. The case relied on by D&M is Colautti Construction Ltd. v Ottawa (City)[^20]. In that case the contractor was to install a sewer in a certain location relying on a surveyor’s staking which turned out to be erroneous causing the contractor to damage the watermain. The city instructed the contractor to proceed. The line had to be relocated. The issue was whether the contractor was entitled to be paid extra for the additional work. The contract required extras to be approved in writing. However, the conduct of the parties had been such that extras that had not been authorized in writing were paid for by the city. The court found that the parties had varied the contract by their conduct and there was an implied agreement to pay for extras requested by the city. The case was sent back for a new trial to determine specified factual issues. In my view the Calautti case is distinguishable from the present case. In Calautti the contractor sought payment for extras as the project progressed and the city paid the contractor, thereby acknowledging items as extra to the contract. In the present case D&M did not raise the issue of extra payment for items not included in its Main Contract or the deck extra and did not claim payment for items that D&M characterizes as extra until after D&M had left the job. Unlike the city in the Peter Kiewit case, 51C did not acknowledge the items claimed by D&M as extra to the Main Contract and 51C did not pay D&M for any of the extras claimed in its invoice of August 12, 2011 after it left the Project. There is no pattern of conduct of the parties that could be construed as amending the fixed price Main Contract or creating an implied contract for the extras claimed in the invoice of August 12, 2011.
[105] It is significant that D&M has no contemporaneous documentary evidence to corroborate an agreement between the parties for extras. D&M did not quote prices for extras and obtain approval in advance, as one would expect when services and materials to be supplied are outside the scope of the contract work. Nor did D&M issue invoices for extras at the time they were carried out, but rather waited many months, until after the contract was terminated, to invoice for extras. There are no emails, notes, letters, quotations, time sheets, order forms or other such documentary evidence to support D&M's claim for the extras invoiced on August 12, 2011.
[106] The evidence of Mr. Manini and Mr. Qu conflicts. Mr. Manini testified that he mentioned the issue of extras for the increased length of trusses and the roof corner up-turns at a meeting on site with Mr. Qu on November 24, 2010. His employee, Jessie Sun, acted as a Chinese-English translator. Ms Sun testified that when Mr. Manini mentioned site conditions and extras Mr. Qu nodded his head. On that evidence Mr. Manini claims that Mr. Qu agreed to pay for the extras. However, that evidence is more consistent with Mr. Qu acknowledging that he heard Ms Sun’s translation than it is with D&M’s assertion that by nodding his head Mr. Qu had agreed on behalf of 51C to pay additional amounts for unquantified extras.
[107] Mr. Manini further testified that Mr. Qu asked him to defer submitting estimates or invoices for extras until the end of the job. Mr. Qu denies that this occurred. I find Mr. Manini’s oral evidence on this point self-serving, uncorroborated and lacking in credibility. One would expect a contractor in this position to quote a price for extras and obtain approval in advance of carrying them out. When that cannot be done one would expect a paper trail to corroborate an agreement to delay pricing and invoicing for extras until the end of the contract. As a steel contractor with over 30 years of experience Mr. Manini knows or ought to know how to obtain approval for extra payment for changes. Mr. Maninin claims that D&M incurred additional costs for extras and then, in the absence of any written agreement to delay payment, waited many months to invoice for them. Such conduct is more consistent with the contractor having treated the items at the time of supply as included in the scope of work under the Main Contract. D&M only characterized the items as extras after the relationship broke down.
[108] By October 15, 2010, the date of the deck quote, the discrepancy between the architectural and structural drawings had been identified and D&M, through its detailer Ron Green, knew or ought to have known, that eight trusses were to be 1500 millimeters longer and that the up-turned corners on the canopy roof and the upper roof would require structural steel support. D&M had the opportunity to raise the issue of these extras with 51C at that time but failed to do so. Nor did D&M raise with 51C the need to re-quote the job to allow for the additional costs associated with the changes from the May 2010 to the October 2010 structural drawings. D&M remained silent on the issue of extras notwithstanding that its detailer, Ron Green, had commenced working with the project engineer, Mr. Kwan, to redesign the trusses and the up-turned roof corners in the detailed erection drawings. There is no documentary evidence to show that D&M asked to be paid extra for these items at the time: no letters, emails, memoranda or other corroborating evidence. Mr. Qu testified that D&M never requested any change orders and had it done so Mr. Qu would have had an opportunity to negotiate the price.
[109] Further compromising D&M’s credibility on this point is that the invoice for extras was submitted on August 12, 2011, four days after D&M’s departure from the job for non-payment. This timing is consistent with a “retaliatory” claim for extras that were never agreed to by the parties. The onus is on D&M as the party asserting an agreement to pay. I prefer the evidence of Mr. Qu over that of Mr. Manini on the issue of whether there was an agreement that 51C would pay for extras, unquantified at the time and deferred to the end of the job.
[110] The extras[^21] invoiced and claimed by D&M are:
| No. | Item | Claim (net of HST) |
|---|---|---|
| 1 | Ground floor: additional steel plates | $ 885.00 |
| 2 | Ground floor: 8 trusses extended 1500 mm beyond grid line E | 7,250.00 |
| 3 | Mezzanine floor and low roof: steel pieces and cut-outs for openings in the mezzanine floor and low roof | 2,804.00 |
| 4 | Elevations: additional pieces pertaining to elevation F | 2,162.00 |
| 5 | Roof: Increase in roof perimeter length required increased beam lengths and chord | 7,167.00 |
| 6 | 2 columns extended 575mm | 208.00 |
| 7 | Roll 4 corners into up-curves at high and low roofs to match architectural drawings (8 roof corners) | 11,000.00 |
| 8 | Additional detailing fees paid to Ron Green | 2,750.00 |
| 9 | Additional delivery charges | 660.00 |
| 10 | Materials price increase | 25,763.00 |
| 11 | Rolling the corners deck on site[^22] | 1,000.00 |
| 12 | Trailer rental [^23] | $1,113.53 |
| Total: | $62,762.53 + HST |
[111] Chittick v Taylor[^24] states that each case is fact specific and sets out the general rules regarding extras:
An item specifically provided for in the contract is not an “extra”.
A plaintiff is not entitled to charge extra for upgraded materials or for services and materials not called for by the contract unless instructed by the defendant to do so.
A plaintiff is entitled to charge extra for additional services or materials not called for by the contract if so instructed by the defendant or on consent of the parties.
[112] In 2016637 Ontario Inc. v Catan Canada Inc.[^25] Justice Broad succinctly summarizes the law as it pertains to extras to a fixed price contract, applying the general rules as set out in Chittick v Taylor. I have extracted these principles and applied them to the present case:
a) D&M is only required to perform work that is within the scope of its contract. In the absence of a contractual provision addressing how extras are to be dealt with, a new agreement is required, express or implied, to cover the supply of and payment for any work that is not within the scope of the contract. An implied contract arises where D&M performs the work at the request of 51C and the work is accepted by 51C. In the absence of a fixed price for the additional work the court will imply a promise to pay a reasonable amount on a quantum meruit basis.
b) Whether the items claimed as extras are in fact extra to the contract is determined by analyzing the contract, the nature of the work and the surrounding circumstances. The test is whether the contract “changed so fundamentally that the payment provisions in the contract no longer have any application to the work actually performed.”
c) D&M is not entitled to be paid as an “extra” for any work performed or materials supplied that are not called for by the contract without the express or implied instructions or consent of 51C.
d) If 51C expressly or impliedly instructed D&M to carry out work that was beyond the scope of the contract then D&M is entitled to charge for the additional work and materials as an “extra”. Determining what amounts to instructions by 51C depends on the circumstances relating to each item. Instructions are implied if 51C knew that D&M was doing extra work or supplying extra materials, stood by and approved of what was being done and encouraged D&M to do it. If that is the case 51C is liable to pay for such extras.
[113] The threshold question is whether the work changed so fundamentally that the contract price no longer applies to the services and materials D&M actually supplied. The next question is whether there was an express or implied agreement for D&M to supply the services and materials claimed as extras. If so, the final question in the absence of an agreement as to the price of the extras is whether D&M has met the burden of proving the value of the extras on a quantum meruit basis. I refer to this as the three part “Test for Extras”.
[114] The extras claimed by D&M fall into three categories, with certain extras falling into more than one category. They are:
Category 1: Extras arising from discrepancies between the structural drawings and the architectural drawings. Items 1, 2, 7 and 11 are in this category. Items 2 and 7 are also in category 2.
Category 2: Extras claimed for changes to the structure after Mr. Green's first erection drawings were provided to the architect and engineer. Items 1, 3, 4, 5, 6, 7, 8 and 9 are in this category. Items 2 and 7 are also in category 1.
Category 3: Items invoiced to D&M for which D&M seeks compensation from 51C on the basis that they arose solely due to design changes or circumstances beyond D&M’s control. Items 8, 10 and 12 are in this category. Item 8 is also in category 2.
[115] For the items in category 1, D&M claims the cost of supplying additional services and materials arising from the increased size of trusses and the eight roof corner up-turns that were not depicted on either the May 2010 or the Oct 4, 2010 structural drawings. D&M’s position is that 51C, through the Temple’s architect Mr. Szeto, instructed D&M to supply services and materials that would allow 51C to build the architect’s final design. This required D&M to pay additional costs for steel, design and installation. The position of 51C and the Temple is that as of October 4, 2010 the revised structural drawings were posted on 51C’s website. On that basis, the defendants argue, D&M ought to have pointed out the discrepancies between the architectural and structural designs and based its quote on the architectural design (measurements are scaled from the architectural drawings, not the structural drawings) depicted in the October 4, 2010 drawings. The flaw in 51C’s argument is that (i) the Main Contract was entered into on the same date as 51C posted the revised architectural drawings so it would not have been possible for D&M to reconcile the discrepancies and quote based on the revised design and (ii) the structural drawings must be relied on by the steel contractor to identify and price the steel required for the Project. From that analysis the measurements are taken off of the architectural drawings. The Temple’s architect and 51C never incorporated the architect’s changes to the eight trusses or the roof corner up-turns into the structural drawings.
[116] D&M's employee, Jessie Sun, performed the calculations upon which D&M based its quote. She admitted that D&M used the May 2010 structural drawings, not the October 4, 2010 structural drawings, to prepare D&M's quote for the Main Contract, having obtained the drawings from another general contractor that was preparing a bid for the subcontract in the summer of 2010. D&M did not download the structural drawings from the 51C website. Nor did D&M take their measurements off of the August 2010 architectural drawings, incorporated by reference into the structural drawings for the purpose of taking measurements. However, had D&M used the structural drawings available as of October 4, 2010 the eight truss extensions and the roof up-turns would not have been shown on the structural drawings.
[117] Ms Sun quantified the price difference, based on the additional steel required to erect the structure as depicted in the October 2010 structural drawings, as $3,500.00. Both Ms Sun and Mr. Manini testified that D&M was not claiming this price difference based on using the older drawings because the changes were minor. The significance of this evidence is that D&M was of the view that it underbid the contract and I draw an inference from this evidence that D&M was motivated to recapture the shortfall.
[118] It is also significant that by the time of the April 4, 2011 three party agreement D&M had incurred the increased costs claimed for most of the extras, yet there is no evidence that D&M claimed payment as extras for the items subsequently claimed and listed in the August 12, 2011 invoice. If D&M had a bona fides entitlement to charge for the extras claimed then one would expect that D&M would have raised and resolved the issue at the time of the three-parties agreement.
[119] For the items in category 2, D&M claims the costs arising from the Temple’s changes to the structure after the first erection drawings were prepared and provided to the architect and engineers. D&M argues that these are extras because they were not in the original scope of work. The defendants' position is that the changes were not fundamental changes to the contract.
[120] For the items in category 3, D&M claims as extra the costs arising from items invoiced by suppliers to D&M where the items supplied arose from changes to the design or site conditions. The defendants' position is that the changes were not fundamental changes to the contract.
[121] My findings regarding each of the items claimed as extras follows.
[122] Extra #1: $885.00 for ground floor plates. This is a category 1 and 2 item. Mr. Kwan, the engineer, testified that a decision was made to use bent steel plates instead of forms to contain the concrete topping. He confirmed that this was a change in design and was not in the structural drawings. Mr. Szeto, the architect, also testified that this item was extra to the original scope of work but asserted that a claim for the item as an extra should have been advanced earlier. I accept his admission that the item is a change from the original structural steel design. The amount claimed is 0.17 percent of the price of the Main Contract. Applying the test for extras I find that the ground floor plates are a change but not a fundamental change from the original scope of work in the Main Contract. That finding is supported by D&M’s failure to obtain agreement as to price or to invoice for the item until after leaving the Project. The claim is disallowed.
[123] Extra #2: $7,250.00 for the 1500 mm extension to 8 trusses. This is a category 1 item. D&M claims that it is entitled to be paid for the additional steel for the increased length of 8 trusses. It is not in dispute that the length of the trusses increased in the final architectural drawings and that D&M’s costing for the Main Contract was based on the structural drawings available at the time of its quote, which did not show the 1500 mm extension. I am satisfied that the first part of the test for extras is met, namely that this is a fundamental change to the scope of work. However there is no evidence that D&M and 51C agreed to a price for the increased length of trusses or that D&M obtained 51C’s consent to charge for it as an extra. The only evidence of quantification is D&M’s extras spreadsheet[^26] wherein it based its pricing on what appears to be almost double the price for labour used in costing the original scope of work. One example is the unit price for TR1 trusses: according to the spreadsheet used for the original quote D&M based its calculation on a price of 51 cents per pound whereas D&M calculated the cost of extras using $1.00 per pound.
[124] I find that D&M’s evidence as to price is self-serving, inflated and uncorroborated as to its reasonableness. There is no independent, impartial evidence of quantification. The onus is on the party claiming the extra to prove entitlement and quantum. D&M has not proven an express or implied agreement as to the price for the extra. Nor has D&M proven the reasonable value of the extras on a quantum meruit basis. I find that the second and third parts of the three part test have not been met. The claim is disallowed.
[125] Extra #3: $2,804.00 for mezzanine floor and low roof: D&M claims the cost of additional steel pieces and cut-outs for openings. This is a category 2 item. The amount claimed is 0.54 percent of the price of the Main Contract. Ms Sun explained that the extra arose because the structural drawings did not show openings in the floor and the beam. There is no evidence of a request for approval or agreement on price. The only evidence of quantification is Ms Sun’s extras spreadsheet setting out what she would charge for the item based on unit prices. The unit prices used in the calculation are not corroborated from any independent source. Even if the first part of the test for extras is met, the second and third parts are not met. I find that there was no agreement by the parties to pay for this item as an extra, that by invoicing after-the-fact D&M denied 51C any opportunity to negotiate the price, and that the party claiming payment has not met the onus of proving that the price charged is reasonable on a quantum meruit basis. The extra is disallowed.
[126] Extra #4: $2,162.00 for Elevation F: D&M claims the cost of additional steel pieces for bracing. This is a category 2 item. The amount claimed is 0.42 percent of the price of the Main Contract. It is not a fundamental change to the scope of work of the Main Contract. There is no evidence of a request for approval or agreement on price. The only evidence of quantification is Ms Sun’s extras spreadsheet. The test for extras is not met. I find that there was no agreement by the parties to pay for this item as an extra, that by invoicing after-the-fact D&M denied 51C any opportunity to negotiate the price, and that the party claiming payment has not met the onus of proving that the price charged is reasonable on a quantum meruit basis. The extra is disallowed.
[127] Extra #5: $7,167.00 for Roof changes. D&M claims the cost of changes to the length of the roof perimeter, requiring an increase in the length of beams. The amount claimed is 1.4 percent of the price of the Main Contract. This is a category 2 item. Ms Sun testified that the roof perimeter increased by 823 millimeters. I find that this is not a fundamental change to the scope of work in the contract. There is no evidence of an agreement between D&M and 51C for D&M to carry out this item as an extra to the contract. Nor is the evidence of value shown in the extras spreadsheet corroborated by independent evidence of value. The claim is disallowed.
[128] Extra #6: $208.00 for an extension in the length of two columns. D&M claims the cost of the 575 millimeter increase in the length of two columns. This is a category 2 item. Ms Sun testified that the length of the columns increased from that depicted in the structural drawings. The quantum is minimal, being 0.04 percent of the price of the Main Contract. I find that the first part of the three part test has not been met: it is not a fundamental change to the Main Contract. The claim is disallowed.
[129] Extra #7: $11,000.00.00 for up-curves: The structural drawings D&M relied on to prepare its quote did not provide for the eight roof corners to be rolled and up-turned to match the architectural drawings. D&M’s position is that Mr. Manini relied on the structural drawings to prepare his job costing. Mr. Qu’s position on behalf of 51C is that the architectural drawings showing the up-turns had been posted prior to D&M submitting its quote. Mr. Qu admitted that the structural drawings did not include this feature. It was reasonable for D&M to conclude that the design of the up-turns was to be effected in a manner other than structural, one possibility being decorative. I accept that the structural drawings upon which D&M’s price quote for structural steel was based did not include the cost of the up-turns.
[130] I find that this is a category 1 and 2 item. It is a fundamental change to the scope of work in the Main Contract. The structural drawings upon which the price of the First Contract was based did not have up-turned corners on the two roofs as part of the structural design. The first part of the three part test is met.
[131] Knowing that the up-turned corners would cost extra, Mr. Manini ought to have taken steps to have the additional cost treated as an extra to the fixed price contract. Mr. Manini has been in business for 30 years. He ought to know that when he enters into a fixed price contract for a job the price cannot be increased without agreement. When additional work is called for then a supplementary agreement is required. There is no evidence of probative value in this case that the parties entered into a subsequent agreement for this item as an extra to the fixed price of the Main Contract. Even after discovering the change D&M did not raise the issue of claiming the increased cost as an extra when the three party agreement was negotiated and signed in April 2011, corroborating the absence of any agreement to pay extra for this item. The second part of the three part test for extras has not been met.
[132] Ms Sun’s evidence is that the quantification of $11,000.00 shown in D&M’s extras spreadsheet costs the additional materials and fabrication at $5,000.00 plus installation at $4,998.00 plus profit, for a total of $10,998.00, rounded up to the $11,000.00 invoiced. There is no independent evidence of value to corroborate D&M’s own pricing for this item. There are no comparative quotes from other suppliers and no evidence of a quantity surveyor or other such expert to verify whether D&M’s quantification is reasonable. The third part of the test for extras has not been met. The claim is disallowed.
[133] Extra #8: $2,750.00 charged by detailer Ron Green. D&M claims the increase cost of detailing invoiced by Mr. Green to D&M for additional detailing required to resolve the conflicts between the structural and the architectural drawings. The amount claimed is 0.53 percent of the price of the Main Contract. This is a category 2 and 3 item. I am satisfied that D&M incurred this additional detailing cost because of the discrepancy in the structural drawings and the architectural drawings. The Temple hired the Project consultant, architect Mr. Szeto, and is responsible for the discrepancies. Mr. Green invoiced for the additional services arising from the discrepancies. He testified that he has not been paid for the extras invoiced nor has he sued for payment. More than two years have passed and the limitation period has expired. Had D&M paid the invoice it could have recovered this amount as an extra. However, not having paid it and no longer liable in law to pay it (although perhaps morally bound to pay for services supplied by Mr. Green), I find that D&M is not entitled to recover this extra. It is disallowed.
[134] Extra #9: $660.00 for extra delivery charges. This is a category 2 item. The amount claimed is 0.13 percent of the price of the Main Contract. I find that this is not a fundamental change to the scope of work in the Main Contract. The first branch of the three part test has not been met. Nor are the second and third parts of the test met. I find that there was no agreement by the parties to pay for extra delivery charges as an extra, that by invoicing after-the-fact D&M denied 51C any opportunity to negotiate the price, and that D&M as the party claiming payment has not met the onus of proving that the price charged is reasonable on a quantum meruit basis. The extra is disallowed.
[135] Extra #10: $25,763.00 for an increase in the price of steel. This is a category 3 item. D&M claims that it is entitled to be paid the cost increase for the price of steel, relying on the following language of the Main Contract under the heading “Notes”:
“Price valid for 30 days only. Material price subject to change based on market value”
[136] The document is a quote. It did not become a contract until it was signed by 51C. The clause in question is ambiguous, capable of two meanings. It could refer to the price quoted as valid for 30 days and if not accepted within 30 days it would be subject to change. It could also refer to the price, even if accepted by 51C, would be subject to change if the price of materials increased at any time during construction. The principle of statutory interpretation known as contra preferentem applies: an ambiguity in a contract must be interpreted against the interest of the party who drafted the contract. D&M drafted the contract. I find that the subject clause applies to the quoted price as being valid for 30 days and if accepted within 30 days, as it was in this case, it became the fixed price for the contractual scope of work.
[137] D&M calculated the quantum of this this extra based on an email dated August 17, 2011[^27] from Mario Nava, a Sales Representative of Salit Steel, addressed to D&M, together with D&M’s calculations of the cost increase based on unit prices and measurements on as shown on D&M’s extras spreadsheet. Had I found that D&M was contractually entitled to a materials price increase I would have found that it failed to provide sufficient evidence of a price increase. Rather than adducing independent evidence of industry prices, D&M tendered only a copy of an email from its own steel supplier, Salit Steel, without calling a witness from Salit Steel to testify. Nor did D&M call an independent industry witness.
[138] The email from Salit Steel is not of sufficient probative value to satisfy me that D&M is entitled to charge for an increase in the price of steel. It is insufficient proof of the price of steel. In the absence of the author of the email attending at court to be cross-examined it is hearsay. It is not evidence of the truth of the contents of the email. Furthermore, Salit Steel is a company that supplies steel to D&M and as such it is not an independent witness. Rather, it is a biased witness with a business connection to the party relying on its opinion evidence as to price. To prove an increase in the price of steel D&M ought to have tendered independent objective evidence in the form of price indices used in the industry, introduced into evidence by an independent witness.
[139] Had I found that D&M was entitled to charge a materials price increase as an extra I would have found that it failed to meet the onus of proving the quantum of the extra. There is insufficient evidence before the court upon which to find that the price of steel increased as claimed or at all. D&M’s claim for $25,763.00 as an extra for an increase in the price of steel is disallowed.
[140] Extra #11: $1,000 for “Rolling the corners deck on site”. D&M claims the additional cost of the on-site installer to roll the roof corners. It is included on the second page of D&M’s invoice dated August 12, 2011. This is a category 1 item. Mr. Philippe testified as to the additional on-site installation work required to turn up the roof corners. I am satisfied that it is part of the fundamental change to the scope of work in the Main Contract and meets the first part of the three part test. There was no agreement as to price, but Mr. Philippe testified as to the price charged at trial. I am satisfied that D&M has met the onus of proving the value for this item. The claim for $1,000.00 plus HST is allowed as a contract claim against 51C and out of holdback required to be retained by the Temple.
[141] Extra #12: $1,113.53 for trailer rental. This is a category 3 item. D&M claims the cost of storing steel on a trailer for a month until site conditions improved sufficiently to drop the load on site. For reasons already expressed I found that site conditions had not changed from April 2011 when the steel arrived to May 2011 when it was dropped on site. The first and second parts of the three part test have not been met. The extra was not incurred due to a fundamental change in the work. Nor was there an express or implied agreement for D&M to incur the expense and work. The claim is disallowed.
e. 51C’s counterclaim for deficiencies and completion costs
[142] 51C claims that it is entitled to recover amounts claimed against D&M by way of counterclaim. 51C must prove that it experienced the losses claimed and that the amounts claimed have been incurred and are reasonable, taking into account 51C’s duty to mitigate damages.
[143] For all of the items claimed by 51C, the evidence relied on by Mr. Qu at trial is that he asked an unidentified person who works in the area of steel structures for quotes and that person gave him the quotes that Mr. Qu testified to at trial. 51C did not identify the person or call that person as a witness at trial. 51C did not lead any other evidence to prove its claims against D&M. Nor are there any written quotes. There is no evidence of value of any expert or other witness as to how the amounts claimed are calculated and the assumptions upon which the amounts are based. Nor did 51C provide any evidence that it experienced losses in these amounts arising from the incomplete items and the piece of steel that fell to the ground.
[144] The first item claimed is $39,130.00 for the lower deck. Mr. Qu admitted that the price that D&M quoted for all four decks was $44,000.00 plus HST, and that out of that amount 51C contracted directly with the steel supplier, Canam, and paid Canam $30,900.00 plus HST for a total of $34,917.00. The deck extra was reduced to $13,100.00 plus HST for D&M to install four decks. Installation of the lower deck, being only one of the four decks, would be only a fraction of that amount. 51C admitted that it did not pay this or any other amount to D&M or anyone else to install the lower deck. There is no other evidence of value to install the lower deck. I find that 51C has not met the onus of proving that it has experienced the loss claimed.
[145] The second item of 51C’s counterclaim is $44,720.00 to complete the unfinished corners of the lower roof. Mr. Qu admitted that 51C did not pay this amount to anyone and he was unable to provide any evidence of this part of his counterclaim. It is disallowed as unproven.
[146] On September 8, 2011[^28], approximately one month after D&M had left the job site, a piece of steel fell from the unfinished lower roof canopy to the ground. 51C claims as the third item of its counterclaim against D&M $11,180.00 for the piece of steel that fell. Mr. Qu admitted that 51C did not pay this amount to anyone and provided no evidence of any loss attributable to the falling steel. There is no evidence that 51C experienced the loss claimed or is liable to pay this or any other amount to the Temple or anyone for the piece of falling steel. I find that 51C has not met the onus of proving its counterclaim.
[147] I find that 51C has failed to prove its defence of set-off and its counterclaim for the three items claimed. Those claims are dismissed.
f. Jing Yin Temple’s counterclaim and crossclaim
[148] The Temple produced a Scott Schedule listing three items claimed as deficiencies and completion costs for which it counterclaims against D&M and crossclaims against 51C. The three items total $161,027.80. They are:
$152,550.00 to complete the structural steel and steel deck.
$7,912.80 to store tiles to be used in the interior finishing of the Temple.
$565.00 to inspect the steel canopy after a piece of steel fell to the ground.
[149] To succeed in its claims the Temple must prove that D&M or 51C or both are liable for these costs, that the Temple reasonably mitigated its damages and that the quantum claimed is reasonable.
Item #1: Completion costs of $152,550.00
[150] The Temple claims $152,550.00 from both 51C and D&M as the cost to complete the structural steel component of the general contract. The cost to complete a job after the original contract leaves is usually the incremental difference between what the owner would have had to pay to complete the structural steel work had that contractor remained on the job, and what the owner actually paid another contractor to complete the same scope of work. No evidence of that incremental difference was tendered at trial.
[151] The Temple quantifies its claim for completion and rectification costs by relying on its contract with CanTrust Construction Ltd. (“CanTrust”), the contractor the Temple hired to complete the Project after terminating 51C as general contractor. In particular the Temple relies on the portion of the contract price that CanTrust allocated to “Outstanding steel and metal deck work” in its quote to the Temple dated November 8, 2011[^29].
[152] The scope of D&M’s work under the Main Contract and the deck extra that had not yet been completed by the time D&M and then 51C left the job was described at trial by several witnesses as the lower roof deck and the up-turned corners of the lower roof. According to Mr. Manini, when D&M left the site on August 8, 2011 only $7,000.00 worth of work had not yet been completed. Mr. Manini described the items not yet competed as the deck and the roof canopy. He quantified the value of the incomplete deck installation at $2,000.00 based on his own calculation of square footage, and the remaining canopy at approximately $5,000.00 based on his installer’s advice to him. Mr. Philippe, the installer, testified at trial that the value of his installation work remaining for the canopy was $5,000.00 for three days of work by four or five workers.
[153] D&M did not call any independent evidence of the value of the work required by the Main Contract and the deck extra left to be completed as of August 8, 2011. Prior to trial D&M prepared an account summary dated January 18, 2012[^30] wherein it quantifies the incomplete work with the following statement:
“Please note balance of $13,000.00 of contract has not been billed due to balance of work that was left to complete the project (approx.. $8,000.00 completed)”
[154] Also prior to trial, on or about January 16, 2014, D&M prepared its response to the Temple’s Scott Schedule[^31], admitting to $13,000.00 as the value of structural steel left to be completed at the time D&M left the job. I accept as D&M’s admission of the value of work left to be completed when it abandoned the Project as $13,000.00, accepting the later document as reflecting D&M’s position at trial.
[155] The Temple’s position, adopted by 51C at trial, is that D&M left the job because the value of the work not yet completed exceeded the amount remaining to be paid pursuant to the fixed price contract and the price agreed to be paid to install the decks.
[156] After D&M left the job in August 2011 51C continued on the project for several months. Then by letter dated December 1, 2011 the Temple terminated 51C’s contract. The Temple replaced 51C as general contractor with CanTrust, a company incorporated by Temple member Henry Yang specifically to complete the Temple Project.
[157] Mr. Yang testified that he was asked by the Temple to provide a quote to complete the work to the exterior and a separate quote to complete the interior of the Temple. On or about November 28, 2011 he submitted a quote[^32] for $796,000.00 plus HST to complete the exterior work. Mr. Yang allocated $135,000.00 plus HST to “outstanding steel and metal deck work”. No breakdown of that amount was produced before trial, despite D&M’s request and the Temple’s refusal to provide a breakdown. A breakdown would have disclosed whether any of the amount allocated to steel in the CanTrust quote was for work that went beyond rectifying D&M’s contract work and completing the items in D&M’s Main Contract and deck extra. Without that breakdown the scope of work included in the CanTrust quote remains unknown.
[158] A procedural issue arose at trial when the Temple sought to introduce at trial a breakdown of the $135,000.00 quote, despite its refusal to produce the breakdown and supporting documents before trial. I heard detailed argument and delivered detailed reasons for my refusal to allow the new evidence to be tendered at trial. My reasons for this procedural ruling are attached as Appendix “A” to this judgment.
[159] In evidence at trial Mr. Yang testified that he quantified the allocation for the steel component of the CanTrust quote based on a quote he had received from his potential steel supplier PrideMax. The Temple had refused to produce the PrideMax quote prior to trial despite D&M’s request for full disclosure of all documents pertaining to the steel component of the CanTrust quote. As such the PrideMax quote was inadmissible at trial.
[160] The Temple lead no other evidence of the value of the steel component of CanTrust’s contract and the services and materials it supplied. Notwithstanding that Mr. Yang attended at trial as a witness and testified, CanTrust provided no time sheets, logs, invoices or other documentary evidence to quantify the steel component of its contract. The Temple did not lead evidence of a quantity surveyor, or of other steel suppliers, or of any independent witness as to the value of the incomplete portion of the D&M contract and the cost to complete the work.
[161] Mr. Yang provided a verbal description of the steel work that was required to complete the steel component of the Project, including attaching perimeter beams to the main structure, attaching channel beams to the structure where these items had only been tack welded by D&M at the time it left the job, completing the roof corners and fixing misaligned pieces of steel. Mr. Yang testified that it took five to six weeks of work to complete the steel component of his contract. He did not produce any evidence itemizing the steel carried out under his contract or otherwise describing the scope of work with any precision or quantification.
[162] Ben Law, the Temple’s representative, also testified about the steel work carried out by CanTrust. It became clear from his evidence that the Temple lumped into the category of “steel” all items fabricated of steel including items that were clearly not within the scope of D&M’s Main Contract or deck extra.
[163] One example is steel staircases. John Kwan, the project engineer retained by the Temple, testified that stairs are part of the structure but not considered “main structural steel” and not included in the structural steel contract. The structural steel contract only provides for the structure to support a steel staircase. The Main Contract between D&M and 51C did not include the steel for the staircases or installation. Mr. Law admitted that a different contractor was hired to build the staircases, but it is unclear whether CanTrust’s completion contract included the cost of steel staircases in the $135,000.00 price allocated to the steel component of its contract with the Temple. If so, then the amount claimed by the Temple in its counterclaim and crossclaim includes a component that was not within D&M’s scope of work, but may have been within 51C’s scope of work.
[164] The Temple has the onus of proving liability and quantum for the items it claims against D&M by way of counterclaim and against 51C by way of crossclaim. Without a breakdown of the $135,000.00 allocated to steel by CanTrust, and in the absence of any other evidence of the components of the steel work actually performed by CanTrust and the value or costs associated with each component, the Temple has not met its burden of proving the costs claimed to rectify and complete items within D&M’s scope of work, beyond the $13,000.00 plus HST admitted by D&M.
[165] Not having paid D&M the $13,000.00 to complete the work and in the absence of proving costs in excess of $13,000.00 to rectify and complete the scope of work in the Main Contract and the deck extra, the counterclaim and crossclaim by the Temple for completion costs is disallowed.
Item #2: Storage costs of $7,912.80
[166] My findings allowing this claim as delay damages of $7,912.80 are set out earlier in these reasons under the subheading “Delay”.
Item #3: Inspection costs of $565.00
[167] Regarding item #3, the Temple claims $565.00 including HST[^33] as the cost to inspect the steel canopy after a piece of steel fell to the ground on September 8, 2011. The evidence relied on by the Temple to prove the quantum of the claim is an invoice from BPCO Inspection Services Inc. dated October 31, 2011 for a field review of structural steel conducted by B. Singh, Certified Welding Inspector, on October 6, and 24, 2011. Mr. Law of the Temple gave evidence of payment of the invoice. The other parties did not object to the authenticity or admissibility of the invoice.
[168] Mr. Singh’s report issued October 12, 2011 refers to his October 6, 2011 field review and includes the following statements regarding his review of the exterior canopy:
“It is our opinion that these members are not properly secured to withstand strong winds… “In the N/W corner, partial collapse of the structure was evident”
[169] Mr. Singh re-inspected on November 1, 2011 and reported that he was unable to inspect the exterior canopy due to its unsafe condition. Nevertheless, it was reasonable for the inspector to return following the earlier inspection.
[170] D&M argues that it is not liable for the inspection costs following the September 8, 2011 event because it has no responsibility for the falling steel. Mr. Manini’s position is that when D&M left the job the lower canopy steel had been tack welded, so that for a piece of steel to fall from the canopy to the ground it must have been hit by a piece of equipment or someone must have been storing a heavy load on the unfinished canopy.
[171] For reasons already given, D&M was in breach of its contract and ought not to have abandoned the job leaving the canopy unfinished. When D&M left the job without finishing the structural steel of the roof canopy, leaving it in a tack welded state, it assumed the risk inherent in its unfinished condition. Fortunately no one was injured when the steel fell to the ground. A serious injury could have resulted.
[172] D&M has not proven on a balance of probabilities that the steel fell as a result of some external cause such as impact from a piece of machinery or storage of heavy materials on the unfinished canopy structure. Those theories are pure conjecture. It is just as likely that the piece of steel fell because the roof canopy was not properly secured.
[173] The Temple acted responsibly in having the roof canopy inspected. I find that the Temple is entitled to its counterclaim of $565.00 for the two inspections.
g. Holdback
[174] For reasons already expressed, the relationship as between D&M and the Temple was one of owner and subcontractor, with the intervening general contractor 51C. As such the Temple has a holdback obligation under the Act. The Temple admitted that it failed to retain holdback and paid out to 51C the amounts invoiced without retaining a holdback. The law is clear. An owner with a holdback obligation to a subcontractor is obligated to the subcontractor up to the maximum of the amount that the owner was required to hold back.
[175] The Temple did not retain any holdback. It paid 51C all of the amounts invoiced as progress invoices. To the extent that the Temple is liable for holdback amounts already released, it remains liable to the subcontractor for amounts proven that are within the quantum of the holdback that the Temple ought to have retained.
[176] Mr. Qu admits that the Temple paid 51C $2,706,000.00 as shown in the statement filed as exhibit 2, tab 132[^34]. The ten percent holdback of $270,600.00 is more than the total amount of D&M’s claim.
h. Accounting
[177] Based on the findings made throughout these reasons,
a) 51C is liable to D&M in contract and the Temple is liable to D&M out of holdback for $1,130.00[^35] for the extra to roll roof corners.
b) D&M as defendant by counterclaim and 51C as defendant by crossclaim are jointly and severally liable to pay to the Temple delay damages of $7,912.80[^36] including HST for storage.
c) D&M as defendant by counterclaim and 51C as defendant by crossclaim are jointly and severally liable to the Temple for inspection costs of $565.00[^37].
[178] The balance of D&M’s claim is dismissed.
[179] 51C’s counterclaim is dismissed.
[180] The balance of the Temple’s counterclaim and crossclaim are dismissed.
IV. CONCLUSION
[181] THIS COURT finds that D&M and 51C jointly and severally pay to the Temple the sum $7,347.80, being the balance payable after setting off the sum of $1,130.00 for the allowed extra.
[182] THIS COURT FURTHER finds that D&M and 51C are jointly and severally liable to the Temple for prejudgment interest at the rate of 1.3 per cent from November 21, 2011[^38] to the date of the Report and post-judgment interest thereafter at the rate of 2 percent or the rate otherwise in effect on the date the report is confirmed.
[183] THIS COURT FURTHER ORDERS that if 51C pays the sum of $7,347.80 plus applicable interest to the Temple then D&M shall indemnify 51C by paying to 51C the sum of $7,347.80 plus the interest paid.
[184] THIS COURT FURTHER ORDERS that the lien claim registered by D&M as instrument AT2815803 on September 16, 2011 be discharged and that the certificate of action registered on October 17, 2011 as instrument AT2842304 be vacated.
V. COSTS and REPORT
[185] The parties should attempt to resolve the issue of costs themselves. If the parties cannot resolve the issue of costs then the issue of costs will be addressed and an order made at the appointment to settle the reference Report.
[186] The parties should prepare and file a draft report in the form prescribed by the Act (modified as necessary) and contact the Assistant Trial Coordinator for Master Albert to schedule an attendance to settle costs and the report.
Master C. Albert .
Released: March 9, 2016
CV-11-437166 D & M Steel Ltd. v. 51 Construction Ltd. and Jing Yin Temple
Appendix “A”
Procedural Ruling re admissibility of evidence at trial: June 17, 2015
The defendant Jing Yin Temple (the “Temple”) brought a motion mid-trial to introduce new evidence at trial. The evidence was not disclosed before trial even though D&M Steel Ltd (“D&M”) asked the Temple’s representative on discovery to provide it. The evidence in issue is the breakdown of the rectification and completion work claimed by the Temple in its counterclaim against D&M Steel Ltd (“D&M”). The Temple claims that it contracted with CanTrust Construction Ltd. (“CanTrust”) on November 28, 2011 to complete and rectify D&M’s work after D&M left the job. The Temple’s counterclaim includes a claim for $152,550.00 made up of $135,000 + HST for the structural steel component of CanTrust’s work.
At Questions 320 and 321 of the examination for discovery of Benjamin Law, a director of the Temple and its representative for purposes of the examination for discovery conducted on April 14, 2014 in this proceeding, D&M asked Mr. Law whether there were any other quotes for services and materials to complete and rectify the structural steel work in the D&M contract. D&M also asked Mr. Law to provide a breakdown of the items of work done and the cost of each item, including the cost of materials. Mr. Law took the questions under advisement. The questions transcribed as taken under advisement are:
“To provide a list of all the work that was done by CanTrust (rectification and completion contractor) for the $135,000 amount and to provide a breakdown of prices for each item if possible”; and
“To ask CanTrust if there are materials included in the price, what the price (of materials) was and how he arrived at the price.” …
The questions asked at discovery are proper questions and directly relevant to the Temple’s counterclaim. There was no basis for the Temple to refuse to answer the questions. Nevertheless, the Temple never answered the questions that it took under advisement and pursuant to rule 37.01(1)(b) and the passage of time those undertakings became refusals.
Now, midway through trial, D&M having called all of its witnesses and closed its case in chief, and 51 Construction (“51C”) having called its one and only witness, and the Temple having called three of its five witnesses, leaving only two witnesses of the Temple remaining to be called, plus Mr. Yang who is presently on the stand, the Temple seeks to adduce the evidence that D&M asked for on discovery but the Temple refused to provide before trial. That evidence includes the breakdown of the Temple’s $152,550.00 counterclaim for the steel component of the rectification and completion contractor’s work, claimed by the Temple against D&M and cross-claimed against co-defendant 51C. The Temple seeks to adduce this evidence by way of questions to be asked of Mr. Yang, the principal of the rectification and completion contractor CanTrust, regarding a quote that the Temple claims it obtained from another contractor, PrideMax. The PrideMax quote purportedly includes a breakdown of the work and is the very breakdown that D&M had requested at discovery but the Temple refused to produce.
D&M objects to the Temple producing this evidence at this stage of the proceedings and relies on rule 31.07(2) which provides as follows:
31.07(2). If a party, or a person examined for discovery on behalf of or in place of a party, fails to answer a question as described in subrule (1), the party may not introduce at trial the information that was not provided, except with leave of the trial judge.
The Temple asks for leave to introduce at trial evidence of the breakdown of the completion and rectification work carried out by CanTrust. The proposed evidence is the quote on letterhead of PrideMax, a contractor not hired by the Temple. The quote lists the components of work that PrideMax included in its quote. The request for leave presumably also includes leave to question Mr. Yang of CanTrust, the contractor retained to complete and rectify D&M’s structural steel work, about the breakdown set out in the PrideMax quote.
In seeking leave to introduce this new evidence the Temple relies on rule 53.08, which provides that leave to admit evidence shall be granted by the trial judge unless to do so “will cause prejudice to the opposite party or will cause undue delay in the conduct of the trial”.
In opposing the request for leave to introduce this previously withheld evidence D&M relies on the decision of the Court of Appeal in Snelgrove v Steinberg[^39]. In that case a new trial had been ordered in circumstances where evidence was not produced before trial. The Court of Appeal noted at paragraph 53 that where a question asked on discovery is proper and is not answered, the opposite party is not obliged to move to compel an answer in order to rely on rule 31.07. I agree. The Temple distinguishes the case on the basis that the party seeking to adduce the new evidence had not asked for leave at trial to introduce it. While the case is distinguishable on that basis, it nevertheless applies to the issue of whether or not D&M was required to seek leave to bring a motion to compel an answer to the questions refused at trial as a precondition to opposing its admission at trial. The Court of Appeal clearly concluded that such a motion need not be brought. The onus is on the party asked to produce evidence at discovery to disclose it within 60 days, and in any event before trial.
Unlike in Snelgrove v Steinberg the Temple in the case before me asks the court for leave to introduce evidence that was requested by the opposite party but not produced before trial.
In Doncrest v Kohany[^40] Justice Caswell excluded invoices not produced before trial where undertakings had been given and the evidence had not been produced. The trial had been on the trial list twice and both times it was not reached. A fixed date for trial was ordered to accommodate an ill party. Justice Caswell found that the defendant had not complied with the rules in form or in spirit. She further found that it would be manifestly unfair to the plaintiff to allow the defendant to produce the invoices at the very last moment, during the trial itself. She opined that to do so would cause prejudice to the plaintiff and an adjournment in the circumstances would not be appropriate.
Clearly the need to conduct and complete the trial without further delay was a factor in Madam Justice Caswell’s decision to refuse leave. It is also a factor relevant to construction lien reference proceedings.
The test for leave in rule 53.08 requires the court to consider prejudice and undue delay. I must also consider the mandate expressed in the Construction Lien Act[^41], section 67, to conduct construction lien proceedings in as summary a manner as is appropriate to meet the needs of the case. Where the provisions of the rules do not align with the Act then the Act prevails.
Would admitting the proposed new evidence cause prejudice to the opposite party?
The prejudice to D&M that arises from the Temple producing a critical breakdown of its counterclaim for the first time near the end of the trial, after D&M has closed its case and several witnesses for the defendants have testified, is obvious. D&M prepared its case and called its witnesses on the basis of the facts that it understood existed before trial. A party’s assessment of its case before trial generally includes consideration of whether to proceed with or settle any or all of the issues. Had the Temple produced its breakdown of the $152,550.00 claimed in its counterclaim and cross-claim for rectification and completion work before trial, D&M’s view of its case may have been different.
In Burke v Gauthier[^42], cited in Marchand v Public General Hospital[^43] the issue concerned evidence learned after discoveries but before trial and not disclosed before trial as required by rule 31.09. The principle is the same as evidence sought at discovery and not produced before trial. Justice Campbell explained the purpose of disclosure of evidence before trial at page 285 of the Burke v Gauthier decision:
“The purpose of the provision is obvious. The parties prepare for trial on the basis of the evidence given at the discoveries. They assume that the answers given on discovery continue to be correct and complete, unless they are given information to the contrary. They figure out what they have to meet, decide how to prepare their own case, what investigations if any to undertake, what witnesses to call, what instructions to seek, and what kind of settlement might be reasonable, on the basis of the evidence given at the discoveries. If that evidence changes then there is a different case to meet. If the changes are not brought to the attention of the adverse party before trial he has no time or opportunity to investigate and prepare and consider the need for fresh medical examination and must meet a case different from the one that his opponent has led him to expect.”
Justice Campbell’s explanation is equally relevant to the present case. I find that the new evidence that the Temple proposes to introduce near the end of the trial would change the nature of the case that D&M and 51C are required to meet. On that basis it would not be fair to D&M, a party opposite in interest to the Temple, and D&M would indeed be prejudiced by the introduction at this late stage of the breakdown of work claimed as rectification and completion work.
51C did not take a position on the motion. That company is represented by its president, Mr. Leo Qu, a lay person participating in this trial with the assistance of a Mandarin translator. I do not interpret Mr. Qu’s silence on this motion as acquiescence. It was not until the end of trial that Mr. Qu understood that the Temple had cross-claimed against 51C for $152,550.00 in rectification and completion costs. Notwithstanding that 51C took no position on the Temple’s motion for leave to adduce evidence at trial I find that 51C is a party opposite in interest to the Temple by reason of the Temple’s crossclaim. On that basis my findings of prejudice extend to 51C as well.
I further find that the prejudice to D&M and 51C cannot be overcome by an adjournment. This construction lien action has been case managed by me as the reference master since it was referred to me by Justice Low on September 24, 2013. The first reference hearing was held on Oct 21, 2013 and I have presided over five hearings for directions and issued orders and directions following each attendance, including orders requiring production of evidence before trial. The Temple’s claim for completion and rectification costs was disclosed during this process and the Temple was required to produce all of the evidence it intended to rely on at trial to prove its counterclaim for rectification and completion costs. The Temple failed to produce the evidence that it seeks to rely on as the breakdown of its counterclaim, notwithstanding that the breakdown existed prior to the judgment of reference and the first hearing for directions. It clearly existed prior to examinations for discovery. Allowing the Temple to produce the evidence now, at trial, after D&M has closed its case in chief, is prejudicial to D&M. To adjourn the trial to allow further discovery on this new evidence would not overcome the prejudice.
Would admitting the proposed new evidence cause undue delay?
Rule 53.08 requires the trial judge to admit new evidence unless to do so will cause prejudice to the opposite party or will cause undue delay in the conduct of the trial. I have already found that admitting the proposed new evidence would cause prejudice to the opposite parties but if I am wrong in that regard I would also find that admitting the proposed new evidence would cause undue delay. The Act requires construction lien proceedings to be brought to a final determination in a summary way and without delay. Trial dates are fixed and peremptory. This case is not the only reference over which I am presiding that has a fixed trial date. The construction lien area of the Superior Court of Justice has limited resources. My trial calendar is booked through to July 2016. The earliest this trial could be rescheduled to continue, if adjourned, is over a year from now. The other construction lien master, who has had no participation in this reference, does not know its history and does not have the benefit of having case managed it, sits only part time in construction lien matters. He does not have earlier availability to start this trial over and complete it any earlier than if it were adjourned to my calendar.
- Further, parties before the court in civil matters have a responsibility to the administration of justice and to other litigants waiting in line for their civil cases to be heard. Given the limited court resources available, litigants have a responsibility to use the judicial and court resources allotted to them efficiently and effectively and not to waste these valuable resources. An adjournment at this stage would be a waste of judicial and court resources.
Additional reasons to refuse leave to admit the PrideMax quote
- As part of the pretrial process the practice in construction lien references is to conduct hearings for directions and make procedural orders to ensure that all relevant evidence is exchanged before trial. One of the directions given in this case, as in all construction lien references over which I preside, was for the parties to deliver to each other witness statements of the evidence that would be elicited from each witness to be called at trial. The directions issued on July 22, 2014 ordered as follows at paragraph 2:
Witness statements:
(a) All witnesses testifying at trial must sign a witness statement by the ordered deadlines. Witness statements provide a summary of the evidence proposed to be adduced from each witness at trial, to avoid surprise at trial. Only evidence fairly summarized in a witness statement signed by the witness may be called at trial.
Mr. Yang of CanTrust, the contractor brought in to complete the structural steel work and to rectify any deficiencies in D&M’s work, is the witness through whom the Temple seeks to adduce this new evidence. Mr. Yang’s witness statement makes no mention of the PrideMax quote that the Temple seeks to introduce through him. The purpose of the witness statement is to outline the evidence the witness is expected to give at trial. A further reason to refuse leave to admit the proposed new evidence at this stage of the trial is that it was not included in Mr. Yang’s witness statement. It would be prejudicial to the parties opposite in interest because it was not included in Mr. Yang’s witness statement.
I have also considered the evidence that the Temple proposes to adduce and find that it would be of marginal probative value. It is a six page document that purports to be a quote from an entity that is named at the top “PrideMax Construction Group Inc.”. It is in the form of an agreement but it is undated and unsigned. There is no name of any individual attached to the document and it is not proposed to be introduced through its author. Rather it is proposed to be introduced through the contractor that actually carried out the work. That contractor is not PrideMax. I find that the probative value of the document, if the court were to allow it to be introduced, would be marginal at best. The probative value of the evidence sought to be adduced does not outweigh the prejudice and delay that allowing it to be adduced at this stage would cause.
For all of these reasons the request by the Jing Yin Temple for leave to introduce the quote of PrideMax at trial, not having produced it in response questions asked on discovery that were proper questions asking the Temple to provide a breakdown of the work done to rectify and complete the contract work of D&M Construction, is denied.
CITATION: D & M Steel Ltd. v. 51 Construction Ltd. and Jing Yin Temple, 2016 ONSC 1335
COURT FILE NO.: CV-11-437166
DATE: March 9, 2016
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
D & M Steel Ltd.
Plaintiff (Defendant by counterclaim)
- and -
51 Construction Ltd. and Jing Yin Temple
Defendants (Plaintiffs by Counterclaim/Crossclaim)
REASONS FOR JUDGMENT
Master C. Albert
Released: March 9, 2016
[^1]: These reasons replace reasons released to the parties on February 25, 2016, correcting paragraphs 165, 177, 181 and 183 (corrections unopposed by the parties) [^2]: Leave for president of company to represent the company was granted by Master Albert [^3]: Reduced from the amount of $161,570.26 claimed in D&M’s registered claim for lien [^4]: Exhibit 2, Tab 127, page 244 [^5]: Exhibit 2, Tab 132 [^6]: Dwgs refers to “drawings” [^7]: Exhibit 5, tab 9 [^8]: Exhibit 6, page 339 [^9]: See: Exhibit 1, tab 96: emaiiil exchange between Lia Gaston of D&M and Mr. Law of the Temple [^10]: The August 12, 2011 list totals $60,649.00 + HST; the invoice includes an additional item: “Additional contract for metal deck as per project code 1075-R2” [^11]: 200-11 ONSC 7135 [^12]: 2011 ONSC 1938 [^13]: Exhibit 2, tab 139 [^14]: Exhibit 2, tab 140 [^15]: Such damages would be completion costs and not damages for delay [^16]: See: Exhibit 1, tab 12 [^17]: Exhibit 1, Tab 11: D&M invoice to 51C dated May 17, 2011 [^18]: Exhibit 1, Tab 43 [^19]: Peter Kiewit Sons' Co. of Canada v Eakins Construction [1960] S.C.R. 361 [^20]: 1984 CarswellOnt 731, 25 A.C.W.S. (2d) 379, 46 O.R. (2d) 236, 5 O.A.C. 74, 9 D.L.R. (4th) 265 [^21]: Extras invoiced August 12, 2011 are in addition to the deck extra [^22]: Exhibit 1, Tab 12, page 20 [^23]: Exhibit 1, tab 11: invoice dated March 17, 2011 from D&M to 51C [^24]: Chittick v Taylor 1954 CarswellAlta 43, 12 W.W.R. (N.S.) 653 at paragraphs 5 - 10 per Justice Egbert [^25]: 2013 CarswellOnt 9697, 2013 ONSC 4727, 230 A.C.W.S. (3d) 10, 26 C.L.R. (4th) 84 at paragraphs 10 through 14 [^26]: Exhibit 1, Tab 43 [^27]: Exhibit 6, Tab 123, page 327 [^28]: Temple members Philip Lo and Steven Tam testified as to the exact date [^29]: Exhibit 6, tab 91 [^30]: Exhibit 6, Tab 128 [^31]: Exhibit 22 [^32]: Exhibit 6, Tab 91 [^33]: Invoice: Exhibit 5, Tab 89 [^34]: page 259 [^35]: $1,000.00 + HST = $1,130.00 [^36]: [$1,167.08 x 6] + HST = $7,912.80 [^37]: $500.00 + HST = $565.00 [^38]: The date of the Temple’s counterclaim and crossclaim [^39]: 1995 CarswellOnt 1222 [^40]: 1997 CarswellOnt 4805 [^41]: R.S.O. 1990, c.C.30 [^42]: (1987) 24 C.P.C. (2d) 281 [^43]: 51 OR (3d) 97 at paragraph 83