COURT FILE NO.: CV-14-511895 DATE: 20160620 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Thomas Alojz Berky and Anna Daphne Berky Plaintiff – and – Julio Alvarez Cruz and Rahul Kesarwani Defendant
B. Moldaver, for the Plaintiff No one appearing
HEARD: June 13, 2016
S. F. Dunphy J.
[1] The plaintiffs contend that they contracted to purchase a dream home and ended up with a lemon. They have brought suit against the vendor for the costs they claim were incurred to make the house right.
[2] While I have considerable sympathy for the plaintiffs’ position and understand their intense feelings of disappointment in what they perceive to be Mr. Cruz’ failure to keep his word of honour to fix the numerous issues they raised regarding the quality of construction, I have concluded that the greater part of the plaintiffs’ claim relates to conditions of completion of the sale and are not warranties that survived completion. The plaintiffs have unfortunately failed to prove before me the terms of any warranties that survived completion with two very small exceptions. Oral undertakings of the sort alleged in this case may be binding in honour but cannot re-write the written terms of the agreement between the parties. The plaintiffs have also satisfied me that their claims to the $10,000 holdback amount far exceed the amount of the holdback and they are entitled to the immediate payment out of court of the holdback.
Overview and factual background
[3] The vendor, Mr. Cruz, initially filed a statement of defence and was defended by counsel. His lawyer withdrew prior to trial and Mr. Cruz continued with the defence of the claim as a self-represented party. Mr. Cruz failed to attend at the pre-trial and failed to attend at the trial. The trial proceeded in his absence.
[4] The plaintiffs discontinued their claim as against Mr. Kesarwani prior to trial.
[5] A preliminary issue arose at the trial. The plaintiffs suggested that I might strike out the statement of defence of Mr. Cruz. They suggest that Mr. Cruz having declined to attend the trial ought to be in no better position than if he had never defended the claim in the first place. Had he never defended, he would have been noted in default and the facts alleged in the statement of claim would have been accepted as true. This would have simplified the plaintiff’s task at this undefended trial.
[6] I declined to grant the requested relief. Mr. Cruz did defend and it might just as logically be supposed that the plaintiffs should be in no better position had Mr. Cruz attended the trial in person but declined the opportunity to present any evidence. That, in effect, is precisely what he did do. In such case, the plaintiffs would be put to the proof of the matters alleged in the statement of claim (both as to liability and as to damages) and the defence – by adducing no evidence – would be able to prove none of the allegations in the statement of defence beyond those pleaded facts that the plaintiff has admitted or happens to have proved in the course of proving its own case.
[7] In my view, such sterile thought exercises are not required. Rule 52.01(2)(b) of the Rules of Civil Procedure has already fully provided for this precise eventuality. Where the defendant fails to attend and the plaintiff does attend after a matter is called for trial, the court may dismiss the counterclaim if any (there is none here) “and allow the plaintiff to prove the claim”.
[8] I accept the plaintiffs’ submission that Rule 52.01(2) of the Rules of Civil Procedure is permissive. The use of the word “may” makes that plain and obvious as does the fact that Rule 52.01(2)(d) of the Rules of Civil Procedure also permits the court to “make such other order as is just”.
[9] While I may have jurisdiction to order otherwise, I can see no grounds before me that might suggest that to be the advisable course. The plaintiffs have pleaded no particular prejudice attending a requirement that they be put to the proof of their claim. A non-appearing defendant who had taken the trouble to inform him or herself of the Rules of Civil Procedure might rationally have reached the conclusion not to attend secure in the knowledge that the plaintiffs will nevertheless be put to the proof of their claim.
[10] It seems to me that the course that Rule 52.01(2)(b) of the Rules of Civil Procedure prescribes – or at least recommends – is also the course of action that appears most proper and just in these circumstances. I can see no reason to depart from it and decline to do so. I declined the plaintiffs’ motion.
[11] I shall now outline the factual background of this case.
[12] In February 2013 Mr. Berky noticed a house under construction at 90 St. Hubert Avenue in Toronto. The house was in the process of being thoroughly renovated. The construction project was what is commonly referred to as a “gut and rebuild”. The interior of the original home, that Mr. Berky estimated to be about 50 years old, was substantially demolished and rebuilt with additions.
[13] Mr. Berky knocked on the door to inquire about purchasing the home. The workmen put him in touch with the builder/owner, the defendant Mr. Cruz.
[14] After a period of negotiations, an agreement of purchase and sale on the standard Toronto Real Estate Board form was entered into dated March 13, 2013. The purchase price was $1,100,000. The completion date fixed under the agreement was August 1, 2013.
[15] Paragraph 26 of the APS contained the standard-form “complete agreement” clause pursuant to which both parties acknowledged that the APS, including the Schedule attached to it, “shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein”.
[16] As executed, the APS was conditional upon the Buyer completing a home inspection within five business days and upon the parties agreeing before 11:59 pm on March 22, 2013, “upon the work, improvements, features to be completed by the Seller”.
[17] The APS named the lawyers for both parties.
[18] Mr. Berky arranged for the permitted home inspection. This was performed by Clearview Home & Property Inspection on March 19, 2013 and a complete report was delivered outlining a number of alleged deficiencies that required correction in this ongoing construction project prior to completion. Among the issues raised in the inspection report was the presence of moisture accumulating in the ceiling on the first floor immediately beneath a newly-constructed bathroom on the second floor.
[19] Following delivery of the home inspection report, the APS was amended on March 22, 2013 to insert a list of 20 items to be required to be completed by the seller prior to closing. In addition, the amendment added the following terms to the APS:
a. “where an allowance is provided to the Buyer/Purchaser in the items above, the Purchaser shall have the right of selection of all items and the said items shall be installed by the Seller in accordance with the other provisions of this agreement. On completion, the seller shall receive an adjustment only for those items where the cost of the item, uninstalled, exceeds the Purchasers allowance. All installation is included in the purchase price”; b. “The Seller shall resolve all deficiencies identified in the inspection report performed March 19, 2013 in a good and craftsman like manner to the satisfaction of the buyer”; and c. “Final inspection shall be completed before closing. The property shall be completed in a professional and timely manner maintaining uniform qualify of finishes inclusive of all customary features, practices and installations associated with a complete renovation”.
[20] The APS contained provisions relevant to certain holdbacks at completion that are not relevant to this proceeding. These were addressed in a separate application between the parties: Cruz v. Luhowy, 2014 ONSC 5569. The only holdback issue relevant to this proceeding is the $10,000 holdback negotiated on the eve of closing. This amount was initially held by the plaintiff’s solicitor, Mr. Luhowy but was later paid into court to the credit of this action and is to be disposed of as part of this proceeding.
[21] In accordance with the APS, the solicitor for the plaintiffs delivered his letter of requisition in early July 2013. The defendant’s lawyer, Mr. Kesarwani, responded to this on July 23, 2013.
[22] The response made by Mr. Luhowy to this on July 28, 2013 became a relevant item and closing. That letter of July 28, 2013 provided on page 2 thereof as follows:
“I’m advised that the following items are not complete.
- Certain items in the March, 2013 inspection report which in accordance with the agreement were to be completed or resolved to the buyer’s satisfaction.
- Under cabinet kitchen lighting needs to be hardwired properly.
- Driveway is not paved.
- Installation and finish of gas fireplace not complete, seller has stated will need to be completed after close.
- Backyard shed/cabana not finished.
- Bedrooms are supposed to have power at outlets and cable wiring for TVs.
- Seller has not located cable correctly in existing locations and trades will need to return to rectify.
- Broken window glass needs to be replaced.”
The letter proposed that if these items cannot be completed prior to closing, “my client will complete the transaction with the unfinished work with a $10,000 holdback until these eight items are properly completed”.
[23] On July 30, 2013, the plaintiffs arranged a further home inspection by Clearview and obtained an updated report of the state of repairs on the earlier-identified deficiencies.
[24] All of the matters raised in the July 28, 2013 letter were conditions of closing in favour of the plaintiffs pursuant to the APS as amended. These were matters that were supposed to have been completed prior to closing but were not yet complete (and appeared unlikely to be able to be completed in time).
[25] On July 31, 2013 an Undertaking and Direction was given to Mr. Cruz as seller by the plaintiffs in the following terms:
“In consideration of and notwithstanding the closing of the above transaction, we undertake as follows: …. 2. To hold back the sum of $10,000 and, within seven days of the completion of the eight items referenced in our letter of July 28, 2013 (Luhowy to Kesarwani) and the outstanding items outstanding items on the March 19, 2013 inspection report prepared for the buyer (as updated on July 30, 2013) to forward same to the seller or as it directs, provided that in the case of disagreement as to the status of completion of said items the parties shall refer such questions to the Architect for the project for his inspection and determination in writing as to completion of any items in dispute. The plaintiffs signed the undertaking and direction irrevocably undertaking to cause their counsel to comply with it.” (emphasis added)
[26] An issue arose at this (undefended) trial as to the identity of the “Architect” referenced in the Undertaking and Direction. This document was, after all, the provided by the plaintiffs to the defendant. Mr. Berky and his counsel disclaimed any knowledge of who the Architect might be. I am not satisfied with that non-explanation. The parties appeared to have had no trouble in identifying the “Architect” as being the project architect in the application before Chapnik J. regarding the holdback amounts. I find that the “Architect” identified in the Undertaking and Direction was the project architect and such project architect could have been identified from the building permit applications among other sources had the plaintiffs chosen to do so.
[27] The plaintiffs made no effort to submit any issues raised in this proceeding to the Architect named in the Undertaking and Direction drafted on behalf of the plaintiffs.
[28] The APS was completed on August 1, 2013 and the $10,000 holdback was made at that time in accordance with the Undertaking and Direction. I infer from the fact of completion that the Undertaking and Direction was accepted by the defendant at least in satisfaction of that portion of the purchase price due.
[29] The plaintiff had access to the documents exchanged by his solicitor at closing and could have produced any additional contractual documents at closing if there were any. If there were any agreements as to warranties surviving closing, the plaintiff had the onus and the opportunity to prove them and failed to do so. No closing documents apart from the Undertaking and Direction were submitted as evidence at the trial. Conspicuously absent was the deed of transfer itself or any agreement or undertaking regarding continuing warranties.
[30] Almost immediately after closing the plaintiff began to compile a list of “deficiencies” only some of which were included on the July 23 letter. The plaintiff communicated this list via email to Mr. Cruz from time to time.
[31] The first list of deficiencies is dated August 10, 2013 and includes a list of 18 items. A second version of the list was sent on August 21, 2013. By this time the list had grown to 30 items and Mr. Cruz was given a short deadline to provide satisfaction. On August 28, 2013 a further copy of the list was sent, this time containing 37 items. By September 3, 2013 the list had grown to 45 items. On September 13, 2013 the final draft of the list delivered contained a total of 54 items.
[32] As might be expected with such a lengthy and apparently expanding list of alleged deficiencies, relations between the plaintiffs and Mr. Cruz did not improve post-closing. Mr. Berky testified that Mr. Cruz became difficult to reach.
[33] In late August, 2013 Mr. Cruz engaged Mr. Roberto Monteaugudo to act as a sort of go-between for the purpose of coordinating and effecting the repair of the various alleged deficiencies.
[34] Unfortunately, Mr. Monteaugudo was not able to assist for very long. On September 5, 2013 a new intermediary named “Stanley” (last name not provided) contacted the plaintiff via email and indicated that due to family commitments, Mr. Monteaugudo would not be able to continue coordinating the necessary repairs due to family commitments. Stanley requested a meeting with Mr. Berky to go through the list. The evidence indicates that Mr. Berky was unable to co-ordinate a meeting with Stanley over the following days and interest in working with Mr. Cruz to resolve the deficiencies noted was quickly waning.
[35] Mr. Berky did not attempt to contact the Architect. Relations (and trust) with Mr. Cruz having deteriorated, he sought instead to find a contractor to fix the problems in a fashion more likely to be to his satisfaction.
[36] On September 13, 2013 Mr. Berky received a quote from Rosewood Design & Build Inc. to perform most of the work outlined in his list of deficiencies. The quotation came in at $55,000 plus HST.
[37] Mr. Berky suggests that Stanley was unable to obtain instructions from Mr. Cruz to complete any work. I don’t accept that evidence. I find that Mr. Berky had lost patience with Mr. Cruz prior to September 13, 2013 and sought the quotation from Rosewood in consequence. Shortly thereafter this matter began its inexorable slide towards litigation as the parties began disputing the fate of the holdback amounts (since resolved as noted earlier).
[38] At the trial, the plaintiff called only one witness, the plaintiff Mr. Thomas Berky. Mr. Berky is not qualified to provide more than a lay opinion as to any of the deficiencies alleged in this claim.
[39] The plaintiffs did not call either of the two contractors used to carry out the various repairs undertaken in 2013 and 2014 (Rosewood and Sovereign Contracting). Mr. Berky testified that these witnesses advised him only on the eve of trial that they would be unable to attend. No request for an adjournment of the trial was made and the plaintiffs chose to close their case in the absence of the evidence of those witnesses.
[40] While I do not draw adverse inferences from failure to call these witnesses per se, the onus of proof lies with the plaintiff in this case and I cannot infer evidence that these witnesses might have given had they been called either.
Issues to be decided
[41] The following issues arose to be determined in this undefended trial:
a. Is the plaintiff entitled to prove alleged breaches of oral agreements not reduced to writing? b. What seller’s obligations survived completion of the APS? c. What damages has the plaintiff proved?
Discussion and Analysis
(i) Oral Agreements
[42] The statement of claim pleads the written APS. The only hint of an oral agreement in the statement of claim is in paragraph 15 that provides “With a view to closing the transaction and on the basis of Mr. Cruz’s representations to the Plaintiffs that were relied upon by them that the property would be fully remedied and he would comply with all of his obligations under the APS and otherwise, the Plaintiffs agreed to close the transaction”.
[43] The APS contained an “entire agreement” clause of a sort that is quite standard and well-known. Whether the parties had solicitors prior to executing the APS, they certainly both had solicitors prior to closing. The day prior to closing, the plaintiffs provided a document entitled “Undertaking and Direction” that itself was stated to be “in consideration of closing”.
[44] I do not accept Mr. Berky’s evidence to the effect that Mr. Cruz agreed to as vague and open-ended a warranty to the APS as is alleged in paragraph 15 of the statement of claim in consideration of closing. I find no need to resort to the parol evidence rule to reach this conclusion. Mr. Berky’s testimony was quite vague and unconvincing on this subject-matter. General oral assurances that things would be fixed cannot be safely relied upon as giving rise to contractual rights in the context of a written agreement of purchase and sale among parties represented by counsel.
(ii) Post-completion obligations
[45] The APS was completed on August 1, 2013. The plaintiffs did not prove in evidence any of the agreements that would have been customarily exchanged on closing. On completion the APS moved from being an executory contract with conditions in favour of the purchaser to a completed contract subject only to such warranties as have been specifically designated as surviving closing.
[46] In this regard, the omission of the plaintiffs to produce the documents exchanged between the parties at completion handicapped the ability of the plaintiffs to make their case considerably. Such agreements would normally have made quite clear which warranties survived closing and on what terms.
[47] The APS required the seller to provide a “warranty equivalent to the Tarion Warranty”. The actual warranty provided at completion was not proved. The terms of the Tarion Warranty were not proved. I cannot find any of the plaintiffs’ claims to be founded on this unproved warranty, assuming it to have been given at completion.
[48] Schedule A to the APS contains a warranty in relation to the condition of chattels at closing. Again, I have not been provided with a copy of the actual warranty provided at completion. I am prepared to assume that a warranty was given in the terms of the warranty contained in Schedule A as to the condition of chattels at completion.
[49] The only closing document proved at the trial was the Undertaking and Direction pursuant to which $10,000 has been paid into court awaiting my ruling. The Undertaking and Direction is a document from the plaintiffs and their solicitor to Mr. Cruz and Mr. Kesarwani (defendant’s solicitor). This document was not signed by Mr. Cruz.
[50] I infer from the fact of closing that the defendant must at least have been content to accept the Undertaking and Direction as the basis on which $10,000 of the purchase price was not immediately paid at closing. The issue I must determine is whether the all of the obligations referenced in paragraph 2 of the Undertaking and Direction (incorporating by reference the eight items from the July 28, 2013 letter) have been carved out of the APS to become post-closing warranties regardless of the cost of fulfilling them or whether, to the contrary, these obligations merged at closing but survived only with respect to the holdback amount and with recourse limited to that sum.
[51] Mr. Berky testified that the $10,000 holdback amount was something proposed by him. It was not based on any quotations of the cost to complete the various incomplete matters. He had not yet lost confidence in the defendant in late July. The holdback amount was a mere rough estimate. I accept his evidence in this regard, but it does not address the doctrine of merger at closing.
[52] The amendments to the APS on March 22, 2014 created conditions of closing that were required to be satisfied by the seller prior to closing. The buyers’ options were to waive and close or to refuse to close and sue for damages absent a new agreement between the parties. The Undertaking and Direction cannot be treated as an amendment to the APS (it was not even signed by Mr. Cruz) still less as evidence of an implied agreement as to the provision of an unlimited warranty post-closing by the seller of the various items that were subject to it.
[53] While I am prepared to infer form the fact of closing that Mr. Cruz agreed to complete the agreement and accept tender of less than 100% of the purchase price in light in consideration of the Undertaking and Direction, that conclusion does not necessarily amount to an acceptance that the obligations to be satisfied out of the holdback amount continued post-closing as warranties without limit. If there was an agreement between the parties as to what warranties were given at completion and the terms attaching to such warranties, the plaintiffs have failed to prove it at trial.
[54] In my view, the plaintiffs have failed to prove any rights arising in respect of the items referenced in the Undertaking and Direction beyond the right to retain the holdback in satisfaction of them. By accepting the Undertaking and Direction, the defendant accepted to close on receipt of less that 100% of the purchase price against the right (but not obligation) to make a claim against the fund created. No continuing warranty has been proved.
(iii) Proof of damages
[55] Paragraph 29 of the statement of claim provides a summary of damages claimed in this action. In my view, the most expedient way of proceeding is to go through each of the claimed damages specified in that paragraph in order to identify, with respect to each, whether the plaintiff has demonstrated a relevant breach of contract and the damages, if any, flowing there from as proved in the evidence before me.
“Fireplace Tile & Kitchen Faucet (Replace defective faucet/payment of materials): $625.37 In my view this item is covered by the Undertaking and Direction and may be recovered from the $10,000 holdback. It is not the object of a warranty that survived closing.
“Replace defective Central Vacuum: $904.00”
[56] The APS contains a warranty that the included chattels “will be in good working order and free from all liens and encumbrances”. In my view, this warranty did survive completion.
[57] Mr. Berky testified that the central vacuum system was working when he assumed possession of the house but that it was “old” and apparently did not provide adequate power. This item did not appear in any of the lists of deficiencies sent to the defendant even though the purchase of the replacement unit was dated August 7, 2013 (prior to the first list of deficiencies). I do not accept Mr. Berky’s evidence that the central vacuum was not in good working order at completion. I can find no actionable breach of warranty as regards the central vacuum system.
[58] This aspect of the claim is denied.
“Repair Master Bath Leak Faucet: $203.40”
[59] This item was not listed in the inspection report as a deficiency nor was it included in the list of deficiencies noted on July 28, 2013. However, the inspection report did note the existence of moisture in the ceiling on the floor below. The invoice for this repair is dated January 14, 2014. I find that the defendant undertook to repair the deficiencies noted in the inspection report and that this is a deficiency that the defendant failed to repair.
[60] This claim is covered by the Undertaking and Direction and may thus be satisfied from the $10,000 holdback. It is not otherwise a warranty that survived closing.
“Repair kitchen ceiling from master bath leak: $3,278.99”
[61] The invoice for this item totals $3,278.99 for kitchen ceiling repair. The invoice is dated March 21, 2014 and indicates that there was sanding, plastering and painting. I have no basis to question the reasonableness of the amount expended. The evidence satisfies me that the defendant undertook to attend to the accumulation of moisture in the ceiling from the slow leak coming from the defective faucet in the shower in the master bathroom above. The issue was clearly flagged in the inspection report and undertaken in the amendment to the APS. The repair was not done.
[62] This claim is covered by the Undertaking and Direction and may thus be satisfied from the $10,000 holdback. It is not otherwise a warranty that survived completion.
“Toronto tax bill – Unpaid Property Tax portion of Builder (2/7 th ): $636.56”
[63] The APS provides in paragraph 19 that “The Buyer and Seller agree that no claim will be made against the Buyer or Seller…for any changes in property tax as a result of a re-assessment of the property, save and except any property taxes that accrued prior to the completion of this transaction ” (emphasis added).
[64] The evidence before me indicates that there was a “supplementary/omitted tax bill” sent following re-assessment performed by the City that was dated October 2, 2013 (i.e. more than two months post-closing) but with an effective date of June 1, 2013 (i.e. pre-closing). The tax bill was for a total of $2,227.97. The plaintiffs claim $636.56 of that sum on the basis that a total of seven months is covered by the bill, two months of which (June and July) are for the account of the seller.
[65] I have not been given a copy of any undertaking to readjust that would normally have been delivered at closing. I am prepared to infer the existence of an undertaking to readjust in respect of property tax – the defendant did fail to pay an amount of pre-closing property tax that was in fact adjusted and paid post-closing. The short question is whether the taxes re-assessed retroactively after closing can be said to have “accrued” prior to closing. The APS clearly covers the situation where a re-assessment is issued prior to closing – in such case, the purchaser cannot make any kind of claim if the assessment results in higher taxes going forward. In my view, the same reasoning applies to a retroactive re-assessment that is effective prior to the completion date. I find that the effect of the APS is to allocate such retroactively revised taxation among buyer and seller as well.
[66] This claim is allowed in the amount claimed. It is not a holdback amount.
“Gutter and Fascia Work: $932.25”
[67] The March 2013 home inspection revealed that some gutters and downspouts were missing or improperly positioned. This deficiency was required by the APS to be repaired by Mr. Cruz and was included in the Undertaking and Direction.
[68] This claim may be satisfied from the $10,000 holdback paid into court. It is not the object of a continuing warranty.
“Doorbell: $125.98; House number and mailbox: $194.40”
[69] I can find no basis to allow this claim. Mr. Berky’s initial deficiency list from August 10, 2013 merely indicated “House number, mail box, doorbell: ( I will purchase you will install )” (emphasis added). This is the first indication of Mr. Berky claiming to be promised a door bell, mail box or house number and he was then claiming only a small amount of labour to install it. The plaintiffs have demonstrated no contractual entitlement to this expenditure. This sort of thing would have been plain and obvious and should have been the object of a requisition prior to closing if alleged to be a required element under the APS.
[70] This claim is denied.
“Wall oven: $3,926.75”
[71] As with the central vacuum system, the APS contained a warranty that the included chattels including the oven and microwave would be in good working order. The APS listed both the oven and microwave as included chattels.
[72] Mr. Berky testified that the oven and microwave in this case were a single, combined unit. He said that the oven/microwave that he saw before purchasing the home had been switched between the signing of the APS and completion. In the place of a the oven/microwave that he had seen was allegedly a different unit of similar make and appearance.
[73] I do not accept Mr. Berky’s evidence that the oven/microwave was switched. I can find no contemporary complaints of such a switch made by him at the time despite his increasingly complex and lengthy deficiency lists sent to the defendant in August and September after completion.
[74] Mr. Berky appears to have been disappointed that used appliances and not new ones were supplied. This was a renovation, albeit a thorough one, and new appliances were not bargained for.
[75] Mr. Berky’s evidence is that the microwave portion of the combined unit was not working at the time of completion. It was either emitting too much power and burning things or emitting no power at all. He claimed to have attempted to obtain repairs to the unit but the manufacturer (Electrolux) would not agree to repair the unit since the plate indicating the model number and year was missing and they could not be sure of which parts to use. As a result, he opted to purchase a brand new combined oven/microwave instead. The price was $3,926.75.
[76] I am not in a position to find that Mr. Berky’s mitigation efforts were necessarily defective. Mr. Cruz was notified of the microwave problem promptly after closing and given several weeks to attempt to fix it before relations broke down. He did not do so. On the other hand, the plaintiffs have purchased a “top of the line” very expensive new unit to replace the used one they had contracted for. I would reduce their claim by $1,000 to account for the increased value and expected life of the new unit.
[77] I would therefore allow this claim in the amount of $2,926.75. This was not part of the Undertaking and Direction and is not properly part of the holdback. It was however a warranty that survived closing. I allow the claim in the amount of $2,926.75.
“Upgrade water line: $2,712.00; Water line upgrade fee to City of Toronto: $500.00”
[78] Mr. Berky testified that the water pressure in the house proved to be quite inadequate after he moved in. He chose to address this problem by arranging to have a higher capacity (i.e. wider) water pipe installed between the house and the city water main, replacing the old ½” pipe with a new 1” pipe.
[79] I cannot find that this was agreed to by the defendants in the APS. The plaintiffs pointed to the provisions of the APS and in particular the provision in the amendment that “the property shall be completed in a professional and timely manner maintaining uniform quality of finishes inclusive of all customary features, practices and installations associated with a complete renovation”. I cannot find that installing a new water line to the City main is a “customary feature” of a “complete renovation”. It is a matter that could have been discovered quite easily in a home inspection. The issue of water pressure was raised in the amendments to the APS that specified that certain fixtures were to have features to equalize temperature and pressure. This matter was not brought up until after closing and granting this claim would amount to a retroactive amendment to the contract.
[80] This claim is denied.
“Rosewood Design & Build Inc.: $59,664.00”
[81] The plaintiffs submitted an invoice from Rosewood Design & Build Inc. outlining a total of 21 items for which a total of $59,664.00 (including HST) was charged.
[82] $10,450 plus HST was charged for “Cabana – not properly built. (Rebuild basic frame structure)(Not inclusive of trims shingles and steps)”. Item 5 in the Undertaking and Direction lists “Back yard shed/cabana not finished” as one of the items that were not complete as at three days prior to completion and in respect of which the $10,000 holdback was created to permit completion to proceed notwithstanding. The amendment to the APS had a requirement in item 12 that the seller “Finish cabana at back of property with roof and seating area as described by Seller, Buyer will be consulted on design of cabana”.
[83] In my view, the plaintiffs undertook a scale of work in respect of the cabana far beyond that which was contemplated and required by the APS as amended. The requirement was to finish what was started, not to rebuild it. The $10,450 charged by Rosewood was only part of the charges for completing the cabana. The Sovereign Contracting invoice charged a further (undifferentiated) amount to complete the work Rosewood began.
[84] I would allow a claim of $5,000 in total that may be claimed as against the holdback amount paid into court but is not otherwise a warranty claim that survived closing.
[85] Rosewood invoiced $3,400 to “Hard wire under cabinet kitchen lighting; reposition power sources for TV outlets; Split 30 kitchen lights onto two separate switches”.
[86] The matter of hard wiring the kitchen cabinet lighting was addressed in the Undertaking and Direction as was the matter of the location of power outlets. The splitting of the 30 kitchen lights on to 2 switches instead of one was not and is a matter that not raised prior to closing. The plaintiffs have failed to break out what it spent on matters covered by the APS and those which were not. I am allowing this portion of the claim in the amount of $3,000 only. The $3,000 is recoverable from the $10,000 holdback amount. These items are not warranty items that survive closing of the APS and are therefore recoverable only from the holdback amount.
[87] Rosewood invoiced $2,500 for a “complete new caulking application required” due to “missing/inappropriate caulking application”. Missing caulking was a matter raised in the March home inspection report and was therefore included in the July 28, 2013 letter and the Undertaking and Direction. I am allowing this claim as recoverable from the holdback amount.
[88] Rosewood invoiced $1,600 for “Outside Insulation: Rear roof deck”. Mr. Berky was advised by Rosewood that the insulation was inadequate and needed to be replaced. The opinion he related is not one that was proved before me in evidence. Further, I cannot find any basis in the evidence to attribute a continuing warranty as to the state of the insulation. I find that this deficiency – if it be one – is a matter that did not survive closing. This claim is denied.
[89] Rosewood invoiced $2,300 for brick and mortar repair throughout the house. This was an item raised in the home inspection report and is thus incorporated in the Undertaking and Direction. I would allow this claim as an item recoverable from the holdback amount. It is not the object of a post-completion warranty that has been proved in evidence.
[90] Rosewood invoiced $3,500 to replace the front porch railing with black iron as stipulated in the APS. The plaintiff elected to close with a railing in place that was other than the type and quality he was entitled to require. There is no evidence before me of a written agreement to amend the APS and require completion of this item post completion. I find that this requirement of the APS merged at closing and may not now be claimed. This claim is denied.
[91] Rosewood invoiced the following amounts for the following work none of which is included in the Undertaking and Direction:
- Carpentry work: baseboard, adjusting doors to back and side: $700
- Defective small bathroom faucet replaced: $350
- Same bathroom – tile to be replaced: cracked: $200
- New shower door to be installed- remove replace: $1,400
- Drywall/taping/sanding ceilings; poor application and water damage: $5,800
- Laminate replaced in basement: $1,800
- Interlock: remove and reinstall front and back (unevenly installed): $2,500
- Back Porch deck ceiling and front porch ceilings to be replaced with cedar planks, stained and finished; Poor installation: $4,600
- Exterior and Interior painting: $6,500
- Demolition/disposal/cleaning: $2,600
I can accept none of these claimed amounts. I cannot find that any of these matters were the object of a warranty that survived completion in the APS.
[92] I will however accept as covered by the Undertaking and Direction the amount of $2,500 in respect of the installation/repair/relocation of the TV cabling supply.
[93] Sovereign Contracting delivered an invoice totaling $21,332.14 including HST on May 7, 2014. Mr. Berky testified that Sovereign was called in to complete work that Rosewood was unable to complete before winter impeded the completion of further outside work in 2013. A total of $5,826.00 was invoiced for completing a number of exterior matters including installing a copper and shingle roof on the gazebo, painting it, rebuilding a garden shed and securing the rear deck to the house with structural hangers.
[94] I would not allow any of these claims. Whether the “repair” of the deck was necessary I cannot say. The plaintiffs did not call evidence of anyone qualified to give that opinion. I have no evidence before me that any of these items is not to the building code or would be required under the Tarion warranty the terms of which were not placed in evidence before me. I cannot find that these items were carried forward by any other more general warranty in the APS.
[95] The Sovereign Invoice contains a charge of $7,526.00 to replace all of the interior doors of the house. Mr. Berky testified that the gap between the doors and the floor (just over 1”) was too much in his view. He had them replaced (re-using the hinges/handles and other hardware). I find that this was a matter of the plaintiffs’ individual preference but was not a requirement of the APS and was not the object of any surviving warranty.
[96] The Sovereign Invoice contains a charge of $5,526 for the substantial re-building of the front porch. Mr. Berky’s evidence was that the porch had been damaged during the course of the very severe winter of 2013-2014. Some stone facing on some of the steps had allegedly been poorly secured. Whether that single item was covered by a continuing warranty, the plaintiffs decided to go considerably further and appear to have substantially re-build the front porch. That was no part of the APS. This claim is denied.
Disposition
[97] In summary, I have determined that the following claim amounts are allowed in respect of the 8 items listed in the July 28, 2013 letter as referenced in paragraph 2 of the Undertaking and Direction and are payable out of the $10,000 holdback amount:
- Fireplace Tile & Kitchen Faucet: $625.37
- Repair Master Bath Leak Faucet: $203.40
- Repair kitchen ceiling from master bath leak: $3,278.99
- Gutter and Fascia Work: $932.25
- Cabana (limited to): $5,000.00
- Hard wire under cabinet kitchen lighting; reposition power sources for TV outlets; Split 30 kitchen lights onto two separate switches (limited to): $3,000.00
- Complete new caulking application: $2,500.00
- Brick and mortar repair: $2,300.00
- Installation/repair/relocation of the TV cabling supply: $2,500.00
[98] The holdback amount to satisfy the Undertaking and Direction that has been paid into court is only $10,000. This amount is clearly less than the $22,984.21 in claims I have found may be made upon it. While the plaintiff did not engage the Architect to resolve disputes, I am satisfied that nothing turns on that failure in this case. The defendants did not move to stay this action pursuant to the Arbitration Act, 1991, S.O. 1991, c. 17 and the damages proved far exceed the holdback amount in any event.
[99] I have found only two amounts to be damages arising from continuing warranties that survived completion (Toronto tax and wall oven). The plaintiff shall have judgment for $3,563.31 in respect of those items.
[100] I therefore find that the plaintiff is entitled to judgment in the total amount of $3,563.31 plus pre-judgment interest. I further direct that the $10,000 holdback amount paid into court plus any accrued interest shall be paid over to the plaintiffs forthwith.
[101] I shall receive the plaintiffs’ written submissions on costs within thirty days. I would request that submissions be kept to five pages exclusive of an Outline of Costs. The submissions should address the fact that this claim as determined is far below the threshold for Rule 76 and whether, in consequence, I ought to exercise my discretion to deprive the otherwise successful plaintiffs of their costs in whole or in substantial part.
S.F. Dunphy J.
Released: June 20, 2016
COURT FILE NO.: CV-14-511895 DATE: 20160620 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: Thomas Alojz Berky and Anna Daphne Berky Plaintiff – and – Julio Alvarez Cruz and Rahul Kesarwani Defendant