ONTARIO SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-14-505019 DATE: May 24, 2016
BETWEEN:
JMCC Ltd. Plaintiff (defendant by counterclaim)
- and -
Buttcon Limited Defendant
COUNSEL: B. Armouzgar, for the plaintiff K. McKenzie, for the defendant
HEARD: March 29, 2016
Master C. Albert
[1] Buttcon Limited (“Buttcon”) subcontracted with JMCC Ltd. (“JMCC”) to provide cleaning services regarding the Kipling Acres Long Term Care facility (“Kipling Acres”) construction project. JMCC registered a claim for lien for $91,854.54 [1] and at trial claimed $109,912.84 for services and materials supplied to Buttcon. The amount claimed includes the contract price of $23,500.00 plus HST, with the balance claimed as extras. Buttcon claims set-off and counterclaimed initially for $250,000.00, reducing the counterclaim at the opening of trial to $17,569.00 for deficiencies plus the cost of the bond purchased to vacate JMCC’s lien.
[2] The main issue in dispute between JMCC and Buttcon is whether JMCC is entitled to charge for extras in the absence of written change orders or a contract authorizing payment for extras. JMCC’s position is that it performed multiple cleanings of the same areas of the building because Buttcon, as general contractor, mismanaged the construction project and allowed its trades to carry out construction tasks after JMCC had completed the final cleaning of most areas of the building, thereby creating dust and dirt, requiring a second and third cleaning of areas already cleaned.
[3] Also in issue is whether Buttcon is entitled to backcharge JMCC for the amount it paid to the subsequent cleaning contractor, Tri-Clean Building Services Inc. (“Tri-clean”), to complete the final cleaning.
[4] For the reasons that follow I find that JMCC is entitled to be paid the contract price for the portion of the contract that it completed before leaving the site on February 24, 2014, plus the extra for services supplied overnight on February 19, 2014 in preparation for a government inspection.
I. Background
[5] Following a tender bidding process in which JMCC lowered its bid three times JMCC and Buttcon entered into a written contract on November 27, 2013 for the price of $23,500.00 plus HST. The contractual scope of work was for JMCC to carry out the final construction cleaning of the building, including exterior windows. The contract incorporated by reference the terms and conditions of the head contract between the City of Toronto and Buttcon. JMCC asserts that it renegotiated its contract with Buttcon verbally on February 14, 2014 for the price of $46,219.60 plus HST, an allegation that Buttcon denies. JMCC supplied cleaning services and materials from December 9, 2013 to February 24, 2014.
[6] JMCC registered a claim for lien on April 10, 2014 as Instrument AT3556054 and issued an action on May 23, 2014 wherein it claimed payment pursuant to the contract and in the alternative on a quantum meruit basis. The lien was vacated on May 12, 2014 by order of Justice DiTomaso, with security posted in place of the lien against the property. Thereafter the lien claim continued as a charge against the security posted. I find that the lien was preserved and perfected within the time limits prescribed by the Construction Lien Act, R.S.O. 1990, c.C.30 (the “Act”).
[7] Buttcon counterclaimed for rectification and completion costs, relying on two invoices from Tri-Clean dated March 11, 2014 and December 10, 2014 that total $12,500 plus HST for a grand total of $14,125.00. Buttcon also claims $3,444.00 as its cost to purchase the bond posted as security to vacate JMCC’s lien. Buttcon reduced its counterclaim to $17,569.00 at trial, abandoning the balance of its $250,000.00 counterclaim.
II. Analysis
a. What were the terms of the contract?
[8] Sonia Peniche is vice president of JMCC. She testified that JMCC’s first quote in response to Buttcon's tender call was for $28,7650 + HST. JMCC then replaced it with a bid of $24,500 + HST and then, following negotiations, the parties agreed to a price of $23,500 + HST, signed on December 4, 2013. Mr. Gonzalves, president of JMCC, admitted that he was required to bid low to beat out other contractors. It appears that JMCC underbid the contract and tried to recoup its losses by claiming extras.
[9] I find that JMCC and Buttcon entered into a fixed price written contract on December 4, 2013 by way of a purchase order on Buttcon letterhead. The terms of the contract specify the scope of work (two pages of specifications), the fixed price of $23,500.00 plus HST and a page of terms and conditions.
[10] Items 5, 12 and 13 of the terms and conditions on page 4 of the contract provide:
No price increase and no charges in addition to those shown on this order will be permitted without written authorization by Buttcon Limited.
If the order refers to plans or specifications the same shall be deemed to be incorporated in and be a part of this order and of the Contract…
When this Purchase Order form is used as a Sub-contract form calling for the supply of both materials and labour on site, acceptance of said Purchase Order form obligated the Vendor to all the standard requirements of the CCA1, Revised 2001 Canadian Standard Form of Construction Contract between contractor and Sub-contractor or the latest revised edition thereto.
[11] Regarding items 5 and 12, JMCC’s witnesses Joachim Goncalves and Sonia Peniche acknowledge that the contract required that all changes to the contract price and extras be approved in writing. Neither party produced any written changes or amendments to the contract.
[12] Regarding item 12 Ms Peniche acknowledged that the Architect’s specifications for final cleaning, identified as section 01710 [2], formed part of the JMCC subcontract.
[13] The scope of work listed in the contract included exterior windows. It is not in dispute that JMCC left the job without cleaning exterior windows. The parties agree that the component of the contract price attributable to exterior window cleaning is $5,000.00 plus HST.
b. Was JMCC entitled to charge for extras?
[14] The contract required JMCC to carry out the final construction cleaning to ready the facility for occupancy. The timeframe was short: Buttcon contracted with JMCC in early December 2013 and at the outset both parties expected completion by December 23, 2013. However, construction of the project was behind schedule. Construction had not reached a stage of completion to be ready for final cleaning to meet the anticipated completion date.
[15] JMCC claims that problems arose because Buttcon had not finished construction when it contracted with JMCC to carry out the final construction cleaning. JMCC asserts that because of ongoing construction it had to re-clean areas previously cleaned two and three times, for which JMCC is entitled to be paid extra.
[16] JMCC’s witnesses admit that there are no written change orders or purchase orders for the extra payment JMCC claims for re-cleaning areas. JMCC provided no evidence of any price agreed upon by the parties on a time and materials basis or on any other basis for re-cleaning areas previously cleaned. JMCC could not identify the areas re-cleaned and produced no notes, site logs or diaries to identify the rooms and areas it claims to have cleaned and then re-cleaned.
[17] JMCC claims that it continued to re-clean areas in this manner from December 9, 2013 through to February 24, 2014, a period of 10 weeks. JMCC further claims that notwithstanding the fixed contract price of $23,500.00 plus HST, and notwithstanding the absence of any written change orders, contracts or email communications wherein Buttcon agreed to pay for re-cleaning areas previously cleaned, JMCC is entitled to be paid for the extra cleaning services supplied.
[18] JMCC did not invoice separately for re-cleaning areas previously cleaned. It sent a single invoice after it left the job. On March 10, 2014 [3] JMCC sent an invoice for $195,144.70 for services and materials supplied from December 9, 2013 to February 24, 2014. That invoice did not provide a breakdown of the price charged for contract work and the price charged for extras. Nor did it identify areas of the building cleaned under the original contract scope of work and then re-cleaned as an extra.
[19] There is no paper or electronic trail to corroborate that the contract could not be carried out as contemplated due to the manner in which Buttcon managed the construction project. Nor are there any written or electronic communications from JMCC claiming extra payment for repeat cleanings, and quantifying the amount claimed, prior to purportedly cleaning the same areas two and three times. The first document addressing the issue is a February 20, 2014 email from JMCC asking Buttcon to provide a purchase order for any further cleaning. JMCC left the job four days later.
[20] JMCC relies on the evidence of Mario Acosta and Joachim Goncalves. Mr. Acosta is JMCC’s operations manager, special services. He testified that after JMCC cleaned various rooms and common areas, Buttcon’s tradespeople would carry out further construction work, creating dirt, dust and mess. He testified that JMCC had to clean many rooms and areas two and three times, thus escalating JMCC’s costs. The trades Mr. Acosta identified as causing the dirt, dust and mess include carpenters, electricians, plumbers, drywall installers and landscapers. He further testified that he had notes on the project in the office, including notes about re-cleaning, but he failed to produce them before or at trial. Such notes, if they exist, are critical to JMCC proving its claim. If they exist they would have been produced. I draw the inference that such notes do not exist.
[21] Mr. Acosta testified that he had several conversations with a person named “Darryl” from Buttcon and Darryl promised Mr. Acosta that he would send him a purchase order for extras to re-clean areas already cleaned. JMCC did not produce a site log, site notes, a work diary, or any other contemporaneous notes to corroborate this oral evidence.
[22] Mr. Acosta admitted that JMCC underbid the job to win the contract over other bidders. He thought the job was worth $28,000.00 but JMCC agreed to a contract price of $23,500.00, expecting to complete the job with 500 hours of labour. JMCC budgeted its labour costs (wages plus employment burden) using an hourly rate of $47.00. When JMCC invoiced for extras it used the hourly billing rate of $45.00, as shown in JMCC’s March 10, 2014 invoice [4].
[23] Mr. Acosta testified that he had repeatedly asked Buttcon personnel to inspect JMCC's work, to write purchase orders for extra work and to sign off on work completed. He testified that “they never had the time”, that they promised to do various things, and they never did. According to Mr. Acosta this pattern of activity continued from mid-December 2013 through to February 19, 2014 but Buttcon never responded, never issued purchase orders for the extra work, and never signed off on areas JMCC asserted had been completed.
[24] Nevertheless, according to Mr. Acosta, JMCC continued to perform the “final cleaning” required by the contract while insisting that numerous trades continued to perform dirty, dusty and messy construction work in the areas that JMCC had already cleaned. I question the reliability of this evidence in the absence of any written corroborating evidence.
[25] Mr. Acosta admitted that JMCC did not clean the exterior windows. He ascribes $5,000.00 of the contract price to the window cleaning component of the contract. This quantification is consistent with Buttcon’s valuation of the exterior window cleaning.
[26] Joachim Goncalves, President of JMCC, has a careless regard for the truth. He admitted that he charged for his own labour for the first week of the contract and testified that he was not on site the first week. He later contradicted himself and testified that he was on site the first week, saw what was going on and reported it to Buttcon’s people in the site trailer.
[27] Mr. Goncalves referred repeatedly to notes taken at various stages of the job to corroborate his evidence, but failed to produce any notes before or during the trial. He testified that upon finishing an area JMCC would ask Buttcon to inspect and sign off but Buttcon failed to do so. In the face of Buttcon’s denial, his notes would have been crucial to proving JMCC’s claim, yet he did not produce any notes, diary, log, email or other corroborating evidence to support his version of events. I conclude as I did regarding Mr. Acosta’s elusive notes that Mr. Goncalves’ notes do not exist.
[28] Mr. Goncalves further testified that after JMCC completed the final cleaning of rooms and areas in different wings of the building various trades would enter the rooms and areas and carry out further construction work, causing dirt, dust and mess that required the rooms and areas to be re-cleaned. He claims that for this reason his workers re-cleaned each room and area three times and he charged for this repeat work as extra to the contract price. He produced no documents to corroborate the multiple cleanings alleged. He could not identify the areas and dates of re-cleaning.
[29] In quantifying JMCC’s claim Mr. Goncalves assumed that all of the contract work was repeated three times over. It is a notional calculation, based on an assumption that JMCC cannot prove. Mr. Goncalves stated in evidence “we have records. I have to go through them and put them together”. The time to go through the records and put them together was when JMCC initiated this lawsuit, not two years later, at trial. Mr. Goncalves’ evidence that written records exist and that he failed to produce them compromises his credibility.
[30] Buttcon created a checklist form for use on the project. Representatives of JMCC and Buttcon were to conduct a walk-through of each wing as it was completed and check off items cleaned in each room and area. JMCC failed to follow this procedure, blaming Buttcon for not following through with it. Mr. Goncalves admitted that forms had been prepared but he did not produce them, stating in cross-examination that the forms “were probably at our office”. Later in his testimony he denied seeing the forms, denied agreeing to the process and stated that Buttcon did not allow the process to be followed.
[31] Mr. Goncalves provided no evidence to corroborate any efforts made by JMCC to compel Buttcon to follow this process of inspecting and signing off on the cleaning of rooms and areas using the forms Buttcon had prepared. JMCC did not follow the procedure and there is no evidence other than uncorroborated self-serving evidence of JMCC’s witnesses that JMCC cleaned the entire premises two and three times.
[32] James Duncan, Buttcon’s project manager, provided his evidence in a straightforward manner. He maintained project notes and produced notes prepared contemporaneously with events. His notes corroborate his evidence. Mr. Duncan admitted that JMCC was concerned about having to re-clean areas already cleaned due to trades performing additional dirty, dusty and messy work. He noted on February 5, 2014 in his site notes [5] that JMCC “will get paid for any additional cleaning if process is followed”.
[33] Mr. Duncan readily admitted that the JMCC contract was for final construction cleaning only, as described in section 2 of the document referred to as the Architect’s specifications, “section 01710”, attached as exhibit A to the affidavit of Sonia Peniche, being the document upon which JMCC tendered its bids.
[34] Mr. Duncan did not try to overstate Buttcon’s case. He admitted that the project was behind schedule, with the initially anticipated completion date of February 23, 2013 pushed back nine weeks. Mr. Duncan also admitted that he had conversations with representatives of JMCC about JMCC’s cost overruns. He testified as to what he described as JMCC’s substandard work. He said that he tried to work with JMCC rather than terminate them for default because the contract required notice of default and as slow as JMCC was in carrying out its work, in his opinion, it was not likely to impact Buttcon’s final schedule.
[35] Mr. Duncan was straightforward and forthright in his evidence, testifying that Buttcon was prepared to pay JMCC extra if JMCC could verify that additional work had been completed. He described the inspection and sign-off process Buttcon put in place in response to JMCC’s complaints about re-cleaning after trades created dirt, dust and mess in areas that had been cleaned. He explained that Buttcon agreed to pay JMCC for extra work if the process was followed and JMCC had to re-clean areas already cleaned. He described the process as a checklist that was to be signed off by JMCC and by Buttcon for each area cleaned.
[36] JMCC failed to follow the process or provide any evidence of areas cleaned and then re-cleaned. Mr. Duncan testified that neither party signed off on the checklists. Buttcon placed a binder of 500 forms in the site trailer to be filled in as the areas were completed and inspected. Only 22 forms representing 19 areas of the project have check marks and none of them are signed by either JMCC or Buttcon. I conclude that Buttcon’s efforts to provide a method to determine whether and when JMCC had to re-clean areas already cleaned failed to identify any such areas.
[37] According to Mr. Goncalves, in the first three weeks of the contract work JMCC had used up almost the entire contract budget and completion was not in sight. Yet JMCC continued to supply services and materials for a further seven weeks without any authorization from Buttcon for JMCC to charge extra for it. JMCC asks the court to believe that Buttcon agreed to pay extra despite the absence of any corroborating documents from any of JMCC’s management personnel or workers.
[38] Mr. Goncalves admitted that the contract required JMCC to send written notice to Buttcon if seeking additional payment for extra work. He admitted that JMCC did not do so. Mr. Goncalves’ also admitted that he had received a notice of deficiencies from Buttcon and he refused to return to rectify deficiencies unless paid extra.
[39] Sonia Peniche records workers’ labour hours and maintains the company’s business records. She testified that from December 9, 2013 to February 3, 2014, a period of approximately 8 weeks, JMCC’s workers worked 234 hours per week, for a total of 1872 hours. Examining her evidence together with that of Mr. Acosta, who testified that the contract budget contemplated 500 hours of work, it is incredulous that JMCC undertook 1372 additional hours of work with the intention of charging for it as an extra but without a work order or other written confirmation that Buttcon would pay for the additional hours of work as extra to the fixed contract price.
[40] Ms Peniche admitted that the contract required Buttcon to approve changes and extras in writing. Yet she provided no explanation for JMCC’s invoice for $195,144.70 [6] issued March 10, 2014 on a contract for $23,500.00 plus HST where Buttcon had not given its written authorization for additional charges that amount to more than seven times the contract price. It is not credible that JMCC expected Buttcon to pay these additional charges in the absence of authorization. It is not credible that JMCC incurred these additional charges as claimed throughout the contract period without any assurance of payment from Buttcon.
[41] I further question the reliability of Ms Peniche’s evidence and the position she is advancing in claiming payment for extra work on a time and materials basis in the absence of any evidence that separates time and materials incurred for contract work from time and materials incurred for work claimed as extra to the contract, except for the labour hours incurred on February 19, 2014, addressed later in these reasons. Ms Peniche testified “I cannot distinguish hours spent on contract work from hours spent on extras”. Further, Ms Peniche testified that for work hours of Mr. Acosta and Mr. Goncalves attributed by her to the contract work and to extras, she just picked 26 hours per week for Mr. Acosta and five hours per week for Mr. Goncalves arbitrarily. They did not actually work the number of hours allocated to them in the business records.
[42] On the issue of the checklist process developed to verify completion of the contract work and identify areas re-cleaned, Mr. Duncan’s evidence, corroborated by contemporaneous notes, was largely unchallenged and I accept it over the evidence of Mr. Goncalves and Mr. Acosta as more credible.
[43] It was incumbent on JMCC to follow the process and it failed to do so. Despite the protestations of JMCC’s witnesses at trial that Buttcon failed or refused to co-operate, and of Buttcon repeatedly putting JMCC off when asked to inspect, if that were the case then there should have been inspection forms completed and signed at the very least by JMCC’s supervisor showing that all areas had been completed as far as JMCC was concerned. There would have been some documentary corroboration of requests by JMCC to Buttcon to carry out its part of the process and inspect the areas completed and signed off by JMCC. No such evidence was presented at trial.
[44] JMCC claims that Buttcon should pay as an extra for every hour of labour expended by JMCC above the 500 labour hours JMCC had used in its budget for the tender bid. The flaw in JMCC’s claim for extras is that it did not enter into a time and materials contract with Buttcon. The parties had never agreed that every hour of labour beyond the 500 hours JMCC budgeted could be charged as an authorized extra. In fact Mr. Goncalves admitted that he lowered his fixed price tender bid so that he could win the contract over competitive bidders. Inherent in a contract for a fixed price are the risks and benefits to the parties. The subcontractor risks paying for cost overruns if he cannot bring the job in on budget, and benefits by cost savings if he can perform the job for less than the budgeted amount. The general contractor caps its risk at the fixed contract price without any risk of cost overruns by the subcontractor, and is precluded from sharing in the benefit of cost savings if the subcontractor’s costs are less than the fixed contract price. Neither party can unilaterally convert a fixed price contract into a time and materials contract.
The February 19, 2014 extra work
[45] Buttcon verbally authorized one extra. Ms Peniche described a February 19, 2014 telephone conversation with Mr. Duncan in anticipation of a Ministry of Health inspection. She explained that Mr. Duncan promised to issue a purchase order for additional work that Buttcon asked JMCC to supply overnight on February 19, 2014 to prepare for the Ministry inspection the next day. I accept her evidence of Mr. Duncan’s promise on behalf of Buttcon to pay for the urgent additional work to prepare for the inspection, and the lack of time to paper it over. Ms Peniche deposes that JMCC workers worked an additional 215.5 labour hours pursuant to this promise to pay for the work as an extra. JMCC filed business records summarizing labour hours of workers for that date.
[46] An email dated February 20, 2014 from Ms Peniche to Mr. Duncan stated:
“our office is still waiting for the email with the PO for the work that was completed over night (sic) due to Ministry of Health inspection this morning. This work was completed before and as per James’ (Duncan) request to re-clean it over night (sic) as an extra to the contract, we need to receive a PO as soon as possible.”
to which Mr. Duncan replied by email a few hours later:
“Can I get a list of areas re-cleaned by JMCC last night and scope of each for records”.
[47] Mr. Duncan did not deny his agreement to treat the re-cleaning work carried out on February 19, 2014 as an extra to the contract. I find that that Buttcon authorized JMCC to perform additional work on February 19, 2014.
[48] In view of the urgent nature of Buttcon’s request for JMCC to provide additional cleaning services overnight on February 19, 2014 and the email exchange I accept Ms Peniche’s evidence that Buttcon requested these additional services, that JMCC supplied the services and that JMCC incurred and paid its workers for an additional 215.5 labour hours.
Quantifying the extra and onus of proof
[49] The fixed contract price was $23,500. Deducting $5,000.00 for the exterior windows that the parties agree JMCC did not clean, the contract price for the interior final cleaning was $18,500.00. JMCC invoiced Buttcon $172,694.42 on March 10, 2014, charging Buttcon $154,194.42 for extras on a contract price of $18,500.00 [7].
[50] The parties verbally agreed that JMCC perform additional cleaning services overnight on February 19, 2014, but there is no evidence of an agreement as to how to quantify that extra. JMCC calculates the 215.5 hours of labour for the extra using an hourly rate of $45.00 but provided no independent evidence of value.
[51] JMCC cannot distinguish between labour hours devoted to original cleaning from labour hours devoted to re-cleaning. JMCC’s position is that the court can extrapolate and conclude that from the total hours recorded that every dollar incurred above the contract price is for re-cleaning. Doing so would require the court to accept that JMCC supplied the contract services and materials efficiently and within its budgeted number of hours. There is no evidence to support such an assumption, particularly since (i) JMCC admitted that it underbid the contract to win the tender, and (ii) Mr. Duncan testified that JMCC’s work was very slow. The more appropriate inference for the court to draw is that JMCC’s actual costs for the contractual scope of work exceeded the contract price.
[52] Other than the February 19, 2014 extra I find that JMCC has not met the onus of proving an agreement to pay extra for all labour hours that exceed JMCC’s budgeted labour hours for the contract work. I further find that JMCC has failed to prove the areas and time spent re-cleaning areas that had already received a final cleaning pursuant to the contract. Absent such proof JMCC has not met the onus of proving an entitlement to be paid for the extras claimed other than the February 19, 2014 extra.
[53] In contrast to JMCC’s hourly rate of $45.00 Tri-Clean, Buttcon’s “completion” contractor, charged Buttcon based on an hourly rate of $31.75. In the absence of JMCC providing evidence that $45.00 is a reasonable hourly rate, I accept Tri-Clean’s rate as independent and reasonable for the purpose of calculating the value of labour for JMCC’s allowable extra on a quantum meruit basis.
c. Set-off for deficiencies and completion costs
[54] Buttcon contracted with Tri-Clean to provide cleaning services on or about February 19 and 20, 2014 in preparation for the Ministry of Health inspection in different areas of the building from JMCC. Buttcon does not claim set-off for this work performed by Tri-Clean.
[55] When JMCC refused to respond to Buttcon’s deficiency list Buttcon retained Tri-Clean to complete the items listed, providing JMCC with Tri-Clean’s quote before engaging Tri-Clean [8]. When JMCC refused to return to complete the deficiencies Buttcon contracted with Tri-Clean to rectify the deficiencies and to clean the exterior windows.
[56] Nelson Rocha, a director of Tri-Clean, testified in chief by affidavit and was cross-examined at trial. He provided evidence of the amounts invoiced by Tri-Clean and paid by Buttcon. He gave his evidence in a straightforward and forthright manner. I found him to be a credible witness.
[57] Mr. Rocha testified that Tri-Clean invoiced and Buttcon paid $12,500.00 plus HST for a total of $14,125.00 for the areas other than the basement cleaned by Tri-Clean, based on hourly rates of $31.75. The $12,500.00 is made up of $7,500.00 to rectify interior cleaning deficiencies plus $5,000.00 to clean exterior windows. Mr. Acosta had also priced the exterior window component of the JMCC contract at $5,000.00.
[58] Mr. Gonsalves values the incomplete interior cleaning work at $1,000.00 based on his estimate that it would have taken 16 labour hours over two days to complete the contract, excluding the exterior windows. He did not agree with Buttcon’s deficiency list.
[59] Based on the evidence given at trial I find that JMCC performed the contract other than the penthouses and exterior windows. Buttcon found JMCC’s work deficient not because JMCC cleaned poorly but rather because Buttcon’s construction workers continued to perform dirty, dusty construction work in areas that JMCC had already cleaned. While JMCC cannot prove that it is entitled to be paid to re-clean areas as an extra, Buttcon has not proven that the cause of what it characterizes as a deficiency was the quality of JMCC’s cleaning. Rather, Buttcon’s management of the construction project is more likely the cause of what it characterizes as deficiencies.
[60] Buttcon is only entitled to deduct from the contract price the portion attributable to the penthouses and exterior windows, items and areas that JMCC never cleaned. In the absence of evidence as to how to measure the component of Tri-Clean’s $7,500.00 price for interior cleaning attributable to the penthouses, I find that a reasonable component of that price is one third to clean the penthouses and allow $2,500.00 as a reasonable deduction from JMCC’s contract price. Buttcon is also entitled to deduct $5,000.00 from JMCC’s contract price for exterior windows.
d. Conclusion
[61] I find that JMCC performed the contract services by cleaning the premises in its entirety at least once, except for the penthouses and the exterior windows. JMCC mismanaged the cleaning project by failing to maintain proper logs and records. Buttcon mismanaged the project by sending in its construction forces to carry out further construction work in areas that JMCC had cleaned.
[62] JMCC is entitled to be paid its contract price for cleaning services supplied, less the cleaning of the exterior windows and the penthouses.
[63] JMCC has not proven its claim for payment to re-clean areas as an extra to the contract price, other than the extra pursuant to the oral agreement regarding the February 19, 2014 overnight cleaning.
[64] Ms Peniche confirmed that Buttcon has not paid JMCC any amount for services and materials supplied to Buttcon pursuant to the contract or for any extras claimed.
[65] I conclude that JMCC is entitled to be paid the contract price of $23,500.00 less $5,000.00 for exterior windows less $2,500.00 for the penthouses, for a balance of $16,000.00 plus HST at 13 percent for a total of $18,080.00 on the contract.
[66] I further find that Mr. Duncan, on behalf of Buttcon, verbally promised to pay and JMCC is entitled to be paid for 215.5 additional hours of labour supplied overnight on February 19, 2014 to prepare for the Ministry of Health inspection. I calculate the extra at $31.75 per hour, for a total extra of $6,842.12 plus HST of 13 percent for a total extra of $7,731.60. The rate of $31.75 per hour is based on Buttcon’s acceptance of Tri-Clean’s billing based on $31.75 per hour as attested to by Mr. Rocha. I reject JMCC’s assertion that the appropriate hourly rate is $45.00 as it was not a rate accepted by Buttcon, it is based solely on self-serving evidence and it is uncorroborated as an appropriate quantification of value by any impartial evidence. I prefer and accept the hourly rates used by Tri-Clean as appropriate for this calculation.
[67] The amount owing to JMCC is the adjusted contract price [9] of $18,080.00 plus the extra of $7,731.60, both inclusive of HST, for a total payable by Buttcon to JMCC of $25,811.60.
e. Buttcon’s claim for financing costs
[68] Buttcon also counterclaims for $3,444.00 as financing costs to post security in the form of a bond to vacate the lien, on the basis that JMCC registered a lien claim in an amount that exceeded the amount to which it is entitled. Buttcon did not plead and does not rely on section 35 of the Construction Lien Act which provides for damages where a plaintiff claims a lien for an amount that the lien claimant knows or ought to know is grossly excessive. Financing costs for bonding off a lien usually form the basis of a claim for damages pursuant to that section. The test requires the party claiming damages to prove (i) that the lien was grossly excessive and (ii) that the lien claimant knew or ought to have known that its lien claim was grossly excessive.
[69] Had Buttcon pleaded section 35 it would not have succeeded because in my view JMCC believed it had a valid claim for a lien in the amount claimed based on recovery for what it characterized as extras. JMCC did not have the evidence it needed to prove its entitlement to extras at trial. I would not have awarded section 35 damages had Buttcon’s claim been made under that section because in my view the test has not been met.
[70] The issue becomes whether Buttcon is entitled to general damages equal to the portion of its financing costs for the portion of the lien claim that was disallowed. I find that it is not. By including section 35 in the Act the legislature put its mind to the circumstances in which a defendant could claim damages for an excessive lien claim. The defendant could have avoided financing costs by leaving the lien claim in place pending final outcome of the litigation. If its contract with the City of Toronto required Buttcon to vacate the lien claim and if it had intended to pass those costs through to the subcontracting lien claimant then those facts ought to have been pleaded and proven at trial.
[71] I also find that Buttcon asserted an excessive claim in maintaining a counterclaim for $250,000.00 up to the opening of trial. Buttcon’s excessive counterclaim likely contributed to the reason the parties were unable to resolve the litigation at a much earlier stage. That is another basis to disallow Buttcon’s claim for damages equal to its financing costs.
III. Order
[72] Buttcon shall pay to JMCC $25,811.60 plus prejudgment interest and post judgment interested to be calculated and included in the final report.
[73] Upon payment of this judgment the lien claim registered as instrument AT3556054 on April 10, 2014 shall be discharged.
[74] The parties shall attend before me on May 30, 2016 at 12:00 noon to make submissions on costs and the final report unless they are able to resolve those issues in advance of the return date.
Master C. Albert. Released: May 24, 2016
COURT FILE NO.: 14-505019 DATE: May 24, 2016 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: JMCC Ltd. Plaintiff (defendant by counterclaim)
- and - Buttcon Limited Defendant (plaintiff by counterclaim) REASONS FOR JUDGMENT Master C. Albert Released: May 24, 2016
Footnotes:
[1] At the opening of trial the plaintiff stated that the claim is $109,912.84 but the statement of claim was not amended to increase the quantum of the claim. [2] Exhibit 2, tab A [3] Exhibit Q to the affidavit of Sonia Peniche filed as exhibit 2, at trial [4] Exhibit 2, Tab Q [5] Trial exhibit 12 [6] Exhibit 2, Tab Q: $172,694.42 plus HST of $22,450.28 [7] These amounts are net of HST, which must be added. [8] Exhibit 2, tab N [9] $5,000.00 has been deducted for exterior windows and $2,500.00 for penthouses because JMCC did not complete these items that were included in the scope of the contract work