Court File and Parties

COURT FILE NO.: CV-14-517321A1 DATE: 20170524

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

CONTERRA RESTORATION LTD. Plaintiff – and – IRVING MOISHE KIRSCH Defendant – and – PANCON ENGINEERING LTD. Third Party

Counsel: Jeffrey A.L. Kriwetz, for the Plaintiff David Taub, for the Defendant Megan Mackey, for the Third Party

HEARD: May 15 and 16, 2017

REASONS FOR JUDGMENT

Mr. Justice P.J. Cavanagh

Introduction

[1] The Plaintiff Conterra Restoration Ltd. (“Conterra”) is a contractor that focuses on the repair and restoration of buildings. The Defendant Irving Moishe Kirsch (Mr. Kirsch”) is the owner of property at 182 Jameson Ave., Toronto, Ontario (the “Property”). Conterra performed restoration work on the Property. The Third Party Pancon Engineering Ltd. (“Pancon”) is a building science and restoration engineer which oversaw the work at the Property that was performed by Conterra.

[2] Conterra is claiming payment of the sum of $109,451.35 from Mr. Kirsch for its charges for work done in connection with (i) the supply of quantities of “through slab concrete” that exceeded the estimated quantity in relation to balcony slabs rehabilitation work that Conterra contracted to perform under a written contract between it and Mr. Kirsch dated September 13, 2012 (the “Contract”), and (ii) waterproofing work on the balconies at the Property that was not within the scope of work under the Contract and that Conterra was directed to perform by Pancon.

[3] The Contract was made for the purpose of completing repairs to the balconies at the Property that were needed in order to comply with work orders that had been issued by the City of Toronto. Mr. Panahi and Mr. Tedesco gave evidence that this work could not be properly completed in order to satisfy the work orders issued unless the additional quantities of through slab concrete were, in fact, provided. No contrary evidence was provided by Mr. Kirsch.

[4] The balcony waterproofing work was not required under the Contract. Mr. Panahi’s evidence is that he strongly recommended that the balconies be waterproofed to prevent further delamination, and that Mr. Kirsch instructed him to have Conterra waterproof the balconies.

[5] Mr. Kirsch’s position is that, under the Contract, the estimated quantity of units of through slab concrete in the Contract could not be exceeded without his prior authorization and a signed Change Order. Mr. Kirsch maintains that he did not give such prior authorization, no Change Order was signed and, therefore, he is not liable for the cost of the additional units of through slab concrete that Conterra provided. With respect to the balcony waterproofing work, Mr. Kirsch’s position is that this work was not provided for by the Contract, he did not authorize this work to be done, and no signed Change Order was made to authorize such additional work, as was required by the Contract. Therefore, Mr. Kirsch also denies that he is liable for the cost of the balcony waterproofing work performed by Conterra.

[6] Mr. Kirsch does not dispute that Conterra properly performed the work and actually supplied the materials in respect of its claims.

[7] Mr. Kirsch has defended Conterra’s action, and commenced a Third Party Claim against Pancon in which he seeks contribution and indemnity for any and all amounts which he may be ordered to pay to Conterra in the main action.

[8] This case first came before me on December 1, 2016 when I heard three motions for summary judgment in the main action and the third party action. I concluded that I was not able to reach a fair and just determination of the merits of the motions for summary judgment without assessing the evidence to be given through viva voce testimony by Mr. Kirsch and by Mr. Panahi, Pancon’s representative, and I dismissed the three motions: Conterra Restoration Ltd. v. Kirsch, 2016 ONSC 7892.

[9] In accordance with the principles expressed in Hyrniak v. Maudlin, [2014] S.C.R. 87 at paras. 74-79, I remained seized of the main action and the third party action and directed the parties to confer with each other and try to reach agreement on procedures for a short trial that would take advantage, to the greatest extent possible, of the work that had been done for the motions for summary judgment. Counsel for the parties did so and used the viva voce evidence given at the trial by Fabio Tedesco, a representative of Conterra, Mr. Kirsch, and Mike Panahi, a representative of Pancon, to supplement the evidence that had been filed on the summary judgment motions. Having heard this viva voce evidence, I am now able to make necessary findings of credibility and make decisions in the main action and the third party action.

[10] For the following reasons, I have decided that Mr. Kirsch is liable to Conterra for the amount of Conterra’s claim and that the third party claim against Pancon should be dismissed.

Analysis

(a) Is the Contract a fixed-price contract?

[11] There was evidence that Mr. Kirsch wanted to have a fixed-price contract. He wrote a handwritten letter to Mr. Panahi dated August 2, 2012 in connection with the work required at the Property. This letter was written in respect of both the balcony slabs rehabilitation and the garage roof slab rehabilitation at the Property (a separate project that Conterra performed under the Contract after the balcony slabs rehabilitation work). Only the balcony slabs rehabilitation work is in issue in these proceedings.

[12] In his letter, Mr. Kirsch indicated that he had reviewed the four contractor tender submission forms with respect to the work and, after calculating the total of the “Lowest Combined Price” for both projects, included the words “Fixed Price No Changes”. Below this, he wrote:

THERE SHALL BE NO PRICE ADJUSTMENTS, NO ALLOWANCES, NO SUPPLEMENTARY CONDITIONS, NO CHANGE IN CONTRACT PRICE, NO CASH ALLOWANCES NO CHANGE ORDERS, NO CONTINGENCY ALLOWANCE, NO CHANGES IN WORK, NO ADJUSTMENTS IN CONTRACT PRICE ALSO WRITTEN WARRANTIES, INSURANCE COVERAGE, WORKMEN’S COMPENSATION CONSTRUCTION SAFETY.

[13] Mr. Panahi wrote to Mr. Kirsch on August 21, 2012. He wrote that he had met with Conterra with respect to lowering their price as per Mr. Kirsch’s instructions dated August 2, 2012 and advised that the Conterra is willing to lower their prices as set out in the letter. With respect to the balcony repair, Mr. Panahi referred to the price of $560,600 plus HST and wrote:

This price does not include waterproofing of slabs… With respect to contingency, as I mentioned to you earlier, we have not had opportunity to look more closely at bricks or floor slabs from the ground level, therefore, once the swing stage is set and we have an opportunity to look more closely at the existing brick condition, further removal of deteriorated bricks beyond what we estimated may be required. Further removal of concrete at balcony slabs beyond the front edge of slabs due to the age and condition of balconies may also be required. Therefore, we recommend that you should set aside a contingency amount in case it is required. Conterra has also indicated that since this project is going to be done in two phases, there will be no increase in costs for the next year.

[14] In the specification and tender documents that Mr. Panahi prepared, some items were listed and priced on a lump-sum basis and other items were listed and priced on a per unit basis. The item for “Isolated Total Through Slab Repairs” was shown to be priced on a “per sq. ft.” basis, with an estimated quantity of 100 units and a per unit price of $76.00. On his cross-examination at trial, Mr. Kirsch said that he did not really review this document in detail and that he did not notice that some items were to be priced on a per unit basis.

[15] The Contract, in paragraph 1 relating to Contract Documents, specifies additional documents that shall be part of the Contract, one of which is “Table of Repair Items”. This table, which was authorized and accepted by Mr. Kirsch on September 5, 2012, lists a number of items and descriptions. One of these is item 2.2 described as “Isilated (sic) Total Thru Slab” that, under the “Units” column, reads “Sq. Ft.”, with the number of units shown as 100, the Unit Rate of $76.00, and the total amount for this item shown as $7,600. The copy of this table that was introduced into evidence is a copy of a fax transmission and the column descriptions are not clearly visible. Nothing turns on this, because the parties agree that this item was quoted on a per unit basis, with an estimated quantity and a specified unit price. There are also other items that are shown on this table on a per unit basis as opposed to a lump sum basis.

[16] On his cross-examination at trial, Mr. Kirsch acknowledged that, after receiving Mr. Panahi’s August 21, 2016 letter, he understood that the extent of the work could be more than anticipated but, in his mind, he was contractually entitled under paragraphs 6 and 10 of the Contract to the protection of a requirement for his approval in writing to any changes that would increase the total contract price to an amount greater than $560,600, which was described in the Contract as the “Total Contract Amount”.

[17] Because some items were priced in the Contract on a fixed price basis and some items were priced on a per unit basis with estimated quantities of units shown, the Contract was not a fixed price contract, because the total Contract price would depend upon the number of units that were needed for the items that were priced on a per unit basis. If the number of units supplied was less than the estimated quantity, the total contract price would be lower. If the number of units supplied was greater than the estimated quantity, the total Contract price would be higher.

[18] The next question is whether, under the Contract, Conterra needed Mr. Kirsch’s prior authorization and a Change Order signed by him before it could charge him for additional quantities of units (greater than the estimated quantities in the Contract) for items that were priced in the Contract on a per unit basis.

(b) Under the terms of the Contract, was a written Change Order required to have been signed by Mr. Kirsch before he could be charged for additional quantities of “through slab” concrete to be used for the repairs to the balconies, beyond the estimated quantity (10) set out in the Contract?

[19] Mr. Kirsch’s evidence as given in his affidavit and confirmed on his cross-examination was that the amounts claimed by Conterra for both (i) the additional quantities of through slab concrete that were supplied, and (ii) the waterproofing work, that he described as “unauthorized additional work”, required written Change Orders under the Contract signed by him before he could be charged for such work.

[20] Mr. Kirsch relies upon paragraphs 6 and 10 of the Contract:

6. Changes Order Any additional work beyond the noted scope of work and quantities that may be required due to site conditions during construction is not included in this Contract Price. All additional work is to be reviewed by Pancon Engineering Ltd. and any additional work that is deemed to be required shall be authorized by Owner AND Owner’s engineer (Pancon Engineering Ltd.) prior to commencement of the additional work. Extras are payable upon approval of extras by the Owner and Owner’s engineer (Pancon Engineering Ltd.) and by signing the Change Order.

7. Contract Amount The Owner and Contractor acknowledged that this contract amount is based on agreed scope of work and price as per attached table. This contract amount does not include any contingency amount as set originally in the Tender Documents by Pancon Engineering Ltd. The Owner and Contractor agree that where unforeseen items are uncovered during construction and anticipated repair quantities for the noted project are beyond the quantities set in enclosed table, the additional work is to be reviewed by Pancon Engineering Ltd. and any additional work that is deemed to be required shall be authorized by Owner and Pancon Engineering Ltd. The cost of approved additional work authorized by Owner will be then additional to this contract as per unit rates noted in this contract. A Change Order shall be formed and signed by Owner and Contractor for authorized additional work and payment.

[21] Mr. Kirsch’s evidence is that he never approved any balcony repair work beyond what was set out in the Contract, nor did he ever approve any waterproofing work to be performed for the balconies at the Property. According to Mr. Kirsch, had Pancon provided him with any change orders in respect of this work, he would have refused to sign them and would have refused to authorize that work.

[22] Pancon’s position is that, for a unit rate contract, payment of work done is subject only to quantity verification. Pancon submits that written change orders are not applicable to quantity overruns and that it is not possible to obtain a change order when one does not know the quantity that will be necessary. According to Pancon, this is precisely why concrete repairs were priced on a per square foot basis. Pancon submits that the supply of through slab concrete for the balcony repairs was not work that was beyond the “noted scope of work” and, therefore, a written Change Order was not contractually required under paragraph 6 of the Contract.

[23] In addition, Pancon submits that it was known at the time the Contract was made that additional quantities of through slab concrete may be required and, therefore, that there was nothing “unforeseen” about the need for additional quantities of through slab concrete. For this reason, Pancon submits that a written Change Order to authorize the supply of such additional quantities of through slab concrete (greater than the number of units that was estimated) was not required under paragraph 10 of the Contract.

[24] The interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine the intent of the parties and the scope of their understanding. To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning. While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement. The evidence that can be relied upon under the rubric of “surrounding circumstances” should consist only of objective evidence of the background facts at the time of the execution of the contract, that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting: Sattva Capital Corp. v. Creston Moly Corp., [2014] S.C.R. 633 at paras. 47, 57, and 58.

[25] The objective evidence of the material background facts at the time of the execution of the Contract consists of the following:

a. Mr. Kirsch needed to have the work orders that were issued by the City of Toronto against the building at the Property lifted. Mr. Kirsch asked Mr. Panahi to investigate the deficiencies cited in the work orders, prepare a report on the deficiencies that would be submitted to the City of Toronto, and oversee work necessary to lift the work orders. Mr. Kirsch retained Pancon to prepare assessment reports recommending repair work, and to prepare specifications for the work, send the project to tender, negotiate with the contractor, and supervise the repair work. b. In Mr. Kirsch’s letter dated August 2, 2012, he said he wanted one contract price with no contingencies, change orders or extras. In Mr. Panahi’s August 21, 2012 letter, he warned Mr. Kirsch that further removal of concrete at balcony slabs beyond the front edge of slabs due to the age and condition of balconies may also be required, and Mr. Panahi recommended that Mr. Kirsch set aside a contingency amount. c. At the time Conterra was preparing its quote for the balcony work, Mr. Panahi advised Mr. Tedesco that his initial estimate of quantities was based on a random visual and sounding inspection of the state of the balconies before any repair work began and that, as is typical in these types of projects, the full scope of the work and quantities of work to be performed would not be known and could not be determined until the repair work actually began. d. Mr. Panahi advised Mr. Tedesco that Mr. Kirsch was aware that the scope of work could be more once the repair work began and the true state of the balconies was revealed and that if more labour and materials were required to complete the repairs than originally quoted and stated in the contract, Conterra would be paid for the additional work performed. e. Following receipt of Mr. Panahi’s August 21, 2012 letter, Mr. Kirsch’s evidence is that he said to Mr. Panahi “we’ll have change orders” and he signed the Contract.

[26] The Contract is clear that item 2.2 on the Table of Repair Items that forms part of the Contract provides for the supply of through slab concrete of a per square foot basis at a unit price of $76.00 with an estimated quantity of 100. The work described by this item was part of the scope of work for the Contract. Paragraph 6 provides that any additional work “beyond the noted scope of work and quantities” that may be required due to site conditions during construction is not included in this Contract Price. This paragraph provides that “any additional work that is deemed to be required shall be authorized by [Mr. Kirsch] and [Pancon] prior to commencement of the additional work”.

[27] When I give the words used in the Contract their ordinary and grammatical meaning, the supply of through slab concrete in quantities greater than the estimated quantity is not “additional work beyond the noted scope of work”. This work is within, not beyond, the noted scope of work. Therefore, under paragraph 6 of the Contract, authorization by Mr. Kirsch was not required. The supply of additional quantities of through slab concrete does not constitute “extras” as that word is used in paragraph 6 of the Contract.

[28] In my view, there is nothing in the surrounding circumstances that should lead me to deviate from giving the words used by the parties in the Contract their ordinary and grammatical meaning. The words used by Mr. Kirsch when he told Mr. Panahi “we’ll have change orders” is not sufficiently clear that a reasonable person in the position of Mr. Panahi would have understood these words to vary the ordinary and grammatical meaning of the words used in the Contract. In cross-examination at trial, Mr. Panahi accepted the proposition that was put to him that the Contract called for a written Change Order if additional quantities of through slab concrete were required. There was no evidence that Mr. Panahi discussed this view of the Contract with Mr. Kirsch before the Contract was signed. I do not consider this subjective view of the Contract expressed by Mr. Panahi in cross-examination at trial to be objective evidence of a surrounding circumstance that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting such that, under the principles expressed in Sattva, it informs the interpretation of the Contract.

[29] Further, I accept the submission made on behalf of Pancon that the parties would have reasonably known that it would not be practical for them to obtain a series of Change Orders as the work required under the Contract progressed in order to secure approval for the supply of necessary quantities of through slab concrete for Conterra to complete the balcony slabs rehabilitation work.

[30] Mr. Kirsch also relies upon paragraph 10 of the Contract. This paragraph provides that “where unforeseen items are uncovered during construction and anticipated repair quantities for the noted project are beyond the quantities set in enclosed table” any additional work that is deemed to be required shall be authorized by Mr. Kirsch and Pancon, and the cost of approved additional work will then be additional to the Contract at the per unit rates noted therein, and a Change Order shall be formed and signed for authorized additional work and payment.

[31] The letter from Mr. Panahi dated August 21, 2016 makes it clear that the supply of additional through slab concrete was not “unforeseen” at the time that the contract was made. Mr. Kirsch agreed that he knew that the extent of work under the agreed scope of work could be more than was anticipated based upon Mr. Panahi’s letter. When I give the words used in paragraph 10 of the Contract their ordinary and grammatical meaning, the supply of additional through slab concrete in excess of the estimated quantity is not an “unforeseen” item that was uncovered during construction and, therefore, authorization by Mr. Kirsch for the supply of necessary quantities of through slab concrete for Conterra to complete the balcony slabs rehabilitation work was not required under paragraph 10 of the Contract. No written Change Order was contractually required.

[32] Counsel for Mr. Kirsch submits that giving paragraphs 6 and 10 of the Contract these interpretations would mean that a Change Order would never be required and that, therefore, such an interpretation could not truly reflect the intent of the parties and the scope of their understanding of the contractual terms. I disagree. If additional work, including the supply of additional materials, was not within the scope of work in the Contract, or qualified as “unforeseen items” uncovered during construction, such additional work would require the authorization of Mr. Kirsch and a written Change Order. For example, if it became known during the course of construction that waterproofing of the balconies would be needed in order to properly complete the rehabilitation of the balcony slabs and have the work orders issued by the City of Toronto lifted, such additional work would, by the terms of the Contract, need the authorization of Mr. Kirsch and a written Change Order.

[33] For these reasons, I have concluded that written authorization from Mr. Kirsch and a written Change Order were not required under the Contract before he could be charged for the supply of quantities of through slab concrete, greater than the estimated quantities, that were necessary for Conterra to complete the balcony slabs rehabilitation work that was called for by the Contract.

(c) Did Mr. Kirsch orally authorize Mr. Panahi to direct Conterra to use additional quantities of through slab concrete as were required in order to complete the repairs to the balconies and comply with the work orders that had been issued by the City of Toronto?

[34] Mr. Panahi’s evidence was that when work began, it became apparent that the condition of the concrete balconies was much worse than anticipated based on a visual inspection. Concrete delamination was severe and a significant amount of rebar was rusted requiring a significant additional amount of concrete replacement. The corroded rebars needed to be cleaned and new rebars needed to be lapped with existing ones. In addition, after cutting into the balcony slabs, Mr. Panahi and Mr. Tedesco learned that the balcony slabs consisted of only one layer of reinforcement which prevented Conterra from carrying out repairs as “top side repairs”. Repairs needed to be carried out as “through slab repairs”. As a result, Conterra had to replace a significantly greater amount of through slab concrete in order to safely repair the balcony slabs. According to Mr. Panahi, this work had to be done otherwise he could not issue a completion letter and the City of Toronto would not lift the work orders.

[35] Mr. Panahi’s evidence was that he telephoned Mr. Kirsch in Vancouver in order to tell him about the extent of concrete deterioration. He suggested to Mr. Kirsch a number of times that he should come to the site to see the extent of concrete delamination for himself. Mr. Kirsch refused to do so. Mr. Panahi’s evidence is that in a particular conversation that he recalled, he told Mr. Kirsch about the extra concrete repair work that needed to be done and, after some discussion, Mr. Kirsch told him to go ahead with the extra concrete repairs. Mr. Panahi recalls Mr. Kirsch saying that he understood the unit rate, and that the additional work should be charged at that rate. According to Mr. Panahi’s evidence, when Mr. Kirsch told him to go ahead with through slab concrete repairs (which was on top of the 100 square feet quoted in the Contract), Mr. Kirsch did not tell him that his signature on a change order would be required in order to perform additional through slab concrete repairs. Mr. Kirsch simply told him to have Conterra repair the delaminated concrete so that the repairs would be complete and the work orders would be lifted. On the basis of Mr. Kirsch’s instructions to him, Mr. Panahi told Conterra to go ahead with the necessary through slab repairs, which would be charged at the unit price agreed to in the Contract.

[36] Mr. Kirsch’s evidence was directly to the contrary. Mr. Kirsch denied that he advised Mr. Panahi or anyone else at Pancon or Conterra to go ahead with the through slab concrete repairs involving quantities of concrete greater than the 100 square feet estimated in the Contract. Mr. Kirsch did not recall a conversation with Mr. Panahi in which he was told that additional quantities of concrete were required. Mr. Kirsch recalls that he told Mr. Panahi that he did not understand engineering, and that Mr. Panahi should just send him the bills and he would pay them. Mr. Kirsch’s evidence was that he only found out after the balcony work was completed about the charges for the extra concrete and the waterproofing. His evidence was that he did not know about this work while it was being done. Mr. Kirsch was adamant that he did not authorize Mr. Panahi to go ahead with the work involving additional supplies of through slab concrete that would increase the price over the price shown on page 4 of the Contract.

[37] In support of their position that Mr. Kirsch knew about and authorized the supply of additional through slab concrete, Conterra and Pancon rely upon the series of eleven progress draw certifications that were sent by Pancon to Mr. Kirsch. Each of these consisted of a covering letter, and enclosures including progress draw invoices and a spreadsheet showing a breakdown of the charges on each invoice. These spreadsheets, in respect of the item for isolated “Total Thru Slab”, show quantities supplied that substantially exceed the initial estimated quantity of 100 square feet. Conterra and Pancon submit that Mr. Kirsch knew from these documents that additional amounts of through slab concrete were being used for the balcony rehabilitation project, and that he accepted the supply of these quantities by paying the invoices without objection.

[38] Mr. Kirsch’s evidence was that he did not read the attachments to the covering letters, specifically, the spreadsheets, that were sent for each of the eleven progress draw certifications and that he threw out the attachments. His evidence was that he complied with the terms of the Contract and paid the invoice amounts that were recommended by Pancon without reviewing the supporting spreadsheets because he knew that any charges for amounts in excess of the total amount shown in the Contract ($560,600 plus HST) needed his authorization and a written Change Order. Only when the invoiced amounts exceeded this amount, on the eleventh invoice, did Mr. Kirsch object to paying the full amount of the invoice. He did so in relation to the last invoice because the overall charges exceeded the amount shown in the Contract and he had not authorized any excess charges through a written Change Order.

[39] Pancon relies upon the following question and answer from the examination for discovery of Mr. Kirsch that was put to him on cross-examination:

241. Q. After they started the work, did you have regular contact with Mr. Panahi? How often would you speak with him? A. If he needed me he called me and usually he would write to me, because, again, I didn’t understand and he understood I didn’t know. He said, “Why don’t you come down?” I said, Mike, it’s a waste of my time and a waste of your time. I don’t understand”, and I said, “Just do it and I’ll know you did a good job if the city accepts your work”. And he would send me… the contract would refer to what I had to pay and it mentioned that I had to pay according to the invoice, which I did. Number 4, “… Payments to the contractor shall be due payable (sic) upon certification of progress invoice by owner’s engineer…” So I paid whatever was on the invoice, that’s what I paid.

Pancon submits that Mr. Kirsch’s statement that he told Mr. Panahi to “Just do it” is an admission that he authorized Mr. Panahi to proceed with the additional concrete work.

[40] Mr. Kirsch maintains that he made no such admission. He points to other questions and answers from his discovery where his evidence was clear that he did not speak with Mr. Panahi about the condition of the balconies and the need for additional quantities of concrete until after the balcony work was completed. For example:

245. Q. Okay. And did he, at any point, when the balcony work was being done, contact you to say and advise you that the condition of the balconies was worse than what was anticipated? A. Never. Never. Never.

246. Q. You never had that conversation with him? A. Never.

[41] I do not accept that the answer given by Mr. Kirsch to question 241 from his examination for discovery is an admission that he authorized Mr. Panahi to proceed with the additional concrete work. Mr. Kirsch’s evidence in his affidavit and on cross-examination at trial was clear that he did not authorize Mr. Panahi to direct Conterra to proceed with the balcony rehabilitation work using additional quantities of through slab concrete in excess of the estimated amount in the Contract.

[42] There is, therefore, a direct contradiction between the evidence of Mr. Panahi and the evidence of Mr. Kirsch in this respect. Each of these witnesses gave his evidence orally in a manner that, from my perspective, was consistent with his personality. Mr. Kirsch came across as forceful, emphatic, determined, and somewhat aggressive in the way that he answered questions. His answers were not always responsive to questions he was asked, but I did not take his answers to be intentionally evasive but, rather, to reflect his determination to forcefully convey to the court the theory of his case, which was based upon his view that a written and signed Change Order was contractually required before he could become liable to pay anything more than the total amount shown on page 4 of the Contract.

[43] Mr. Panahi is a more soft-spoken person, and has a quieter and less emphatic manner of delivery. He fairly acknowledged that Mr. Kirsch wanted a simple contract and that he was very concerned about certainty with respect to the price. Mr. Panahi was shown the transcript of a conversation with Mr. Kirsch in respect of the garage contract (that came later) in which Mr. Kirsch made it clear that he was relying on the Contract under which he would get to decide whether to approve the work to be done, and he would have control over the price to be paid through written Change Orders. Mr. Panahi said that Mr. Kirsch did not take the same position with respect to the balcony work, and he was firm in his evidence that when he spoke with Mr. Kirsch about the condition of the balcony slab, Mr. Kirsch said he was not a technical person, and his response was that there was a unit rate in the contract, and to go ahead and do the work.

[44] In assessing the credibility of Mr. Kirsch and Mr. Panahi, I focus on the extent to which the evidence of each is in harmony or lack of harmony with the preponderance of probabilities disclosed by the facts and circumstances of this case. I do not give particular weight to the forcefulness with which each witness gave his evidence. An emphatic answer of “no, no, no !” or “never, never, never !” given by one witness, expressed with vigour and apparent conviction, does not alone, in my view, justify more judicial deference than a simple answer of “yes” given by another witness in response to the same question.

[45] In this regard, I am guided by the statements made by the British Columbia Court of Appeal in Faryna v. Chorny, [1952] 2 D.L.R. 354 (B.C.C.A.), at paras. 9-10:

9. If a trial judge’s finding of credibility is to depend solely on which person he thinks made the better appearance of sincerity in the witness box, we are left with a purely arbitrary finding and justice would then depend upon the best actors in the witness box. On reflection it becomes almost axiomatic that the appearance of telling the truth is but one of the elements that enter into the credibility of the evidence of a witness. Opportunities for knowledge, powers of observation, judgment and memory, ability to describe clearly what he has seen and heard, as well as other factors, combined to produce what is called credibility, see Raymond v. Bosanquet Tp. (1919), 59 S.C.R. 452, at 460. A witness by his manner may create a very unfavourable impression of his truthfulness upon the trial judge and yet the surrounding circumstances in the case may point decisively to the conclusion that he is actually telling the truth. I am not referring to the comparatively infrequent cases in which a witness is caught in a clumsy lie.

10. The credibility of interested witnesses, particularly in cases of conflict of evidence, cannot be gauged solely by the test of whether the personal demeanour of the particular witness carried conviction of the truth. The test must reasonably subject his story to an examination of its consistency with the probabilities that surround the currently existing conditions. In short, the real test of the truth of the story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions.

[46] When I consider and assess the conflicts in the evidence given by Mr. Panahi and by Mr. Kirsch with respect to whether Mr. Kirsch orally authorized Mr. Panahi to go ahead with the balcony restoration work using quantities of through slab concrete that were needed to complete the work required to be done under the scope of work, priced at the contractual unit rate, I prefer the evidence of Mr. Panahi. I make this finding for the following reasons:

a. Mr. Panahi had already warned Mr. Kirsch in his August 21, 2012 letter that removal of concrete at balcony slabs beyond the front edge of slabs due to the age and condition of balconies may be required, and he recommended that Mr. Kirsch set aside a contingency amount in case it is required. Mr. Panahi was having regular telephone discussions with Mr. Kirsch while work under the Contract was ongoing and, in my view, there would have been no reason for Mr. Panahi to withhold from Mr. Kirsch information about the condition of the balcony slabs and the need for additional quantities of through slab concrete. b. Mr. Panahi was sending regular Progress Invoice Draw Certifications which included invoices and a spreadsheet that showed clearly the additional quantities of concrete that were supplied and the correspondingly higher charges based upon the contractual per unit price. Although Mr. Kirsch denied reading the spreadsheets and insisted that he destroyed them, Mr. Panahi had no way of knowing this and, in my view, would likely have given Mr. Kirsch a warning in their telephone discussions that such additional charges would be shown on the invoices to be sent so that Mr. Kirsch would not be surprised when he received the invoices. c. Mr. Panahi advised Mr. Tedesco to proceed with the additional work to complete the repairs to the balconies and that he would advise Mr. Kirsch of the quantity overrun. Mr. Tedesco’s evidence is that Mr. Panahi advised him that Mr. Kirsch agreed to pay for the additional cost. In my view, it is unlikely that Mr. Panahi would have provided this information to Mr. Tedesco unless, in fact, Mr. Kirsch had been told about the condition of the balconies and the need for additional quantities of concrete. d. Although Mr. Kirsch insisted that he never looked at the spreadsheets that accompanied the regular letters and invoices sent by Pancon and that he destroyed them, there was evidence from Mr. Panahi that, in respect of the later garage work, Conterra made a mathematical error in one of the spreadsheets that Mr. Kirsch caught and drew to Mr. Panahi’s attention. Mr. Panahi’s evidence was that he did not know what legal implications may arise as a result of the error and that he called a lawyer and asked him what to do. He was advised to simply write a letter to Mr. Kirsch, and he did. The letter was put into evidence, and refers to a conversation “last week” between Mr. Panahi and Mr. Kirsch. Mr. Kirsch, when he was cross-examined on discovery and at trial, did not recall having such a conversation. In my view, the evidence of this incident shows that on this occasion, Mr. Kirsch reviewed the spreadsheet that was sent to him, and this casts doubt on his evidence that he never looked at the spreadsheets that were sent to him in respect of the balcony project.

[47] Therefore, in respect of the issue of whether Mr. Panahi told Mr. Kirsch about the condition of the balconies and that additional through slab concrete would be needed to repair them and was told by Mr. Kirsch to go ahead and do so, I find that the evidence of Mr. Panahi should be preferred over the evidence of Mr. Kirsch.

(d) Under the terms of the Contract, was a written Change Order required to have been signed by Mr. Kirsch before he could be charged for the balcony waterproofing work?

[48] The balcony waterproofing work was expressly excluded from the scope of work under the Contract. This work was not required in order for Pancon to issue a certificate of completion and have the work orders that were issued by the City of Toronto lifted. This work was not “required due to site conditions during construction”. Therefore, this work is not “additional work” under paragraph 6 of the Contract and no authorization under the Contract and written Change Order were required from Mr. Kirsch prior to commencement of the balcony waterproofing work under paragraph 6 of the Contract.

[49] The balcony waterproofing work was not an unforeseen item that was “uncovered during construction”. Mr. Panahi’s recommendation to Mr. Kirsch that the waterproofing work should be undertaken was specifically addressed before the Contract was signed, and this work was expressly excluded from the Contract. Therefore, the balcony waterproofing work was not “additional work” under paragraph 10 of the Contract and the approval of Mr. Kirsch and a written Change Order were not contractually required under paragraph 10 of the Contract.

[50] The question remains whether Mr. Kirsch separately authorized Mr. Panahi to enter into a contract with Conterra to perform the balcony waterproofing work.

(e) Did Mr. Kirsch orally authorize Mr. Panahi to direct and authorize Conterra to undertake and complete work in connection with waterproofing the balconies?

[51] Mr. Panahi’s evidence is that he had a number of telephone conversations with Mr. Kirsch over a two or three day period after which Mr. Kirsch instructed him to have Conterra waterproof the balcony slabs. Mr. Panahi recalls calling Mr. Kirsch and telling him that it was a waste of money to perform extensive concrete repairs without waterproofing the slabs. He was concerned that water would enter the joint between the new and old concrete and cause further concrete deterioration. He recalls telling Mr. Kirsch that in order to protect his investment, he had to put a membrane on top of the balconies and that he was spending so much money on this project that it did not make sense not to waterproof the balconies. Mr. Panahi recalls telling Mr. Kirsch that if the balconies were not waterproofed, the concrete deterioration would likely begin immediately and remediation work would become necessary in a few years’ time.

[52] Mr. Panahi’s evidence is that he told Mr. Kirsch that he might be able to get him a discount on the waterproofing work. According to Mr. Panahi, Mr. Kirsch suggested that he may agree to waterproof the balconies if Conterra discounted their price. Mr. Panahi called Mr. Tedesco who agreed to do the waterproofing work for $36,000 (instead of the $38,000 that had been in Conterra’s initial quotation). Mr. Panahi’s evidence is that he then called Mr. Kirsch back and gave him the $36,000 price for the balcony waterproofing and, during that last phone call, Mr. Kirsch instructed him to have Conterra waterproof the balconies for a price of $36,000.

[53] Mr. Tedesco’s evidence is that after Conterra began doing the balcony rehabilitation work, Mr. Panahi told him that, given the nature of repairs and as built construction of the building, he would prefer to have the balconies waterproofed and he would discuss once again with Mr. Kirsch the option of waterproofing the balconies. Mr. Panahi and Mr. Tedesco then discussed a revised price for which Conterra would do the waterproofing work. Mr. Tedesco advised Mr. Panahi that Conterra would perform the waterproofing work for $36,000 plus HST. Mr. Panahi told him that he would speak to Mr. Kirsch and get back to him. Mr. Panahi thereafter advised Mr. Tedesco that Mr. Kirsch had agreed to the said price and that Conterra should proceed to complete the waterproofing work.

[54] Conterra completed the waterproofing work in two phases and rendered two invoices to Mr. Kirsch, each in the amount of $18,000. Both of these invoices were paid.

[55] Mr. Kirsch’s evidence is that he never authorized any waterproofing work at any price and that he had consistently informed Mr. Panahi that he did not want to do any waterproofing work on the balconies at the Property. His evidence was that he first discovered that the waterproofing work had been done on the balconies only after the work was completed, when Mr. Panahi telephoned him and asked for payment of $36,000. According to Mr. Kirsch, Mr. Panahi informed him then that he had negotiated a reduction of $2,000. Mr. Kirsch’s evidence is that he did not authorize or want the waterproofing work and that he would not pay for it. According to him, Mr. Panahi replied that if he did not pay, Pancon would need to pay Conterra and Mr. Kirsch responded that Pancon should pay Conterra.

[56] When I consider and assess the conflicts in the evidence given by Mr. Panahi and by Mr. Kirsch with respect to whether Mr. Kirsch orally authorized Mr. Panahi to direct Conterra to go ahead with the balcony waterproofing work, I prefer the evidence of Mr. Panahi. I make this finding for the following reasons:

a. The evidence was clear that Mr. Kirsch had asked that the balcony waterproofing work, which was initially included in the Conterra bid, be removed from the Contract, and it was. Mr. Panahi had recommended the balcony waterproofing work, and he knew that Mr. Kirsch had asked that it be removed from the Contract. I do not consider it likely that, given these events, Mr. Panahi would simply authorize Conterra to proceed with the waterproofing work without discussing it first with Mr. Kirsch. b. The evidence of Mr. Panahi and Mr. Tedesco is that Mr. Panahi asked Mr. Tedesco to provide a revised price for which Conterra would do the waterproofing work and that Mr. Tedesco provided a price that was $2,000 lower than the price that Conterra had initially quoted. This is consistent with Mr. Panahi’s evidence that Mr. Kirsch told him that he might reconsider approving the waterproofing work if Conterra quoted a lower price. c. Mr. Panahi sent to Mr. Kirsch Progress Invoice Draw Certification No. 7 and 8 on July 11, 2013 and August 8, 2013 that showed two equal charges of $18,000 for the waterproofing work on the balconies. It is very unlikely, in my view, that Mr. Panahi would have sent these invoices to Mr. Kirsch without first discussing this work with him. d. Although Mr. Kirsch repeatedly referred to Mr. Panahi as a “rogue contractor”, there was no evidence that Mr. Panahi’s recommendation that it made sense to do the balcony waterproofing work was not a sound and valid one from an engineering perspective. In my view, a reasonable building owner in the position of Mr. Kirsch would likely have accepted this recommendation and authorized the work in the circumstances.

(f) What is the effect of oral directions by Mr. Kirsch to Mr. Panahi to authorize Conterra to proceed with (i) supply of additional quantities of through slab concrete, and (ii) the balcony waterproofing work on the requirements in the Contract for written Change Orders, if applicable?

[57] I have held that the Contract, properly construed, did not require a written Change Order to be signed in order for Mr. Kirsch to become liable for the supply of additional units of flow-through concrete that were necessary for Conterra to complete the balcony rehabilitation work under the Contract. I have also held that the Contract did not require a written Change Order to be signed for the balcony waterproofing work, which was outside of the scope of the Contract, if Mr. Kirsch separately agreed with Conterra, through Pancon as Mr. Kirsch’s agent, to have this work done.

[58] Both of Conterra and Pancon rely upon a decision of the Ontario Court of Appeal in Colautti Construction Ltd. v. Ottawa (City) (1984), 46 O.R. (2d) 236 in support of their submission that additional work requested outside of the scope of a contract constitutes waiver by conduct of the strict terms of the contract such that the work should be paid for. In Colautti, the City of Ottawa relied upon provisions of the contract which required that all additional costs be duly authorized in writing. The Court of Appeal held that, in the circumstances, the parties, by their conduct, had varied the terms of the contract which required the extra cost to be authorized in writing. As a result, the Court of Appeal held that the City could not rely on its strict provisions to escape liability to pay for the additional costs authorized by the City: Colautti, at paras. 28-30.

[59] In my view, the same conclusion follows in the circumstances of this case. By orally approving the supply of additional units of flow-through concrete as necessary to complete the balcony rehabilitation work, and by orally approving the balcony waterproofing work, Mr. Kirsch agreed that a written Change Order was not contractually required in order for him to become liable for Conterra’s charges for work that he had authorized.

[60] Therefore, if I am wrong in my interpretation of the Contract, and if the Contract required that written Change Orders be signed for (i) the supply of additional units of through slab concrete greater than the estimated quantity in the Contract, and (ii) the balcony waterproofing work, I have concluded that Mr. Kirsch orally agreed to vary the terms of the Contract to dispense with the need for written Change Orders.

(g) Other grounds for relief claimed

[61] Given these conclusions on the interpretation of the Contract and the findings I have made with respect to the conflicting evidence of Mr. Kirsch and Mr. Panahi, I do not find it necessary to address the submission made by Conterra that it is entitled to a remedy based upon principles of quantum meruit and unjust enrichment, or the submission made by Pancon that Mr. Kirsch, by paying the invoices that were submitted that included charges for the work that is now disputed, represented to Conterra and Pancon that he had approved the work and, because of detrimental reliance by Pancon, he is estopped from denying that he approved this work.

Disposition

[62] I therefore order and adjudge that Mr. Kirsch shall pay to Conterra the amount of $109,451.35 together with prejudgment interest. The third party claim is dismissed.

[63] If the parties are unable to resolve the question of costs, Conterra and Pancon are directed to make written submissions not to exceed five pages in length (not including costs outlines) within 30 days of the release of these reasons. Mr. Kirsch may provide written submissions in response also not to exceed five pages in length within 15 days of receipt of the written submissions of Conterra and Pancon.

If so advised, Conterra and Pancon may make brief written reply submissions, not to exceed two pages in length, within 10 days of receipt of Mr. Kirsch’s responding submissions.

Mr. Justice P.J. Cavanagh Released: May 24, 2017