Court File and Parties

COURT FILE NO.: CV-12-464383 DATE: May 13, 2016

ONTARIO

SUPERIOR COURT OF JUSTICE

IN THE MATTER OF the Construction Lien Act, R.S.O. 1990, c.C.30

BETWEEN:

TIF MECHANICAL LIMITED David P. Preger and Mordy Mednick, for the plaintiff, Tel.: 416-646-4606; Fax: 416-865-1398. Plaintiff

AND:

MASSIMILIANO ORTOLLI and NICOLINA LOBELLO Stephany Mandin, for the defendants, Tel.: 416-867-9200; Fax: 416-867-9103. Defendants

HEARD: November 5, 6, 10, 12, 13, 2015 and December 1, 2, 3, 4, 8, 9 and 10, 2015.

Master C. Wiebe

REASONS FOR JUDGMENT

I. INTRODUCTION

[1] The plaintiff, TIF Mechanical Limited (“TIF”), claims a lien in the amount of $471,312.17 in relation to a residential property at 47 Spalding Road, Toronto (“the Property”) owned by the defendants, Massimilliano Ortolli (“Ortolli”) and Nicolina Lobello (“Lobello”), together “the Owners”. The Owners are married.

[2] The Owners deny the entirety of this claim, alleging that TIF has been paid more than enough. They also counterclaim for alleged damages of $500,000 for incomplete and unauthorized work, overpayment, deficiency correction costs and variance costs.

[3] The trial hearing of this case took place before me on the above noted dates. For the reasons stated herein, I have decided to award TIF the bulk of its claim and dismiss most of the counterclaim.

II. BACKGROUND

i. Case history

[4] I will review the relevant, undisputed facts. Ortolli became a real estate agent in November, 2005. Lobello became a real estate agent in July, 2010. They have three small children. They work together at Homelife/Romano Realty Brokerage in North York, Ontario. By March 30, 2015 they had bought, leased or sold over 100 homes for clients. TIF was created by its principal, Antonio Gallucci (“Gallucci”), in 2000 as a mechanical contractor. It also had experience working as a contractor on certain residential home projects.

[5] The Owners bought the Property in April, 2011 for $600,000. According to the title abstract, the purchase closed on August 2, 2011. The home on the Property was 2,400 square feet in size and was a two-storey back-split, namely with a half second floor. The Owners wanted to renovate before they moved in. They lived with family members in the meantime.

[6] The Owners retained Simon West, a designer, and Iradj Sirjani, a structural engineer, to prepare drawings and specifications. The Owners assert that they made it clear to West that they had a renovation budget of $400,000, as they had limited finances and also did not want to “overbuild” for the neighborhood. They assert that West agreed to stay within that budget. West was not called as a witness at trial. On August 28, 2011 West’s firm, InHouse Design, produced a “permit” set of drawings for the renovation. On August 31, 2011, the permit was issued.

[7] The Owners assert that they met Gallucci at a family dinner party in August, 2011. Gallucci claims it was August, 2010. Ortolli’s mother is a close friend of Gallucci’s sister-in-law. There is a further connection between the Ortolli and Gallucci families.

[8] Shortly after the party Ortolli asked Gallucci to quote on the HVAC, plumbing and electrical work for the renovation (including the provision of mechanical drawings) and for the creation of a side entrance to the basement. Ortolli sent Gallucci the InHouse drawings on September 6, 2011. TIF provided the requested quotes on September 26, 2011 showing a combined price of $73,600 plus HST. The quotes were accepted, a down payment was made, and TIF’s work began on September 28, 2011.

[9] Here the positions of the parties diverge. Ortolli’s father was diagnosed with cancer in early October, 2011, and Lobello’s father fell ill at the same time. The Owners tended to their parents and were under stress. They assert that, to assist them in this stressful time, TIF, through Gallucci, assumed the position of general contractor and agreed to do the entire renovation on a time and material contract within the Owners’ budget of $400,000. They assert that Gallucci on several occasions assured them that they were “not to worry” and that he would “take care of everything” at the budget limit. There was no written contract between the parties. There was no document corroborating the Owners’ position.

[10] TIF asserts that there was no overarching general contract. Instead, according to TIF, the Owners expanded TIF’s scope of work piecemeal, item-by-item, with each item agreed upon verbally with Ortolli in advance to be done on a time and material basis. There were a few instances where there were written quotes. TIF asserts that it was not made aware of or agreed to any budget limit. TIF asserts that, because of this piecemeal scope creep, the costs were not the most competitive and increased well beyond what it would have cost had the work been done to one set plan.

[11] TIF started rendering invoices on September 28, 2011. This first invoice was for the plumbing, electrical and heating work that was under the fixed price arrangement. The second invoice was for the general renovation and was sent on October 13, 2011. There was another invoice in October, 2011, two in November, 2011, four in December, 2011, three in January, 2012, five in February, 2012 and five in March, 2012. Each invoice contained a description of the work that was covered by the invoice, but with no backup. The Owners insist that TIF promised to provide this backup and an eventual reconciliation of this backup with the invoices in the end, and never did. TIF denies this promise and insists that the Owners knew and approved the expenses in advance. With the exception of a few written quotations, there is no document corroborating either position.

[12] On November 18, 2011 TIF provided the Owners with a written quotation for the construction of a swimming pool at a price of $55,150 plus HST. The quotation was accepted and the work was done. TIF billed for this work through its regular invoicing.

[13] On November 24, 2011 the Owners obtained a revised set of drawings from InHouse Design showing several changes from the August 28, 2011 permit drawings such as the following: movement of the stairway; movement of the den; relocation of washrooms in the basement; deletion of walls in the den; kitchen cabinet changes; door relocation; window relocation; and reduction in mechanical room size in the basement. It was not clear as to which of these changes were purely conceptual or involved rework.

[14] The Owners paid the TIF invoices relatively consistently until mid-January, 2012. Nevertheless, TIF continued working thereafter. InHouse Design produced “as built” drawings on February 24, 2012.

[15] By April 16, 2012 the Owners had paid a total of $354,673.67 (inclusive of tax). On that day, TIF produced a statement showing the Owners that they had not paid invoices totaling $381,633.42. Both sides were deeply concerned. A meeting took place between them on April 16, 2012. Gallucci said that the meeting was in March, 2012. At this meeting, Gallucci produced a handwritten document he prepared entitled, “Estimated Cost to Completion,” which showed a total cost for the renovation of $868,000, of which $578,000 was yet to be paid.

[16] There was no change in course. TIF continued working. It rendered five invoices in April, 2012, four in May, 2012, four in June, 2012, three in July, 2012, one in August, 2012, one in September, 2012 and one in October, 2012. The Owners paid TIF another $95,000 on account at various times between April 16 and August 30, 2012. In the end, TIF’s running statement showed that $471,312.17 was owed. TIF ceased working on July 16, 2012.

ii. Litigation history

[17] On July 17, 2012 TIF registered a claim for lien in the amount of $485,136.37. The Owners’ subsequent payments and TIF invoices reduced the TIF claim for lien to $471,312.17. TIF purported to perfect its lien by commencing an action for the claim for lien on September 27, 2012 and registering a certificate of action. On December 12, 2012, the Owners delivered their Statement of Defence and Counterclaim. TIF delivered its Statement of Defence to Counterclaim on February 20, 2013.

[18] TIF obtained a judgment of reference from Justice MacDonald on May 16, 2013. The order for trial was issued on June 6, 2013. I conducted the first trial management conference on August 19, 2013. I made various orders for interlocutory steps. I conducted a second trial management conference on March 10, 2014, and a third one on June 23 and 24, 2014. At the third trial management conference, counsel for TIF advised that his client wanted to bring a motion before a judge for a de-referencing order and summary judgment. I scheduled a leave motion concerning this process to take place before me. By letter dated August 20, 2014, TIF abandoned this process.

[19] At the fourth trial management conference on November 4 and 10, 2014, I set a schedule for a process to determine the costs of the abandoned leave motion. I also scheduled the trial of this action. I heard argument on the costs issue on December 9, 2014 and rendered my decision on costs on March 5, 2015 awarding the Owners $7,500 in costs.

[20] The trial hearing was conducted in the format of a summary trial with affidavits served in advance for evidence in chief. TIF called several persons who worked on the project for TIF, namely David Gallucci (cement finisher), Renzo Martire (steel beam installer), Salvatore Porco (forming work), Frank Yu (insulation installer), Gary Holmes (pool installer) and Pasquale Giambattista (carpenter). Mr. Giambattista’s evidence created issues, as he was at the time a resident in a facility under doctor’s orders not to attend the trial. Arrangements were made to have Mr. Giambattista give his oral evidence by video-conference from the facility. TIF also called an expert in building technology, Rick Derbecker, to both opine on the issue of the alleged deficiencies, and in response to the quantum meruit estimate of TIF’s work by the expert called by the Owners. TIF also called its principal, Antonio Gallucci (“Gallucci”).

[21] The Owners called Ortolli and Lobello and an expert quantity surveyor, Willem Huinink, to give a quantum meruit estimate of TIF’s work.

III. ISSUES

[22] This case raises the following issues: a) Was there a contract(s) between the Owners and TIF, and, if so, what kind? b) What was the price of TIF’s services and materials? c) Was there any unauthorized work? d) Was there any deficient work? e) Do the Owners have a counterclaim? f) What are the accounting issues, if any?

IV. WITNESSES:

[23] Before I discuss the issues, I will comment on the credibility of the fact witnesses who were called at the trial hearing. In this regard, Ms. Mandin provided me with the helpful decision of Justice Trimble in Santaguida v. Enroute et al., 2014 ONSC 1492. In paragraph 24 of the judgment His Honour stated that credibility involves an assessment of both the truthfulness and accuracy of the witness. He went on to provide a non-exhaustive list of factors to be considered in weighing credibility: the demeanor of the witness; whether the evidence makes sense, namely whether it is in “harmony with the preponderance of probabilities which a practical and informed person would find reasonable given the particular place and condition;” internal consistency; prior inconsistencies; independent corroboration; and an interest in the outcome of the case. I will apply these factors.

[24] The six tradesmen TIF called to give evidence generally impressed me as being credible and accurate. None appeared to have a direct stake in the outcome of the case, although I note that David Gallucci is a brother of Antonio Gallucci. The six gave their evidence forthrightly and without embellishment. Except as stated below, they were not contradicted by other evidence. They withstood cross-examination well. However, their evidence was limited to the scope of their work on the project and their cash receipts. They were called to corroborate TIF’s charges. To the extent it is relevant, I give the evidence of these witnesses weight.

[25] I must comment on the evidence of Mr. Giambattista in particular. He was TIF’s carpenter and appeared on TIF’s witness list. However, at trial Mr. Preger presented me with two letters from his doctor advising that Mr. Giambattista had been hospitalized due to a “psychotic breakdown” in 2013, that he suffered from a “delusional disorder,” and that he resided at LOFT, a community-based housing service with support staff. The doctor, Dr. D’Arcy, asked that the Mr. Giambattista be excused from attending at the trial. The parties worked with the doctor and obtained Mr. Giambattista’s evidence by video-conference from the LOFT facility with the doctor present. The doctor gave evidence as to Mr. Giambattista’s condition.

[26] I found Mr. Giambattista to be a clear thinking witness who gave his evidence without incident, and forthrightly. He had no stake in the outcome of the case. He freely admitted that his recollection was quite inconsistent with his sworn affidavit, which he stated had been drafted by others and he had not read before signing. He freely admitted facts that were not helpful to TIF, such as his statements that he was not paid what TIF alleged he was paid, that the Owners’ changes were not major other than the basement work, the second floor 9 foot ceilings and the roof peak change, that he never worked on the veranda, that he thought that TIF was the general contractor, that he unilaterally decided to change the roof peak from a Georgian style to a Victorian style to facilitate snow removal (which change Orotlli did not like), and that Orolli was upset most of the time. Mr. Giambattista’s cavalier attitude towards his affidavit concerned me, but this was counterbalanced by the clarity and forthrightness of his verbal evidence. I decided to give his verbal evidence (as opposed to his affidavit) weight where it was relevant.

[27] The credibility of the parties was the major issue in this case. Their versions of events were almost diametrically opposed, and they obviously had opposite stakes in the outcome of the case. What complicated matters further was the fact that the parties are related to each other, and that the project in question happened during a time of admitted family stress for the Owners, as their fathers were quite ill. Therefore, what normal commercial parties would do in similar circumstances cannot be readily applied to this situation.

[28] Nevertheless, the Santaguida factors guided me to a conclusion as to which side was more credible. On balance, I found Gallucci more credible. First, he seemed more firm and forthright in the delivery of his evidence. Second, I was impressed by the corroboration he gave to his evidence through the TIF invoices and the backup for the TIF invoices he provided at trial. These invoices were contemporaneous documents, and the Owners admitted receiving them at the time they were sent. There was no evidence that the Owners objected to them at the time. Furthermore, and most importantly, none of these invoices make reference to a budget limit. Had there been such a limit, any contractor of Gallucci’s experience would have made reference to it on an ongoing basis in its invoicing as a control. That did not happen.

[29] Third, and this was the most important factor, Gallucci’s evidence made the most overall sense to me, given the circumstances. No reasonable contractor would enter a project of this magnitude subject to a budget limit without a written contract derived from a take-off. There was no evidence of such a general take-off by TIF.

[30] What makes more sense is the opposite. As of October, 2011 the Owners were under stress due to the family illnesses. They would have been disinclined as a result to do the work of making a comprehensive general plan and written contract for their project. Gallucci, a relative, would also have been disinclined to force them to do so. It makes sense, therefore, that Gallucci would have minimized his contractual relationship with Ortolli to verbal approvals of verbal quotations for specific items of work in advance of the work. It also makes sense in the circumstances that TIF would not have included the usual backup for its time and material invoices, as there was a level of trust in the relationship and a desire to minimize stress. It also makes sense that TIF would have continued working despite a payment shortfall to maintain amity during the family stress. This essentially is Gallucci’s version of events. As a result, it is understandable that the work proceeded piecemeal with no overall contract, control or coordination and that a payment shortfall unfolded. That there were indeed several ongoing changes was evident from a comparison of the permit set of drawings to the November 24, 2011 set of drawings and the eventual as-built drawings.

[31] Ortolli, on the other hand, was less credible. First, his demeanor was not convincing. He seemed nervous and on edge throughout his evidence. At one point, he even objected to Gallucci whispering to Mr. Preger during Ortolli’s cross-examination.

[32] Second, there was no corroboration of the key element of his evidence, namely that there was a verbal general contract with TIF (entered into in September, 2011) at a fixed price of $400,000. I looked for any reference to such a contract in the documents, and there was none. This was telling to me. Ortolli is a real estate agent, and had been one for over five years by the time of the project. Indeed, both he and Lobello stated that they had bought or sold over a hundred houses. In that line of work, contracts are an everyday realty. For them not to confirm in any written form what they viewed to be the critical aspect of the project, namely a general contract with a fixed price at their budget limit, renders this evidence incredible. Indeed, it colored the credibility of the Owners’ entire case.

[33] Third, Ortolli’s evidence was not consistent and did not make sense. He admitted receiving the TIF invoices, and expressed deep concern about the cost build-up and the lack of accounting. By the time of the April, 2012 meeting, he admitted that the Owners’ payments were approaching the alleged budget limit and that the total of the TIF invoices to that date was over $300,000 beyond the alleged budget limit. The handwritten document Gallucci produced at that meeting indicated that the project would cost well over twice the alleged budget limit. Yet, Ortolli did not stop TIF’s work and did not force TIF to provide an accounting. His evidence consistently was that he “trusted” Gallucci who, according to Ortolli, consistently assured him that he, Gallucci, would “take care” of the Owners at the end of the project by correcting invoicing “mistakes” through a grand reconciliation. Despite the family relationship and stress, by this time there was no reason for Ortolli to “trust” Gallucci if indeed there was a fixed price contract. At a minimum, one would have expected Ortolli, an experienced realtor, to confirm the budget limit and the Gallucci assurances at this time in writing, if they in fact existed. There was none of that. Later in his evidence, Ortolli conjectured that there may have been corroborating evidence on his cell phone which he said he lost. I found Ortolli’s evidence here hollow and self-serving.

[34] There was one moment of Mr. Ortolli’s cross-examination on this point that particularly caught my attention. He admitted that he could not bring TIF’s work to an end in April, 2012 because he needed TIF to finish as he “needed a place to live in.” This indicated to me a level of dishonesty and deceitfulness. It was comparable to what Master Albert described in Grainger v. Flaska, 2013 ONSC 4863 (Ont. Master) at paragraph 13 as “dishonest and deceitful” behavior in that case. In the Grainger case, a home owner admitted misleading the contractor about being paid in the end in order to keep him working when the owner had in fact no intention to pay. I find Mr. Ortolli’s behavior to be of the same kind. He admitted he wanted the TIF to finish and his reference to a grand reconciliation of accounts in the end I found to be a disguise for an intention not to pay TIF for its work.

[35] Fourth, there were other inconsistencies in Ortolli’s evidence. For instance, he claimed in his affidavit that the budget limit was based a design that was reflected in the November 24, 2011 set of drawings. Yet, in other evidence he claimed that the budget limit had been set earlier in August, 2011 and formed the basis of the TIF contract allegedly agreed to on September 24, 2011, namely months before the design on which the budget was allegedly based. Furthermore, he claimed that TIF did work on its own initiative and without authority. One would expect an owner to be upset by this and express outrage in written correspondence. None of this written corroboration came to light at the trial.

[36] There were other inconsistencies. After the April, 2012 meeting the Owners continued receiving TIF invoices without complaint and continued paying TIF invoices, although intermittently. The payments in the end exceeded the alleged budget limit. Yet, Ortolli claimed that he and Lobello remained deeply concerned about the massive cost overrun and the lack of accounting. This is inconsistent. The continued payment and absence of complaint is not the conduct of owners faced with a gross and mounting cost overrun on a fixed price contract. Ortolli continued to explain his conduct as coming from a “trust” he had in Gallucci and Gallucci’s assurances, none of which were corroborated by any documents. Again, by this time, there was no basis for this “trust” if there was a budget limit. Furthermore, in June, 2012, when TIF retained counsel to deal with the substantial accounts receivable, the Owners’ responses again never once mentioned a budget or the Gallucci assurances. This further evidence only further eroded my confidence in Ortolli’s credibility.

[37] Lobello was equally lacking in credibility. First, she also seemed nervous and unsure of herself in the witness stand. This did not impress me.

[38] Second, her evidence did not make sense. She stated in her affidavit and on the stand that she took on the financial role in the project, while Ortolli took care of the construction issues. University educated and a realtor herself, Lobello stated that she did not realize the existence of the cost overrun until TIF presented the April 16, 2012 invoice statement showing an invoice total over $300,000 beyond the alleged budget limit. She claimed she was under stress due to the family illnesses, and did not pay attention to the invoice build-up as a result. This makes no sense, since all she had to do was add up the TIF invoices she admitted receiving, which was not much work and which was her responsibility.

[39] Third, there were also glaring inconsistencies in Lobello’s evidence. She stated that she could “not make sense” of the TIF invoices because of the absence of backup, and that she had expected that Gallucci would provide the backup at the April, 2012 meeting. There was no correspondence from Lobello to TIF demanding backup. Also, when Gallucci did not provide the backup at the meeting, the Owners did nothing. The work continued and the Owners continued paying.

[40] Indeed, in cross-examination she was confronted with two telling documents. On April 19, 2012, shortly after the April, 2012 meeting, Lobello sent Gallucci an email that stated the following: “Please find attached all the financial info you requested. Please let me know if you need anything else.” What followed were a series of financial documents concerning the mortgage on the Property, the Owners’ line of credit and the Owners’ income. There is no reference to a budget, an accounting or any assurances from TIF. Lobello had difficulty explaining this document, but in the end stated that she sent the document because she wanted to encourage TIF to continue working and to mollify TIF’s concern about the Owners’ means. I found this behavior to be of the same kind as Ortolli’s and as described in Grainger, namely misleading TIF as the Owners’ intention to pay.

[41] Lobello had the same problem with an email she wrote on September 11, 2012 in response to TIF’s desperate plea for money. This was two months after the TIF claim for lien was registered. In this email Lobello refers to the Owners’ liquidity problems, not any budget or final reconciliation of accounts by TIF. This was all inconsistent with the Owners’ position (about a binding budget) and consistent with TIF’s position, as TIF maintained that it was the Owners’ inability to pay that caused the payment drop-off, not a budget, and that the Owners misled TIF about their finances and payment intentions to cause TIF to continue working.

[42] Furthermore, Lobello purported to support her husband’s position that there was throughout a general fixed price contract with TIF at $400,000. However, in cross-examination at one point she stated that she would be prepared to pay TIF whatever was fair for what it had done. After all this, I was left wondering what of her evidence I could accept.

[43] In general, I found that the evidence of the Owners had a general sense of the unreasonable and self-serving about it. While I do not make an explicit finding on this point, much of it appeared contrived for the litigation. I add that the Owners did not call as a witness Simon West, the architect who they said provided them with the design in accordance with their budget. I draw a negative inference from this that West would not have assisted the Owners on this point. Therefore, in the end I have decided to prefer the evidence of Gallucci where it conflicts with the evidence of the Owners.

[44] Mr. Preger brought to my attention the decision of Justice Hughes in Shorty Drywall Inc. v. Lombardo, 2003 ABQB 747 (Alta. Q.B.). In this case, a drywall company did certain work on a home. The homeowners alleged that there was no contract between the parties as there was no agreement on price, and that they were shocked by the first invoice. His Honour dismissed this assertion as lacking in credibility, as it did not make sense. The defendants had owned and operated a business. He found that the defendants would not have allowed the contractor to perform all of his work without an agreement on price. Similarly, I find that the Owners’ position in this case is largely not believable given their line of work, and their conduct.

[45] Concerning the evidence of the two experts, Rick Derbecker and Willem Huinink, their credibility turned primarily on my assessment of the accuracy of their opinions. I will reserve my comments on their credibility for my assessment of the substance of their opinions.

V. ANALYSIS

a) Was there a contract(s) between the Owners and TIF, and, if so, what kind?

[46] In light of my discussion about credibility, I find that there were individual contracts between TIF and the Owners for individual items of work as the work unfolded. The initial contract at the end of September, 2011 was a fixed price one for the HVAC, plumbing and electrical work. The scope then increased piecemeal through primarily verbal time and material contracts based on verbal TIF quotations for individual items, approved by the Owners. The prices were not tendered. On four other occasions, there were written, fixed price, contracts (obtained through written quotations) agreed upon in advance of the work. TIF then billed for this work globally through its invoices to the Owners that were rendered from time-to-time without backup. While somewhat of an unorthodox approach for time-and-material contracts and invoices, this interpretation makes the most sense to me in light of the evidence and the circumstances of this case.

[47] Ms. Mandin urged me to find that there was an overall fixed price general contract between TIF and the Owners that was entered into at a meeting in TIF’s office on September 24, 2011. I do not accept that position. There is no credible evidence of such an arrangement.

[48] In the alternative, Ms. Mandin urged that I find that there was no contract as there was no “meeting of the minds” between the parties on one of the three essential elements of a construction contract, namely price. It is well established law that there must be an agreement between the parties to a construction contract on the following three elements for there to be a binding contract: price; scope of work; and schedule. If one of these elements is not agreed to, there is not enough certainty to make a binding contract.

[49] In my decision in Goulimis Construction Ltd. v. Smith, 2014 ONSC 1239 (Ont. Master) I came to the conclusion in that case that there was no binding contract because the owners and the contractor had not agreed on price. Ms. Mandin urged me to use this case as precedent for making the same finding here.

[50] I find that the facts in Goulimis are distinguishable. In that case, there was clear documentary evidence that the owners had a firm budget in mind from the outset of their relationship with the contractor and that they pressed the contractor to produce a construction budget to conform to their budget. Indeed, at one point, when they became concerned about uncontrolled cost buildup, the owners went so far as to cause a suspension of the work until the contractor had produced an acceptable construction budget. In the case before me, on the other hand, the evidence of the Owners’ alleged budget came from self-serving and uncorroborated pronouncements in the Owners’ affidavits and oral evidence given years after the events. I do not believe it.

[51] Mr. Preger referred me again to the Shorty Drywall decision at paragraphs 17 to 19 where Justice Hughes found that he could not believe the defendants, who were business people, in their denial of an agreement on a contract price. His Honour noted that such defendants would not have allowed the plaintiff to work on the house without an agreement. Similarly, I find that the Owners in this case, who are business people and who deal with contracts regularly, would not have allowed TIF to do all of its work without a contract.

[52] I find that the Owners’ conduct, as opposed to their pronouncements, was consistent with TIF’s theory of several contracts for individual items in an ever increasing scope. The Owners continued to pay until the money ran out. Therefore, I do not believe that there was a genuine disagreement between the parties on the essential elements of a construction contract.

b) What is the price for TIF’s services and materials?

[53] The evidence as to the contractual value for TIF’s services and materials diverged markedly. The Owners produced an expert quantity surveyor, William Huinink, and filed an expert report that Mr. Huinink had prepared dated March 3, 2014 that was entitled, “Quantum Meruit Estimate” (“the Huinink Report”). This report contained a cost estimate of the value of TIF’s work that Mr. Huinink called a “Class A (Pre-Tender)” estimate. What followed was a breakdown of the TIF work into its elemental parts plus stated quantities for these parts. Certain unit rates were applied to these quantities to produce costs for each part. These costs were then added up to a total of $439,600 plus HST for a grand total of $496,748, which Mr. Huinink described as his opinion of the “value of work supplied” by TIF.

[54] The Huinink Report then contained a section entitled, Revised Deficiencies List – Schedule “E,” which contained Mr. Huinink’s valuation of the cost to correct the Owners’ final list of 78 alleged deficiencies in TIF’s work, a list that appeared in the Scott Schedule. Again certain unit rates were specified for stated quantities. Mr. Preger challenged Mr. Huinink’s qualification to opine on the issue of deficiencies in any way, as Mr. Huinink is not an engineer. In the end, I allowed Mr. Huinink to opine on what was within his expertise, namely the cost of correcting the alleged deficiencies, not the merits of the deficiencies themselves. Mr. Huinink assessed the cost of correcting the 78 deficiencies at $102,762 (tax inclusive). While not clear from the Huinink Report, Mr. Huinink made it clear in his evidence at trial that his final opinion on the quantum merit estimate of TIF’s work included a deduction of the $102,762I from the $496,748. This means that Mr. Huinink’s final quantum meruit estimate of TIF’s work was $393,986 (tax inclusive). If accepted, this would result in a finding of a significant overpayment by the Owners.

[55] TIF, on the other hand, produced an expert in building technology with the firm CCI Group Inc., Richard L. Derbecker. Mr. Derbecker’s accepted expertise extended to commenting on the quality and cost of construction. He prepared two reports that were submitted at the trial. The first report was dated February 27, 2014 (“the First Derbecker Report”) and concerned his opinion of the merits of and cost to correct the 138 items of deficiencies that the Owners initially listed in the Scott Schedule. This list was reduced to 78 after this report. Mr. Derbecker prepared a second report on April 30, 2014 (“the Second Derbecker Report”). In his second report, Mr. Derbecker responded to the Huinink Report. Concerning the question of the value of TIF’s work, this is what Mr. Derbecker stated on page 3: “In our opinion with the addition of a mark-up on the sub-contractor’s invoices and the inclusion of all of the TIF efforts, . . . the cost of the work as it was actually completed on the project, in my opinion, appears to reasonably reflect the values billed by TIF.” The TIF invoices total $885,617.60 (tax inclusive).

[56] I will deal with the issue of deficiencies under a separate heading. Concerning the question of the baseline contractual value for TIF’s work, I have decided not to accept Mr. Huinink’s opinion for the following reasons: a) One complete design assumption: Mr. Huinink based his Class A estimate on the as-built drawings of February 24, 2012 and the permit drawings of August 28, 2011 plus his on-site review of the finished construction. He was not even aware of the November 24, 2011 drawings. He admitted assuming that the work was done with competitive bidding to the final design from the beginning. Therefore, his estimate did not capture the considerable increase in cost caused by the ever changing design of the project, a point that Mr. Derbecker made forcefully. Mr. Huinink admitted in cross-examination that there was “no room for scope creep” in his estimate. He admitted as well that scope creep could have a significant impact on construction cost. He admitted in reviewing the November 24, 2011 drawings that there were several changes during the course of the work. This is what Mr. Derbecker stated on this subject: “As a result of the way the work flowed the project had numerous changes, re-pricing of elements, work commenced and abandoned, and other factors which limit the value of a comparison of a similar model project with competitive pricing on all elements.” I accept that criticism. b) Invoices ignored: Mr. Huinink admitted not even looking at the TIF invoices in formulating his opinion. As I have found that there were certain fixed price contracts plus numerous verbal, time-and-material, contracts for the TIF work, this oversight, in my view, is critical. The TIF invoices captured the contractual arrangements between the parties. The few fixed price contracts are determinative of the issue of the value for the work on those items. By ignoring them, Mr. Huinink’s opinion became less relevant. Mr. Derbecker pointed out, for instance, that Mr. Huinink valued the pool work, a fixed price contract item, at about 22% below the fixed price for that work. Concerning the time-and-material work, Mr. Huinink’s opinion has more relevance, but even here his oversight of the TIF invoices diminishes his credibility. The invoices and their back-up show the cost rates and estimates that I find were agreed to. Competitive bidding was not contemplated. In my view, Mr. Huinink should have used that cost information rather than his own rates, and should have confined his opinion to the reasonableness of the bottom-line cost in light of the work that was done. Instead, Mr. Huinink simply applied his own rates with the assumption of competitive bidding. In my view, Mr. Huinink’s approach concerning the time-and-material work did not respect the arrangements between the parties. Interestingly, I note that in re-examination Mr. Huinink admitted that the contractor’s cost was relevant to his quantum meruit estimate. Yet he did not consider this cost, and in the end gave an opinion on value that was grossly disproportionate to the documented TIF cost. The evidence shows that, while TIF invoiced the Owners $885,617.60, TIF was invoiced $782,035.43 by third party contractors, suppliers and employees, and that TIF paid these third parties at least $671,551.66. Mr. Huinink’s opinion would have me find that the value of TIF’s work (after deducting for deficiencies) was about half of TIF’s third party expenses, much less the TIF invoicing. I do not find this to be reasonable. c) Quantification missed: During his cross-examination, Mr. Huinink admitted having missed several quantities. He admitted not including the new windows, the larger joists and sheeting, the in-floor hearing, the shoring for the basement work and the metal cladding. He admitted under-quantifying the stud walls. Concerning profit and overhead, he had difficulty defending his use of 5% of the cost of construction for profit and overhead cost. Mr. Preger pointed out to him that in the case of Homewood Developments Inc. v. 2010999 Ontario Inc., 2013 ONSC 4441 (Ont. Master) at paragraph 105 Mr. Huinink had rendered a similar opinion of the value of construction work and had used 30% for profit and overhead. In another case, Crownwood Construction Ltd. v. Omartech Construction Inc., 2006 CarswellOnt 1337 (Ont. Master), Mr. Huinink rendered another similar opinion and allocated 20% to profit and overhead. Mr. Huinink tried to explain these other cases as involving more constricted space in larger, more commercial, projects. But he admitted in the end that profit and overhead cost on the project in question would be considerably higher than his estimate, namely in the 25% range, if the work was done item-by-item. I have found that the work was done indeed on an item-by-item basis. d) Unsubstantiated evidence: At the end of his re-examination, Mr. Huinink gave evidence about what he stated was the unreasonableness of the TIF total invoiced cost based on a per square footage analysis. He stated that TIF invoice total translated into a per square footage cost (using total square footage for the finished house of 4,620) of almost $200/SF. He then said that this was in excess of what the Toronto Real Estate Board (“TREB”) considers to be the cost per square foot benchmark for a “luxurious home” in Toronto, namely $160/SF. The inference was that Mr. Huinink did not consider the house to be “luxurious.” The evidence about TREB was not established as being within Mr. Huinink’s professional knowledge. It was hearsay as it was not verified. I discount it. The inference about the house not being luxurious was not grounded in his report. In his report, Mr. Huinink made no comment about the overall quality of the home. That Mr. Huinink suddenly made these statements at the end of his evidence suggested a lack of confidence and detracted from his credibility. Furthermore, it left me wondering whether the house had in fact been transformed piecemeal into a “luxurious home,” as Gallucci maintained. Gallucci stated throughout that Ortolli wanted a “dream home.”

[57] For these reasons, I have decided not to accept Mr. Huinink’s opinion of the value of the TIF’s work. I agree with Mr. Derbecker that the TIF invoices, totaling $885,617.60 (tax inclusive), reflected the reasonable value of the work, given the way it unfolded. Furthermore, the TIF invoices reflect what the parties agreed to, namely the price.

[58] I am bolstered in this conclusion by the evidence TIF proffered. I was impressed by the detail of the TIF invoice back-up, which showed the extent of the work TIF did. Ms. Mandin criticized TIF for its poor record keeping and argued that a contractor on a cost-plus contract should bear the risk of such poor record keeping; see G. T. Parmeter Construction Ltd. v. Sanders [1947] O. J. No. 568 (Ont. Master). I have determined that the TIF record keeping was sufficiently detailed to qualify for payment. The absence of the back-up when the invoices were rendered, I have determined was a function of the relationship between the parties and the circumstances.

[59] I was also impressed by the evidence of TIF’s witnesses, Messrs. David Gallucci, Giambattista, Martire, Porco, Yu and Holmes. These men gave credible evidence of the complications and detail of the work that was done on site.

[60] At this point, I must mention an issue that arose during Mr. Giambattista’s evidence. In his affidavit, Mr. Giambattista swore in his affidavit that he had been paid $54,200. In cross-examination, he denied this and stated that he had been paid only about $35,000 for the seven months of work he did on this project. As stated earlier, I found Mr. Giambattista’s oral evidence much more compelling than his affidavit. Because of this evidence, I have decided to deduct $20,000 from what I otherwise find to be the price of TIF’s work.

[61] Therefore, I find that the price of TIF’s work was $865,617.60 (tax inclusive), subject to the issue of set-off yet to be determined.

[62] I, therefore, also find that, by not paying this amount, the Owners were, and are, in breach of contract, subject to any issues of unauthorized work, deficiencies or other set-off.

c) Was there any unauthorized work?

[63] The Owners maintain that TIF did work that was not authorized. Ortolli asserted in his affidavit that TIF unilaterally altered the following items in the design:

1. Basement ceiling height: Ortolli alleged that Gallucci decided unilaterally to drop the basement floor to facilitate a 9 foot basement ceiling rather than the 8 foot basement ceiling specified in the permit drawings.
2. Roof style: Ortolli alleged that TIF unilaterally changed the specified Georgian style roof to a Victorian style, which was more slopped.
3. Second floor ceiling height: Ortolli alleged that TIF unilaterally installed 9 foot ceilings on the second floor as opposed to the 8 foot ceilings specified in the drawings.
4. Second floor ceiling removal: Ortolli alleged that TIF unilaterally removed the entire second floor ceiling, as opposed to the partial removal indicated in the drawings. This change, according to Ortolli, led to a “rebuilding” of the roof.
5. Brick veneer removal: Ortolli alleged that TIF unilaterally removed the original brick veneer on the east side of the dwelling
6. Awning: Ortolli alleged that TIF unilaterally replaced the specified pergola for the front of the house with an awning.

[64] Ortolli stated that he did not require that TIF redo this work because Gallucci said it was too late to redo the work, that he, Gallucci, would “make it up” to the Owners, and that these changes could all be done within the Owners’ “budget” in any event.

[65] Gallucci’s evidence was, again, the opposite. Concerning the basement ceiling, he stated that Ortolli was the one who wanted the higher ceilings in the basement because he wanted eventually to lease the basement to tenants at high rents. According to Gallucci, Ortolli told him to ignore the specified heights in the drawings, which were not engineer approved in any event. Gallucci gave the same evidence in relation to the changes to the second floor ceiling. As to the other changes, Gallucci stated that they were all approved by the Owners in advance or at the time of construction, with full knowledge of the eventual cost.

[66] There was no corroboration concerning either of these positions. Therefore, given my conclusion about the credibility of the parties, I prefer the evidence of Gallucci. I so find. I would only add that I find incredible the Owners’ allegation that Gallucci would unilaterally change the design in these significant ways. This would only make sense if the changes were necessitated by building code or core practice requirements. Otherwise, TIF had no motive to make such changes. To sustain such an allegation, therefore, the Owners had to present clear corroboration that this happened. There was none.

[67] The evidence of Mr. Giambattista needs to be discussed here. He was the carpenter for most of the project. He confirmed that unilateral changes were made to insure the structural integrity of the house, such as when the location of the stairway was changed. But the Owners did not complain about these changes.

[68] Concerning other changes, Mr. Giambattista confirmed making them, such as with the above-noted basement and second floor ceilings. He added though that in every case Ortolli approved of the changes. Mr. Giambattista’s evidence impressed me as to the number and complexity of the changes that were made.

[69] Mr. Giambattista addressed the roof style change in some detail. He stated that he unilaterally changed the roof style from the specified Georgian style to a steeper Victorian style to facilitate snow removal from the roof. He frankly admitted doing this without Ortolli’s up-front approval. He said that this was the one instance in which that happened. However, he added that when he learned about the roof change, Ortolli approved it, though reluctantly. As stated earlier, I found Mr. Giambattista to be a clear and forthright witness with no bias, even to the point of contradicting Gallucci’s evidence. I accept his evidence here.

[70] I, therefore, find that TIF did not do work that was unauthorized or unapproved by the Owners. There will be no deduction for this reason.

d) Was there any deficient work?

[71] The Owners allege that there were numerous deficiencies in TIF’s work. As stated earlier, the original list in the Scott Schedule contained 138 items. At trial, this list had been reduced to 78. Mr. Derbecker commented extensively on all 138 items in the First Derbecker Report, both as to merit and as to the cost of correction if the claim had merit. He attended on a site visit of the property on October 28, 2013 and took numerous photographs. He reviewed the productions. There was no challenge as to his qualifications for doing this work. The list was later reduced to 78. I will, therefore, use his evidence in reviewing the 78 items.

[72] Mr. Huinink valued the cost of correcting these deficiencies in order to determine his bottom-line valuation of TIF’s work. He admitted that he did not have the qualifications to and did not do the work of assessing the merits of the deficiency claims. I ruled that I would use Mr. Huinink’s opinion only in the event I otherwise found that a deficiency claim had merit, and then only on the issue of the cost to correct the deficiencies.

[73] Mr. Preger argued that there should be no deduction for deficiency related costs, as the Owners did not give TIF an opportunity to correct deficiencies. The general rule is that a contractor who is not in breach of contract should be given a reasonable opportunity to correct its deficiencies before it is charged the costs of correcting them, and if that is not done, there can be no deduction from the contractor’s entitlement to payment for such costs; see Grainger, op. cit., at paragraph 45, and C. S. Bachly Builders Ltd. v. Lajlo, 2008 CarswellOnt 6572 (S.C.J.) at paragraph 87.

[74] I do not accept that proposition in this case. The Owners have not denied TIF the opportunity to correct its deficiencies. The Owners’ evidence was that they did not have the proper opportunity to examine the TIF work until they moved into the house in July, 2012. I find this assertion credible as the Owners were under stress with their respective families and busy before they moved in. They did not have on-going consulting advice, which TIF knew. They served the initial list of 138 deficiencies in December, 2012 at the time they served their pleading. There was then a response from TIF as to what it considered to be within its scope and an investigation by TIF’s expert, Mr. Derbecker, starting in October, 2013 as to whether the claimed deficiencies had merit. In their affidavits, the Owners did not state that they barred TIF from correcting its deficiencies. My view of Mr. Gallucci’s evidence is that he was simply not prepared to do any further work for the Owners in light of their non-payment.

[75] I have, therefore, decided to deduct the reasonable cost of proven deficiencies from TIF’s entitlement. The next task is to determine what deficiency claims have merit. I will now review the final list of 78 alleged deficiencies.

d.1 Precast moldings were not caulked

[76] The Owners alleged that the precast moldings were not caulked. The First Derberker Report contains a picture showing proper caulking. Mr. Derbecker commented that the caulking was proper. The Scott Schedule does not articulate a substantive response from the Owners. I accept Mr. Derbecker’s evidence, and deny the claim.

d.2 Failed to remove old entrance concrete step (West side)

[77] There was a small foundation projection on the West side. Mr. Derbecker gave no merit to this claim, as the drawings did not identify it. I accept this evidence and deny the claim.

d.3 Poorly laid brick

[78] The Owners allege that TIF laid the brick poorly, and left the brick dirty with mortar and “poorly finger jointed.” Mr. Derbecker commented that the brick used was “rustic textured brick,” which does not lend itself to smooth, straight edges. As a result, the joints do not have a “clean linear appearance.” As to the mortar, he commented that the mortar work was appropriate for the type of brick used. In the Scott Schedule, the Owners assert that the brick needed power washing. Since the Owners have the onus of proving their deficiency allegations, I find that they have done so in this case. I deny the claim.

d.4 Insufficient insulation/inadequate air circulation

[79] The Owners allege that there is insufficient insulation and air circulation, causing ice damming on the roof by the west side entrance and east side wall. In the Scott Schedule, TIF stated that the insulation had been tested and certified by the municipality, and that the municipality had not raised this issue. Mr. Derbecker advised that, as his site visit was not during the winter, he could not confirm this deficiency. However, he noted that there was no evidence of water penetration or other damage that would indicate a deficiency in this regard. Since the Owners have the onus of proving their deficiency allegations, I find that they have not met that onus in this case. I deny the claim.

d.5 Chipped masonry side of poured concrete veranda

[80] The Owners allege that there was chipped masonry on the west side of the concrete veranda. The Scott Schedule contains a picture of a piece of concrete with a crack. Mr. Derbecker stated in his report that he could not locate this item. I will give the Owners the benefit of the doubt here. Mr. Huinink valued the correction work at $150. I grant that claim.

d.6 Chipped precast next to down spout on west side

[81] The Owners allege that there was chipping in the precast next to the down spout on the west side of the building. They include a picture in the Scott Schedule. Mr. Derbecker agreed that this was a deficiency and valued the repair at $200. Mr. Huinink’s valuation was $400. I grant the Owners’ claim here of $400.

d.7 Stucco’d columns are cracked and second paint coat not applied

[82] The Owners allege that there was cracking in the stucco on the columns at the joints. Mr. Derbecker commented that Tarion does not consider cracks that are not visible beyond 6 meters and that do not involve water penetration as a deficiency. He stated that this was the case with what he saw on the columns, as there was no issue of water penetration. Based on the photographs in the Scott Schedule and the First Derbecker Report, I agree, and deny the claim.

d.8 Front entrance door installed out of square

[83] The Owners allege that the front door was installed out of square, does not properly close and bleeds air as a result. Mr. Derbecker stated that the door was square and operating well at the time of his site visit. Again, since it is the Owners who have the onus of proving the deficiency claim, I find that they have not done so in this case. I deny the claim.

d.9 Water coming over the flat roof onto veranda causing marks

[84] The Owners allege that water falls off of the flat roof onto the veranda causing rust marks. Their picture in the Scott Schedule does not clearly show any marks. Mr. Derbecker stated that he could not find any such marks on his site visit. The Owners have not proven their claim here. I deny it.

d.10 Backyard was not graded

[85] The Owners allege that the backyard was not graded. Mr. Derbecker stated that it was graded when he attended at the site. Again, the Owners have not proven their claim here.

d.11 A/C system was undercharged

[86] The Owners allege that the air conditioning unit was undercharged, and that the Owners had to pay Firenza Plumbing and HAC $300 plus HST to service the unit on June 26, 2013. Mr. Derbecker agreed and valued the item at $300. Mr. Huinink’s valuation was the same. I accept this claim at $300.

d.12 Self-latching gate on the east side does not self-latch

[87] The Owners allege that this self-latching gate does not work. Mr. Derbecker was not able to get access to this gate. I give the Owners the benefit of the doubt here. Mr. Huinink valued the claim at $75. I grant that claim.

d.13 Weeping tile system is grossly deficient

[88] The Owners allege that the weeping tile system was grossly defective, which led to extensive water damage during a heavy storm on July 8, 2013. They also allege that the sump pumps were useless and that downspouts were not properly connected. TIF’s Scott Schedule response was that the Owners have not demonstrated that this deficiency was attributable to TIF’s work.

[89] Mr. Derbecker stated that he did not have access to the weeping tile system, but that he was advised, no doubt by TIF, that a new water proofing system was not in TIF’s scope. I have found that TIF was not a general contractor with overall responsibility for the renovation project. I was also given no evidence that waterproofing was what TIF was required to do or did. I, therefore, find that the Owners have not proven this claim. I deny it.

d.14 Poorly constructed cedar deck with wobbling railing

[90] The Owners allege that the railing on the cedar deck is wobbling, and that the deck is defective. Mr. Derbecker dealt only with the railing and agreed with them on that point, valuing the correction work at only $200. Mr. Huinink valued the entire correction of the deck, including the railing, at $1,250. Because Mr. Derbecker did not deal with the deck as a whole, I give the Owners the benefit of the doubt here. I grant the claim at $1,250.

d.15 Mortar in two different colours

[91] The Owners allege that TIF used different mortar colours. Mr. Derbecker did not deny this allegation. He just stated that this was in the normal range of variations “in typical home construction.”

[92] I do not agree with Mr. Derbecker here. The home, according to TIF, was supposed to be Ortolli’s “dream home.” This kind of deficiency cannot be tolerated as a result. Mr. Huinink referred to his valuation of the entire repointing and cleaning of all brickwork, which was valued at $13,775. Because of this issue, I will accept this entire deficiency at the $13,775 figure.

d.16 Pillars not flush and cracking

[93] The Owners allege that the single pillars are not flush with the edge of the porch. Mr. Derbecker looked at this item and only noticed a minor gap where the chamfered edge of the slab extends past the column. He did not consider this minor issue a defect. I find that the Owners have not met their onus of showing that is a defect. I deny the claim.

d.17 Exterior outlets/GFIs not working

[94] The Owners allege that the exterior GFIs were not working at the end of TIF’s work. Mr. Derbecker agreed with them and allotted $300 to the cost of correcting this item. Mr. Huinink allotted $450. I will accept this claim at $450.

d.18 HVAC system not installed correctly

[95] The Owners allege that TIF did not install the HVAC system properly and that they are suffering inordinate heat loss as a result. Mr. Derbecker commented that the HVAC system appears to comply with the requirements of the home. I find that the Owners have not met their onus of proving this claim.

d.19 Central vacuum rough-in absent faceplates

[96] The Owners have withdrawn this claim.

d.20 No central vacuum system

[97] The Owners have withdrawn this claim.

d.21 Hardwood floor threshold not flush with tile floor

[98] The Owners allege that the hardwood floor is not flush with the tile floor where the two joined. Mr. Derbecker commented the variance at worse was 2 mm, which is within Tarion’s acceptable variance and normal standards of workmanship. I find that the Owners have not proven this claim. I deny it.

d.22 Windows in office are installed off square by ¾ inch

[99] The Owners allege that the windows in the office are not square. Mr. Derbecker disagreed, as he found that the windows were “reasonably square.” I find that the Owners have not met their onus of proving this claim. It is denied.

d.23 Closet has hole in the wall with cables jammed inside

[100] The Owners allege that the hole in the closet wall with cables inside was a deficiency. Mr. Derbecker commented that this was in effect a rough-in for a future garage, and therefore not a deficiency. I find that this claim is not proven, and deny it.

d.24 Drywall was finished sloppily throughout the house

[101] The Owners complain that the drywall was poorly finished throughout the house. Mr. Derbecker commented that what he saw in this regard was within Tarion’s tolerance and industry norms as he understood them. I find that the Owners have not proven this claim, and I deny it.

d.25 Grouting not completed properly

[102] The Owners allege that grouting was not completed properly. In the Scott Schedule TIF denies this. Mr. Derbecker stated in his first report that this item did not fall within TIF’s scope. The pictures in the Scott Schedule are inconclusive. I deny this claim.

d.26 Missing grout throughout the shower stall, entrance and doorway

[103] The Owners complain that there was not proper grout in these areas. Mr. Derbecker noticed one void between the finished wall tiles and the trim. He commented that the trim was the responsibility of other contractors, not TIF. The Owners have not proven this claim. I deny it.

d.27 Windows in living room out of square

[104] The Owners allege that the windows in the living room are out of square. Mr. Derbecker commented that these windows were in fact within acceptable tolerance. I find that the Owners have not proven this claim, and I deny it.

d.28 Drywall in living room had imperfections

[105] My finding here is the same as with d.24 above. Mr. Derbecker added that the dings and dents in the drywall in this area should have been addressed by the painter, which was not in TIF’s scope.

d.29 Wood valiance in the kitchen has imperfections

[106] The Owners complain that the valiance was not properly installed, leaving gaps. Mr. Derbecker noted some minor gaps, but also stated that some minor gaps are common and relate to changes in moisture in the wood. He gave some merit to this claim. Mr. Huinink valued this item at $200. I give the Owners the benefit of the doubt. I grant this claim at $200.

d.30 Nails and joints on crown molding in the kitchen are exposed

[107] This is an extension of d.29 above. I will give the Owners the benefit of the doubt here, and grant this claim at $120, the value assessed by Mr. Huinink.

d.31 Ceiling drywall in kitchen has hole due to water damage from bathroom

[108] Mr. Derbecker did not notice this alleged damage. He did notice that another contractor had not finished properly on the drywall around the exhaust fan. I find that the Owners have not established that this items falls within TIF’s scope, and therefore have not met their onus of proving this claim. I deny it.

d.32 Pot lights are coming off the ceiling in the kitchen

[109] Mr. Derbecker did not see this alleged deficiency at the time of his site visit. I note that the Owners signed an acknowledgment confirming that TIF’s electrician, Delmarc Electric Inc., had completed its work. I find that the Owners have not met their onus of proving this claim. I deny it.

d.33 Vents in kitchen are not properly exposed

[110] The Owners allege that vents in the kitchen are partially obscured by cabinets. Mr. Derbecker agreed and valued the correction work at $50. Mr. Huinink valued the work at $150. I grant this claim at $150.

d.34 In-floor electrical wiring ripped out

[111] The Owners are now not pursuing this claim.

d.35 Range hood not installed as per contract

[112] The Owners allege that the range hood was not properly installed by TIF. Mr. Derbecker commented that this was not a part of TIF’s scope. I find that the Owners have not established that this falls within TIF’s scope and have, therefore, not met their onus of proving this claim. I deny it.

d.36 Kick plate by sink not properly installed

[113] The Owners allege that the kick plate by the sink becomes loose and falls off. Mr. Derbecker agreed, and valued the correction work at $50. Mr. Huinink valued the item at $250. I grant this item at $250.

d.37 Missing wood trim above the oven

[114] TIF commented in the Scott Schedule that this item was a part of the oven, and was not purchased by the Owners. Mr. Derbecker agreed with that position. I find that the Owners have met their onus of proving this claim. I deny it.

d.38 Kitchen built-in microwave shelf not built as per drawings

[115] The Scott Schedule is not more particular as to this item, namely what drawing is referred to and what exactly the alleged variances are. I, therefore, deny this claim.

d.39 Spindles in the basement are missing bases and do not match ones leading to 2nd floor

[116] Mr. Derbecker found that the variance here is minor and not readily visible. He added that none of the documents he reviewed required that the spindles be identical. The Owners have not met their onus of proving this claim. I deny it.

d.40 The basement is incomplete

[117] The Owners have now withdrawn this claim.

d.41 Basement ceilings should have had 5/8 inch drywall

[118] The Owners allege that the ceilings in the basement should have had 5/8 inch drywall and that TIF used ½ inch drywall instead. Mr. Derbecker pointed out that the floor schedule in the drawings specified ½ inch drywall. The Owners have not proven this claim, and I deny it.

d.42 Highly uneven concrete floor in basement

[119] The Owners allege that basement floor was uneven, causing poor drainage. Mr. Derbecker agreed that there were “localized uneven areas” in the basement. He valued the repair at $500. Mr. Huinink assessed the repair costs as a part of another item, namely the complaint about piping. I accept this claim, and value it at $500.

d.43 Pot lights and registers coming off walls

[120] This appears to duplicate item d.32 above. Mr. Derbecker did not comment on this item separately in a meaningful way. Because I denied d.32, I will deny this claim as well.

d.44 Vestibule light in wrong location and original hole not covered

[121] The Owners allege that the vestibule light was installed in the wrong location, and that the original hole was not covered. Mr. Derbecker agreed about the hole cover-up but not the location, which he stated was requested by the Owners. He assessed the cover-up work at $50. Mr. Huinink assessed the correction work here at $150. I accept this claim at $150.

d.45 Huge cracks in concrete floor at entrance on vestibule door

[122] The Owners allege that there are “huge cracks” at the entrance on the vestibule door. Mr. Derbecker acknowledged the existence of the cracks but stated that they fall within Tarion’s stated tolerance for cracks, namely up to 4 mm. He asserted that the cracks in question were approximately 2 mm.

[123] Having reviewed the Owners’ photograph in the Scott Schedule, I am not prepared to accept Mr. Derbecker’s opinion, particularly as this home was supposed to be a “dream home.” The cracks in any event appear to be greater than 4 mm. I am prepared to accept this claim. Mr. Huinink assessed the cost of correction as part of the larger complaint in item d.54 concerning piping. In the absence of other evidence, I determine that this item of floor cracking correction is properly assessed at $5,000.

d.46 Drywall at vestibule has gaping hole with exposed electrical box

[124] Mr. Derbecker agreed with this claim and valued the repair cost at $50. Mr. Huinink’s assessment was the same. I accept this claim at $50.

d.47 2 phone jacks and cable installed in same location

[125] Mr. Derbecker agreed with this claim and valued the repair at $50. Mr. Huinink assessed the repair cost at $150. I accept this claim at $150.

d.48 Cable wires are protruding and exposed in the basement

[126] Mr. Derbecker did not agree with this claim, asserting that it was a function of the basement rough-in not being done. Presumably, he accepted TIF’s position that it rightfully did not finish because it was not being paid. I agree, and do not accept this claim as a result.

d.49 Plumbing and rough-ins are installed poorly and incorrectly

[127] The Owners allege that this work was done poorly and incorrectly. Mr. Derbecker did not agree, stating that the plumbing was roughed-in and accessible for finishes, no doubt by others. I find that the Owners have not met their onus of proving this item, and I deny it.

d.50 Wires left exposed and dangling from the ceiling of the basement

[128] Mr. Derbecker did not see this alleged deficiency during his site visit. Nevertheless, the photograph in the Scott Schedule shows this dangling wire. Mr. Huinink assessed the repair cost at $150. I grant this item at $150.

d.51 No vent cover supplied or installed for the exhaust fan in the laundry room

[129] Mr. Derbecker agreed with this complaint. He assessed the repair cost at $30. Mr. Huinink assessed the repair cost at $50. I accept this claim at $50.

d.52 Sump pump is continuously running and not operating properly

[130] Mr. Derbecker noted that the sump was not continuously running during his site visit. He added that the pump was working. The Owners have not met their onus of proving this item, and I deny the claim.

d.53 Radiant heat not completed

[131] In the Scott Schedule the Owners withdrew this claim.

d.54 No combi-tank was provided or installed

[132] In the Scott Schedule, the Owners withdrew this claim.

d.55 Raising the ceilings in 2nd floor to 9 feet and resulting effects on roof

[133] As stated above, I do not accept the Owners’ position that TIF unilaterally and without authority raised the ceilings in the 2nd floor to 9 feet. I find that the Owners gave TIF that authority. Therefore, I do not accept this complaint as being a deficiency.

d.56 Holes or air pockets in grout in tiled area of 2nd floor bathroom

[134] Mr. Derbecker did not notice this issue during his sight visit. I, therefore, find that the Owners have not met their onus of proving this item. I deny it.

d.57 On May 4, 2013 all window jam tiles in 2nd floor bathroom fell

[135] Mr. Derbecker noticed that these jamb tiles were missing. He assessed their cost at $100. Mr. Huinink assessed the cost at $240. I accept this claim at $240.

d.58 Exhaust fan is poorly installed and falling off the ceiling

[136] The Owners allege that the exhaust fan in the 2nd floor bathroom is poorly installed and falling off the ceiling. Mr. Derbecker agreed, stating that the fan housing appeared to be “over-cut.” He assessed the repair cost at $50. Mr. Huinink assessed the cost at $150. I accept this claim at $150.

d.59 Drywall around exhaust fan is sloppy and uneven with exposed holes

[137] This claim appears to be the same as item d.58. Mr. Derbecker stated the same. I do not find that the Owners have met their onus of proving that this is a separate claim. I deny this item.

d.60 Not enough grout between floor tiles

[138] The Owners allege that there is not enough grout between the floor tiles in the second floor bathroom. Mr. Derbecker stated that he did not see this problem during his site visit. The Owners’ photographs in the Scott Schedule are inconclusive. I find that the Owners have not met their onus of proving this claim. I deny it.

d.61 Permanent marker on marble border tiles

[139] The Owners allege that TIF’s tradesmen left permanent markers on the marble border tiles in the second floor bathroom. Mr. Derbecker agreed and assessed the repair cost at $100. Mr. Huinink’s assessment was $75. I accept this item at $100.

d.62 Holes in the ceiling by the pot lights in rear east bedroom

[140] The Owners allege that TIF left holes in the ceiling by the pot lights of the rear east bedroom. Mr. Derbecker agreed with this complaint and assessed the repair cost at $50. Mr. Huinink assessed the cost at $300. I accept this claim at $300.

d.63 Nails exposed in the drywall of east rear bedroom

[141] Mr. Derbecker’s report was not clear as to his position on this item. The Owners’ pictures in the Scott Schedule are inconclusive. However, I will give the Owners the benefit of the doubt here in light of Mr. Derbecker’s report. Mr. Huinink assessed the repaid cost at $150. I accept this claim at $150.

d.64 Plumbing in the semi-ensuite bathroom is not venting properly

[142] The Owners allege that the plumbing in the venting in the semi-ensuite bathroom is not venting properly, causing a foul smell. Mr. Derbecker appears to have assessed this issue as being one of use, not construction. He stated that the unused shower “traps in residential installations are not self-priming.” He recommended that the Owners fill in the drain periodically to prevent odours. I am not sure what Mr. Derbecker means here by “residential installations.” I am prepared to give the Owners the benefit of the doubt here as a result, and because this was supposed to be a “dream home.” Mr. Huinink assessed the repair cost at $1,500. I accept this item at $1,500.

d.65 Electrical rough-in for heated floors left exposed and unfinished

[143] Again, the Owners allege that the heated floors were not finished. TIF asserts it did not finish because the Owners did not pay for the finishing work. Mr. Derbecker agreed with TIF. As stated earlier, the Owners have the onus of showing that this work fell within TIF’s scope and that they did not breach their contracts with TIF by not paying. I find that the Owners have not met their onus in this regard. I deny this claim.

d.66 Grout work incomplete

[144] The Owners allege that the grout work in the semi-ensuite bathroom is incomplete. Mr. Derbecker stated that this was outside of TIF’s scope. Again, the Owners have the onus of proving that this is within TIF’s scope, and have failed to do so. I deny this claim.

d.67 Shower light does not work

[145] The Owners allege that the shower light in the semi-ensuite bathroom does not work. Mr. Derbecker stated that this item worked at the time of the site visit. I note that the Owners signed a written acknowledgment that Delmarc Electric Inc. had properly completed its work as of July 24, 2012. I find that the Owners have not met their onus of proving this item, and I deny it.

d.68 Ceiling tiles in the shower are not flush

[146] The Owners allege that ceiling tiles in the shower of the semi-ensuite bathroom are not flush. Mr. Derbecker stated that he did not see this problem at the time of the site visit. The Owners’ photographs in the Scott Schedule are inconclusive on this issue. I find that the Owners have not met their onus of proving this item. I deny it.

d.69 Pot lights are detached from the drywall in semi-ensuite bathroom

[147] Mr. Derbecker agreed that “isolated” pot lights were separated from the ceiling. He assessed the repair cost at $20. Mr. Huinink assessed the cost at $300. I accept this item at the amount of $300.

d.70 Ceiling exhaust fan is falling off and drywall should have been cement board

[148] The Owners allege that the ceiling exhaust fan is “falling off” the ceiling in the 2nd floor laundry room, and that the drywall for the ceiling should have been cement board. Mr. Derbecker did not notice this issue on his site visit. Furthermore, he stated that the building code does not require cement board for this application. I find that the Owners have failed to meet their onus of proving this item, and I deny it.

d.71 Laundry floor lip was made too wide

[149] The Owners allege that TIF built the laundry floor lip for the 2nd floor laundry room too wide, and that they cannot, as a result, get a standard washer and dryer to fit properly into the laundry room. Mr. Derbecker dismissed this claim on the basis that TIF was not responsible for the appliances. I do not find this position reasonable. TIF was responsible for the framing, which appears to cover this item of work. Therefore, I accept the Owners’ position. Mr. Huinink assessed the cost to correct this item at $2,000. I accept this claim at $2,000.

d.72 Exterior side door trim has a huge dent

[150] The Owners allege that the exterior door trim in the master bedroom has a huge dent. The Owners’ picture of the issue in the Scott Schedule is clear on this point. Mr. Derbecker noted that he did not see the issue during his site visit.

[151] I conclude that there was a dent, and that it was fixed at the Owners’ expense before the site visit. Mr. Huinink assessed the cost of repair at $150. Although the Owners have not produced any evidence of repairing this item, I am prepared to give them the benefit of the doubt in light of their photograph. I accept this item at $150.

d.73 3 missing registers for vents in master ensuite bathroom

[152] Mr. Derbecker agreed with this complaint. He assessed the repair cost at $75. Mr. Huinink assessed the cost at $150. I accept this item at $150.

d.74 Grouting poorly finished and incomplete

[153] The Owners allege that the grout work in the master ensuite bedroom and bathroom was poorly finished and incomplete. Mr. Derbecker stated that this was outside of TIF’s scope. Again, the Owners have the onus of proving that this is within TIF’s scope, and have failed to do so. I deny this claim.

d.75 Theshold from master ensuite to hardwood floor poorly finished

[154] The Owners allege that the threshold from the master ensuite bathroom to the hardwood floor is poorly finished. Mr. Derbecker observed that this threshold was within standard practice and does not represent a tripping hazard. I find that the Owners have not met their onus of proving this claim. I deny it.

d.76 Poor framing and drywall work

[155] The Owners allege that the framing and drywall is generally of poor quality in the master ensuite bathroom and bedroom. Mr. Derbecker stated that he did not notice this problem during his site visit. The Owners’ photograph of this issue in the Scott Schedule is inconclusive. I find that the Owners have not met their onus of proving this claim. I deny it.

d.77 Poor drywall work around pot lights

[156] The Owners allege that there is poor drywall work around the pot lights in the master ensuite bathroom and bedroom. Mr. Derbecker did not notice this problem. The Owners photographs on this issue in the Scott Schedule are inconclusive. I find that the Owners have not met their onus of proving this claim. I deny it.

d.78 Vanity faucet is installed off centre

[157] The Owners allege the vanity faucets were installed off center, causing water leaks. Mr. Derbecker did not notice this issue during his site visit. Again, the Owners’ photographs in the Scott Schedule are inconclusive. I find that the Owners have not met their onus of proving this claim. I deny it.

d.79 Conclusion concerning deficiencies

[158] Having gone through the Owners’ 78 deficiency claims in the Scott Schedule, I have found that the following 28 items have merit: items 5, 6, 11, 12, 14, 15, 17, 29, 30, 33, 36, 42, 44, 45, 46, 47, 50, 51, 57, 58, 61, 62, 63, 64, 69, 71, 72 and 73, totaling $28,210 in estimated repairs costs. That figure is not inclusive of tax. With HST, the figure expands to $31,877.30. Any amount otherwise found owing to TIF must be reduced by this amount.

e) Do the Owners have a counterclaim?

[159] The Owners have raised a $500,000 counterclaim. In closing argument, Ms. Mandin described the aspects of this claim. First, there are the alleged costs the Owners incurred for correcting TIF’s deficiencies. I have already imposed a deduction on account of deficiency correction work.

[160] Second, the Owners claim $150,000 in cost to obtain a zoning variance to allow for the increased ceiling heights installed by TIF and for the cost to complete TIF’s work. As I have found that TIF was not in breach of contract for installing the ceiling heights, I do not allow that claim. As I have found that the contractual relationship between the Owners and TIF was piecemeal, I do not allow the claim for completion costs.

[161] Third, the Owners claim $250,000 for general damages, bad faith and loss of opportunity. The loss of opportunity claim concerns a delay in the Owners’ ability to bring tenants into the basement, as they had intended from the outset. Again, as I have found that the contractual relationship between the parties was piecemeal, I find that there was no contractual schedule that concerned the work. Therefore, I deny the loss of opportunity claim. Because I have found that the Owners were in breach of contract for not paying TIF, I also deny the claim for general damages and bad faith.

[162] Ms. Mandin also mentioned allegations against TIF of registering an excessive claim for lien pursuant to section 35 of the Construction Lien Act and gross overpayment by the Owners. Because I have found in favour of TIF on the issue of the price of TIF’s services and materials, I do not accept these submissions.

[163] Therefore, I dismiss the entirety of the Owners’ counterclaim, other than the above noted set-off for deficiency correction cost.

f) What are the accounting issues?

[164] The final accounting of the TIF claim would start with the determination of final price for the TIF labour and materials. As noted above, I have determined that we must start with the figure of $865,617.60 (tax inclusive) and deduct what I have determined to be the reasonable cost of correcting TIF’s deficiencies, namely $31,877.30 (tax inclusive). $833,740.30 is the resulting total.

[165] The evidence was quite clear as to what the Owners paid TIF. They paid TIF $416,462.48 by cheque and $40,000 by cash, for a total of $456,462.48.

[166] Deducting the amount paid ($456,462.48) from what I have determined to be TIF’s final price for its services and materials ($833,740.30) produces a grand total of $377,277.82. This is the amount the Owners must pay TIF.

VI. CONCLUSION

[167] I, therefore, find that TIF has a valid lien in this matter in the amount of $377,277.82. It also has a personal judgment for breach of contract damages from the Owners in the same amount.

[168] TIF is also entitled to prejudgment interest calculated in accordance with section 128 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The exact amount of this prejudgment amount is yet to be determined.

[169] I dismiss the counterclaim that does not pertain to the deficiency claims I have accepted. These deficiency claims have been factored into my decision as to what TIF is owed.

[170] I asked for and received costs outlines from the parties on the last day of the trial hearing. TIF’s Costs Outline shows a partial indemnity amount of $248,486.69, a substantial indemnity amount of $301,526.46, and an actual cost amount of $389,926.14. The Owners’ Bill of Costs shows a partial indemnity amount of $285,264.33, a substantial indemnity amount of $378,255.42, and an actual cost amount of $430,243.90. These figures are all tax inclusive.

[171] Generally costs follow the event. If the parties are unable to agree on costs, counsel may file written submissions on costs. Submissions may not exceed four pages (typed, 8 ½” x 11” pages, double spaced, minimum font size 12). TIF’s submissions must be served and filed by May 27, 2016. The Owners submissions must be served and filed by June 10, 2016. TIF’s reply submission, if any, must be served and filed by June 17, 2016.

[172] These submissions should also address the prejudgment interest to be included in my report. That point was not addressed in closing argument.

[173] Given the amounts in issue, the parties may wish to give oral argument on costs. If either side wishes to give oral argument, the parties are to arrange an attendance before me in this regard through my Assistant Trial Coordinator.

[174] If the parties are unable to agree on the form of the final report, an attendance may be required to settle the report.

Released: May 13, 2016

MASTER C. WIEBE