C.M. Callow Inc. v. Tammy Zollinger et al., 2017 ONSC 7095

CITATION: C.M. Callow Inc. v. Tammy Zollinger et al., 2017 ONSC 7095

COURT FILE NO.: 13-58903

DATE: 2017/11/27

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

C.M. Callow Inc.

Plaintiff

– and –

Tammy Zollinger et al.

Defendants

COUNSEL:

Miriam Vale Peters for the Plaintiff

Jocelyn Duquette for the Defendants

HEARD: October 2, 3, 4, 5, 6, 9, 10 and 11, 2017

REASONS FOR DECISION

O’BONSAWIN J.

Overview

[1] Mr. Christopher Callow (“Mr. Callow”) is the sole principal of C.M. Callow Inc. (“Callow”). Callow provided winter and summer maintenance services to the ten residential condominium corporations located at Baycrest Gardens, which are managed by Condominium Management Group and one of its designated Property Managers. At the time of the termination of the contract, Tammy Zollinger was the Property Manager. I will collectively refer to the Defendants as “CMG”.

[2] Each condominium corporation has its own board of directions to manage its affairs. In addition, the condominium corporations formed a Joint Use Committee (“JUC”), which consists of a representative of each condominium corporation. The JUC makes decisions regarding the joint and shared assets of the condominium corporations.

[3] The winter maintenance services contract in question between Callow and the condominium corporations was finalized in April 2012 and related to winter maintenance services from November 1, 2012, to April 30, 2014. In addition, Callow also had a summer maintenance services contract with the JUC from May 1, 2012, to October 31, 2013.

[4] The winter maintenance services contract was terminated earlier than expected on September 12, 2013. The summer maintenance services contract remained in effect until its end date.

[5] Mr. Callow commenced a claim in his personal capacity on September 24, 2013. On Friday, September 29, 2017, the day before the start of trial, he brought a motion before me to amend his Statement of Claim. On the same day, I provided my verbal Endorsement finding that Mr. Callow’s case was a situation of misnomer and granted the requested Orders to amend the Statement of Claim to correct the name of the Plaintiff incorrectly named as Christopher Callow to be correctly named as C.M. Callow Inc. At that time, counsel for CMG advised me that his clients were going to appeal my decision and asked for an adjournment of the trial, which was scheduled to start on the following Monday. This was strenuously objected to by counsel for Callow. I refused to grant the adjournment and ordered the trial to start on Monday. On October 6, 2017, I issued my Reasons for Decision regarding the Motion.

Issues

[6] There are two issues to be determined in this matter:

(a) Were CMG in breach of contract by terminating Callow’s winter maintenance services contract pursuant to section 9 of the contract?

(b) If CMG were in breach of contract, what are Callow’s damages?

Positions of the Parties

[7] I will briefly summarize the positions of the parties. Callow argues:

• this is a case about CMG’s active dishonesty, which started in March 2013 and continued throughout this trial;

• the evidence is undisputed that the condominium corporations or their agent, Ms. Zollinger, knowingly decided not to advise Mr. Callow, Callow’s principal, that the winter maintenance services contract had been terminated in the spring of 2013;

• the evidence is undisputed that Mr. Callow was not advised of this decision until September 12, 2013;

• from March 2013 to September 12, 2013, Ms. Zollinger and certain board member owners of the condominium corporations falsely represented to Mr. Callow that the winter maintenance services contract would be extended or renewed;

• CMG failed to satisfy this Court that Callow’s work was unsatisfactory and even if this Court determines that it was unsatisfactory, CMG’s breach of the common law duty of honest performance still holds them liable to Callow;

• if this Court accepts Mr. Callow’s version of events surrounding the termination of the contract, this Court must find that CMG breached their duty of good faith or the common law duty of honest performance of contractual obligations; and

• the damages must be calculated on the basis of what Callow’s economic position would have been had CMG fulfilled that duty.

[8] For their part, CMG argue:

• there were complaints under the prior winter maintenance contract;

• notwithstanding Callow’s shortcomings, CMG decided to give Callow another chance and they entered into another winter maintenance contract from November 1, 2012, to April 30, 2014;

• Callow’s level of service did not improve under the new winter maintenance contract;

• on January 14, 2013, a JUC meeting was held and Mr. Callow attended to hear the complaints;

• in April 2013, the JUC voted to terminate the winter maintenance services contract with Callow;

• the JUC members instructed Ms. Zollinger to wait until the end of the summer before providing Callow with the notice of termination in order to ensure that the summer maintenance services contract would not be jeopardized and the winter damage would be fixed;

• Callow undertook “freebie” work on his own and some of the work was to fix winter damage;

• on September 12, 2013, Ms. Zollinger provided Callow with the formal ten-day notice of termination by e-mail based on unsatisfactory services;

• CMG did not breach the contract with Callow, it simply exercised its termination right as per clause 9 of the contract; and

• CMG did not act in bad faith.

Findings Regarding the Evidence

[9] I must begin by dealing with the issues of credibility of the witnesses. Callow presented one witness and CMG presented seven witnesses.

[10] Mr. Callow testified first. I found him to be credible during his testimony. Mr. Callow did not provide exaggerations, over-statements or illogical propositions. He did not hesitate when answering questions, especially during cross-examination, he answered the questions asked and did not challenge opposing counsel or provide run-on answers. Mr. Callow easily agreed with CMG’s counsel in cross-examination, even when it was an issue that could cast a negative light on him. For example, when it was put to Mr. Callow that he had blocked the fire exit, Mr. Callow agreed, stating: “we blocked the fire exit, we were to avoid doing that and it did not happen.”

[11] CMG called as witnesses Mr. Kyle Campbell, Mr. Joseph Peixoto, Ms. Claudia Trites, Ms. Maryann D’Abramo Campbell, Ms. Sandra Monsour, Ms. Zollinger and Ms. Brown. The main witnesses for CMG, Mr. Campbell, Mr. Peixoto, Ms. Zollinger and Ms. Brown, however, had significant credibility issues. They provided many exaggerations, over-statements and constantly provided comments contrary to the written evidence. CMG’s other witnesses had faded recollections of the events and were not overly helpful.

[12] During his testimony, Mr. Peixoto promoted a very personal position and this approach negatively impacted his testimony. He played a part in misleading Mr. Callow after the JUC decided to terminate his contract. During his testimony, Mr. Peixoto wanted to be seen as the good guy, the helpful witness.

[13] Mr. Campbell had limited credibility. In fact, he was part of the duo with Mr. Peixoto that misled Mr. Callow into believing that his winter maintenance services contract would remain in place during the following winter. There was a series of private e-mails produced as evidence between Mr. Campbell and Mr. Peixoto that supported Callow’s position that Mr. Callow had been misled about the winter maintenance services contract. These e-mails shed a negative light on Mr. Campbell and Mr. Peixoto. One of Mr. Campbell’s e-mails states: “I kind of want to keep a back pocket option” regarding the winter maintenance services contract. I found his notion of keeping something in his “back pocket” to be unsettling.

[14] As for Ms. Zollinger, she got stuck in Baycrest’s parking lot on her first day as Project Manager. This event likely negatively impacted her view of Callow moving forward. It is clear from her testimony, especially during cross-examination, the path that she took afterwards was not appropriate and did not fall in line with the principle of good faith dealings in contractual performance.

[15] Lastly, Ms. Brown testified after I inquired if she was going to be called as a witness since she wrote a large portion of the e-mails that were submitted as evidence. Ms. Brown testified that her approach was to give credit where it is due. However, she did not take this approach when she testified. She wrote or was involved in many positive e-mails about Callow’s service. However, throughout her testimony, for every positive e-mail that she drafted regarding Callow and its services, she continually tried to shed a negative spin on them.

[16] There is a significant amount of written evidence in this case: 108 exhibits to be exact. During cross-examination, many of CMG’s witnesses worsened or tried to change any positive comments made about Callow’s performance. This affects the credibility of CMG’s witnesses and leaves me to rely on Mr. Callow’s evidence and what is actually plainly written in the documents. On a whole, I have determined that Mr. Callow’s evidence is preferable to that of CMG’s witnesses.

[17] I have made a series of findings regarding the evidence presented during this trial. Mr. Callow has operated Callow for the past ten years. He is the sole director of the company. Prior to this, he personally shoveled driveways.

[18] Callow entered into a two-year winter maintenance contract with the condominium corporations at Baycrest in 2010. Callow performed the winter maintenance services to enough satisfaction that the contract was renewed in April 2012.

[19] Baycrest has ten condominium corporations, each having an individual board of directors. In addition, each condominium corporation sends a representative to the JUC, which is tasked with making decisions regarding funding affecting the ten condominium corporations and the various contracts. CMG provide a Property Manager, who is responsible for assisting the boards and the JUC. Baycrest is located on approximately ten acres of land. The condos share roadways, walkways and two parking lots. A typical condominium block is ten units with a total of four stories, two doors up and two doors down.

[20] It is clear from the evidence that there were challenges for snow removal since Baycrest does not have a lot of room to store snow. This is supported by pictures that were submitted as evidence.

[21] When Mr. Callow first signed his snow removal contract for Baycrest, Ms. Seaby was the Property Manager. The contract was a standard CMG contract. The difference between the first and second contracts are that the second contract had attached specifications that were not in the first contract. When Ms. Brown took over as the Property Manager, the contract with Callow was already in place. Even after Ms. Seaby left as the Property Manager, Callow continued to work for her at other properties for at least three years.

[22] Ms. Brown testified that there were complaints regarding Callow’s work during that first contract. Despite this, the documentary evidence shows that she recommended to the condominium boards that they continue with Callow for the new 2012-2014 winter contract. To the reasonable person looking at this situation, Callow’s work must not have been that unsatisfactory because the condominium boards signed a new winter contract with Callow in April 2012.

[23] Mr. Peixoto negotiated with Mr. Callow a reduction of 5% per year for the two-year term. The yearly value of this contract was $80,383.70. The 5% discount equalled $4,420.00. Mr. Callow testified that normally, there would be a 5% increase on a yearly basis for things such as fuel, insurance and labour costs. During his testimony, Mr. Peixoto took the position that he was just a condominium corporation president; however, it is clear that his role was larger than that. He negotiated the main pricing terms with Mr. Callow for the renewal of the winter maintenance contract, which also added a separate summer maintenance services contract.

[24] Ms. Brown added the price information provided by Mr. Callow and inserted it along with the new specifications into the winter maintenance contract and sent it to Mr. Callow on April 27, 2012. The term of the contract was from November 1, 2012, to April 30, 2014. The standard CMG contract contained a provision for early termination with a ten-day notice provision. As per paragraph 8 of the contract, Callow had to provide CMG with proof of insurance coverage. Mr. Callow testified that there was an epidemic level of huge problems related to slip and falls and snow removers’ insurance skyrocketed and this lead to a 5% increase per year.

[25] As per the terms of the contract, Callow was required to plow once snowfall between 5 cm – 10 cm had accumulated. In addition, after a snowfall, Callow had eight hours to remove the snow and put it into designated areas. As previously stated, the areas to pile the snow were very limited at Baycrest. After the parking stalls were cleared, the piled snow was hauled off site. Mr. Callow testified that they normally tried to clean the individual parking stalls when the owners/tenants had gone to work. They beeped the horn and drove around the complex in order to get the attention of the owners/tenants in order for them to know they must move their cars. If owners/tenants did not move their cars, it was difficult to clear their parking stalls and Callow did not have the capacity to tow cars out of the stalls.

[26] In the case of larger snow storms, a priority was given to clear the main roadways in order for individuals to move in and out of the project. When the site was completely cleared of snow, they salted the entire site with ice melter. Ice melter was more effective than sand. Mr. Callow also testified that ice melters lose 80-90% of their effectiveness when the temperature approaches -15 degrees and therefore at that temperature, it is not worth salting because it would do more damage than anything else.

[27] As per paragraph 5 of the contract, if Callow did not clear the main roadways, CMG could fine him $250 per occurrence. Mr. Callow testified that he was never fined as per this paragraph. As per paragraph 11 of the contract, Callow was responsible for damage to the site and CMG could withhold the final payment. Mr. Callow testified that he was paid in full. Paragraph 17 also stated that CMG could withhold payment if the stockpiled snow was not removed from the site. Mr. Callow testified that CMG never withheld such a payment. In addition, sidewalks and common steps had to be cleared within 12 hours after the snowfall ended. Afterwards, Callow salted the areas.

[28] Callow also entered into a summer maintenance contract with CMG in April 2012 at a yearly rate of $9,686.20.

[29] There is evidence on record that there were complaints from owners/tenants during the first year of the second winter maintenance services contract. However, many of the complaints related to the snow removal from individual parking stalls. There were issues for the snow removal related to these areas; for example, if the owner/tenant did not remove his or her car, the snow could not be removed. It is plain to see why this would be an issue for Callow. Furthermore, there were complaints regarding tardy snow removal from the site and dumping snow in unlabelled spots. Mr. Callow testified that he met the requirements of the contract for snow removal and the evidence supports this claim. With regards to dumping the snow in unlabelled spots, Mr. Callow had been previously advised that they were to dump snow in the visitor parking by Richcraft. These parking stalls were in the process of being sold to new owners. At that time, Richcraft had posted barriers in this area and were not using the parking stalls. Mr. Callow testified that they would then haul out the snow two to three days later.

[30] Ms. Brown actually noted on December 22, 2012: “I know that your crew have [been] working tirelessly to deal with the onslaught of snow…thank you for this.” Another e-mail from Ms. Trites of December 22, 2012, adds: “I would like to thank you very much to you and your crew for the great work you are doing with the removal of the snow etc. I have emailed all owners of my corporation advising and reminding them to come out and remove their cars when they heard the horn. Thank you again.”

[31] On January 14, 2013, the first JUC meeting was held. Mr. Callow was invited to that meeting to address certain issues related to his services, especially with regards to the issue of trying to get cars moved in order for parking stalls to be cleared. Mr. Callow testified he recommended to the JUC members that at the beginning of the year, CMG should send out a notice to explain the procedures for the snow removal related to the parking stalls: the horn would be honked and the owners/tenants would move their cars in order for Callow to clear the stalls. The Minutes indicate that a newsletter was supposed to be sent out to educate owners/tenants on snow removal procedures. The evidence shows that the newsletter was never sent out to the owners/tenants.

[32] It was also discussed during that meeting if they could schedule a day where all cars could be removed to allow Callow to scrape down the parking lot and stalls. Mr. Callow testified that he was willing to do so. However, it was determined by the JUC that this was not required. There was also a discussion regarding if Callow had to return three to four times, it could send the owners/tenants a bill in order for them to be more diligent. One person from the committee voted to send bills and the six others declined to do so.

[33] It was further discussed that in the past, Callow used to clear the fire lanes first until the Ottawa Fire Department told Mr. Callow to stop doing so. Mr. Callow suggested that he could remove the chain from the fire lane, plow to get the snow out and then put the chain back; however, Ms. Brown stated that the City would not allow this. In addition, Ms. Monsour asked for extended interlocks and the JUC decided that this was to be put off into the spring.

[34] It is important to note that in the Minutes, the JUC states that Mr. Callow was diligent and did his absolute best. The Minutes state: “The Committee confirmed that C.M. Callow has been diligent in addressing this issue as best as could be expected considering the nature of the storms recently experienced.”

[35] After this first JUC meeting, Ms. Brown sent an e-mail to the JUC members where she confirmed information regarding the meeting and stated: “I know that your Board has been generally satisfied with the snow removal – so there is nothing outstanding to report here.”

[36] Mr. Callow also testified that he had a positive relationship with Mr. Peixoto. The latter would normally either e-mail or call him for little jobs like changing a light bulb, removing a bicycle that the garbage collector would not pick up, etc. These little jobs were billed as extras. In fact it was Mr. Peixoto who first advised Mr. Callow that Ms. Brown was going to be replaced with Ms. Zollinger as the new Property Manager. Mr. Callow and Ms. Zollinger both testified that they had never worked together before March 1, 2013.

[37] On March 19, 2013, another JUC meeting was held. Ms. Zollinger testified that this was a meet and greet meeting and not a standard JUC meeting. This is not accurate: this was a JUC meeting and the Minutes support this fact. The JUC members discussed many issues including roofs, snow removal, the JUC bank account, parking, garbage and electrical rooms, balconies, window cleaning, summer unit inspection, parking lot sweeping, easvesthroughs etc.

[38] The Minutes indicate that “Tammy is considering terminating the snow removal contract with CM Callow due to poor workmanship in the 2012-13 winter”. In fact, the Minutes continue to state that Ms. Zollinger had reviewed the contract and advised the JUC members that they could terminate the contract with Callow with no financial penalty. She advised that she would get quotes from other snow removal contractors. In response to Callow’s counsel’s demand letter, Ms. Zollinger states that the JUC made the determination to terminate Callow’s winter maintenance services contract on March 19, 2013, and it was a unanimous decision. It must be noted that only two weeks prior to the trial, counsel for CMG sent a letter to counsel for Callow advising that they had to correct Ms. Zollinger’s sworn evidence during discoveries in the prior year when she confirmed this information. I do not put any weight to this new enlightenment.

[39] After Callow finished the winter maintenance services contract for 2012-2013, during the spring it fixed signs and grass damaged throughout the winter as required by the contract. Callow performed what Mr. Callow called the “spring cleanup.” Mr. Callow testified that in the course of snow removal, it was usual for grass to get scuffed off, signs to be pushed over and this was repaired in the spring. Ms. Zollinger testified that Callow did not fix the damage caused by the winter snow removal. I prefer Mr. Callow’s evidence over that of Ms. Zollinger and I find that the damage was fixed.

[40] During the spring and summer of 2013, Callow performed regular weekly grass cutting, garbage pick-up and was in discussions with the condominium corporations’ board members to renew the contract for the following summer and also the winter maintenance services contract for a further two years. At this time, Callow had only completed year one of a two-year contract. The contract was supposed to remain in place for the winter of 2013-2014.

[41] After his discussions with Mr. Peixoto and Mr. Campbell, Mr. Callow thought that he was likely to get a two-year renewal of his winter maintenance services contract and they were satisfied with his services. This assumption is also supported from the documentary evidence, especially by the private e-mails between Mr. Peixoto and Mr. Campbell.

[42] Furthermore, during the summer of 2013, Callow performed work above and beyond his summer maintenance services contract with CMG. Mr. Callow testified that there was a garden in the back property that he sodded, and to which he added wood chips and plants. In addition, at the entrance of Baycrest’s property, there was another area where bushes were overgrown. Callow shaved them back and reshaped them, added a few extra bushes and re-sodded; this improved the appearance of the entrance of the property. Callow performed this work because it was on the second year of the summer maintenance services contract and entering the second year of the winter maintenance services contract. Mr. Callow hoped that this supplemental work would act as an incentive for CMG to renew Callow’s winter maintenance services contract. Mr. Callow testified that he hoped the board members and owners would see that his work improved the appearance of the property and showed that he cared about it, which would make it worth keeping Callow for another two-year contract.

[43] On June 14, 2013, there were e-mails between Mr. Peixoto and Mr. Callow. Mr. Peixoto understood that the work performed by Callow was a “freebie” to add an incentive for the boards to renew his winter maintenance services contract. Mr. Peixoto advised Mr. Callow that he would tell the other board members about this work.

[44] Mr. Callow testified that he estimates the value of this “freebie” work at $5,000 plus HST. Mr. Callow received the mulch, also referred to as wood chips during testimonies of other witnesses, for free. Mr. Callow did not provide any receipts for the purchase of the plants, shrubs, etc. However, the main cost associated with this work was related to workforce costs. It must be noted that CMG did not provide any testimony from landscapers to support their allegation that the cost of $5,000 for the “freebie” work done in the two gardens is excessive. Mr. Peixoto and Ms. Zollinger testified as to their comments about the costs; however, they are not landscapers.

[45] On June 20, 2013, Ms. Zollinger wrote the following e-mail to Mr. Callow: “I was there today and nobody has weeded the gardens. I mean bent over and picked out weeds and there was lots of garbage. The look of the property is not acceptable. As for the garbage rooms. If you are not into a contract, I will bid it out.” Mr. Callow testified “this is typically how she would speak to you.” In person, she would also speak to him in the same way and in the same tone.

[46] During this time, Ms. Zollinger wanted Mr. Callow to submit a quote for a garbage contract. Mr. Callow testified that he did not submit a quote because it was not fair to the owners: “I am not interested in the short haul get rich quick philosophy. I want to keep customers for a long time. I don’t want to unfairly charge them and affect the relationship and it is not right to both parties.” These statements add to Mr. Callow’s credibility in these proceedings.

[47] On July 16, 2013, there were e-mails between Mr. Callow and Mr. Peixoto. Mr. Callow decided to improve the appearance of the two gardens. Mr. Peixoto replied that he saw Callow’s staff working and thanked Mr. Callow. However, during his testimony, Mr. Peixoto testified that the free mulch was “better than a patch of sand”. This, along with other comments during his testimony, leads me to find that Mr. Peixoto is not credible due to his exaggeration in comparison to his e-mail to Mr. Callow. Mr. Peixoto led Mr. Callow to believe that all was fine with the winter and summer maintenance services contracts and that the former was interested in a future extension of Callow’s contracts.

[48] On July 17, 2013, there were e-mails between Mr. Peixoto and Mr. Campbell. Counsel for Callow submits that these are very relevant because they are private communications between them. These two men never expected that they would be disclosed during this proceeding. I agree with her. They were both aware that this was “freebie” work performed by Callow and “no corporation is paying for this.” Mr. Campbell e-mailed Mr. Peixoto on July 17, 2013, regarding the “freebie” work: “Yeah, I was talking to him about it last week and he was mentioning he was going to do that. He’s basically doing this to try and make sure we keep him for summer grounds, which is fine by me.” Mr. Peixoto then responds: “I figured as much. It’s nice he’s doing it but I am sure it’s an attempt at us keeping him. Btw, I was talking to him last week and he is under the impression we’re keeping him for winter again. I didn’t say a word cuz I don’t wanna get involved but I did tell Tammy that Callow thinks we’re keeping him for winter.”

[49] Mr. Callow was only advised by way of e-mail from Ms. Zollinger on September 12, 2013: “Please be advised that Baycrest will not be requiring your services for the winter contract for 2013/2014 season, as per section 9 of the contract, Baycrest needs to provide the contractor with 10 days’ notice.” Mr. Callow testified that immediately after he received the termination notice, he reached out to both Mr. Peixoto and Mr. Campbell. Mr. Callow believed that if there was a problem, he would have expected them to bring it to his attention like they had done in the past. Callow entered into the contract with CMG under good faith. Mr. Callow testified: “After reading this, it is pretty obvious that they used me, misled and lied to me.” I agree.

[50] Mr. Callow testified that he spoke to Mr. Campbell on the phone. Mr. Campbell told Mr. Callow that he thought the winter maintenance services contract would be renewed. However, Ms. Zollinger had told them they should not have the same contractor performing the summer and winter maintenance services contracts. Mr. Campbell asked Mr. Callow to provide him with a quote for the following winter, which he would provide to the board. This is quite odd if Mr. Campbell did not want to renew the winter maintenance services contract with Callow.

[51] During the vote for termination of the winter maintenance contract, Mr. Callow testified that he was advised that both Mr. Campbell and Mr. Peixoto had voted against the termination and one board member had abstained. The other remaining board members wanted to receive pricing from other contractors. The evidence about the vote is mixed. Mr. Peixoto wrote in an e-mail to Mr. Campbell on September 13, 2013: “In a nutshell, I told him that I am only one voice and one vote. That although me and you like him that doesn’t mean anything cuz if we get out-voted then we get out-voted. Told him I don’t recall who voted against keeping him back when we met in May.” In response to the demand letter sent by Callow’s lawyer, Ms. Zollinger wrote in her letter sent by e-mail on September 19, 2013: “Also in a joint use committee meeting on March 19, 2013 in was unanimous to replace CM Callow as there were many complaints by owners regarding the lack of snow removal being performed at Baycrest Garden”. Other CMG witnesses testified the contract was terminated in either March or April and some witnesses testified that it was terminated in April. It is difficult to find CMG’s witnesses credible about anything related to the termination of Callow’s winter maintenance services contract.

[52] For what it is worth, Mr. Peixoto testified that he did a half vote at the April meeting. Mr. Peixeto further said there was no use voting against the others since they would have the majority. It is not clear if it was a unanimous vote due to all of the contradictory evidence. This only leads me to more solidly find that Ms. Zollinger was responsible for the termination of the winter contract with Callow. On March 19, 2013, not even three weeks as the new Property Manager, Ms. Zollinger told the JUC they should terminate the contract with Callow and she was the instigator of the termination of the contract.

[53] During the summer of 2014, Callow continued to perform the work associated with his summer maintenance services contract even after the early termination of his winter maintenance services contract.

[54] During discoveries, CMG refused to provide Callow with the contract for the subsequent winter maintenance services contractor. Mr. Callow testified with regards to photographs that he took of the property after his contract was terminated. These photographs show similar issues with tasks that CMG alleged Callow did not properly perform: stockpiled snow on the front lawn and other inappropriate places where snow was piled such as against the fence and in the emergency exit, chunks of ice against trees and snow-buried trees, parking stalls covered in snow and ice, ice on stairs, snow piled in the back, inappropriate snow conditions in the parking lot that was not salted and snow caked in and tilted parking signs.

[55] Was the quality of Callow’s work below standard? The evidence leads me to answer no, it was not. Were there complaints about Callow’s work? Absolutely. However, a significant portion related to the clearing of parking stalls, which was the fault of owners/tenants who did not move their vehicles.

Law and Analysis

(a) Were CMG in breach of contract by terminating Callow’s winter maintenance services contract pursuant to section 9 of the contract?

[56] CMG take the position that this is a simple matter of contract interpretation. The termination clause in the winter maintenance services agreement stipulates that CMG can terminate the contract for any reason by providing Callow with ten days’ notice in writing. CMG argue that the termination clause is clear and unambiguous and that it should be interpreted by giving its words their ordinary and grammatical meaning. In addition, the interpretation of the contract must also “accord with sound commercial principles and good sense” (Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673, 268 O.A.C. 279, at para. 16). CMG argue that when interpreting a contract, the court “aims to determine the intentions of the parties in accordance with the language used in the written document” (Salah, at para. 16). There is a presumption that the written contract reflects the intention of the parties and that the parties intended the legal consequence of their words.

[57] In addition, CMG argue that while no cause is required to be shown to trigger the termination clause, the evidence demonstrated that Callow’s level of service did not comply with the contractual specifications and was not to the complete satisfaction of CMG.

[58] The problem for CMG is that this is not a simple contract interpretation case. As per Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, good faith performance is a general organizing principle of common law contract. In addition, parties to a contract have a duty to act honestly in performing their contractual obligations (Bhasin, at paras. 33-34).

[59] This organizing principle requires parties to perform their contractual duties honestly, reasonably, and not capriciously or arbitrarily (Bhasin, at para. 63). The principle of good faith exemplifies the notion that a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner. This requires that a party not seek to undermine the partner’s interests in bad faith (Bhasin, at para. 65).

[60] The duty of honest performance should not be confused with a duty of disclosure. However, contracting parties must be able to rely on a minimum standard of honesty. In addition, a party does not have a duty to subordinate his or her interest to that of the other party. However, the standard of honesty in relation to the contract’s performance is meant to ensure that parties will have a fair opportunity to protect their interests if the contract does not work out (Bhasin, at para. 86). There is a clear distinction between a failure to disclose a material fact, and active dishonesty (Bhasin, at para. 86).

[61] Unless there is active deception, there is no unilateral duty to disclose information before the notice period. In Bhasin, the Supreme Court of Canada referred to United Roasters Inc. v. Colgate-Palmolive Co., 649 F. (2d) 985 (4th Cir. 1981), where the terminating party decided to terminate the contract in advance of the required notice period. The Supreme Court found there was no unilateral duty to disclose information relevant to termination; there was no active deception in that case (Bhasin, at para. 87).

[62] Bhasin has continued to be applied by trial courts. In Paulo Viana Dentistry v. Kapoor et al., 2017 ONSC 4312, 281 A.C.W.S. (3d) 742, Grace J. did not grant a summary judgment, stating that the case was sufficiently nuanced to warrant an examination of the limits of the duty of honesty that was unnecessary in Bhasin (at para. 109).

[63] In the franchising context, the duty of good faith has been defined as “requiring a franchisor to observe standards of honesty, fairness and reasonableness, and to give consideration to the interests of the franchisees, this duty does not involve an obligation to prefer the interests of the latter, and is not a fiduciary duty in that sense” (Seto v. Wendy’s Restaurants of Canada Inc., 2016 ABQB 493, 270 A.C.W.S. (3d) 510, at para. 29, citing Landsbridge Auto Corp. v. Midas Canada Inc., 176 A.C.W.S. (3d) 38, 73 C.P.C. (6th) 10 (Ont. Sup. Ct.)).

[64] In the employment context prior to Bhasin, the Supreme Court recognized a duty on an employer to act in good faith when terminating an employee (Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 S.C.R. 701, 152 D.L.R. (4th) 1; Keays v. Honda Canada Inc., 2008 SCC 39, [2008] 2 S.C.R. 362). In particular, “the employer should not engage in conduct that is ‘unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive’” (Bhasin, at para. 54). However, good faith in this context did not extend to the employer’s reasons for terminating the contract of employment (Wallace, at para. 76; Bhasin, at para. 54). See Avalon Ford Sales (1996) Ltd. v. Evans, 2017 NLCA 9, 275 A.C.W.S. (3d) 779.

[65] In Callow’s case, CMG actively deceived Callow from the time the decision was made to terminate the winter maintenance services contract in either March or April to September 12, 2013. More specifically, CMG acted in bad faith by (1) withholding the information to ensure Callow performed the summer maintenance services contract; and (2) continuing to represent that the contract was not in danger despite CMG’s knowledge that Callow was taking on extra tasks to bolster the chances of renewing the winter maintenance services contract.

[66] CMG argue that on its own, the exercise of the contractual right of termination is not evidence of a breach as there was no positive obligation on CMG to disclose their intention to terminate the contract before the ten days’ notice. CMG further state that Callow has not successfully provided evidence of bad faith in the decision to delay. I disagree. There were active communications between the parties between March/April and September 12, 2013, which deceived Callow. Due to the active deception by CMG, I do not accept the argument that no duty was owed to disclose the decision to terminate the contract before the notice.

[67] CMG did not perform the contract pursuant to the minimum standard of honesty. CMG’s delay to provide notice to Callow failed to provide a fair opportunity for the latter to protect its interests. The minimum standard of honesty would have been to address the alleged performance issues, to provide prompt notice, or to refrain from any representations in anticipation of the notice period.

[68] Although the scope of good faith may be broader in the franchise and employment context, principles from these areas provide guidance. In the employment context, it is recognized that there is a duty to act in good faith when terminating an employee. In this case, Callow was not an employee. However, as a result of Bhasin, it is arguable that the duty to act in good faith in performing a contract also extends to terminating a contract.

[69] To counter Bhasin, CMG argue that in Nlogic v. Microtherapy Inc., 2017 ONSC 722, 277 A.C.W.S. (3d) 304, at para. 44, the Court found that the Applicant had not misled the other party with respect to its intentions about the future of their contractual relationship by failing to disclose its intention to terminate the contractual relationship. As in Callow’s case, the contract did not stipulate that disclosure was required in the termination clause. However, Nlogic can be distinguished from Callow’s case because the internal communications in Nlogic did not mention plans to withhold the information. In Callow’s case, the evidence is clear that CMG intentionally withheld the information in bad faith.

[70] CMG also rely on Marathon Canada Ltd. v. Enron Canada Corp., 2008 ABQB 408, 447 A.R. 46, at paras. 98, 125 and 131, where the Plaintiff argued that based on industry practice, the defendant should have given him notice prior to exercising the termination clause in order to allow him to improve his performance. The Court rejected this argument since such notice would be contrary to the wording of the contract. The Court concluded that “[e]xercising one’s contractual right of termination is not evidence of a breach of good faith”. Marathon, however, is also distinguishable from Callow’s matter. I agree that exercising a contractual right of termination is not evidence of a breach of good faith. However, in Callow’s case, deliberately misleading and deceiving a party is a breach of the party’s duty to act honestly in performing its contractual obligations (Bhasin, at paras. 33-34).

[71] Callow also claims that it should receive compensation for unjust enrichment. Callow argues that CMG was unjustly enriched when it received a 5% yearly discount off the winter maintenance service contract. In addition, Callow claims that CMG was unjustly enriched for receiving $5,000 worth of landscaping work that was performed during the summer of 2013.

[72] In Pettkus v. Becker, 1980 CanLII 22 (SCC), [1980] 2 S.C.R. 834, 117 D.L.R. (3d) 257, the Supreme Court of Canada set out the elements of a claim for unjust enrichment. In order for a Plaintiff to successfully argue unjust enrichment, he or she must establish that there is (a) an enrichment; (b) a corresponding deprivation; and (c) the absence of any juristic reason for the enrichment (Pettkus, at p. 848).

[73] In Marathon, Marathon made an Application for a Declaration it had properly terminated a Natural Gas Purchase Agreement and for $560,007 for gas delivered to Enron that was not paid for. Enron filed a Counterclaim alleging the termination of the agreement was not valid and sought damages for the purchase of replacement gas at a higher price. Marathon argued that the early termination of the agreement was in accordance with the terms of the agreement and those terms were a “juristic reason for the enrichment”. The Court noted: “When the parties have entered into a carefully negotiated commercial contract, as here, a Court should be reluctant ‘to find a gap to fill with unjust enrichment’” (Marathon, at paras. 133-134).

[74] In Callow’s case, the parties negotiated the terms and the price of the agreement. I am mindful of the Court’s comments in Marathon and conclude that Callow has not demonstrated there is an absence of any juristic reason for the enrichment as per Pettkus because the parties negotiated a 5% reduction.

[75] However, the “freebie” landscaping work falls into a different category. Callow established that CMG were enriched by the work. Ms. Zollinger admitted during her testimony that Callow was not paid for its final invoice of $1,600 because she thought that the damaged trees were not replaced. However, Mr. Callow testified that he had repaired all of the winter damage. As previously stated, I prefer Mr. Callow’s evidence over that of Ms. Zollinger.

[76] I have concluded that CMG breached the contract with Callow by acting in bad faith by (1) withholding the information to ensure Callow performed the summer maintenance contract; and (2) continuing to represent that the contract was not in danger despite CMG’s knowledge that Callow was taking on extra tasks to bolster the chances of renewing the winter maintenance services contract.

[77] With regards to the issue of unjust enrichment, I have concluded that CMG was not unjustly enriched by the 5% negotiated reduction for the winter maintenance service contract. However, CMG was unjustly enriched by Callow’s “freebie” work.

(b) If CMG were in breach of contract, what are Callow’s damages?

[78] Since I have concluded that CMG were in breach of contract due to their actions, I must determine the damages owed to Callow by CMG.

[79] Due to the breach of contract, Callow is entitled to be placed in the same position as if the breach had not occurred (Ticketnet Corp v. Air Canada, 1997 CanLII 1471 (ON CA), 105 O.A.C. 87, 154 D.L.R. (4th) 271 (Ont. C.A.), at para. 97).

[80] The value of the winter maintenance services contract is $80,383.70 per year. Mr. Callow testified that he paid approximately 20% in expenses. After paying expenses, Callow’s profit would have been $64,306.96 had CMG not terminated the contract.

[81] Furthermore, Mr. Callow testified that he had leased machinery for the winter maintenance services contract that he would not have leased if he knew that the contract would be terminated. The cost of the lease was a one-time fee of $282.50 and a monthly payment of $1,212.72 for a period of 36 months. For the first year of the lease, Callow’s cost was $14,835.14.

[82] With regards to the issue of the “freebie” work, Mr. Callow did not provide evidence to support his expenses. However, there is evidence to support that he was not paid his last invoice of $1,600.

Conclusion

[83] For the reasons noted previously, I order that CMG must pay Callow the amounts as follows:

(a) $64,306.96 for the value of the contract after expenses;

(b) $14,835.14 for the value of one year of the lease of equipment; and

(c) $1,600.00 for the last unpaid invoice.

[84] CMG must pay Callow within 30 days of these Reasons for Decision.

Costs

[85] Callow is the successful party at trial. If the parties cannot agree as to costs, Callow may serve and file written submissions on costs not exceeding three pages, exclusive of the Bill of Costs, within ten days of these Reasons for Decision. CMG will have ten days to provide their written submissions (with the same restrictions) from the date that Callow provides its written submissions. Callow will be allowed a brief reply if deemed necessary, of no more than one page, which shall be provided within five days after it receives CMG’s written submissions.

Justice M. O’Bonsawin

Released: November 27, 2017