COURT FILE NO.: CV-11-00430372 DATE: 20160517
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
TECTON CONSTRUCTION INC. Plaintiff – and – JERRY YEUNG AND JANEY NG Defendants and Plaintiffs by Counterclaim
Richard H. Parker, Q.C., for the Plaintiff and Defendants by counterclaim Hashim Syed, for the Defendants, Plaintiffs by counterclaim
– and – TECTON CONSTRUCTION INC. AND JOHN KANAVAS Defendants to Counterclaim
HEARD: June 23, 24, 25, 26, October 14-17, 2014, May 12-15, December 21, 2015
REASONS FOR JUDGMENT
JUSTICE W. MATHESON
[1] This trial arises from a home renovation project that commenced in 2010 under a contract between the plaintiff Tecton Construction Inc. and the defendant homeowners. The contract related to certain work to be done on the defendants’ home at 1802 Gerrard St. East, Toronto.
[2] This action was commenced under Rule 76, seeking damages for breach of contract arising from extras requested by the homeowners over the course of the work being done under the contract. The claim is not for payments under the contract itself; those payments have been made. However, the defendants counterclaimed and added John Kanavas, the general contractor of the corporate plaintiff, as a defendant to the counterclaim. They seek damages regarding work not completed and deficient work, among other relief.
Motion for leave to amend
[3] In final argument, the defendants/plaintiffs by counterclaim, sought leave to amend to increase the amount of their counterclaim to $95,000, and to rely on the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A (“CPA”).
[4] Although obviously late in the proceeding, the request for leave to amend is still within Rule 26.01, which provides as follows:
On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. [Emphasis added.]
[5] Rule 26.06 also contemplates amendments at trial, and provides that in those circumstances, amendments may be made on the face of the record without the need for a formal order or formally amended pleadings. In keeping with this rule, the defendants’ position was that the plaintiff/defendants by counterclaim were free to rely on any provision of the CPA without delivering amended pleadings.
[6] There is some history to this litigation that explains this motion. In addition to their counterclaim in this action, the defendant homeowners commenced a second action against the City of Toronto and Vicki Kanavas, Mr. Kanavas’ spouse. Mrs. Kanavas is the sole director of the plaintiff company Tecton. The claims in the second action related to the same home renovation project and relied on the CPA.
[7] It was the homeowners’ intention to seek an order joining these two actions. However, an order for joinder was not actually made. In her November 13, 2013 endorsement, Master Abrams stated: “If an order for trial together needs to be made, I will make that Order (in that as of today, the Parties have all agreed that such an Order be made).” It was not ultimately necessary to make an order because the second action was settled.
[8] Prior to the commencement of the trial of this action, the parties were required to file concise statements of law and case briefs. They did so just before the trial began. The materials filed by both sides dealt expressly with the CPA. The defendants submit that it is apparent from those materials that the plaintiff/defendants by counterclaim were fully aware that the CPA was relied upon by the defendants in this action and there was no surprise or prejudice. Indeed, the plaintiff/defendants by counterclaim’s statement of law expressly lists alleged unfair practices under the CPA as one of the issues in dispute and contains a section focused on the CPA.
[9] The defendants also rely on Bailey v. Jainarine, 2011 CarswellOnt 1127 (Small Claims Court), a case where the deputy judge raised the CPA on his own initiative in final argument. In that case, the deputy judge found that the necessary facts had been fully explored on the evidence and he was not persuaded that it would be unfair to allow the CPA to be relied upon even though it did not form part of the pleadings.
[10] The plaintiff/defendants to the counterclaim object to both proposed amendments. The objection to the increase of the amount claimed in the counterclaim was argued partly on the basis that it could cause the counterclaim to exceed the limit for proceedings commenced under Rule 76. However, that limit will operate even if the amendment is granted and, in any event, the proposed amount is less than $100,000. In addition, the plaintiff/defendants to the counterclaim submit that they were not certain if they would have to defend against the allegations made in the expert report of Greg Stevens that formed the foundation for the increased amount, but their counsel was obviously prepared to address Mr. Stevens’ evidence at trial and did so.
[11] With respect to the CPA, the plaintiff/defendants by counterclaim submitted that they included written submissions on the CPA in the event that the allegations were brought forward at trial, despite not being pled. With respect to prejudice, they argued that defence counsel did not cross-examine Mr. Kanavas on allegations under the CPA, and those allegations are therefore barred on the basis of the rule in Browne v. Dunn (1893), 6 R. 67, 70-71 (H.L.). The plaintiff/defendants to the counterclaim also submitted that they would have called additional evidence to rebut those allegations, and were therefore prejudiced having not done so.
[12] The trial evidence called on behalf of the plaintiff/defendants by counterclaim was extensive, as were the cross-examinations. The events giving rise to the claim and counterclaim were explored in great detail with a number of witnesses, so much so that this trial, which counsel originally booked for four days, extended over more than twelve days plus written submissions. Counsel to the plaintiff/defendants by counterclaim explored all the factual issues extensively and has not identified any specific omissions that would give rise to any prejudice. The rule in Browne v. Dunn can be and has been considered by me in weighing the evidence in the ordinary course.
[13] It is apparent from the parties’ statements of law that both sides were well aware that the defendants were relying on the CPA in this action. The plaintiff/defendants by counterclaim’s written submissions on the motion for leave to amend did reference other issues they have about the conduct of the action, but I conclude that those submissions are more relevant to costs.
[14] No prejudice arises from either proposed amendment. I grant the motion for leave to amend, increasing the amount claimed in the counterclaim to $95,000, and permitting the defendants to plead the CPA. Specifically, the defendants may assert the sections of the CPA that form part of their concise statement of law delivered before the commencement of trial, and the plaintiff/defendants by counterclaim may rely on the CPA provisions in response, which they have already done in their legal submissions filed in advance of trial and in argument.
Events giving rise to claims
[15] The plaintiff Tecton describes itself as a general contractor in the areas of industrial, commercial and residential properties. John Kanavas is the sole employee and the person who provided the services for Tecton. As the defendant Ms. Ng testified, from the defendants’ standpoint, he and Tecton were essentially one and the same.
[16] Mr. Kanavas had been a licensed building renovator since 1990 and his licence provided that all work was to be sub-contracted to licensed renovators or contractors. He used a number of licensed trades on this job. Over the course of this dispute, an issue arose regarding whether Tecton should be separately licensed, and it became separately licensed in 2011.
[17] Mr. Kanavas is a gregarious person who speaks imperfect English with a heavy Greek accent. Sometimes his phrasing could be misunderstood if not considered in context, but that did not occur frequently in the trial evidence and I have taken that into account.
[18] The defendants Jerry Yeung and Janey Ng own and live in a house at 1802 Gerrard St. East, Toronto, with their family. They are both well-educated and intelligent individuals but, when they embarked on the renovation of their home, they had no prior renovation experience. Mr. Yeung is an environmental consultant, with a Bachelor of Science as well as a university degree in environmental engineering science. Ms. Ng is a business analyst. In contrast to Mr. Kanavas’ outgoing nature, both of the defendants appeared somewhat reserved at trial.
[19] The defendants wanted some renovations done to their house. They were having a problem with a wet basement and wanted to put a two-storey addition on the back of the house. After looking into possible contractors, the defendants decided to enter into an agreement to have Mr. Kanavas do their renovation.
[20] It was the defendants’ responsibility to retain an appropriate engineer, get plans from the engineer and get the necessary approvals and related building permits from the City of Toronto. The defendants received some suggestions from Mr. Kanavas about engineers, including Michael Hatch, but ultimately it was the defendants’ decision to retain Mr. Hatch to prepare the plans and obtain the permits.
[21] Mr. Kanavas was not consulted about the actual plans prepared by Mr. Hatch. The defendants dealt directly with Mr. Hatch. Once the plans were ready, Mr. Kanavas was provided with a copy of them. He provided a couple of estimates in March 2010 and, by agreement dated March 26, 2010 and signed back on April 3, 2010, Mr. Yeung and Ms. Ng entered into an agreement with Tecton (the “Contract”).
[22] The Contract was for a two-storey addition. It set out the required work in significant detail, including 36 items altogether, for a total cost of $126,000 excluding taxes. It required that all work comply with drawings approved “by the City of Toronto Building Department and prepared by Michael Hatch Design Ltd.”
[23] The Contract set out a payment schedule with a total of four payments to be made, each at a different stage. The Contract further provided that “any changes that might occur should be agreed to by both parties, in an additional written agreement, including its dollar value.”
[24] The Contract did not incorporate a schedule for the work itself, and did not provide for a date of completion. This was not an oversight. The defendants realized that there was no completion date in the Contract and did not ask for one to be included. They decided, instead, to assume that the work would take twice as long as the two-month verbal estimate provided by Mr. Kanavas. Ms. Ng was pregnant with their second child and they hoped the work would be completed before she had the baby.
[25] Work commenced in April 2010 and appeared to be moving forward well. In the course of the work, there were numerous visits by the City of Toronto building inspector. In April 2010, the excavation and shoring, footings and foundations were passed by the City building inspector.
[26] Work continued and problems arose. It was evident that there were problems with water that could have an impact on the excavation and other work. Mr. Kanavas arranged for a visit from a soil engineer. The engineer only did a perfunctory view of the site but he nonetheless noted that water was issuing from the soil into the excavation.
[27] There is a dispute between the parties about the extent to which Mr. Kanavas told the defendants about this and other problems that arose. In addition to water-related problems, there were problems with the plans. For example, it became apparent that the plans did not include a necessary custom steel beam, which Mr. Kanavas had to address with the City and then special order. There were also no plans and no permit for the necessary HVAC work, which Mr. Kanavas expected the homeowners to obtain from Mr. Hatch but were not forthcoming. Mr. Hatch testified that he did not ordinarily prepare HVAC plans, which appears to be the source of the problem. The Contract placed no obligation on Mr. Kanavas to obtain any plans. In the end, however, Mr. Kanavas had to make the arrangements to obtain the HVAC plans and a permit in order to keep the project moving forward, even though it was not his obligation to do so.
[28] Having heard all the trial evidence, I conclude that Mr. Kanavas did tell the homeowners about problems as they arose. At trial, Mr. Yeung did recall some issues being raised with him, including the visit by the consulting engineer regarding water, HVAC and the steel beam.
[29] The defendants began to make requests for additional work that was not part of the Contract. Mr. Kanavas agreed to do many of the extra things requested without charge in order to maintain his good relationship with the defendants. However, there were certain larger items for which he expected to be paid.
[30] The defendants testified that they believed all of the many extra items they requested were covered by the Contract. This belies both the words of the Contract and common sense.
[31] A significant point of controversy at trial was the selection of upgraded windows and a door. The Contract provided for basic aluminum thermal casing windows. In late May 2010, Mr. Kanavas and the defendants went to look at windows at Gator Windows. Mr. Kanavas testified at trial that the defendants decided to order significantly upgraded windows and a door, beyond what was covered by the Contract.
[32] Before ordering the custom windows and the door, Mr. Kanavas obtained a quote from Gator Windows, and provided it to the defendants. The quote, dated May 26, 2010, showed the cost of $10,749.69. These custom items were ordered about 10 days later. These steps are consistent with Mr. Kanavas’ evidence that it was the defendants’ decision whether or not to incur what would be an additional cost.
[33] The defendants’ evidence regarding these events was not credible. They essentially testified that Mr. Kanavas led them to pick more expensive items at Gator Windows, yet also testified that Tecton would have to pay for the upgrades. More telling is the position taken by the defendants in their statement of defence. In that pleading, they made a binding concession that Tecton was entitled to some consideration for the upgraded windows, and challenged only the amount claimed as excessive.
[34] Another example of the defendants’ requests for significant additional work was a request to remove all the knob and tube wiring in the house. This was not part of the Contract yet the defendants suggested that it should be inferred into the Contract. On this and other requests for extra work, the defendants took the position at trial that Mr. Kanavas had agreed that these things had to be done anyway.
[35] Mr. Kanavas was trying to be helpful by agreeing to do a number of additional things requested by the defendants, as well as dealing with various problems arising with the project. He worked together with the City of Toronto inspector to deal with problems as they arose and implemented the changes needed to satisfy the inspector’s requirements. At no time while Mr. Kanavas was still on the project did the City inspector note anything as not passed.
[36] There were certainly delays. The lack of HVAC plans and the related permit was one of a number of reasons why the project began to experience delays, along with problems with the plans and extra requests that began to be made by the homeowners beyond the work contemplated under the Contract.
[37] Work continued into the summer. The City inspector passed the drain/waste and vents in June, the structural framing in July, the insulation and vapour barrier and water distribution in early September. In order to avoid the financial impact of new HST legislation, the defendants paid the second and third installments under the Contract early.
[38] The project was going on much longer than expected and was becoming a major inconvenience to the defendants. When they returned from their summer holiday, they moved in with Mr. Yeung’s father. They continued to ask for more work to be done, including renovations to the kitchen and the master bathroom, none of which formed part of the Contract.
[39] Ms. Ng had her baby in early November. A few weeks later they concluded that they had to move out of Mr. Yeung’s father’s house. Given the status of the work at their house, they had to move into their basement.
[40] Tension between the parties escalated in late 2010. By this time, Mr. Kanavas was feeling under substantial pressure with respect to payment for the extras that he had been asked to complete. The homeowners felt under substantial pressure from trying to live in their home during construction, which I accept was very difficult for them and their young family. I further accept the evidence of a trial witness, Mr. Hormonylo, who observed a very dusty work site in December 2010 while in the house for other reasons.
[41] In December 2010, Mr. Kanavas presented the homeowners with a statement of account regarding the extras and upgrades that he had completed and believed he should be paid for, totaling $46,581.62. This covered only part of the extras he had provided; the rest he did without charge.
[42] Mr. Yeung testified that even though he did not believe they owed money, he had been expecting for a while that Mr. Kanavas would want to talk about cost. He also admitted that the defendants knew there were some extras that were over and above the Contract. However, the statement of account was for a very large amount from his standpoint.
[43] There was then a series of events that showed the breakdown of the relationship between these parties. Mr. Yeung decided to surreptitiously tape a meeting about the account for extras on December 20, 2010. He perceived some of Mr. Kanavas’ comments made at that meeting to be threats, although they were not intended in that way.
[44] In the course of the difficult period, the defendants paid the final amount due under the Contract in full. The issue was the extras and the completion of the work under the Contract, some of which could not be done in the winter.
[45] On December 22, 2010, the parties entered into an agreement to resolve the matters in dispute between them. Both sides were very unhappy with the situation, so much so that both sides have claimed duress in entering into this agreement, and neither side seeks to enforce it.
[46] In January 2011, before the plaintiff had an opportunity to complete the interior work, the defendants turned the plaintiff out. The plaintiff’s tools were put outside and Mr. Kanavas was told to come and pick them up. Tecton was prevented from finishing the work. By this time, the defendants already had others on the property doing work.
[47] Mr. Yeung then received two letters on behalf of Tecton, both dated January 28, 2011, one of which alleged breach of contract and the other asserted that the December 22, 2010 agreement was entered into under duress and was therefore void.
[48] In February 2011, Mr. Yeung requested that the building inspector attend at the property. The City inspector did so, and identified one issue – a problem with insufficient headroom for the basement stairs – those stairs being part of the unfinished work.
[49] In March 2011, the defendants entered into an agreement with Neil Davies of Davies Design Build UK to do work arising from the renovation, which included work remaining under the Contract. Mr. Davies gave a contract price of $36,442.50. That agreement also had no completion schedule or deadline. Again, the homeowners later asked for additional work to be done, although this time it was documented in change orders.
[50] Mr. Davies also had difficulty with the project. With respect to the basement stairs, Mr. Davies concluded that they needed to be redone. He put in new stairs, but the stairs he installed did not pass inspection. The stairs had to be done a third time.
[51] Mr. Davies completed the work, which passed inspection by the City in July 2011. The City recorded the building permits as completed.
[52] Despite the completion of the work in 2011 to the City’s satisfaction, the defendants retained another contractor, Greg Stevens, in 2012. He reviewed the work on the property at the defendants’ request. At the defendants’ instigation, the City also did a re-inspection using a different building inspector. A number of deficiencies were identified.
[53] As a result of the deficiencies, the City reopened the permit. It followed up with an order to comply issued on January 18, 2013. As of trial, the defendants had not complied with that order and the City had not taken any steps to enforce it.
[54] Mr. Stevens, representing the defendants, had a dialogue with the City regarding items identified as deficiencies. He also assisted the defendants with a complaint to the Ministry of Consumer Services.
[55] Two actions were commenced: this action and the later action against the City of Toronto. In their statement of defence and counterclaim, the defendants list over 50 alleged problems with the work done.
[56] It is agreed that the defendants settled their claim against the City of Toronto for $34,000. Further, counsel to the City wrote indicating that this settlement related to building code issues regarding the work done by Tecton, and would reduce the amount due in this action. For those reasons, the City required that Tecton agree not to pursue a claim against the City as a condition of that settlement.
Expert evidence
[57] Each side put forward an expert witness in support of their case.
[58] Tecton called David J. Lehman of A-D Engineering Group Ltd. Mr. Lehman is a consulting engineer with 45 years of experience. He is a Professional Engineer and has completed Ministry of Municipal Affairs and Housing examinations for legal, structural, houses and small buildings. He has extensive construction experience working for both contractors and owners on a wide range of projects including home renovations. His work has included substantial experience with respect to properties in Toronto. The defendants did not object to Mr. Lehman’s qualifications as an expert witness.
[59] The defendants called Greg Stevens, who had previously assisted them in their dealings with the City and others. Mr. Stevens, of Construction Investigation Services, has about 30 years of work experience in the construction area including as a general contractor, and has been involved in both the building of homes and home renovations. Most of his work in this area was done in Hamilton, though he did do some work in Toronto.
[60] At trial, the plaintiff/defendants by counterclaim objected to Mr. Stevens being permitted to testify as an expert witness. This objection was not based upon his qualifications. While the plaintiff/defendants by counterclaim left open arguments about the relative qualifications between the two experts, the focus of the challenge was on a lack of impartiality given Mr. Steven’s prior role representing the defendants.
[61] As set out in my ruling made during the trial, I concluded that there was good reason to raise this concern. However, I permitted Mr. Stevens to testify and deferred the question of whether his evidence would be found inadmissible, as requested by the plaintiff/defendants by counterclaim, or if any issues would go to weight.
[62] The decision in Mouvement laïque québécois v. Saguenay (City), 2015 SCC 16, [2015] 2 S.C.R. 3, addresses this issue. In that case, the Supreme Court emphasized that despite the importance of independence and impartiality for expert witnesses, those factors are not always an insurmountable barrier to the admissibility of an expert’s testimony. As set out by the Court, “what must be determined is whether the expert’s lack of independence renders him or her incapable of giving an impartial opinion in the specific circumstances of the case”: Mouvement laïque québécois, at para. 106.
[63] The impartiality issue arose because of Mr. Stevens’ role in dealing with the City of Toronto and the Ministry of Consumer Services as advocate on behalf of the defendants. I will not go through all the correspondence, but there is no question that Mr. Stevens was aligning himself with the defendants and their position arising from the very home renovation that is at issue in this trial, and acting as their advocate. In addition to advancing their position, he also made derogatory statements about Mr. Kanavas of a personal nature, even though he had never met or spoken with him.
[64] The correspondence written by Mr. Stevens suggests an impassioned and wholesale acceptance of the defendants’ position. Obviously, an expert can obtain factual information from the party who retained him or her. That is commonplace. However, an impartial expert should maintain some independence from the party. I do not conclude that Mr. Stevens’ evidence should be rendered inadmissible, but the issue of impartiality does significantly detract from the weight that ought to be given to his evidence.
[65] Mr. Stevens was also dismissive of a Report entitled “Investigation of Chronic Basement Flooding”, regarding the Eastern Beaches area of Toronto. That Report, released in 2012, reported on a project initiated by the City of Toronto Works Committee after significant basement flooding in that area, which includes the defendants’ property. It concluded, among other things, that the ground water table was between 0-5 metres below ground surface and it was possible that groundwater infiltration would have been rapid enough in some areas with shallow ground water levels to contribute to basement flooding. Mr. Stevens rejected the Report’s conclusions without a careful review of it.
[66] At trial, the defendants attempted to undermine the evidence of Mr. Lehman because his inspection of the property was for only two hours, despite the fact that this was the result of their position. The plaintiff/defendants by counterclaim had to go to court to get permission for Mr. Lehman to visit the property at all. The defendants objected to him doing so, but a two hour on-site inspection was permitted by the court. I have taken the time limit into account to some degree, bearing in mind the reason for the short time period. Mr. Lehman had considerable additional material upon which he based his opinion.
[67] There were other practical challenges associated with any on-site inspection, including that done by Mr. Stevens, given that the defendants had work done by Mr. Davies between the end of the plaintiff’s work and the time of these inspections. As a result, neither expert viewed the premises as of the time that the relationship between these parties broke down in early 2011. Both experts attempted to take that into account and were assisted by photographs.
[68] Considering the background, experience and other relevant factors for both experts, I readily conclude that I prefer the evidence of Mr. Lehman. He has superior qualifications, including a more extensive focus on the Toronto area. Mr. Stevens, although qualified, has fewer credentials and less relevant experience, especially in the Toronto area, and his evidence is affected by a lack of independence and impartiality. I have, however, taken into account the evidence of Mr. Stevens as I conclude is appropriate on various issues.
[69] Both experts gave some evidence that overlapped with legal issues. To the extent that they gave evidence about the law, I have disregarded their evidence.
[70] After lengthy and detailed testimony about all aspects at issue, Mr. Lehman opined that the work performed by Tecton was, in his opinion, acceptable according to drawings where adjustments to the drawings were not required, and according to good construction practice. Mr. Lehman did indicate a number of concerns, which he did not attribute to the plaintiff’s work. He noted the lack of proper drawings in certain areas, unforeseen site conditions and the lack of due care by the City inspector. With respect to the cost of extras claimed by the plaintiff, as set out in its invoices dated December 20, 2010, Mr. Lehman relied upon RS Means Building Construction Cost Data applicable at the relevant time, concluding that the costs claimed were within reasonable bounds.
Discussion
[71] The parties made both written submissions regarding the law and oral submissions in final argument. Bearing in mind that I have granted leave to amend the pleadings to incorporate the CPA, the issues are as follows:
(1) with respect to the plaintiff’s claim, whether the goods and services invoiced as extras actually fell within the Contract, for which the plaintiff has already been paid;
(2) if not within the Contract, whether the plaintiff has an enforceable claim for those goods and services and if so in what amount;
(3) whether the defendants are entitled to relief due to deficient and incomplete work as a breach of the Contract itself;
(4) whether the defendants are entitled to relief under the CPA; and,
(5) the quantification of damages.
[72] The CPA provides the backdrop to these issues because the Contract and the alleged oral agreements for extras are consumer transactions with the meaning of s. 2(1) of the CPA. Further, they are “future performance agreements” under the CPA and s. 22 of that Act provides that such agreements must be in writing. Section 24 of O.Reg 17/05 sets out in detail the matters that must be addressed in future performance agreements. The defendants allege that the Contract and alleged oral agreements did not comply. They therefore rely on s. 93(1) of the CPA to submit that the plaintiff’s claim for extras is based upon agreements that are not binding on them.
[73] Although it has been accepted that the CPA applies to contracts for home renovation, the courts have also recognized that this sort of contract is different from the door-to-door salesperson situation: Grainger v. Flaska, 2013 ONSC 4863, 31 C.L.R. (4th) 23 (Master), at para. 74. This is a case of a homeowner approaching a contractor and negotiating a contract with the contractor. It has been recognized that just as consumers may require protection, contractors may be in need of protection from homeowners who try to use the courts to take advantage: Grainger, at para. 74; Connect Electric Inc. v. Pullen, 2013 ONSC 1837, [2013] O.J. No. 1464, at paras. 52-57, cited in Grainger. The plaintiff/defendants by counterclaim rely on s. 93(2) of the CPA, which provides that a court may order that a consumer is bound by all or a portion or portions of a consumer agreement, even if the agreement has not been made in accordance with the Act or the regulations, if the court determines that it would be inequitable in the circumstances for the consumer not to be bound.
Scope of the Contract and claim for extras
[74] As a general matter, the Contract should be interpreted “as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633 at para. 47. As mandated by Sattva, I have taken a practical, common sense approach not dominated by technical rules of construction, with due regard for proper evidence of surrounding circumstances: Sattva, at para. 47.
[75] As well, in that the Contract is a future performance agreement under the CPA. Section 11 of that Act requires that any ambiguity that allows for more than one reasonable interpretation of the Contract be interpreted to the benefit of the consumer.
[76] The Contract sets out, in detail, the work to be completed. It itemizes 36 components of that work. Further, it requires that all of that work complies with the approved drawings prepared by Mr. Hatch.
[77] Interpreting the Contract in accordance with the above principles, I find that it is a contract to build a two-storey addition, with a basement, on the back of the defendants’ house. The individual steps, including labour and equipment, that were required to complete that work are set out in the list of 36 itemized components.
[78] The question then becomes whether or not any of the items now claimed by the plaintiff as extras form part of the Contract. Those extras are detailed in the December 20, 2010 invoices.
[79] Leaving aside the windows, the items invoiced by the plaintiff were not covered by the Contract. Those matters related to work in the pre-existing house, and an additional pump for the basement. Even Mr. Stevens, often an advocate for the defendants, acknowledged that almost all the items invoiced as extras were not covered by the Contract, though he would have assigned lower costs to them. I conclude that the items invoiced as extras were not covered by the Contract.
[80] With respect to the windows, the Contract required only the specified aluminum windows, not the substantially upgraded custom windows and door specially ordered by the defendants. I find that the defendants agreed to that upgrade after being provided with the estimated cost.
[81] However, it is insufficient for the plaintiff to demonstrate that its claim for extras arises from work or upgrades not covered by the Contract. It must demonstrate an entitlement to be paid for the extras and upgrades. The plaintiff relies on oral agreements in this regard.
[82] Mr. Kanavas testified that for each and every item, the defendants requested that the extra work be done and he agreed to do it. I found Mr. Kanavas to be a straightforward and responsive witness, subject to occasional challenges with his English. In contrast, I found Mr. Yeung, who was the main contact, to be frequently unresponsive and providing answers that were inconsistent even within his own testimony. He was also selectively knowledgeable, for example, readily referring to what was on the drawings in support of his answers, but saying that he did not know about the drawings at other times. Where the evidence of Mr. Kanavas and Mr. Yeung conflict and Mr. Yeung’s evidence is not otherwise supported by documentation, I prefer the evidence of Mr. Kanavas.
[83] This evidence of offer and acceptance is relevant to the alleged oral agreements but it is not, by itself, sufficient. To have a binding oral agreement, all material terms must be agreed upon. Price is a material term. It must either be agreed, or the agreement must set out how it would be determined.
[84] In this case, the trial evidence showed that price was not discussed until December 2010, after the work had been completed. The one exception is the upgraded windows and door, for which the defendants were provided an invoice for their approval before those goods were ordered. With respect to the other items, there was no agreement on price or price methodology.
[85] The plaintiff submits that if I find, as I do, that the parties had not agreed to all the essential terms, I should proceed to assess the value of the work done on a quantum meruit basis. A succinct summary of the law in this regard is found in Summer v. Harrower, 49 C.L.R. (3d) 303, as follows:
[8] Where there is no consensus ad idem as to the essential terms in a construction contract, the court will assess the value of work on a quantum meruit basis.
Komorowski v. Van Weel (1993), 12 O.R. (3d) 464 (Gen. Div.)
[9] Where the contract or estimate of the contractor does not contain sufficient information, a detailed plan or specifications, a court may award a contractor the price of the work on a quantum meruit basis.
Serafin v. Johnston (1977), 12 Nfld. & P.E.I.R. 169 (P.E.I.A) pages 171 and 176
[10] Even where a court finds a valid contract exists between the parties, a court may award damages on a quantum meruit basis in lieu of or in addition to damages for breach of contract.
Alkok v. Grymek, [1998] S.C.R. 452 Foderaro v. Future Homes Construction Ltd. (1991), 46 C.L.R. 1 at 13 (Ont. Gen. Div.)
[11] The courts have found that five elements must be present in a claim based solely on quantum meruit, including that:
- there was a contractual relationship between the parties;
- the parties agreed that certain work was to be done but failed to agree on all aspects of the contract, for example, the price to be paid;
- the defendant accepted the work;
- both parties had or should have had in the circumstances an expectation that the work was not being rendered gratuitously; and
- the payment sought was reasonable remuneration for the work done.
Fairwood Industries Ltd. v. Lin (1997), 33 C.L.R. (2d) 111 (B.C.S.C.) at 120
[86] In regard to the claim for extras, these elements are met. There was a contractual relationship between the plaintiff and the defendants. The defendants requested that the extra work be done and the plaintiff agreed to and did complete that work, to the defendants’ benefit. Although the price was not agreed upon (other than for the windows and door), the defendants should not have expected that the work be done gratuitously and admitted as much to some extent. Lastly, on the evidence of Mr. Lehman, the quantum now sought is reasonable.
[87] Another issue must be addressed. The Contract required that any changes to it should be in an additional written agreement, including the dollar value. This obviously applies to the upgraded windows. The parties disagree about whether this clause applies to the other items outside the Contract. However, given s. 11 of the CPA, I find that it does apply in that any ambiguity should be resolved in favour of the defendants. Further, even if this clause did not exist, the CPA requires that future performance agreements be in writing.
[88] In response to this difficulty, the plaintiff relies on s. 93(2) of the CPA. Section 93(2) provides that even if an agreement is not binding because it was not made in accordance with the CPA, the court may order that the consumer is nevertheless bound by all or portions of it where the court determines that it would be inequitable in all the circumstances for the consumer not to be bound.
[89] This subsection does apply in the circumstances of this case. Here, the entirety of the plaintiff’s claim is for extra work that was requested by the defendants that they have received the benefit of. This is not a case where the consumer was taken advantage of, quite the contrary. Here, Mr. Kanavas was too trusting. He accommodated numerous requests made by the defendants. He completed an impressively long list of extra work without charge. He ought to have had written agreements that were compliant with the CPA for the extra work for which he expected to be paid.
[90] For the reasons given above, it would certainly be inequitable for the defendants to receive the benefit of the invoiced items without payment. I therefore grant relief to the extent necessary under s. 93(2). The defendants shall pay the two December 20, 2010 invoices, subject to other considerations discussed below.
Alleged deficient and incomplete work under the Contract
[91] The defendants counterclaim for, among other things, work not completed under the Contract and deficient work done under the Contract. The defendants have paid the Contract price in full.
[92] There is no question that there were difficulties on this job. There were problems with the plans, about which the City required that Mr. Kanavas implement changes. There were missing plans for the HVAC. There were water-related problems, giving rise to challenges in the basement. Although the City inspector passed numerous aspects of the work, problems were identified much later by a different inspector. As well, since the plaintiff was dismissed early, he could not complete the work. I am satisfied on the evidence that some of the work that the defendants contracted for was not completed and some of it has now been determined to be deficient from the standpoint of the new City inspector.
[93] Beginning with the work not completed, this occurred because the defendants chose to dismiss the plaintiff. The plaintiff acknowledges that work remained to be done and has reduced its damages claim accordingly. This aspect of the counterclaim is therefore dealt with below in relation to the quantification of damages.
[94] With respect to the work now determined to be deficient, there are some complications. The City deficiencies were identified after another contractor finished the job, despite his work having been passed as well. Nonetheless, I conclude that there were deficiencies, as set out in the City’s order, and the defendants are entitled to damages for breach of the Contract. The complications are dealt with below, in the quantification of those damages.
Alleged unfair practices
[95] The defendants allege that the plaintiff and Mr. Kanavas have engaged in unfair practices under s. 14 of the CPA in two respects: by saying that the work would be completed within two months, and by representing that Tecton was a licensed contractor when it was Mr. Kanavas himself who was licensed and with respect to the scope of that licence. If an unfair practice is proved, the defendants/plaintiffs by counterclaim seek rescission and related damages under s. 18 of the CPA.
[96] Section 14(1) of the CPA provides that it is an unfair practice for a person to make a false, misleading or deceptive representation. Section 14(2) then gives examples, including:
- A representation that the person who is to supply the goods or services has sponsorship, approval, status, affiliation or connection the person does not have.
- A representation that the goods or services or any part of them will be available or can be delivered or performed by a specified time when the person making the representation knows or ought to know they will not be available or cannot be delivered or performed by the specified time.
[97] The defendants rely on these two provisions as capturing the following representations: (1) the representation that the work would be completed in two months, and (2) an alleged representation that Tecton specifically (and not just Mr. Kanavas personally) was licensed as a general contractor and as regards the scope of that licence.
[98] Whether a statement constitutes a “false, misleading or deceptive representation” is determined on an objective basis and does not require reliance on the representation by the consumer. For example, the fact that the defendants did not rely on the two-month estimate is irrelevant. As well, the defendants bore some responsibility for the delays due to all the requests that they made for additional work. I have disregarded this as well.
[99] The representation must be “false, misleading or deceptive” at the time it was made: Memorial Gardens Ontario Ltd. v. The Queen in Right of Ontario (1992), 6 O.R. (3d) 720 (C.A.), at para. 5 (interpreting similar language under the Business Practices Act, R.S.O. 1990, c. 55).
[100] Under subsection 14(2) item 9, relied upon by the defendants in relation to the two-month time estimate, they would have to establish that the plaintiff knew or ought to have known that the renovation could not be completed within two months at the time that estimate was given by Mr. Kanavas. On the trial evidence, this was not the case. Quite the contrary, it is apparent from the trial evidence that the delays on the project were caused by unexpected developments after the Contract was entered into between the parties. It was not a false, misleading or deceptive statement at the time it was made.
[101] With respect to the second alleged unfair practice, under subsection 14(2) item 2, the defendants have failed to establish that any representation was actually made to them about the licensing status of the plaintiff company as distinct from Mr. Kanavas. It was clear on their evidence that they saw no distinction between the company and Mr. Kanavas. As for the scope of the licence itself, which required Mr. Kanavas to use sub-contractors for the work being done, the defendants’ evidence was that while Mr. Kanavas used sub-contractors, he sometimes did some work himself. The defendants did not establish that there was a representation made to them regarding these matters.
[102] The defendants also rely on s. 15(1) of the CPA, which provides that it is an unfair practice to make an unconscionable representation. Under s. 15(2), “Without limiting the generality of what may be taken into account in determining whether a representation is unconscionable, there may be taken into account that the person making the representation... [knew or ought to have known]… that a statement of opinion is misleading and the consumer is likely to rely on it.” Again, the two-month estimate was a good faith estimate for a project that was later plagued with problems causing delay. The plaintiff did not know nor ought to have known about the delays that ultimately did occur when the time estimate was given. As for the licensing issue, there was no statement of opinion in that regard.
[103] There is a further bar to the defendants’ claim for rescission under section 18 of the CPA, in any event. Section 18(3) requires that notice be given within one year after entering into the agreement in question. Section 18(4) expressly requires that the notice, in whatever form, indicate the consumer’s intention to seek rescission and other relief and the reasons for doing so. The defendants do not claim to have given notice, and ask to be excused from the obligation to do so under s. 18(15) of the CPA.
[104] Section 18(15) permits a court to disregard the above notice requirements where it is in the interests of justice to do so. It is discretionary. In this case, the defendants have not put forward a sufficient foundation to invoke the interests of justice. Even their statement of defence and counterclaim, dated about two years after the date of the Contract, does not make a claim for relief under the CPA. The reasons for no notice were not explained in the trial evidence. Further, the defendants have asserted a claim based on non-performance under the Contract, which does not require resort to the CPA. These alleged unfair practices, which have not been proved, do not materially add to the basic counterclaim. I am therefore not prepared to exercise my discretion to relieve from the ordinary obligation to give notice.
[105] The defendants’ counterclaim is made against both Tecton and Mr. Kanavas personally. The claim against Mr. Kanavas is based upon the CPA, which provides for joint and several liability under s. 18(12). Since the claim under the CPA is unsuccessful, the claim against Mr. Kanavas personally is dismissed.
Damages
[106] The plaintiff claims for monies owed for extras, less credits for the work not completed. The amount claimed for extras is as set out on the plaintiff’s invoices dated December 20, 2010: $32,080.70, plus $8,879.71 for the upgraded windows and door. In final argument, plaintiff’s counsel provided a written summary of the damages claim, which deducted from the invoiced amount a total of $2,599 for work not completed. The resulting claim is $38,361.41. The amounts used to arrive at this quantification of damages were proven at trial.
[107] The defendants/plaintiffs by counterclaim claim for the amount paid to the second contractor, Mr. Davies, excluding taxes: $32,250. As well, the defendants/plaintiffs by counterclaim seek $60,490 to complete the work required to satisfy the outstanding order to comply with the City of Toronto and other deficiencies, based on Mr. Stevens’ opinion. These two amounts total $92,740. From these amounts, the defendants deduct $500 in regard to the upgraded windows, $2,599 in regard to the same credits used by the plaintiff for the work not completed under the Contract, and $10,598 in regard to the amounts that Mr. Stevens acknowledged were owing for extras. As a result, the amount claimed is $79,043.
[108] With respect to the $32,250 for Mr. Davies’ work, some of that work must be removed and replaced to remedy the items in the City’s order to comply. The estimated amount for that work forms part of Mr. Stevens’ estimate of further costs to repair. Essentially, the plaintiff is being asked to pay for that work twice, the first time by paying for Mr. Davies’ work, and then by paying for it to be re-done. The plaintiff is not responsible for both. However, not all of the work done by Mr. Davies is overlapping with what Mr. Stevens has included in his quantification of what must now be done.
[109] Further, some of the work done by Mr. Davies was not part of the Contract at all, for example, the removal of knob and tube wiring in the pre-existing home. Those items are therefore not properly part of the defendants’ damages claim.
[110] The demarcation between items properly included and those that are not is made difficult because Mr. Davies’ contract is not itemized at all. It was for the defendants to prove their damages, but I am not prepared to rule out this part of the claim altogether. Considering all the trial evidence, I find that almost two thirds of the amount, $21,500, should form part of the defendants’ damages claim.
[111] As for the $60,490 figure, it includes not only the work required to meet the City order, but also other items. It includes work that did form part of the Contract, such as work in the pre-existing bathrooms among other things. The estimate is also high. Mr. Stevens put in his own quote for a major part of the work, and it was for $36,600. Another quote was also lower. Considering all the trial evidence, I find that $45,000 is proven by the defendants.
[112] As for the deductions, the $2,599 should still be deducted in regard to the same credits used by the plaintiff for the work not completed under the Contract. The other deductions proposed by the defendants amount to a set-off of the plaintiff’s claim against their counterclaim, which I address below.
[113] These amounts give rise to a claim for damages of $63,901 before any set-off of the plaintiff’s damages.
[114] The defendants have already received $34,000 in relation to the deficiencies, as a result of their settlement with the City of Toronto. At trial, they took the position that this amount should not be deducted from their claim because the claim against the City, although overlapping with this claim, was not the same. This position was inconsistent with the defendants’ position on the motion for leave to amend. In any event, in the trial evidence, correspondence from the City shows that the settlement related to issues regarding the work done by the plaintiff and would reduce the amount due in this action. The plaintiff in this action therefore had to agree not to pursue the City for contribution and indemnity as part of the defendants’ settlement. On the trial evidence, it is apparent that it was the City inspector who created the situation that the defendants now want to remedy, by repeatedly passing work that ought not to have been passed. I find that the counterclaim includes, but is not limited to, the deficiencies that were the subject of the $34,000.
[115] I therefore conclude that the settlement amount fully overlaps with amounts claimed in this action and ought to be deducted to avoid double compensation. I allow for the possibility that some of the $34,000 was directed to legal costs in relation to the claim against the City. To the extent that this was the case, the defendants may assert that claim in any costs claim they may make in this action.
[116] The defendants’ damages are therefore $29,901.
Summary of disposition
[117] Tecton shall have judgment against the defendants in the amount of $38,361.41.
[118] The defendants shall have judgment against Tecton in the amount of $29,901.
[119] These amounts shall be set-off against each other.
[120] The counterclaim against Mr. Kanavas is dismissed.
[121] If the parties are unable to agree on prejudgment interest or costs, the plaintiff and the defendants by counterclaim shall make their submissions by delivering brief written submissions together with any costs outline by June 6, 2016. The defendants may respond by delivering brief written submissions and any costs outline by June 20, 2016. Any brief written reply shall be delivered by June 30, 2016. This schedule may be changed on consent provided that counsel notifies me of the new schedule by June 6, 2016.