ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Perfect Plastering Limited
R. Quance for the plaintiff Tel: 416-599-8080; Fax: 416-599-3131
Plaintiff (Defendant by counterclaim)
- and -
863704 Ontario Ltd. and The Toronto-Dominion Bank1
B. Zinman for the defendant Tel: 416-221-5919; Fax: 416-216-0910
Defendant (Plaintiff by counterclaim)
HEARD: July 11 and 13, 2017 and October 3, 5, 6, 10 and 17, 2017
Master C. Albert
I. Overview
1Perfect Plastering Inc. (“Perfect”) claims payment for the supply of services and materials to improve and build an addition onto a commercial property owned by 863704 Ontario Ltd. (“863”) at 76 Densley Avenue. On January 16, 2014 Perfect registered a claim for lien for $253,721.00 as instrument AT3499869, followed by a certificate of action registered on January 30, 2014 as instrument AT3508787. Perfect reduced its lien claim to $175,396.25.
2863 denies the claim, alleging that Perfect’s work was incomplete, deficient and delayed. 863 claims set-off and counterclaims for its cost to rectify and complete the work. 863 did not proceed with its delay claim for lost rental income. After setting-off payments made to Perfect, holdback paid to subcontractors and completion and other costs that 863 claims are Perfect’s responsibility, 863’s position is that it owes Perfect only $55,597.91. The result is that this multi-day trial was over a $119,798.34 dispute.
3For the reasons set out below I find that the amount owing by 863 to Perfect for services and materials supplied, less allowable set-off, is $91,817.55.
II. The Issues
4The first issue is quantification: what is the value of the services and materials that Perfect supplied and how much did 863 pay to Perfect directly and to its subcontractors out of holdback?
5The next issue is backcharges: what amount is 863 entitled to set-off as proper backcharges for completion costs, deficiencies and consultant’s fees?
6The third issue is termination or breach of the contract as it relates to calculating damages.
III. Background
7863 and Perfect entered into a CCDC 2 Stipulated Price Contract in January 2013 for the fixed price of $487,030.00 including HST. The contract named Peter Archer of Peter Archer & Associates Ltd. as project consultant (the “Consultant”).
8The scope of work included building an addition along the north side of the building. The owner’s intention was to use the additional space for its own business purposes and rent out the space that the owner’s principal, Frank Zuccaro, had been using at 76 Densley Avenue to 863’s existing tenant, Perl’s Meats, to expand its operations. Unfortunately, Perl’s Meats became insolvent and on or about June 1, 2013 863 evicted Perl’s Meats for non-payment of rent for the pre-expansion premises it already occupied.
9Specific provisions of the CCDC 2 contract are relevant to the issues in this trial including:
Construction was to start November 26, 2012 and be completed by April 30, 2013.
The Consultant’s role included receiving Perfect’s applications for payment and certifying the amount of work completed and payable (GC 2.2.5).
The contract contemplated change orders, including an addition to the contract price for approved changes and additional time required to complete additional work (GC 6.1, 6.2, 6.3 and 6.6).
The contract addressed delays at GC 6.5: if caused by 863 the completion date was to be extended for a reasonable time.
Perfect was required to correct defective work rejected by the Consultant (GC 2.4.1).
Perfect could apply for monthly payments (GC 5.2.1) as the work progressed and the Consultant was required to process the applications for payment and issue payment certificates for the amounts the Consultant determined properly due and owing to Perfect (GC 5.3). 863 was required to pay Perfect within 20 days after issuance of each payment certificate, subject to statutory holdback.
The contract specified the rights and obligations of the parties in the event of default. If Perfect failed to comply with the contract terms, and if the Consultant determined that notice of default was warranted, then notice must be given (GC 7.1).The contract specified the responses available to Perfect.
If Perfect failed to correct the default 863 could terminate the contract (GC 7.1.4).
The rights and obligations of Perfect and 863 upon 863 terminating Perfect for cause are specified in GC 7.1.5, as follows:
(i) 863 could take possession of the work and finish the work by whatever means 863 considered expedient;
(ii) 863 could withhold payment to Perfect until the Consultant issued a final payment certificate;
(iii) 863 could charge back to Perfect the amount by which 863’s cost to complete the work as certified by the Consultant (including consultant fees) exceeded the unpaid balance of the contract price. If the cost to complete the contract work was less than the unpaid balance of the contract price then according to the CCDC2 contract, 863 must pay Perfect the difference;
(iv) After expiry of the warranty period, Perfect must pay to 863 the amount by which the cost to correct deficiencies exceeded the allowance for such corrections or, if the cost of such corrections was less than the allowance, 863 must pay Perfect the difference.
Perfect’s obligation to correct deficiencies in contract work performed by Perfect continued after termination of the contract.
863 was responsible to obtain and pay for development approvals, building permits and other necessary approvals and permits, with certain exceptions (GC 10.2.2). Perfect was responsible to obtain such permits, licences, inspections and certificates necessary to carry out the work and as are customarily obtained by contractors after a building permit is issued. The cost of such permits was included in the contract price (GC 10.2.3).
Annual interest on unpaid amounts is 2% above prime for the first 60 days and 4% above prime thereafter.
10After Perfect started the contract work construction stalled. The parties extended the completion date several times due to delay arising from the need to remove the old transformer from the site of the addition and replace it with a new one in a different location. The old transformer was in the middle of the space required for the addition and the addition could not be completed without moving it out of the way. However, the old transformer could not be disconnected and moved before a new transformer was purchased, delivered, installed and hooked up, otherwise the supply of electrical service to the site would have been cut off. The efforts to deal with the old and new transformers caused delay for which the parties blame each other.
11Perfect blames the delay on 863’s failure to arrange and pay for a new hydro transformer. 863 blames the delay on Perfect’s failure to have sufficient workers on site to progress with the work and Perfect’s failure to erect the steel structure for the addition in two stages to accommodate the presence of the old transformer until it could be removed from the site.
12Much of the trial time was devoted to details of delays on the construction job, but ultimately 863 abandoned its delay claim for lost rent2.
13When the court asked 863 to explain the legal significance of the abundance of trial evidence on the issue of delay, 863 replied that it is relevant to breach of contract.
14863 removed Perfect from the project on December 15, 2013 and issued a formal notice of termination on December 24, 2013. Perfect does not dispute that 863 terminated the contract in accordance with its terms.
IV. Witnesses
15Luigi Pitocco testified as president of Perfect. He gave his evidence in a straightforward and forthright manner. He readily admitted facts against his own interest. I find him to be an honest and reliable witness.
16Mr. Pitocco testified that the project was delayed because the old transformer had not been moved. He explained that the addition that Perfect contracted to build ran alongside the existing building and the old transformer sat in the middle of the area where the addition was to be built. Until the old transformer was moved Perfect could not proceed. The old transformer had to be disconnected to be moved. It could not be disconnected and moved until a new transformer had been installed in a different location. Otherwise, there would be no electrical supply to the existing commercial building.
17Mr. Pitocco testified that 863 delayed taking the steps required to arrange and pay for the new transformer. That was not done until August 2013 and the new transformer was activated on September 4, 2013. The old transformer was finally disconnected on the same date. While waiting to resolve the transformer issue Mr. Zuccaro, the principal of 863, arranged for Perfect to carry out work on his farm property outside of the city.
18Mr. Pitocco testified that 863 had wanted Perfect to erect the steel structure for the addition around the old transformer while awaiting its disconnection and removal, but that could not be done as it would have been an electrical hazard to carry out steel construction in such close proximity to the old transformer prior to its disconnection.
19Mr. Pitocco further testified that after the old transformer was disconnected Mr. Zuccaro instructed him not to remove it immediately because he was trying to find someone to buy it. Mr. Zuccaro did not find a buyer and ultimately Perfect removed the old transformer, demolished the pad on which it had been placed and proceeded with the addition.
20Mr. Zuccaro testified as principal of 863. Initially he testified in chief with a meek and mild demeanor. However in cross-examination he tended towards loud aggressiveness, denying facts that were easily proven and contradicting his own discovery evidence.
21Tabs 41 through 47 of exhibit 2 are court pleadings and other documents in court file CV-15-521692, being an action by 863 against Peter Archer and the Pitocco’s. When asked at trial Mr. Zuccaro denied having sued his consultant Peter Archer when it was clear that he had done so. Because of the lawsuit against his Consultant he had to summons Mr. Archer as a witness for trial and the court came very close to having to issuing a bench warrant to compel Mr. Archer to comply with the summons and attend.
22There are instances at trial where Mr. Zuccaro changed the evidence given on discovery One example is the date Perl’s Meats vacated the premises as tenant: on discovery he testified that Perl’s Meats left in June 2014. At trial he testified that Perl’s Meats vacated in June 2013. He further explained at trial that Perl’s left in June 2013 but their equipment remained on site until June 2014. Mr. Zuccaro attributes the discrepancy to his confusion at the time of discovery.
23Mr. Zuccaro testified that Perfect performed very little work from November 2012 to March 2013, yet the Consultant certified and 863 paid for services and materials supplied by Perfect and certified as completed during that time period. At trial Mr. Zuccaro insisted that “no work” was done from November 2012 through March 2013. Such clear exaggeration diminishes his credibility as a witness and the reliability of his evidence as a whole.
24For these reasons, where the evidence of Mr. Pitocco and Mr. Zuccaro conflicts I generally prefer and accept the evidence of Mr. Pitocco.
25Peter Archer, architect, was the Consultant and payment certifier on the project. 863 summonsed Mr. Archer who attended the trial as a reluctant witness. By the time of his attendance 863’s civil action against him had been resolved and discontinued. When examined in chief by counsel for 863, who repeatedly asked leading questions, Mr. Archer could be lead to agree to incorrect facts without apparently giving much thought to his answers. For example when asked if the contractual completion date was March 2012, he readily admitted that it was, although the contract states clearly on its face that the completion date was April 30, 2013. 863’s counsel had taken him to Perfect’s tender document dated January 10, 2013 at page 35 of exhibit 2 wherein Perfect had incorrectly written a completion date of March 26, 2012. I conclude that Mr. Archer could carelessly be lead to say what the questioner wanted him to say with a well-crafted leading question, regardless of the actual facts.
26In Mr. Archer’s letter dated February 21, 2014 to 863’s former lawyer Mr. Archer stated at item 1 that:
“the work required that the existing pad mounted (hydro) transformer be relocated and replaced. The application had been made, the transformer paid for, and fees had been paid to Toronto Hydro in October of 2012”.
27That statement was clearly wrong, as proven by evidence tendered at trial. In fact, by letter of June 5, 2013 from Mr. Archer to his former client 863, to the attention of Mr. Zuccaro, (exhibit 2, tab 30), Mr. Archer informed 863 that Perfect had submitted a schedule and was not in default of their contract, and that if the old transfer was not removed as soon as possible the schedule could slip. He instructed Mr. Zuccaro on June 5, 2013 as follows:
“To that end, could you please ensure that the monies and arrangements are made with Toronto Hydro to have the transformer removed and the new service reinstalled. Failure to do so would result in Perfect Plastering Limited not being able to complete their job as per the submitted schedule”
28Toronto Hydro had received Mr. Zuccaro’s application3 on April 19, 2013 according to its letter of May 13, 2013 (exhibit 3, volume 1, Tab 18). Toronto Hydro informed Mr. Zuccaro in this letter that he was required to pay the cost of “connection fees” of $38,267.48. Mr. Zuccaro did not pay the connection fees until June 5, 20134. When asked at trial to explain his error Mr. Archer testified that he did not know that Mr. Zuccaro had not paid the connection fees by October 2012 as stated in his letter of February 21, 2014.
29Mr. Archer testified that Perfect had caused delay on the project because it had not built the transformer pad to receive the new transformer. Under cross-examination he admitted that Perfect built the pad by May 14, 2013 and installation of the new transformer was delayed because 863 had not paid the required fee until June 5, 2013. I find that Mr. Archer’s careless disregard for the facts undermines his reliability as a witness.
30In his letter of February 21, 2014 Mr. Archer was careless in reciting and relying on facts presumably told to him that were not true. On the issue of delay, Mr. Archer testified about Perfect’s attendance on site, relying largely on hearsay evidence provided to him from Mr. Zuccro and other, unnamed sources. As a professional one would expect him to verify facts before relying on them and repeating them.
31Mr. Archer testified that none of the delay was attributable to changes and extras and the time required for drawings to be prepared to reflect changes and extras. The contract specifically contemplated that additional time would be required for changes and extras. Mr. Archer’s testimony on this issue defies logic. When taken through specific change orders he acknowledged that many of the changes were requested by 863 and additional time was required to carry out the change order work.
32Mr. Archer’s cavalier approach to facts and his careless disregard for the truth of the facts he relied on reduces the reliability of his evidence.
33Perfect called Frank Bellini, president of Arca Design Inc., as a witness. Arca had been hired by Perfect as a consultant to assist with the construction schedule. Mr. Bellini described his role largely as a bookkeeping function for Perfect. His evidence was not helpful to the substantive issues in this trial.
V. Quantification
a. Value of contract work and approved extras supplied by Perfect
34The following questions must be answered to determine the value of Perfect’s supply of services and materials:
How much of the work (contract work and approved extras) did the Consultant certify as completed by Perfect?
How much of the work (contract work and approved extras) did the Consultant accept as completed by Perfect after the last payment certificate was issued for work performed by Perfect?
What is the value remaining in the contract price for contract work not completed by Perfect prior to 863 terminating Perfect?
35As Consultant, Mr. Archer certified payment and issued six payment certificates certifying completion of contract work and approved extras supplied by Perfect. The Consultant also accepted as complete (i) contract work and approved extras completed by Perfect after payment certificate #6 was issued but prior to 863 terminating the contract, and (ii) change order CO.11.
36Payment certificates #1 through #6 and Mr. Archer’s February 28, 2014 review were filed in evidence. 863 does not dispute that the Consultant’s findings reflect Perfect’s completed work.
37The Consultant approved change order CO.11 (supply and install metal studs and drywall partitions) on December 13, 2013 for $1,800.00. Perfect completed this work.
38The following table shows the value of work the Consultant accepted as completed by Perfect, by approval date, with percentage of completion, payment status and unpaid holdback.
| No.5 | Date | % complete | Total certified complete | Certified payable this certificate | Amount paid |
|---|---|---|---|---|---|
| 1 | Jan. 11, 2013 Certificate | 16.56% | $80,670.70 | $72,603.63 | $72,603.63 |
| 2 | May 17, 2013 Certificate | 28.87% | $140,594.60 | $53,931.51 | $53,931.51 |
| 3 | July 15, 2013 Certificate | 35.64% | $173,557.83 | $29,666.91 | $29,666.91 |
| 4 | Sept. 10, 2013 Certificate | 44.84% | $218,390.58 | $40,349.47 | $40,349.47 |
| 5 | Oct. 28, 2013 Certificate | 58.85% | $286,607.55 | $61,395.28 | $61,395.28 |
| 6 | Nov. 28, 2013 Certificate | 79.56% | $410,940.32 | $111,899.50 | $0 |
| Feb. 28, 2014 “Review” | 93.53% | $489,667.42 | $20,602.736 | $0 | |
| Dec. 13, 2013 Approved CO.11 | $1,800.00 | $0 | |||
| Unpaid holdback as of Nov 28, 2013: | $41,094.03 | $0 |
39The evidence proves that the unpaid services and materials supplied by Perfect and certified or approved by the Consultant as having been completed totals $175,396.26, including HST.
40In his February 28, 2013 review of Perfect’s final invoice, the Consultant quantified the total contract price, including approved change orders, as $521,171.82, including HST. The value remaining in the contract price for contract work not completed by Perfect is $521,171.82 less $489,667.42 (the amount that the consultant accepted as having been completed by Perfect) for a value of $31,504.40 of contract work not completed by Perfect.
b. Accounting and backcharges
(i) Holdback paid to subcontractors
41As required by the Construction Lien Act 863 held back 10 percent of the value of work certified as complete, pending resolution of subcontractor lien claims. 863 is entitled to backcharge Perfect for payments made by 863 to subcontractors out of holdback.
42863 paid the lien claims of two subcontractors out of holdback funds as follows:
$24,361.65 to E.M. Electrical, and
$4,299.11 to Sentinel D.E.C.
43After paying subcontractors out of holdback, 863 retained $12,433.27 in holdback funds.
(ii) Accounting
44Based on the evidence of Perfect, which I accept:
863 failed to pay the amount of $111,899.50 certified as complete by the Consultant in payment certificate #6.
863 failed to pay the amount of $1,800.00 approved by the Consultant on December 13, 2013 as a completed extra.
863 failed to pay the amount of $20,602.73 approved by the Consultant in his February 28, 2014 review as having been completed.
863 retained holdback funds of $12,433.27.
45The total amount owing by 863 to Perfect for unpaid services and materials supplied by Perfect is $146,735.50, before deducting allowable backcharges.
(iii) Completion costs, deficiencies and consulting fees
46863 claims set-off for seven items listed at tab 73 of exhibit 3, as follows:
Water hook up to City of Toronto: $20,143.25 (not disputed by Perfect);
Invoice from CJM for heater: $19,951.51 (Perfect disputes $4,707.81);
Invoice from Richvale for blocks: 4,192.64 (not disputed by Perfect);
Invoice from Woodbridge for insulation: $2,484.76 (not disputed by Perfect);
Invoice from UMUT for concrete floor: $3,000.00 (not disputed by Perfect);
Invoice from Iberia Masonry for Blocks: $9,853.60 (not disputed by Perfect);
Invoice from Lea Landscaping for paving: $15,000.00 (Perfect disputes $15,000).
The CJM backcharge:
47CJM issued two invoices. The first invoice is dated January 23, 2014 for $15,243.70 to install gas fired unit heaters and piping on the roof. The second invoice is dated April 30, 2014 and is for $4,707.81 to “replace all unwelded gas piping at meters as per gas company red tag”. Mr. Zuccaro testified that the second invoice was for work that could not be completed in the winter when the work that resulted in the first invoice was carried out. No witness from CJM testified. The invoice reads “replace all unwelded gas piping”, which suggests to me that CJM reattended to redo work that it had already done because it had been red tagged by the gas company. The onus lies with 863 to prove its claim for backcharges. I am not satisfied that the second invoice was for original work that was required to complete or rectify Perfect’s contract work. The $4,707.81 invoice is disallowed as a backcharge.
The Lea Landscaping backcharge:
48Regarding the Lea Landscaping invoice for $15,000.00 for paving, Mr. Zuccaro testified that of the $15,000.00 invoice $9,000.00 was for the front parking lot and the balance was for the two loading docks.
49Perfect disputes the claim on the basis that Mr. Zuccaro admitted that these amounts had not been paid and the work had not been done. Perfect also disputes the claim on the basis that this claim for set-off was not pleaded and was not particularized in the defendant’s Scott Schedule, wherein 863 was required to particularize its set-off claim.
50The court’s order of August 11, 2014 required 863 to provide a Scott Schedule particularizing its claim of set-off and counterclaim. The court issued the following order:
Scott Schedule: A combined Scott Schedule in the form of Schedule “A” is required in the Perfect Plastering action and the EM Electrical action7. The pages must be numbered, each item listed must be numbered, the subcontractor allegedly liable for the deficiency must be identified and the total of the amounts claimed against each subcontractor must be set out clearly. The Scott Schedule is not a factum. Parties should identify the item claimed but must not argue their case in the Scott Schedule.
(a) The defendant 863704 Ontario Limited shall serve a Scott Schedule8 on the lien claimants by September 30, 2014 in hard copy and in electronic format. Each item claimed must be identified with the party’s position on the item, together with amount claimed for the item.
(b) The lien claimants shall serve a responding Scott Schedule by November 30, 2014. This version of the schedule must include all of the information provided by all parties and must also include the position of all parties on each item, including cost estimates. The Scott Schedule must be provided in hard copy and electronic format and must be filed with the court by November 20, 2014.
(c) If an item or items listed on the Scott Schedule are resolved either strike a line through the item(s) or eliminating them from the final schedule. Emphasis added
51In delivering its Scott Schedule particularizing its claim against Perfect, 863 did not claim a backcharge for the cost of paving. On that basis alone the claim for paving must be disallowed.
52The paving claim is also disallowed because payment of the amounts claimed is disputed and has not been proven. In argument 863’s counsel submitted that the invoice was paid in cash. There was no evidence tendered by a witness at trial to support this allegation. In the absence of evidence or a receipt for payment the claim, had it been considered despite 863’s failure to claim for it in its pleading or its Scott Schedule, I would have disallowed the claim as unproven. The onus is on 863 to prove that it has incurred the expense for which it claims reimbursement by way of set-off. On that basis the claim must be disallowed.
53Perfect also argued that the landscaping claim should be disallowed because it pertains to the front parking lot, which was not included in Perfect’s scope of work. In response, 863 argued (in the absence of any evidence on this issue) that the sewer installation caused the parking lot to be torn up so that it had to be re-paved.
54The claim by 863 for $15,000.00 for paving as a set-off is disallowed.
Consultant fees claimed as a backcharge:
55863 claims set-off for consulting fees for engineers Hammerschlag & Joffe Inc. (“Hammerschlag”) for $678.00, for TMP Consulting Engineers (“TMP”) for $5,175.41 and for Peter Archer & Associates (“Archer”) for $9,246.51.
56In cross-examination Mr. Zuccaro testified that he did not know if the invoices rendered by Hammerschlag for $678.00 and by TMP for $5,175.41 were paid. The onus is on the person claiming set-off to prove that the amounts claimed have been paid.
57The documents filed by 863 are invoices. They are not marked paid and there is no other document proving payment, such as a cancelled cheque, a credit card statement or an acknowledgement from Hammerschlag and TMP that the invoices were paid.
58On that basis I find that 863 has not met its onus of proving payment and the amounts claimed for these consulting fees is denied as a set-off.
59Regarding the set-off claimed for Mr. Archer’s consulting fees, I find that it was not provided in respect of completing the contract work. Mr. Archer testified that he was not involved as Consultant in the completion work undertaken by 863 to finish the project. The invoices 863 claims as a backcharge were rendered by Mr. Archer for providing information to 863’s lawyer for this lawsuit.
60I find that 863 has not proven that the consulting fees claimed for Mr. Archer’s services pertain to work undertaken to complete Perfect’s contract. Mr. Archer did not provide consulting services for this purpose. The amounts claimed for Mr. Archer are not properly set-off against amounts otherwise owing to Perfect. At best they would constitute a disbursement in this lawsuit if the court awards costs of the action to 863.
61The total of allowable backcharges to be set-off against payments otherwise owing to Perfect as certified or found completed by the Consultant is $54,917.95, calculated as follows:
| Item | Quantification |
|---|---|
| Water hook up: City of Toronto | $20,143.25 |
| CJM heater | 15,243.70 |
| Richvale: blocks | 4,192.64 |
| Woodbridge: insulation | 2,484.76 |
| UMUT: concrete floor | 3,000.00 |
| Iberia Masonry: Blocks | 9,853.60 |
| Total: | $54,917.95 |
62The total of allowable backcharges is $54,917.95.
(i) Delay and breach of contract
63863 pleaded delay and devoted much of the trial to evidence regarding delay. However, 863 had abandoned its claim for delay damages when it failed to produce evidence of lost rental income when ordered to do so. 863’s position is that delay is relevant to det4ermining which party breached the contract.
64The contract completion date was April 30, 2013. The steel structure to erect the addition could not be erected until the old hydro transformer was moved. That could not be done before June 6, 2013 because 863 had not paid for the new transformer. The old transformer could not be shut off and removed until the new transformer was in place in the new location and switched on. 863’s proposal that Perfect build the structure in two parts around the old transformer was not feasible due to the danger of erecting a steel structure so close to an active transformer.
65It would have been impossible for Perfect to complete its contract work by the contractual completion date of April 30, 3013 because the owner failed to take the steps necessary to allow Perfect to carry out its contract work. Recognizing this impossibility 863 extended the completion date several times.
66863 complains that even after 863 paid for the new transformer Perfect caused delay by its failure to have sufficient workers on site to carry out the work. Mr. Pitocco’s version of events is that Mr. Zuccaro, principal of 863, instructed Perfect not to remove the old transformer right away because Mr. Zuccaro wanted to try to sell it. According to Mr. Pitocco it was not until September 2013 that Mr. Zuccaro gave up on trying to sell the old transformer and allowed Perfect to proceed to remove it. In the meanwhile, Mr. Zuccaro hired Mr. Pitocco to carry out work at Mr. Zuccaro’s farm property over the summer.
67For reasons expressed earlier in these reasons, I accept the evidence of Mr. Pitocco over that of Mr. Zuccaro. In my view both parties were responsible for delay on the project. I conclude that there was a mutual breach of contract: 863 was in breach of the contract by reason of its failure to pay Perfect amounts certified by the Consultant as payable. Perfect was in breach of the contract for contributing to the delay in completing the work once the transformer issue was resolved.
68By letter dated December 24, 2013 from 863’a lawyer to Perfect 863 terminated the contract. The letter reads, in part: “Remaining work was to have been completed by December 15, 2013….I am advised that you have not completed the work and accordingly your work is hereby terminated.” Perfect accepts that 863 terminated the contract according to the terms of the contract.
69The contract specifies the rights and obligations of the parties upon termination of the contract, providing at articles 7.1.4 and 7.15 as follows:
“7.14 If the Contractor fails to correct the default in the time specified or in such other time period as may be subsequently agreed in writing by the parties, without prejudice to any other right or remedy the Owner may have, the Owner may…:
.2 terminate the Contractor’s right to continue with the work in whole or in part or terminate the Contract.”
“7.15 If the Owner terminates the Contractor’s right to continue with the work as provided in paragraphs 7.1.1 and 7.1.4, the Owner shall be entitled to:
.1 take possession of the work and products at the place of the work, subject to the rights of third parties, utilize the construction equipment at the place of the work, finish the work by whatever method the Owner may consider expedient, but without undue delay or expense, and
.2 withhold further payment to the Contractor until a final certificate for payment is issued, and
.3 charge the Contractor the amount by which the full cost of finishing the work as certified by the consultant, including compensation to the Consultant for the Consultant’s additional services and a reasonable allowance as determined by the Consultant to cover the cost of corrections to work performed by the Contractor that may be required under GC 12.3 – WARRANTY, exceeds the unpaid balance of the Contract price; however, if such cost of finishing the work is less than the unpaid balance of the Contract price, the Owner shall pay the Contractor the difference, and
70Applying article 7.1.5 863 was entitled to charge Perfect the amount by which 863’s costs to complete the work, as certified by the Consultant, exceeded the value of the work not completed by Perfect prior to termination. 863 was also entitled to charge Perfect for consulting fees arising from the completion of the contract work by another contractor. However in this case, for reasons already given, 863 has not proven consulting fees pertaining to completing the contract work.
71The value of unpaid services and materials supplied by Perfect is $146,735.50, including HST. Based on the Consultant’s February 28, 2014 review of Perfect’s final invoice, the value of contract work not completed by Perfect was $31,504.40 (see paragraph 40 of these reasons). 863’s completion costs were $54,917.95.
VI. Conclusion
72For the reasons given I find that 863 owes and must pay Perfect the sum of $146,735.50 (including HST) for services and materials supplied, from which backcharges of $54,917.95 must be deducted, for a balance owing of $91,817.55, plus applicable prejudgment interest.
73The contract provides at article 5.3 for interest on overdue payments at the rate of 2 percent per annum above prime for the first 60 days and 4 percent above prime for after the first 60 days. The parties must attend the hearing on December 15, 2017 prepared to make submissions and provide their calculations on the quantum of prejudgment interest.
VII. Costs
74By the time this case reached trial the plaintiff had reduced its claim to $175,396.25 and the defendant admitted that of the amount claimed, 863 owed Perfect $55,597.91, leaving in dispute the sum of $119,798.34. Despite the modest amount in dispute, the parties required a total of seven hearings for trial directions, two days to argue preliminary and procedural trial issues and five days for trial evidence and argument. The disproportionate manner in which the litigation was pursued and conducted is relevant to the issue of costs.
75This trial will reconvene on December 15, 2017 at 10:00 a.m. to hear submissions on costs and finalize the reference report.
Master C. Albert .
Released: December 13, 2017 Amended December 15, 2017
Appendix “I”
(A) Procedural issue #1: leave for defendant to call Peter Archer
(1) The defendant asks for leave to call Peter Archer as a witness despite not having delivered a witness statement or summary of anticipated evidence by March 31, 2017 as ordered, or at all.
(2) The purpose of delivering witness statements or, where a witness is uncooperative, an outline of anticipated evidence of a proposed witness, is to ensure that the opposite party knows the case to meet at trial and to avoid surprise at trial. The primary purpose of the hearings for directions in construction lien references is to identify and narrow issues for trial. Trial by ambush is unacceptable.
(3) The defendant failed to deliver a witness statement or an outline of anticipated evidence of Peter Archer, despite having identified Peter Archer as a trial witness as early as January 18, 2016 (see hearing for directions order #4 of January 18, 2016).
(4) The defendant’s reason for failing to deliver the statement or outline is that the defendant was in litigation with Mr. Archer and he was a potentially hostile witness.
(5) The defendant’s explanation is insufficient. My trial directions specifically contemplate the need to call uncooperative witnesses and the requirement to provide an outline of anticipated evidence of such witnesses. The January 18, 2016 order (repeated at paragraph 4 of the May 9, 2016 order and paragraph 5 of the September 26, 2016 order) directed the parties to serve an outline of anticipated evidence from uncooperative witnesses. Paragraph 9 orders:
“Where a witness is not co-operative such that an affidavit of evidence in chief is not available and the witness must be summonsed then counsel must serve a statement outlining the anticipated evidence of the witness and where this order refers to “affidavit of evidence in chief” it shall be deemed to include such an outline of evidence prepared where the witness is unco-operative and must be summonsed. Witnesses testifying in chief must file witness statements signed by the witness by the ordered deadlines, failing which the witness may not be called.”
(6) 863 was cautioned on at least four occasions that if a party fails to deliver an outline of anticipated evidence for a witness then that witness may be precluded from testifying at trial.
(7) Nevertheless, Perfect agreed to withdraw any objection to 863 calling this witness provided 863 delivered a witness statement or outline of anticipated evidence by July 14, 2017.
(8) Accordingly, at trial I delivered the ruling orally that provided the statement of evidence signed by the witness or the outline of anticipated evidence signed by counsel is served and filed by July 14, 2017 then this witness may be called by the defendant at trial.
(9) The defendant delivered a “will say” statement for Peter Archer on July 12, 2017. On that basis the plaintiff withdrew the objection to calling Mr. Archer as a witness and I granted leave for the defendant to call Peter Archer as a witness.
(10) I advised the parties at the trial that to the extent they require access to Mr. Archer’s file prior to calling him as a witness a motion may be brought on notice pursuant to rule 30.10. If the parties agree that documents from Mr. Archer’s file should be incorporated into a document book for trial then they may prepare a joint book of supplementary documents.
(B) Procedural issue #2: leave for defendant to cross-examine Frank Bellini
(1) The defendant asks for leave to cross-examine the plaintiff’s witness Frank Bellini who filed an affidavit of evidence in chief. The court’s orders were clear: a party seeking to cross-examine a witness testifying in chief by affidavit must serve a notice of intention to cross-examine at least 10 days before trial.
(2) Mr. Bellini’s affidavit was served on 863 in sufficient time for 863 to deliver a notice of intention to cross-examine. No explanation was given for the defendant failing to do so. Initially I asked defendant’s counsel to find out whether Mr. Bellini would be available to attend trial on Friday July 14, 2017 to be cross-examined before issuing my ruling. However, subsequent events have caused the trial to be adjourned from July to October 2017 so that if a notice of intention to cross-examine Mr. Bellini is served by July 31, 2017 then leave is granted for the defendant to cross-examine this witness.
(C) Procedural issue #3: leave for defendant to rely on CRSV expert report
(1) The defendant seeks leave to rely on the December 30, 2014 report of Mr. William Huinink of CRSV filed in the defendant’s document book at Tab 77, as an expert report. The plaintiff objects to the admissibility of the report on two grounds:
a. The report was not served on the plaintiff; and
b. The report is not admissible as an expert’s report because it fails to comply with the requirements of rule 53.03.
(2) As to whether the report was served on the plaintiff prior to trial, I address that issue under part “D” of this appendix together with the plaintiff’s objections to other documents in the defendant’s document book that the plaintiff claims were not produced as ordered before trial.
(3) As to the second issue, the plaintiff’s position is that the complete report, including a signed version of the letter of December 30, 2014, the acknowledgement of expert witness and the expert’s CV were not served prior to one week before the opening of trail, contrary to the court’s orders and rule 53.03. The photographs referred to on the first page of the report have never been served on the plaintiff and are omitted from the document that the defendant seeks to have admitted as an expert report despite the report referring to photographs taken contemporaneously with the report.
(4) Regarding admissibility of the report as a qualifying expert report for use at trial, the evidence of expert witnesses is governed by rule 53.03, which provides at subparagraph (1) that expert reports must be served at least 90 days before the pretrial conference. In civil actions a pretrial is convened generally at least six weeks before the trial is scheduled to commence. Section 67 of the Construction Lien Act, R.S.O. 1990, c.C.30 provides that where the rules and the Act conflict, the Act prevails. In references under the Act, where an order arising from a hearing for directions specifically fixes the deadline for the delivery of expert reports, then that deadline applies even if it is less than 90 days before trial.
(5) In this case the court ordered and then extended the deadline for the defendant to deliver its expert reports. The first deadline was fixed by order dated January 18, 2016, requiring the defendant to deliver its expert report by March 31, 2016. This deadline was fixed in consultation with all counsel, including 863’s counsel.
(6) The defendant failed to meet this deadline and by order dated May 9, 2016 the deadline for the defendant to deliver its expert reports was extended to June 24, 2016. This deadline was fixed in consultation with all counsel, including 863’s counsel.
(7) The defendant failed to meet the extended deadline. At the hearing for directions on September 26, 2016 I noted as follows:
“The defendant has never delivered the complete quantity surveyor’s report …. This order provides a last chance opportunity for the defendant to file the complete reports, including statement of impartiality and C.V., failing which the reports may not be relied on at trial.”
(8) In the order arising from the September 26, 2016 hearing for directions the deadline for the defendant to deliver its complete expert reports was further extended to October 7, 2016. This deadline was fixed in consultation with all counsel, including 863’s counsel. The court’s order provided at paragraph 2:
“The defendant shall deliver the complete expert reports of its engineer and its quantity surveyor, including C.V. and statement of impartiality, by October 7, 2016 failing which the defendant may not rely on the expert reports at trial.”
(9) The order is clear and unambiguous and the consequences of the defendant failing to serve the expert reports complete with C.V. and statement of impartiality were clearly specified in the order.
(10) On the first day of trial the defendant’s counsel asked for time to locate and produce evidence that the complete report of December 30, 2014 of Mr. Huinink had been served on the plaintiff prior to the extended October 7, 2016 deadline or at the latest 90 days before trial. Defendant’s counsel advised the court by letter dated July 12, 2017 that he does not have any evidence that the complete report was provided to the plaintiff prior to one week before the commencement of trial. I accept the representation of Mr. Quance, as plaintiff’s counsel and as an officer of the court, that he did not receive the complete report of Mr. Huinink, with signed letter, acknowledgement of expert duty and C.V., prior to one week before trial and that he has never received the photographs referred to in the report.
(11) The defendant’s position is that there is no prejudice to the plaintiff because the substance of Mr. Huinink’s opinion was produced at examinations for discovery. The “substance” to which counsel refers is a two page list of values in chart form, with five columns and no column headings and no explanations. The first column is a numerical listing. The second column is a description of work under the heading “value of incomplete work”. The third column appears to reflect measurements. The fourth and fifth columns contain numerical figures represented in monetary amounts, again without heading to disclose what is supposed to be reflected in the two columns.
(12) Not included from the two page list of numbers produced to the plaintiff at discovery was the letter dated December 30, 2014 purportedly signed by Mr. Huinink, addressed to the defendant’s previous counsel, explaining the report. The letter explains that the report quantifies the value of work to be completed, the value of work completed by Perfect Plastering and the value of work to correct deficiencies. The letter further identifies the documents relied on and reflects that Mr. Huinink has attached to his report his own photographs depicting conditions current at the time of his report (December 2014).
(13) I find that the defendant did not serve the plaintiff with a fully complete, signed copy of the expert report of W. Huinink of CRSP, the quantity surveyor, including the cover letter, the photographs referred to in the report, the expert’s CV and the acknowledgement of expert duty, until July 4, 2017, one week prior to trial.
(14) Even if the report had been properly served it fails to meet the requirements of an expert report as specified in rule 53.03 in many respects. The report is deficient because:
a. Mr. Huinink’s report to the defendant’s previous counsel included photographs which were not produced.
b. Until July 4, 2017, one week before trial, the report failed to disclose the expert’s address and area of expertise contrary to rule 53.03(2.1) paragraph 1.
c. Until July 4, 2017, one week before trial, the report failed to disclose the expert’s qualifications and employment and educational experiences in his area of expertise, contrary to rule 53.03(2.1) paragraph 2.
d. The report fails to provide any details of the instructions and information provided to the expert by defendant’s previous counsel, and upon which the expert relied in forming his opinions, contrary to rule 53.03(2.1) paragraph 3. Mr. Huiniunk’s statement in his covering letter dated December 30, 2014, not provided to the plaintiff until July 4, 2017, that “as instructed, I have prepared our report that quantifies the value of work to be completed, the value of work completed by Perfect Plastering Limited at the 76 Densley Ave building addition for 863704 Ontario Ltd., as well as a value of work to correct the noted deficiencies along with the residual value of work completed”, and does not disclose the particulars of the instructions and the factual foundation that the defendant’s prior counsel provided to Mr. Huinink.
e. The report does not explain the expert’s opinion on each issue and the reasons for the opinions of value reflected in the two page summary of values. It does not provide any information as to the (i) factual assumptions on which the opinions are based, (ii) a description of the expert’s research including the data and indices he relied on in forming his opinions of value; and (iii) a complete list of the documents relied upon in forming his opinions, all contrary to rule 53.03(2.1) paragraphs 5 and 6.
f. Until July 4, 2017, one week before trial, the report failed to provide an acknowledgement of expert’s duty, contrary to rule 53.03(2.1) paragraph 7.
(15) The rules regarding the preparation and delivery of expert reports was substantially amended several years ago to ensure that parties opposite in interest had a clear understanding well in advance of trial of the expert opinions that they would be required to respond to at trial. The introduction of the requirement of a statement of impartiality and a C.V. listing qualifications and experience was added, again to avoid surprise at trial and to allow the party opposite in interest to properly assess whether to respond and if responding to identify and retain an expert properly qualified to respond.
(16) The defendant argues that the plaintiff is not prejudiced because it had the list of values and even though the other requirements of rule 53.03 had not been met, the plaintiff knew the substance of the opinions of the defendant’s expert.
(17) I disagree. The plaintiff is severely prejudiced by the defendant’s blatant disregard for the requirements of expert reports as provided for in rule 53.03.
(18) Firstly, the two page summary of values that the defendant asserts was the expert report produced for the first time at examinations for discovery is not an expert report. It is so utterly deficient and non-compliant with the requirements of rule 53.03(2.1) that it could not in any way be considered to be an expert report.
(19) Secondly, a litigant prepares its litigation strategy based on the evidence that it expects to face at trial. In construction lien references that evidence is fully disclosed well before trial by reason of the disclosure requirements ordered in the hearings and trial directions conducted before trial.
(20) The “drop dead” deadline for the defendant to deliver a properly qualifying expert report, extended by many months due to the defendant’s failure to comply with earlier orders, was October 7, 2016. As of October 8, 2016 the plaintiff knew that there was no expert report of a quantity surveyor to which it would be required to respond and the plaintiff made the decision that it did not require an expert to respond because there was nothing to which it was required to respond.
(21) The defendant attempts to blame the plaintiff for not having complained at the May 24, 2017 conference call with the court about (i) the defendant’s failure to deliver an expert report of the quantity surveyor and (ii) deficiencies in the report. The purpose of that conference call was solely scheduling: Defendant’s counsel needed to change and extend several of the dates fixed for trial due to his own medical circumstances. The court convened a conference call to address trial scheduling. In any event, the onus is on the defendant to deliver a properly compliant expert report. It is not for the plaintiff to raise the issue if one has not been served.
(22) Not having been served with a proper expert report of a quantity surveyor the plaintiff did not deliver a responding report before trial. There was no qualifying report that required a response.
(23) In addition, aside from the defendant’s failure to serve a proper report within the time required, the report that the defendant asserts to be an expert report is so lacking in the substantive requirements of rule 53.03(2.1) as to fail to qualify as an expert report. Most significantly, the report of Mr. Huinink fails to provide details of the factual assumptions upon which the opinions rely, fails to provide details of the research and authorities on which he relies, and fails to give reasons for his opinions.
(24) For all of these reasons the document filed at tab 77 of the defendant’s document book and purporting to be an expert report of Mr. Huinink is inadmissible as an expert report. In the absence of a proper expert report having been delivered the precondition of delivery of an expert report as required by rule 53.03(1) has not been met and Mr. Huinink may not be called as an expert witness at trial.
(D) Procedural issue #4: leave for defendant to rely on documents not previously produced
(1) On July 5, 2017, the day after receiving the defendant’s two volume book of documents, the plaintiff delivered a notice of objection, objecting to several documents that the defendant had included in its document book. The reason for the objection in each case is that the documents had not been produced to the plaintiff prior to trial, either as part of the affidavit of documents, as part of the examination for discovery or in response to undertakings given at discovery.
(2) Production before trial is important to allow the parties to know the case to meet at trial and to prepare properly for trial. This is particularly so in construction lien references where the parties participate in multiple pre-trial hearings for trial directions to ensure the exchange of evidence and narrowing of issues. A parties’ disregard for the court’s orders is more than mere non-compliance – it renders the entire pretrial hearing for directions process meaningless if the parties simply disregard the pretrial orders and beg for leave at trial, to the detriment of the trial strategy and trial preparation of the opposite party.
(3) Initially the plaintiff objected to the documents at tabs 41, 51, 62, 65, 66, 67, 68, 69, 70, 71, 73, 74, 75 and 77. The plaintiff withdrew the objection regarding the documents at tabs 41, 66 and 67.
(4) Regarding the documents at tabs 51, 62, 65 and 68, the defendant could not prove that these documents were produced before trial as required by rule 30.08. The defendant either withdrew its opposition to the objection or was unable to provide a satisfactory explanation as to why the consequences of rules 30.08 and 53.08 should not apply. I ordered that these documents (tabs 51, 62, 65 and 68) be removed from the defendant’s document books.
(5) Regarding the documents at tabs 69 and 70 of the defendant’s document book, these pertain to quantifying holdback of subcontractors with whom the owner settled out of holdback funds. The plaintiff is prepared to admit the amounts referred to in the letters. There is no prejudice to the plaintiff to allow these documents to remain in the document book. The objection to these documents is dismissed.
(6) Regarding the documents at tabs 71 I find that it is not relevant and that it was not produced to the plaintiff by the defendant. The document is ordered removed from the defendant’s document book.
(7) Tab 73 contains a sheet of paper, (not letterhead or in any way identifying the author of the page) listing several items with numbers beside each item, followed by invoices and estimates. The defendant claims that these are the costs of completing or rectifying the plaintiff’s work. The plaintiff objects to the admissibility of these documents because they were not produced until one week before trial. The defendant’s counsel advised the court that the documents had been produced at examinations for discovery but are not marked as an exhibit to the discovery. I allowed the defendant until July 13, 2017 to provide evidence that the documents at tab 73 were given to the plaintiff, failing which they would be ordered removed from the defendant’s document book as inadmissible, not having been produced before trial.
(8) At the reconvening of the trial defendant’s counsel asked for another day to provide the portions of the transcript to the plaintiff where these documents had been discussed. Plaintiff’s counsel agreed that if the defendant’s counsel could identify the portions of the discovery transcript where these documents were addressed then the plaintiff would withdraw the objection to the tab 73 documents.
(9) On that basis I allowed the defendant until July 14, 2017 to produce to the plaintiff and file with the court the portions of the transcript where the documents at tab 73 (pages 239 to 249) of the defendant’s document book were produced and discussed. By letter dated July 14, 2017 plaintiff’s counsel withdrew his objection to the admissibility of the documents at Tab 73 of the defendant’s document book.
(10) Regarding the documents at tab 74 of the defendant’s document book, the documents are stamped as a discovery exhibit and I am satisfied that they were produced before trial. The documents may remain in the defendant’s document book.
(11) Regarding the documents at tab 75 of the defendant’s document book, the defendant acknowledges that the JNE invoices were not produced before trial and agrees that they should be deleted together with the reference to JNE on the bottom half of the first page of that tab. It is so ordered.
(12) Regarding the documents at tab 77 of the defendant’s document book, despite the court having given the defendant an opportunity to prove that these documents had been produced before trial, the defendant is unable to provide any evidence that the first page, being the December 30, 2014 letter from Mr. Huinink to Mr. Capelovici, was produced prior to one week before trial. The second and third pages flow from the first page and are meaningless without it. These documents are inadmissible at trial for failure to properly produce the documents before trial (see also: reasons and discussion under part “C” of this appendix of procedural rulings).
(E) Procedural issue #5: Adjourn trial due to defendant’s medical issues
(1) After the lunch recess on the first day of trial the defendant asked the court to adjourn the trial for medical reasons pertaining to the principal of the defendant. Given the medical issues, and in anticipation of receiving a copy of the medical note that counsel for the defendant advised the court was read to him over the telephone during the lunch recess, the plaintiff did not object but proposed that none of the trial evidence begin before the reconvened date for the trial in October 2017.
(2) The trial dates scheduled for the week of July 17 had already been vacated to accommodate a medical issue of defendant’s counsel. The trial was to have reconvened the week of July 25, 2017 and then if not completed it was to continue on October 3, 2017.
(3) Given the sudden medical issue of the defendant’s principal, the trial will be adjourned to October 3, 2017 and continue on October 5 and 6, 2017 as previously scheduled. To make up the additional trial time required due to the cancellation of the July trial dates, I fixed additional trial dates of October 10, 22, 12 and 13, 2017 as peremptory trial dates for all parties. Counsel confirmed at the July 13, 2017 trial date that these additional dates are available to counsel and parties.
(4) All procedural issues were dealt with during the July 2017 sitting of the trial and I directed counsel that no additional evidence for trial may be served or filed without leave of the court.
(5) I advised the parties on July 13, 2017 that these procedural rulings and reasons would be incorporated as an Appendix to the judgment following trial.
(F) Conduct during hiatus before continuing trial
(1) All procedural issues were dealt with during the July 12 and 14, 2017 trial dates. I informed the parties that any procedural issue that could have been raised at that time but that was not raised would not be considered at the continuation of the trial on October 3, 2017.
(2) I cautioned the parties that they may not serve or file any additional evidence without leave of the court which must be requested by motion on notice.
CITATION: Perfect Plastering Limited v. 863704 Ontario Ltd., 2017 ONSC 7433
COURT FILE NO.: CV-14-497288
DATE: December 13, 2017 Amended December 15, 2017
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Perfect Plastering Limited
Plaintiff (defendant by counterclaim)
- and -
863704 Ontario Ltd
Defendant (plaintiff by counterclaim)
REASONS FOR JUDGMENT
Master C. Albert
Released: December 13, 2017 Amended December 15, 2017
Footnotes
- Action discontinued as against TD Bank
- By motion endorsement of January 30, 2017 (see: trial record tab 18) the court ordered 863 to provide evidence of lost rental income within 30 days failing which 863’s claim for lost rental income would be deemed abandoned. 863 failed to produce evidence of lost rental income and the claim for lost rental income was deemed and treated at trial as abandoned.
- The letter is addressed to Mr. Zuccaro care of one of his other companies, Metrololitan
- Exhibit 3, volume 1, Tab 23: 863 bank account showing cheque/debit of $38,267.48 on June 6, 2013.
- Payment certificate number
- Without deducting and withholding 10% for holdback
- Notwithstanding that at the hearing for directions we discussed that a Scott Schedule is not required in the E.M. Electrical action, I have decided that it would be more efficient to include the deficiencies in the same Scott Schedule so that all deficiencies are listed in one document.
- Word compatible