Consultants v. Lad, 2018 ONSC 3273

COURT FILE NO.: CV-11-00306

DATE: 2018 05 29

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

MARCOS LIMITED BUILDING DESIGN CONSULTANTS

Plaintiff

• and -

ISHVER and SUMITRA LAD

Defendants

G. Hemsworth and A. Zaccagnini, for the Plaintiff

A. Speigel and J. Speigel, for the Defendants

HEARD: May 9-12, 2017, May 15-19, 2017, June 12-16, 2017, June 19-20, 2017, October 10-13, 2017, October 16-18, 2017, December 12-13, 2017, January 12, 2018

REASONS FOR JUDGMENT

SEPPI, J

OVERVIEW

[1] The Plaintiff, Marcos Limited Building Design Consultants ("Marcos Limited") built a custom design home (the "house") in Caledon for the Defendants, Ishver and Sumitra Lad (the "Lads"). The contractual and operational dealings throughout the course of the project were handled almost exclusively between Manuel (“Manny”) Marcos and Ishver Lad. Mr. Marcos, Mr. Lad and their families were friends when the project began. The friendship ended abruptly when this dispute arose in November 2010.

[2] The Lad’s moved into the house on August 16, 2010, believing they had fully paid for its total cost. The financial arrangements throughout the process had been exceptionally casual for a project of this nature. This was so from its inception when, in February 2009, Mr. Marcos accompanied the Lads in their search for suitable land to build their house. When the Lads bought the land for their house in early March 2009, Mr. Lad had viewed the property and consulted with Mr. Marcos about the purchase. The relationship was easygoing right up until the Lads moved into the house with the use of Joseph Marcos’ truck.

[3] Throughout the process, and following the execution of an itemized all-inclusive contract used as the basis for the project financing, Mr. Lad paid Mr. Marcos whenever and however he asked for payment. Often payments were made in cash. Some were made by cheque, on occasion by cheque to Mr. Marcos’ family members. When asked, Mr. Lad paid suppliers or agencies directly on the promise this would be accounted for as payment on the contract.

[4] After the Lads had moved into the house they discovered several problems in the construction noted by them to be deficiencies. There were disagreements over the Lads’ requests for rectification. Conflicts arose. Family members on both sides entered the fray. There is evidence of Mr. Marcos’ brother Joseph and Mr. Lad’s wife Sumitra becoming involved in offering opinions in the hope of resolving the matter.

[5] The conflicts were not resolved. In early November 2010 Mr. Marcos delivered an invoice to the Lads claiming the sum of $523,068.52 owing on the project. The Lads were shocked to receive such an invoice and disputed this charge. The Plaintiff registered a lien against the property and the parties have been in bitter litigation ever since.

THE CLAIMS

[6] The Plaintiff claims damages in the sum of $523,068.52 for services and materials supplied, or in the alternative, damages for unjust enrichment in the same amount, plus the lien.

[7] The Lads dispute the claim. They say they overpaid Marcos Limited by approximately $75,502 thereby unjustly enriching the Plaintiff by this over payment. They also state the Plaintiff breached their contract by failing to repair its deficient work. They challenge the lien and counterclaim for damages.

THE ISSUES

(1) The scope, nature and terms of the contract to build the house.

(2) The reliability and effect of the documentary paper trail created and presented by the Plaintiff for execution.

(3) Credibility.

SUMMARY OF THE PLAINTIFF'S POSITION

[8] Marcos Limited submits the design and cost of the custom house requested by the Lads changed over time from a single-storey, vinyl clad 1430 square foot two-bedroom cottage, to a 2,800 square foot stone clad two-storey custom home. The Plaintiff submits there was no all-inclusive contract between the parties when the project started, claiming it evolved as it went along.

[9] The Plaintiff claims the itemized contract signed by both parties at the beginning of the project, on which the Defendants rely, was a bogus document prepared for bank financing. Instead, the Plaintiff relies on a series of signed documents, which delineate various stages of the project, plus a construction proposal agreement for $718,700 dated May 31, 2010. The Lads say this latter document was fraudulently altered from $440,000 for the litigation.

[10] The Plaintiff submits the Lads paid $527,432.50 plus approximately $57,000 for items excluded from the agreement, such as building permits and surveying work. The Plaintiff denies the receipt of some of the cash payments, which the Lads say they made. The Plaintiff relies on a number of invoices, some of which were prepared after the litigation had commenced and marked paid in full. The final invoice claiming $523,068.52 has not been paid.

[11] The Plaintiff says the last day of work was October 29, 2010. It registered the claim for lien on November 24, 2010 and commenced this action on January 25, 2011.

[12] The Plaintiff did not produce the all-inclusive contract for $378,000, dated April 3, 2009, showing the major elements of the project. A copy of this was produced by the Lads. Mr. Marcos does not dispute he signed it, and claims this was for the small cottage the Lads initially wanted and not for the 2,250 square foot dwelling shown on the April 6, 2009 CAD drawings, which the Lads say was the reference point for the contract.

[13] A subsequent all-inclusive revised contract was signed for $448,000, in which the price of the dwelling increased from $230,000 to $300,000. This document, which the Lads say was signed by them and returned to Mr. Marcos, was also not produced by the Plaintiff. The Lads’ copy is signed by Mr. Marcos and the Plaintiff admits he signed it.

[14] Despite this, Mr. Marcos denies he had offered to complete the project for $448,000 plus tax, contradicting his admission at discovery to that effect. The Plaintiff's position is that the $378,000 and the $448,000 contracts were meaningless non-binding estimates given to the Lads solely to obtain bank financing.

[15] The Lads claim there was a further and final all-inclusive contract for $450,000, incorporating July drawings with changes to the April, 2009 CAD drawings, signed by both parties in July 2009. The Lads claim Mr. Marcos kept the signed copy of that contract, which they inadvertently left behind when they had to rush off due to Sumitra Lad's work commitments. It is the Plaintiff's position there is no such contract or document.

[16] The Plaintiff submits it is entitled to the amount claimed pursuant to the series of contracts signed by the parties over time as the project progressed. The Plaintiff submits the work referenced was done and invoiced, as were the extras listed by Mr. Marcos which total $62,201.00. The total amount of $523,068.52 claimed is the unpaid balance on the invoices. In the alternative it claims the same amount, as unjust enrichment, for the value received by the Defendants.

[17] The Plaintiff submits the outstanding deficiencies alleged by the Defendants are not valid and, to the extent these existed, they were either rectified or, if not, it was because the Lads refused entry to the house after the breakdown of their relationship.

SUMMARY OF THE DEFENDANTS' POSITION

[18] It is the Defendants' position the Plaintiff's claim is entirely without merit, based on lies and fabricated documents designed to support its story and greed. They never requested a "cottage" as the project. The house, as it was ultimately built, was what they contracted for with some revisions, which they acknowledge. They say $540,000 was ultimately agreed upon as the final price, after accepting Mr. Marcos' representations the project was costing more than the original $450,000 all-inclusive contract.

[19] The Defendants submit Manuel Marcos, the principal of Marcos Limited, and his project manager brother, Joseph Marcos, took advantage of their trust and friendship leading to this outrageous claim of almost double the parties' contract price.

[20] Mr. Lad wanted to move to the country, a dream fueled by visiting the Caledon home of his good friend Joseph Marcos. Joseph introduced Ishver Lad to his brother Manny, who designed and built custom homes. The friendship had originated many years before through Joseph and Ishver's wives, who had met as teachers and become close friends. The Lads say they wholly trusted the Marcos brothers, based on their strong friendship at the time. They relied on Mr. Marcos' oral representations when signing documents and making payments.

[21] According to the Defendants, the contract to build was all-inclusive. It mutually increased in price from a total of $378,000 to $540,000 as the plans progressed, but it was always an all-inclusive agreement. The land purchased for the project cost $450,000. Their goal throughout was to keep their ultimate cost manageable and in line with the all-inclusive contract price, agreed to at the beginning of the project.

[22] The Lads are of average means. Mr. Lad is a police officer. His wife Sumitra, then a teacher, is now a vice-principal. To build the house they had to borrow from their parents in addition to obtaining a mortgage. They candidly communicated the limitations of their financial situation to Mr. Marcos from the beginning. They told him they needed to know how much the total project would cost before entering into the contract to build.

[23] The final increase from $450,000 to $540,000 was agreed to in good faith after much of the construction was already done. This was after an unexpected request from Mr. Marcos for the increase, upon the promise there would be no other changes or requests for money.

[24] As the project progressed, the Lads trustingly paid cash advances when asked. The cash payments were recorded in two separate books maintained by Mr. Marcos. They made some payments to Mr. Marcos' wife and brothers when directed to do so by Mr. Marcos. They trusted Mr. Marcos to keep all the records of the cash payments and left with him the original copies of the documents he asked them to sign.

[25] For the most part Mr. Marcos dealt with Ishver Lad. Sumitra Lad, who was focused on achieving her accreditation to be vice-principal at the time, paid little attention to the contractual dealings. She signed whatever documents her husband requested of her. Moving to the country was not her choice, but she was supportive of her husband's dream.

[26] Mr. Lad indicates that when he signed the series of documents dealing with individual aspects of the project, which Mr. Marcos presented to him from time to time, Mr. Marcos told him these were breakout agreements for items already included in the all-inclusive contract. This explanation made sense to the Lads as the amounts charged for items on these breakout agreements closely corresponded with items shown on the all-inclusive contract. What mattered to the Lads throughout was that the bottom line amount remained as agreed and affordable for them.

[27] The Lads were pleased with the house when they took possession in August, 2010. Mr. Marcos told them to make a note of any deficiencies, promising he would fix these for them. They made a note of the deficiencies to Mr. Marcos. Although a few of the deficiencies were fixed, conflicts soon arose. Mr. Marcos wanted more money.

[28] Ultimately, on November 10, 2010, Mr. Marcos delivered what the Defendants say was an unexpected, unjustified and exorbitant invoice showing over $523,000 as owing, and then filed a lien on the property for non-payment. The deficiencies remained and the cost of fixing these is about $65,112. According to the Defendants' calculations, they have paid the Plaintiff considerably more than what was owing on the contract.

CREDIBILITY AND RELIABILITY ISSUES

[29] As is obvious, the evidence about the parties’ agreement differs to the extreme. Thus this Court's assessment of the witnesses' credibility and document legitimacy is key in this decision. Much time at trial was spent on what proved to be a targeted and effective challenge of the Plaintiff's evidence. The inconsistencies and blatant lies in Mr. Marcos’ testimony are numerous. The witnesses he called to bolster his case, who were either related, friends or clients, were also not credible and unreliable, parroting theories advanced by Mr. Marcos. For example, one witness presented invoices that appeared to have been altered and was not able to explain the discrepancy on the face of the document. He seemed unconcerned when caught in blatant lies by the questioning.

[30] In final submissions counsel for the Defendants identified 62 times Mr. Marcos’ evidence at trial was materially inconsistent with or contradictory to what he said in his discovery. His evidence in chief was decimated in cross, and shown to have been substantially fabricated or deceptively manipulated to fit his version of the events.

[31] Mr. Marcos admitted he lies and creates false paper trails to cheat on his taxes. His brother, Joseph Marcos, admitted to the same. To bolster the Plaintiff's claim Mr. Marcos created false documents. Of significance is the last purported agreement in which he substituted altered pages, alleging the Lad’s signed it and agreed to $718,000 instead of the $440,000 which the Lad’s remember seeing on the actual original document, which was never produced by the Plaintiff.

[32] Mr. Marcos refused to give Mr. Lad his duplicate copy of the all-inclusive $450,000 contract despite numerous requests, thereafter claiming no such contract exists. This, despite his own signed declaration of $450,000 as the contract price on the building permit application. He dismissed the earlier $448,000 all-inclusive contract as bogus and inapplicable, repeating to the court over and over, without being asked, that it was prepared and signed just for the banker who wanted the contract particularized. This obviously false declaration defies common sense. Why would anyone undervalue the contract when applying to borrow money to build their dream home? Logically one would want to have as much money available for the project as possible.

[33] The fact is that the $448,000 contract, which itemizes prices and particularizes the entire project, was the governing all-inclusive agreement to build when the Lad’s applied for their financing. The later contract for $450,000, which the Plaintiff has hidden or destroyed, and did not produce, was substantially the same deal, adjusted for the elimination of the environmental impact study, which was not required and for the addition of some stone exterior, rather than all vinyl siding.

[34] When confronted about his habit of lying, not only in court but also to various other officials such as the Town of Caledon, Mr. Marcos gave answers such as, “I tell the truth as much as I can, but that was not true- I lied.” He said it did not bother him to lie and present false information to the bank. He instructed Mr. Lad write “pay back loan” on cheques to his wife and brother to create a false paper trial to facilitate tax fraud. For the same dishonest endeavor he kept separate books for the Plaintiff and did not give T4’s to family members who worked for the Plaintiff.

[35] In order to advance his position in court, Mr. Marcos was shown to have altered documents such as invoices, to insert false dates, to replace pages of documents, and to prepare back-dated invoices to create a false paper trail for court after the dispute arose. In a particularly egregious fraudulent endeavour he altered and replaced two pages of a signed document to show the total cost of the house at $718,000, rather than what the Defendants signed for at $440,000. He also produced and tried to pass off costs documents that related to other projects to support the Plaintiff’s alternative unjust enrichment claim. The Defendants sought production of the electronic version of the questionable documents to verify when they were created and last modified. The Plaintiff refused, saying it’s computer had crashed, but no proof was provided of that having happened.

[36] Despite this overt and overwhelming falsification of evidence, Mr. Marcos presented as if oblivious to the manifest duplicity in the Plaintiff's evidence. Instead, Plaintiff's counsel sought, without success, to discredit Mr. Lad as a witness. He submits Mr. Lad is not to be believed based on how he conducts himself in his business dealings.

[37] For example, counsel points to a dispute in which Mr. Lad alleged dishonesty against a certain representative of the Credit Valley Conservation Authority ("CVC") in the course of the permit process. This, the Plaintiff alleges, shows Mr. Lad habitually challenges adversaries for lying as he is doing with Mr. Marcos. He submits this supports a conclusion that Mr. Lad's allegation of lying against Mr. Marcos is meritless. In actual fact, however, Mr. Lad's challenge to CVC was successful. Mr. Marcos agreed with Mr. Lad's concerns at the time of the complaint. This complaint to the CVC from Mr. Lad, which appears to have been justified, does not affect his credibility at this trial.

[38] Plaintiff's counsel also submits the detail in the complaint to CVC belies the lack of detail Mr. Lad was able to show at trial regarding his record-keeping of meetings with Mr. Marcos. There is a difference in the circumstances, however. Mr. Lad felt he had no need to document discussions in great detail when discussing the project with Mr. Marcos, whom he trusted as a friend. He relied on Mr. Marcos, as the contractor in charge, to keep track of the progress. This is shown by how freely he paid and handed over cash to Mr. Marcos, whenever and for whatever asked, as the project progressed.

[39] The Plaintiff's counsel also points to an error in the Defendants' mortgage application to challenge Mr. Lad's credibility. Money from the Lads’ parents was shown on the form as a receivable rather than a debt. The Plaintiff submits this false characterization shows the Lads are dishonest.

[40] However, based on the mortgage broker's evidence, she was the one who filled in the form. The form was not shown to the Lads. She said she based it on the Lads’ information that part of the money for the project was coming from their parents, which was true. The broker did not inquire about the arrangements between the Lads and their parents. In these circumstances the error on the application form, which was prepared by the broker and not shown to the Lads, is not indicative of Mr. Lad's lack of credibility.

[41] The Plaintiff's challenges to the Defendants' credibility overall are without merit. Mr. Lad was straightforward and forthright as a witness. He calmly answered challenges during cross-examination. His testimony was generally consistent throughout. He presented facts reliably, often from memory but also against a backdrop of documents given to him from the Plaintiff, which he had saved in what he called his "crude filing system", as the house building progressed.

[42] The Defendant, Sumitra Lad's evidence was not of much assistance to the court. She had limited information to offer regarding the details about the progress of this project. She had no firsthand knowledge about the discussions between Mr. Marcos and her husband. But she did not present as dishonest or as a witness seeking to evade answering questions. It became clear she was not involved in the day-to-day contractual and financial matters, as was Mr. Lad in dealing with Mr. Marcos.

[43] Of the two main witnesses in the case, Mr. Lad's evidence is by far preferred over that of Mr. Marcos, where their versions differ. Moreover, this is not a case of one witness being unreliable due to reasonable factors such as memory lapses or misunderstandings. Mr. Marcos deliberately lied, hid and falsified important documents in a contrived but failed effort to extract more money than is due from the Lads, his former friends.

[44] The extent and degree of lies and false documentation from the Plaintiff is exceptionally egregious, rendering its evidence of little and on some aspects of no weight in the ultimate determination of the facts in this case. The position of the Defendants, as was summarized earlier, is the version which prevails. I find the Plaintiff's version to have been substantially fabricated or deceptively manipulated to fit his contrived version of the events.

FACTUAL CHRONOLOGY

[45] The Plaintiff, Marcos Limited, contracted with the Defendants, Ishver and Sumitra Lad, to build a house on property they purchased in Caledon, Ontario. Marcos Limited was the only builder considered by them for the job, as it was owned and operated by Manny Marcos, brother of their good friend Joseph Marcos. Joseph was the project manager. Throughout the process the Lads, who had no previous experience in custom home building, trusted and relied on the Marcos brothers' advice. They expected integrity and fairness of them in all their dealings.

[46] Early on in the process Manny provided to the Lads a marketing document claiming Marcos Limited had 17 "current projects". As it became later known this was not true; Mr. Marcos misrepresented its business from the beginning to convince the Lads to hire them.

[47] After the Lads had signed the agreement to purchase the land on March 3, 2009, the parties met to discuss the project. At that first meeting Mr. Lad prepared drawings to show what he and his wife had in mind. After the meeting he informally filed and labelled these as "first discussions of house construction. Discussed cash only". The drawings depict an approximately 2,070 square foot house, with a curved balcony loft, three dormers and a covered porch. Mr. Lad told Mr. Marcos they wanted an attached garage and a stone exterior similar to a house near Mr. Lad's work.

[48] Before this first meeting Mr. Marcos had given the Lads a stack of home design magazines to rip out pages showing what kind of home and finishings they would like. The Lads did this. The clippings, together with the above-noted drawings that were provided, closely depicted the house as it was ultimately built.

[49] The Lads did not ask for a small cottage. They were moving from a comfortable and spacious suburban house. Mrs. Lad communicated her expectation the kitchen would be "a dream kitchen" and much nicer than what she already had.

[50] At the first meeting Mr. Marcos told Mr. Lad he wanted a significant amount paid in cash. Those payments would be tax included, and payments by cheque would exclude tax. All documents, including the contracts, were prepared and presented by Mr. Marcos. Routinely he would bring the document to Mr. Lad on his clipboard, already signed and dated by him. Often the dates beside his signature did not correspond to the date the document was signed or presented to the Lads. Mr. Marcos was habitually careless and unconcerned about accurately dating his documents. After discussing the document, the Lads signed and dated it, returning it to Mr. Marcos the same day. The Lads generally kept the second copy off the clipboard. Their copy was typically not signed by them.

[51] From the beginning the Lads communicated to Mr. Marcos their need to know the total all-inclusive price of the project before it began to ensure they could afford and finance it. They met again on or about April 2, 2009 when, in accordance with this stated requirement, Mr. Marcos produced the first set of CAD drawings with a corresponding $378,000 contract. The drawings depict a 1.5 storey, 2,250 square foot house, with a 900 square foot three car garage, drilled well, septic system, driveway and covered porch. To illustrate the sloppiness of the Plaintiff's attention to dates, the dates inputted by Mr. Marcos on these and subsequent drawings were often inaccurate. Mr. Marcos admitted this saying the intent was for the dates to be "in proximity" to the event.

[52] As a result of the parties' discussions at the April, 2009 meeting, certain changes were requested by the Lads. Without explanation, the Plaintiff did not produce its executed copy of the $378,000 contract in this action. If the Lads had not provided their copy there would be no evidence of its existence, which appears to have been the Plaintiff’s deceptive litigation strategy from the beginning of this action.

[53] This failure to produce is material to this Court's findings regarding the final all-inclusive written contract for $450,000, the existence of which Mr. Marcos denies. Jumping ahead on that point, the Lad's evidence is that their copy of the $450,000 contract was inadvertently left behind after it was signed. Mr. Marcos never gave it to them despite numerous requests. The executed copy of that contract, left with Mr. Marcos after the Lads signed and dated it, was also never produced by Mr. Marcos. Mr. Lad's evidence that Mr. Marcos kept the signed copy after it was signed in July, 2009 is believed. The resulting circumstance of the contract not being in evidence was used by Mr. Marcos to deceptively claim it never existed. In this too he is not believed.

[54] Returning to the chronology of meetings, the next meeting was on April 21, 2009. Mr. Marcos had made the requested changes, and brought a revised set of CAD drawings together with a revised contract for $448,000. The drawings show a 2,250 square foot house with a garage increased in size to 1,513 square feet, attached via a covered porch.

[55] The $448,000 contract refers to enclosed sketches, which were the April 21, 2009 CAD drawings shown to the Lads at that meeting. The contract is for Marcos Limited to construct the project for $448,000, in accordance with those drawings. The parties agreed the $448,000 contract replaced the $378,000 contract.

[56] Significant to the credibility of the parties is the fact that the Plaintiff would have had the fully executed copy of that contract, based on the routine manner of the parties' dealings with signed documents. Yet again, because it did not fit the Plaintiff's false claims, it never produced it in this action! Had the Lads not kept and produced their copy, as signed by Mr. Marcos, the Plaintiff would have undoubtedly claimed he never signed it, just as Mr. Marcos claimed the final $450,000 contract, of which both copies were left with Mr. Marcos, does not exist.

[57] At this meeting Mr. Marcos also produced hand drawings. These the Lads found to be irrelevant as they did not show certain critical elements that had been agreed to from the beginning, such as the curved railing for the loft balcony and the three dormers in the front. Drawings had been requested by the Lads from the beginning but were never produced until much later at this meeting by which time they were of no value, having regard to how far the project had already progressed.

[58] Mr. Marcos claims the April 21, 2009 CAD drawings were not presented with the $448,000 contract at the meeting that day, a claim that is not believed. He says the word "sketches" instead of “drawings” supports that contention, but his evidence at trial was not consistent with what he said at discovery about that. Also, Mr. Marcos in his evidence admitted he could not remember the dates of the meetings, nor what drawings were discussed at each meeting, and whether hand drawings were provided at the same time as the CAD drawings. Mr. Lad on the other hand was clear and unequivocal on his recollection of the drawings that were provided at that meeting.

[59] The $448,000 contract was identical to the $378,000 contract, except for the price of the dwelling being increased from $230,000 to $300,000, to take into account the finishings chosen, increased garage size, and connection between the house and the garage. The $448,000 contract included a detailed breakdown of all the elements from excavation, footings and foundation to the finishings, with prices noted for each. The prices reflected the cost and quality of the finishings, as had been illustrated by the clippings given by the Lads to Mr. Marcos at the beginning of the project.

[60] Contrary to what Mr. Marcos claims, there was no significant upgrading of finishings during the project. Whenever a choice had to be made by the Lads for a specific item such as flooring or kitchen finishings, Mr. Lad's evidence, which is believed, is that Mr. Marcos routinely offered samples of choice to the Lads. There was no suggestion or mention of any choice being of higher quality or cost than another. The logical inference is that the quality and cost of all the choices that were offered to the Lads were comparable and within the all-inclusive contract price. The Lads were never told their choice of finishings cost more than what was contemplated in their itemized contract, subject to what is later discussed regarding a demand of about $100,000 by Mr. Marcos, after the project was well underway.

[61] The Lads requested two changes to the April 21, 2009 CAD drawings, namely that the garage be fully attached and the exterior vinyl siding be changed to stone exterior. Mr. Marcos agreed to make the changes and provide a revised contract price.

[62] Mr. Marcos made the requested changes to the April 21, 2009 CAD drawings, and incorporated this into revised CAD drawings. He presented these with a $450,000 contract at the end of July. This was shortly after the Lads had finalized their mortgage with Concentra, as will be discussed below. As mentioned above, the Lads inadvertently did not receive or take their copy of that agreement after the meeting and were not able to obtain it after the fact. Mr. Lad did, however, receive and file a copy of the July CAD drawings. He wrote "final drawings" on his filing cover sheet.

[63] Mr. Marcos would have had the only copy of the $450,000 contract, but has refused to produce it, saying it does not exist. In his discovery, however, he said he did not remember whether the parties had signed the $450,000 contract. Also, he showed $450,000 as the cost of the project on the building permit application. Clearly Mr. Lad's unequivocal recollection and evidence about the existence of this contract is the true evidence.

[64] The changes in the July CAD drawings show a larger, 2,480 square foot house, and 1,600 square foot attached garage. It had been Mr. Lad's belief the house, as it now stands, was built in accordance with those July drawings. The drawings, however, do not show the fake dormers or bay window that Mr. Lad had expected, and which were in fact part of the construction. Mr. Lad did not realize these features were not on the drawings until it was pointed out to him in the litigation. That was because the features as built were consistent with what the parties had originally discussed.

[65] This is but another example of the fluidity of the ad hoc arrangements and informal dealings between the parties during the course of this project. Even Mr. Marcos was unable to follow his own drawings. He was inconsistent in his evidence regarding the size of the house. At trial he said it is 2,603.81 square feet. At discovery he said 2,480 square feet. One of the final CAD drawings on its face describes the house as two different sizes.

[66] According to the evidence of Mr. Lad, which is believed, the $450,000 contract was the same as the $448,000 contract, except for the elimination of the $16,119 environmental impact study, which was ultimately not required. It was replaced by an increase in the cost of the dwelling to account for the increased square footage and change from vinyl siding to a stone exterior. The indication of stone on the CAD drawings was of a stone apron rather than the exterior of the entire house.

[67] The circumstances of the $450,000 contract are credibly detailed in Mr. Lad's evidence. As was routine with all executed documents, Mr. Marcos had two copies on his clipboard signed and dated by him when he brought the contract to the Lads. He told the Lads the $450,000 contract replaced the $448,000 contract and had them sign his copy. They did, but Mr. Lad forgot to take their copy. Afterwards he repeatedly asked Mr. Marcos for his copy, without success. He stopped asking for it when they signed the building permit application in September 2009, which showed $450,000 as the contract price. In response to Mr. Lad's request for a copy Mr. Marcos told him he did not need a copy because the permit application showed the $450,000 as the contract price. At the time Mr. Lad on trust accepted this explanation.

[68] In the meantime, the Lads had continued to work on their financing arrangements with a mortgage broker. These began in February 2009 to buy the land, and ultimately build the project. They had to borrow money from their parents to close the land transaction as the mortgage was to be a construction mortgage, from which no draw would be released until the construction began.

[69] The Lads financed the land and house project as follows:

1. A loan of $145,000 from Sumitra Lad's parents;

2. A loan of $308,000 from Mr. Lad's parents; and

3. A mortgage of $715,000 inclusive of fees from Concentra Financial Services ("Concentra").

[70] The loans from the parents did not have a repayment date, but the Lads recognized Sumitra's parents needed to have the money repaid as soon as possible, which was communicated to Mr. Marcos.

[71] Consistent with the Lad's evidence about the $448,000 contract signed on April 21, 2009, the financing file notes and evidence indicate the mortgage broker was seeking financing on their behalf to cover the $450,000 for the land purchase, plus $448,000 on the construction project. Based on the April 21, 2009 CAD drawings the appraiser appraised the value of the land plus completed project at a total of $730,000, with a net advance allowance of about $689,000.

[72] The Lads signed the mortgage documents on July 26, 2009. Mr. Lad informed Mr. Marcos about this mortgage amount. At Mr. Marcos’ requests, he also kept him informed about the state of their finances. The Lads planned to pay off the debt to Sumitra's parents from the mortgage funds.

[73] Due to a delay in the receipt of the entire loan from Mr. Lad's parents, the Lads were required to obtain bridge financing to close the land purchase on September 18, 2009. This was repaid on October 14, 2009 after receiving the full amount from Mr. Lad's parents.

[74] Mr. Marcos claims the $378,000 and $448,000 contracts were bogus, and signed solely to obtain financing. He alleges the final $450,000 contract does not exist, as stated above. These allegations are totally rejected as false. Despite these allegations, Mr. Marcos had no memory of telling Mr. Lad these were fake contracts to be presented for the financing. In contrast, Mr. Lad was firm and credible in his evidence that Mr. Marcos never said these contracts were bogus or fake. The evidence of Mr. Lad is accepted in its entirety as to these contracts and the progress of the project. These contracts formed the basis of their agreement to build the house.

[75] Throughout the process Mr. Marcos was responsible for obtaining all the necessary permits. As early as March, 2009, Marcos Limited was authorized by the previous owners of the land to make permit applications to the town of Caledon and CVC. The latter was obtained in August, 2009. The building permit was issued on October 20, 2009.

[76] Consistent with Mr. Marcos' litigation strategy of hiding relevant documents that were unfavourable to Marcos Limited's position, he did not produce the copy of the permit application. Again, had the Lads not sourced the document from the town, there would have been no documentary proof that the project value was shown by Mr. Marcos to be $450,000. To compound this egregious transgression he claimed he fraudulently inserted $450,000 as a value on the permit application on his own initiative, without the knowledge of the Lads to reduce their property taxes. He admitted he lies when it suits his purposes. He was shown in cross-examination to have lied in his examination in chief when he said he discussed the fabricated value with the Lads. When confronted with his contradictory evidence from his discovery, he admitted he does not remember discussing a fabricated value with the Lads.

[77] In reality Mr. Marcos' whole story about why he inserted $450,000 as the value of the project was obviously fabricated in an unsuccessful and dishonest effort to deny the existence of the $450,000 contract.

[78] When Mr. Lad completed the Tarion Enrollment form he showed $687,000 as the cost of the project, coincidentally almost identical to the $689,000 which was the amount Mr. Lad had told him was available from the Concentra mortgage. When questioned about this, Mr. Marcos agreed the Lads had not agreed to pay him anywhere close to that amount for the project at that time. A copy of the Tarion Enrollment form was not provided to Mr. Lad until February, 2010 with a bundle of other numerous receipts, leading Mr. Lad to suspect Mr. Marcos had intended to hide this enrollment form from him. At trial Mr. Marcos first said he gave the form to Mr. Lad in October of 2009, later changing his story to admit he provided it to the Lads at a later date. His excuses and attempted explanations for the false declaration were inconsistent and make no sense.

[79] After the all-inclusive $448,000 contract was executed on April 21, 2009, Mr. Marcos presented two separate agreements for the Lad's signature on April 26, 2009. The documents each dealt with portions of the project which were already included in the $378,000 and $448,000 contracts. The date beside Mr. Marcos' signature on the first of these for gravel work is March 16, 2009, the same day he signed the all-inclusive $378,000 contract, three weeks before he signed the $448,000 all-inclusive contract.

[80] The explanation Mr. Marcos gave about these separate agreements, which oral representation was accepted by Mr. Lad at the time, was that these agreements were a breakout to delineate separate items at various stages of the project, already included in the all-inclusive $448,000 contract. The $450,000 agreement had not yet been signed when the first two of these were presented. Several other breakout agreements were presented to Mr. Lad for signature as the project progressed. These were signed by him always on the understanding, based on Mr. Marcos' representations at the time that these were merely breakout delineations of what was already in the all-inclusive contract, the $448,000 contract having been revised by agreement to the $450,000 missing contract.

[81] Mr. Marcos never indicated these separate agreements were in addition to what had already been agreed upon in the all-inclusive contract in existence at the time. He could not remember what he told the Lads before these breakout agreements were signed. He agreed he never told them they would be signing a serious of documents that would be added up at the end of the project to determine the final price.

[82] There follow three additional breakout agreements, each relating to portions of the total project signed respectively on August 14, 2009, September 10, 2009 and January 20, 2010. Mr. Marcos represented each of these as a breakout of the items already included in the $450,000 contract. The Lads also signed these on that representation and agreement to that effect.

[83] Even before and concurrent with these breakout agreements, Mr. Marcos requested and received numerous and various payments from the Lads. The first payment was made on March 17, 2009 payable to the town of Caledon as directed by Mr. Marcos. This was included as an item in and intended as part of the payment for the all-inclusive contract. Contrary to this obvious mutual intention, as conceded by Mr. Marcos, as evidenced by both the $378,000 and $448,000 contracts, and also included in the missing final $450,000 contract, Mr. Marcos at trial alleged this was a separate disbursement. It was not.

[84] The second payment on the contract was payable to Marcos Limited for $8,242.50 dated April 20, 2009, as requested by Mr. Marcos. At trial Mr. Marcos said this payment was a deposit on the first two breakout contracts relating to portions of the project. When challenged on this assertion, because those breakout contracts were not signed until after that payment, Mr. Marcos had no explanation. The payment was obviously on the main contract, which was in existence at the time.

[85] When Mr. Lad was given each of the five breakout agreements to be signed, he accepted these as representing confirmation of items already accounted for as part of the existing all-inclusive agreements. The cost of the items to him at the time were in the ballpark of what was stated in the all-inclusive contract. The separate agreements, therefore, did not give him concern, based on Mr. Marcos' representation that these were all breakout figures from the all-inclusive contract. Mr. Lad did not compare these dollar for dollar and did not notice that some of the prices charged were slightly higher. His only concern was the total project price, which had been agreed in advance. He trusted Mr. Marcos would ensure all the accounting would make sense.

[86] Such was also the course of conduct throughout the project in relation to the invoices submitted to the Lads. Each invoice given to Mr. Lad was marked "paid in full". But the payments from the Lads in fact bear no relationship to the invoices. Mr. Lad made payments in various amounts as and when requested by Mr. Marcos, who then applied the funds to invoices which he created after the fact. For example, one payment in advance was made on November 17, 2009 for $190,000. Five unrelated invoices were submitted on January 20, 2010, all marked "paid in full", each showing a different date which had no relationship to the time that these invoices were notionally paid. The money was applied from the lump sum $190,000 pre-payment.

[87] Mr. Lad did not question this pattern at the time, nor did he pay any attention to the details on the invoices as they were all clearly marked "paid in full". This satisfied him as to the progress of their dealings. Throughout the project the Lads fully trusted Mr. Marcos to honestly keep track of all the accounting. They faithfully handed over the money as asked.

[88] At trial Mr. Marcos tried, without success, to explain his invoicing suggesting it as being representative of charges as these were actually incurred. Instead, it was more evidence of the Plaintiff attempting to create a misleading paper trail, after the fact. Five invoices with random and different dates were handed to Mr. Lad on January 20, 2010. These were the ones Mr. Marcos admitted to have been covered by the $190,000 November 2009 payment. They were clearly not attributable to the breakout agreements Mr. Lad was asked to sign from time-to-time, as Mr. Marcos initially alleged.

[89] As an example, the date on one invoice predated the breakout agreement for the same work. As another example, Mr. Marcos tried by several different versions to explain these discrepancies during the litigation process, starting with his request to admit, to his evidence at discovery, and finally to the version he gave at trial to say the invoice was for extra excavation work. He had no memory of having discussed the extra work with the Lads. His invoice did not even match his notes on the amount charged, nor could he name the excavation company that did the work. He explained one invoice as being for extra gravel, yet also admitted the initial all-inclusive contract included all the gravel required to build the driveway.

[90] Mr. Marcos presented the sixth breakout agreement to the Lad’s on April 19, 2009. This was after the project was well under way. The amount invoiced was $100,100 purportedly for project management and labour. Mr. Marcos initially falsely claimed this agreement was signed on March 8, 2010, the date he put on it, later admitting he did not remember when they signed it. The document, being signed on April 19 by the Lads and March 8 by Mr. Marcos on its face was invalid due to the 30-day time limit for signing by its terms. More sloppy paperwork. However, an additional $100,000 was accepted as an increase to the contract price, as discussed below.

[91] Receiving this invoice was a shock to the Lads, who up until then believed their total cost was $450,000 all-in. That was their contract. To convince the Lads to sign for this additional $100,100, Mr. Marcos said his labour costs were high, and without this additional amount he would lose money on the project. He did not provide any accounting to the Lads for these extra labour costs, but assured them the extra $100,000 would cover everything else and there would be no further increases.

[92] At that point their friendship was intact and the Lads were satisfied with the progress on their new home. They believed Mr. Marcos about these extra costs and his claim about losing money. Thus they acquiesced to this extra cost as they did not want their friend to lose money. To pay this, Mr. Lads’ parents' loan was arranged to be repaid over a longer period of time than had been originally planned. The contract was now for the all-inclusive price of $550,000 plus tax on non-cash payments.

[93] On May 31, 2010, Mr. Marcos presented a document for signature showing the cost of the dwelling as the total of $440,000. By then most of the project had been completed. He explained this was separate from the previous $100,000 labour agreement making the contract a total of $540,000 for the entire project. This corresponded with the Lads' understanding that about $440,000 was the all-inclusive deal and $100,000 was for the extra labour cost that they had agreed to in April. It was $10,000 less than the $550,000 agreed upon when he accepted the additional $100,000 in labour costs. Mr. Lad believed this was a bonus for agreeing to the increase in the final contract price.

[94] According to Mr. Lad's evidence, which is believed, Mr. Marcos asked him to disregard the above-noted $100,000 agreement and instead use the $440,000 plus the first 5 breakout agreements to represent the same, a total cost of $540,000 plus tax on non-cash payments. Mr. Marcos did not understand that explanation, nor had he added up the breakout agreements, but was pleased with the $10,000 reduction. He thus signed the May 31, 2010 agreement for $440,000, a copy of which was not given to the Lads.

[95] The Lads were required to leave their meeting quickly that day. The copy was inadvertently left with Mr. Marcos and never provided to them. Instead, as discussed above, Mr. Marcos produced an altered version of this contract which is 3 pages. The last page, which is not disputed, shows the parties' signatures and is dated May 31, 2010. What is disputed are the first 2 pages on which the dwelling features are itemized and $718,000 is shown as the price instead of $440,000. These first 2 pages have obviously been altered by means of cutting and pasting. The documents differ from other genuine documents, prepared and produced by Mr. Marcos, in terms of the layout and formatting. The indicia to prove these alterations was meticulously reviewed by Defendants' counsel at trial and are obvious to a neutral observer on the face of the version of the document copy which the Plaintiff produced.

[96] Aside from Mr. Marcos' serious lack of credibility, as explained above, the Plaintiff's altered version showing $718,000 as the cost of the dwelling, plus the breakout charges signed, is utterly improbable in the circumstances. By May 31, 2010, as confirmed by the photographic evidence shown at trial, the work on the house was almost complete. The Lads were on a strict budget. They would not have allowed their house to be built without having an agreement on the total price in advance. For sure they would not at this late juncture have suddenly agreed to $818,000, that is $718,000 plus the $100,000 extra, a $368,000 increase in the price from their original contract of $450,000.

[97] Taken in context of the course of conduct between the parties throughout the process, Mr. Marcos provided no credible justification for the cost of constructing the dwelling having increased to $718,000. He was unable to tell the court how he explained this to the Lads. If the Plaintiff's version on this were to be believed, the court would have to find that the Lads, who were clearly concerned about knowing the total cost ahead of time and went into considerable debt already in terms of the original contract price, simply accepted and signed for a huge unexplained increase in their cost after the house was almost built. This improbable conclusion is totally rejected by the court.

[98] Not only did the Lads not ever agree to the amount claimed by the Plaintiff for the project, but the evidence presented by Marcos Ltd. also does not support a finding of such value being received by them. The Plaintiff claims the last 5 invoices, which Mr. Marcos admittedly prepared after the fact, were representative of the $718,000 shown on the altered document. But this proposition does not compute. When this discrepancy was pointed out to Mr. Marcos he tried to justify it saying the total extras he claimed of $62,210 were added to the five last invoices to make up the total. This still does not compute. He was making up his story while on the stand giving his evidence. But it makes no sense because it is all based on lies.

[99] Mr. Marcos admitted to creating the final invoice after the dispute arose. It is for $462,892 plus HST for the total of $523,068.02, the amount the Plaintiff claims is still owing. Presentation of such an invoice, after the project is completed and the Defendants had moved in, is offensive and outrageous to any neutral observer. The careless manner by which this concocted paper trail was prepared and presented is further evidenced by a claim of HST being inserted on the full $462,892, when in fact most of the work had been done by July 1, 2010 when the HST first went into effect.

[100] Mr. Marcos' claim during his examination in chief that it would not have been possible to enter into an all-inclusive contract in April 2009 before the project began, contradicts his own evidence during cross-examination. He admitted it is customary in the building industry to have an all-inclusive contract signed at the beginning of the project, with changes to the contract being documented by change orders. He stated there were no discussions about finishings when the all-inclusive contracts were signed, while at the same time maintaining the Lads chose finishes that were far superior to what had first been discussed, an obvious inconsistency to his position there was no agreement made on the finishings when the project began.

EXTRAS

[101] The Plaintiff claims it provided extras on the construction valued at $62,210. Mr. Marcos and his brother Joseph prepared a handwritten list of that claim, after the dispute arose. At trial neither of the Marcos brothers were able to explain how the prices listed by them were calculated. In their evidence at trial the amounts claimed were inconsistent each with the evidence of the other. On many items their evidence at trial differed significantly from the amounts shown on the extras claimed on the prepared list. There was no documentary proof of any items or work having been agreed to as extras.

[102] In cross-examination Mr. Marcos conceded the Lads neither agreed to those extra costs, nor do the charges claimed reflect the actual costs. He said the numbers were "rough". Only one extra is admitted by the Defendants, namely $433.14 for the Jenco equipment. That is the only allowable extra on the claim.

DEFICIENCIES

[103] When the Lads moved into the house on August 16, 2010, Mr. Marcos told them to make a note of any deficiencies they found. The Lads made a list and put yellow sticky notes on items noted to show Mr. Marcos. When Mr. Marcos returned on August 26, 2010 he said he would fix all the deficiencies and would do so better than Tarion. He gave them the completed Tarion form. The form showed the purchase price to be $687,000. Mr. Lad questioned him about this, as he believed the total cost of the project was $540,000. Mr. Marcos told Mr. Lad the added amount was for appliances purchased and paid separately by the Lads, plus the value of the portion of the land on which the dwelling was built. Mr. Lad accepted this explanation and signed the Tarion form for submission.

[104] In an attempt to explain the major discrepancy between what the Plaintiff is now claiming as the cost of the project and what he inserted on the Tarion form, Mr. Marcos said he purposely inserted a lower value on the Tarion form to reduce the enrollment fee. This does not make sense as it would have been a minor estimated saving on the fee of about $170.

[105] As requested by Mr. Marcos, Mr. Lad had a cheque ready for him in the amount of $95,000 on August 26, 2010. By then the Defendants had already settled into the house. When at the house Mr. Marcos asked for an additional $35,000 cash which he said was for cost overruns. Coincidentally this was the amount the Lads kept on hand in their safe, a fact known by Mr. Marcos as a result of Mr. Lad keeping him informed about his financial situation.

[106] When Mr. Marcos asked for this additional cash he told the Lads the building had extras beyond what had been originally agreed and that this would be their final payment. At the time the Lads would have recognized the stone cladding on the exterior covered the entire house rather than the stone apron shown on the CAD drawings when the contract was signed.

[107] Mr. Lad was still hoping to maintain their friendship. He paid the extra $35,000 believing it to be final and on the expectation and Mr. Marcos' promise the deficiencies noted would be fixed. Mr. Marcos made a note of that $35,000 payment in a green book, which has never been produced by the Plaintiff who denies the payment was made. When the note was made in the green book, Mr. Lad asked to also see a copy of the blue book in which other cash payments had been recorded. He also asked for a "final breakout copy" to show how the contract had increased from $450,000 to $540,000. He never was shown the blue book until after the litigation. The Plaintiff disingenuously claims the green book does not exist.

[108] As time went on it became apparent to the Lads the deficiencies were not going to be fixed as promised. At the end of October 2010, Mr. Marcos asked for additional payment to fix the deficiencies. Mr. Lad by then would not pay anymore. On November 9, 2010, they met at a coffee shop after which Mr. Lad still believed the deficiencies would be fixed without additional payment. Yet by text on November 15, 2010, Mr. Marcos again asked for more money to fix the deficiencies. Mr. Lad replied he did not owe any more money.

[109] On November 24, 2010, the Plaintiff registered a lien and later commenced this action. At trial Mr. Marcos claimed the Lads denied him access to fix the deficiencies. Inconsistently he also claims there are no deficiencies to be fixed. The list prepared by the Lads shows it was marked by Mr. Marcos on items that he did fix, implicitly showing the other items listed as not being fixed.

[110] Inconsistent with his claim alleging he could not fix all the deficiencies because he was denied access to the house after October 29, 2010, the evidence indicated Mr. Marcos attended there on November 12 with a subcontractor. His last invoice for a total of $523,068.52, dated November 10, 2010 was also hand delivered that day, or later, to the house.

[111] Mr. Lad denies the Defendants refused access to the house to fix deficiencies. This makes sense in the circumstances as he clearly would have wanted the deficiencies fixed, as had been promised.

THE PLAINTIFF'S UNJUST ENRICHMENT CLAIM

[112] The Plaintiff has claimed for the value of its work in the amount equivalent to what it has claimed on the contract, as $523,068.02 still owing in value beyond what was already paid by the Lads. In an effort to support its claim it has produced a pile of documents including receipts, cheques and credit card statements (collectively called "costs documents"). Most of these costs documents on their face show no relationship to the Lads' project. The total costs alleged greatly exceed expenses shown on the Plaintiff’s own financial statements. The court has only the unsupported claim of the Plaintiff that the costs were all incurred for the Lads' project.

[113] Apart from the lack of credibility on the part of the Plaintiff's witnesses, and unreliability of its documentary evidence, there are also a number of inconsistencies and other problems regarding the pre-trial production of these costs documents. At his examination for discovery, Mr. Marcos said he had produced all his costs documents by May 2013, after checking all his bank records. At the time these totalled less than $200,000. As questions arose about the documentation during the interlocutory proceedings, a court order was made on September 2014 for the Plaintiff to produce all of its costs documents by no later than October 10, 2014. No additional documents were in fact produced by that date, leading to the logical conclusion there were no additional costs documents.

[114] On September 15, 2016, the Plaintiff again confirmed it had produced all its costs documents. What were produced were compiled by Defendants' counsel into a PDF sent to Plaintiff's counsel who, in October 2016, indicated that only a half dozen or so were missing from the compilation.

[115] Subsequently, in November 2016 the Plaintiff requisitioned and dumped on the Defendants all of its banking records from 2009 and 2010. At that point the trial was scheduled to begin in January 2017, one and a half months later. This massive number of documents, including cheques, invoices and credit card records now produced at trial do not show a relationship to the subject project.

[116] Not only is this last minute dump of costs documents a flagrant violation of the court's production order in September 2014, but also Mr. Marcos' own evolving versions throughout the discovery process underline the unreliability of these documents and the Plaintiff's claim that these all relate to the Lads' project. At first Mr. Marcos claimed he only worked on this project between April 20, 2009 and December 20, 2010. When confronted with evidence of other work in that timeframe he admitted there could have been other projects after October 29, 2010. In discovery he refused to answer what other projects the Plaintiff was working on after that date. At trial in chief he said he worked on the Defendants' project between March 2009 to November 2010, and then in cross-examination he could not remember the time frame. Neither could Joseph Marcos when asked. The purported claim that all the cost documents relate to the Lads' project due to an alleged time frame is clearly unreliable, and probably false.

[117] Mr. Marcos also gave inconsistent stories about other projects in 2009 and 2010. In one discovery he said he could not remember what other projects the Plaintiff worked on in that time frame. He later changed this to claim the Lads' house was the Plaintiff's only construction project. When requested, he refused production of particulars in relation to all the Plaintiff's contracts in that time frame. The inference from all these refusals is that this information, had it been produced, would not support the Plaintiff's claim the Lads' construction project was the only one for the Plaintiff in the relevant time frame.

[118] In face of these persistent refusals, the diligent investigative work of the Defendants’ counsel uncovered a significant project during this same period, namely the renovation and addition to the Plaintiff's own office building in Toronto ("the office project"). Records show the building permit for the office project was issued on November 2, 2009. Despite this, Mr. Marcos initially denied work being done at that location in 2009 and 2010. He then provided numerous inconsistent statements about the extent and terms of the work done on the office project.

[119] Despite being ordered to produce all documents related to the office project nothing was produced. The Plaintiff also refused to produce those documents or answer particulars about other projects when asked at discovery. Again the inference is that had these documents been produced for examination, they would be shown to relate to many of the costs documents the Plaintiff tried to pass off as related to the Lads' project.

[120] As further evidence of other projects on the go at the relevant time, the Plaintiff's credit card statements revealed use of a construction waste site close to the office project and another at highway 427 and the Gardner Expressway, both of which were nowhere near the Lads' house in Caledon.

[121] Numerous costs documents also appeared to relate to other projects. When questioned about these Mr. Marcos admitted there were other projects at the time. However he insisted these were only for design work, while still refusing to provide the names of and addresses of the owners of these other so-called design projects for verification.

[122] As a result the court cannot rely on these costs documents as proof of costs incurred by the Plaintiff on the Defendants' project. Without explanation most of the cheques had no corresponding invoices. No particularized receipts were produced to support alleged credit card payments. Some of the payments were admitted to have been made before work on a project was begun, or after projects were finished.

[123] One cheque produced even showed "Meadowbrook" on its reference note, referring to income property owned by Mr. Marcos or a family member. The explanation at trial for that odd notation was that it was inserted to make it appear the expense related to income property of the Plaintiff, for the purpose of getting a false tax write off on it, more evidence of a habitual falsifying of documents by the Plaintiff. Personal expenses on credit card statements were admitted to be co-mingled with business expenses, that latter of which designation appears to have been randomly attributed by date to the Lads' project. There was no proof provided to support the Plaintiff’s claim that they advanced money in their personal credit cards for payments on the Lad’s project.

[124] In short neither the allocation nor the time frame of these costs documents is a reliable indicator for proof of these costs documents relating to the Lads' house project.

[125] The Plaintiff also alleges cash payments to suppliers and subcontractors. No documents were produced to verify these alleged cash payments. There is no evidence that relates these to the Lads' project. Mr. Marcos claimed he destroyed those records to ensure there was no paper trail for Canada Revenue Agency to find. In his evidence he conceded his numbers on the cash payments were rough. Neither he nor his brother Joseph, whose evidence differed as to the cash amounts paid, could remember when these payments were made.

[126] The two witnesses called by the Plaintiff to verify cash payments received also had no documents to support their evidence, which overall was neither credible nor reliable. As regularly hired subcontractors for the Plaintiff they were motivated to repeat the Plaintiff's claims, which they did without independent verification.

DEFENDANTS' CLAIM FOR DEFICIENCIES

[127] All the work on this contract was to be completed in a good and workmanlike manner. Inspection by a separate contractor uncovered numerous problems with the construction. An estimate for the total of $65,112.86 was provided and explained by the witness as a projected cost of fixing these deficiencies. For example there is evidence that the tile flooring was unevenly installed and had sunk at the edges at the baseboards. The stain on the banister does not match the stain on the treads and risers as expected. The concrete floor in the garage is cracked due to the concrete not being scored with control joints. It was also not properly graded, as evidenced by the pooling of water in the corners. The septic system installed for the house is faulty and needs to be replaced as it emits a smell into the house and requires pumping once or twice a year, rather than every three years, as expected.

[128] The Defendants have not attended to the repair or replacement of any of the deficiencies claimed. The cost has been prohibitive to them due to the expense of the ongoing litigation. They have also been unable to borrow against the house equity for making repairs, owing to the lien registered by the Plaintiff. These explanations are accepted as reasonable in the circumstances for the fact that the deficiencies have not been repaired by the Defendant’s despite the passage of time.

ANALYSIS

A. The Agreement

[129] As is obvious from the above, the positions and evidence of the parties differ to the extreme. The dispute is not merely over certain items of a contract. It goes to the very nature of the contract. Having regard to the careless manner by which the documents and financial arrangements for this project were handled by the Plaintiff, and the unusually informal and trusting response of the Defendants to the Plaintiff’s lead, the interpretation of their contract requires an examination of both their written and oral agreements.

[130] The Plaintiff through his counsel submits it was a "design evolution", and there was no agreement on price when the Lads hired the Plaintiff to build their house. The Plaintiff claims it was not until the house was mostly built that the final price was revealed for the building at $718,800, added to six earlier separate agreements which total $184,400, ranging from design and site preparation charges to a separate agreement for project management and labour. The Plaintiff claims this series of written agreements randomly signed between March, 2009 to May, 2010 is the contract.

[131] Even putting aside the issue of credibility, which is critical, and discussed above, an agreement to build a house for an unknown amount, allowing the cost to randomly escalate while it is being built, defies common sense. That was not the agreement. Nor was there an understanding the Defendants would pay based on the Plaintiff's assessment of the ultimate value received, as claimed under the principle of unjust enrichment by the Plaintiff.

[132] Mr. Lad, whose funds were limited, made it clear to Mr. Marcos from the outset that he had to know what it would cost to build the house before he agreed to go ahead with the project. That was admitted by Mr. Marcos. This fact firmly contradicts the Plaintiff's claim of an evolving project without an agreement on the final cost from the beginning.

[133] Before construction began, the parties agreed in July 2009 to the all-inclusive price of $450,000 to build the Lads’ house. That is the base contract for the project. On the totality of the evidence and having the regard to analysis of the witness's credibility above, that is the logical conclusion. The permit application for the project prepared and submitted by Mr. Marcos was submitted on the basis of this contract price. The drawings that were submitted with the permit application on or about September 14, 2009 had been revised numerous times by the Plaintiff, in consultation with Mr. Lad.

[134] Numerous changes had been made to the drawings which increased the cost of the dwelling by $70,000 from the original price, as evidenced by the two previously signed agreements. Both of these, as well as the base contract for $450,000, enumerated all the items required to completion. The second revised contract from the initial cost of $378,000 on April 3, 2009 to $448,000 on April 22, 2009 added to the size of the garage and connected it to the house. The $450,000 contract eliminated the costs of an environmental impact study, thus allowing for a larger house plus some stonework on the outside of the house as per the July, 2009 drawings.

[135] This $450,000 agreement was later revised to $550,000 and then $540,000 on or about May 25, 2010 by agreement of both parties, to be the final price. This increase was at the request of Mr. Marcos who claimed his costs were higher than expected and that he would lose money on the project without the increase. The $540,000 price was final and all-inclusive with tax payable on the non-cash payments. There was no agreement for payment of extras. By the time this increased final price was agreed to, the house was near completion. The value received, including the quality of the finishings, was known to both parties.

[136] The parties also orally agreed to have a major portion of the payments from the Defendants made in cash. From the beginning of their discussions, Mr. Marcos indicated he would want a significant portion paid in cash. He explained that any payments made in cash would be inclusive of tax, and payments made by cheque would exclude tax. Mr. Lad agreed to this arrangement.

[137] On August 26, 2010, the Defendants’ final payments of $95,000 by cheque plus $35,000 cash resulted in payment over and above the final contract price at Mr. Marcos’ request, after they had moved in. This was paid on the promise this payment was final and all deficiencies would be fixed. The Lads also were aware of receiving the full rather than the partial stone exterior, and voluntarily made this final payment on the project to finish the deal, as was promised by Mr. Marcos at the time.

[138] The accounting for what amount of tax was actually payable was not ever particularized by the Plaintiff. The last payments on August 26, 2010 of $95,000 by cheque and $35,000 cash, resulted in payment over and above the contract price plus tax payable of about $75,000.

[139] The first five separate breakout agreements were signed and agreed to on the oral representation of Mr. Marcos that these represented breakouts of amounts already included in the main contract. The written all-inclusive agreement, ultimately revised to $540,000 was not increased by these breakout agreements, which were signed as confirmation of the work. As orally represented by Mr. Marcos and agreed to by Mr. Lad when these separate agreements were executed, the amounts shown on the breakouts were not in addition to what was already in the contract.

[140] The document purporting to be the seventh separate agreement showing $718,000 as the dwelling price is not valid. This three page document produced by the Plaintiff, showing the Defendants' signatures on the third page, is a fraudulently altered document. It is a poor attempt to justify the excessive claim. Pages one and two are obviously altered, and then photocopied. The original of this document, unilaterally kept by Mr. Marcos after execution, was not produced to the Defendants. The evidence of Mr. Lad that this is not the document he signed is accepted in that regard. Mr. Marcos' evidence that this was the three page document that was signed by the Lads is not believed. Based on the evidence of Mr. Lad, the original had it been produced, would show $440,000 as the dwelling cost, not $718,000.

[141] As explained above, this court rejects the Plaintiff's contention that the contractual arrangement between the parties consisted of a design evolution, the cost of which would not be known until after the house was substantially completed. The Plaintiff and Defendants contracted for the project before construction began when the financing arrangements were in process. Their base agreement, was for an all-inclusive construction contract for a total price of $450,000. After adjustments were made the final contract price, agreed to by both parties, was for $540,000 plus tax on amounts not paid in cash. In addition to this contract price the Defendants paid over and above the contract price, upon the promise that the deficiencies would be fixed which was not done.

[142] The dispute over the purpose and effect of the partial breakout agreements on the overall cost of the project is determined in accordance with the intention of the parties and in the context of the circumstances existing at the time those partial agreements were signed. Mr. Marcos' representation to the Defendants and the parties’ oral agreement regarding the first 5 of these separate breakout agreements when they were signed was that these were to delineate and breakout what was already agreed to in their all-inclusive contact. These were never represented by Mr. Marcos to be separate charges over and above the all-inclusive contract price. There is no evidence beyond the bald allegations of Mr. Marcos that these breakout agreements are part of a series of separate contracts to be totalled in the end to determine the cost of the project after the fact.

[143] The representations by Mr. Marcos to the Defendants and the Lads’ acceptance of those representations resulted in an oral agreement regarding the purpose and effect of these breakout agreements as being already included in the overall contract between the parties.

[144] As stated by Rothstein J., at paragraph 47 of Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53:

…the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine "the intent of the parties and the scope of their understanding."

[145] The contract is to be interpreted "consistent with the surrounding circumstances known to the parties at the time of formation of the contract." (also at para. 47).

[146] The Supreme Court in the same case at paragraphs 56-58 explains the role of surrounding circumstances, and the nature of the evidence that can be considered in contractual interpretation. While surrounding circumstances may be relied upon in the interpretive process, these cannot be used to "deviate from the text such that the court effectively creates a new agreement." (at para. 57). The rubric of surrounding circumstances "should consist only of objective evidence of background facts at the time of the execution of the contract…, that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting." (at para. 58).

[147] While the parole evidence rule generally precludes admission of evidence outside the words of the contract, such as evidence of the subjective intentions of the parties, it "does not apply to preclude evidence of the surrounding circumstances when interpreting the words of a written contract." (at para. 61).

[148] Applying these principles of contract interpretation to the case at bar, the circumstances in which these breakout agreements were signed included the previous and existing all-inclusive contract which the parties had signed at the beginning of the project and the changes they made to the all-inclusive price. Mr. Lad was assured by Mr. Marcos that these separate breakout agreements, and the charges shown on each of the first five of these had already been accounted for in the main contract. Both knew the Lads' intention and requirement was that the all-inclusive price formed the basis of their agreement. This was the intention and mutual understanding of the parties when they signed the base agreement at the beginning of the project, and also when these breakout agreements were signed. These were presented and signed as acknowledgment of the work, not as additional charges. The first five breakout agreements were not presented, not intended, nor executed to signify charges over and above the original contract.

[149] The sixth separate agreement was presented and understood by the parties as adding $100,100 to the overall contract price. Mr. Lad accepted this charge added by the Plaintiff due to what Mr. Marcos explained was unexpected costs of the construction. It was understood by the parties as additional to the $450,000 all-inclusive contract then making the total contract for $550,000. Ultimately, by oral agreement it was reduced by $10,000 to $540,000. The parties had also orally agreed that tax would be paid and added to the cost on all payments that were not made in cash.

[150] After the dispute began over deficiencies in August 2010, Mr. Marcos requested, and Mr. Lad paid, additional payments of $95,000 by cheque, plus $35,000 cash. Although resulting in an additional payment from the Defendants, these amounts were agreed by both parties to be the final payments. At the same time there was the promise from the Plaintiff that the deficiencies would be repaired.

[151] I find the Plaintiff is therefore liable for the cost of the deficiencies as claimed. No amount is payable on account of extras, as none other than the Jenco equipment was agreed to be an extra. The items claimed as extras were covered in the all-inclusive contract. The cost of the Jenco equipment extra is absorbed in the amount already paid by the Defendants.

B. Unjust Enrichment

[152] As an alternative to its claim in contract, the Plaintiff claims damages in the amount of $523,062 for unjust enrichment. The three requirements for recovery by unjust enrichment, as expressed by Dixon J., in Becker v. Pettkus, 1980 CanLII 22 (SCC), [1980] 2 S.C.R. 834 (SCC), are for the Plaintiff to prove an enrichment, a corresponding deprivation, and the absence of any juristic reason for the enrichment.

[153] The Defendants have paid the Plaintiff a total of $633,707.05 inclusive of tax on the non-cash payments pursuant to their written contract, and oral agreements. To prove an enrichment and a corresponding deprivation, Marcos Limited is required to demonstrate that the value of the work performed for the Lads on this project exceeded the amount they have paid.

[154] The evidence falls far short of such proof. As explained above, the Plaintiff's costs documents presented to prove the value of its work are wholly unreliable for that purpose. In addition, the Plaintiff's own documents, including its financial statements and tax returns, contradict its claim of costs being attributed to this one project over 13.5 month's duration. Mr. Marcos explained this inconsistency in his tax returns and financial statements as being a false paper trail he created to save taxes. A false paper trail is not proof of costs incurred to build the project. The evidence clearly fails to prove the value of the Plaintiff's work on the Defendants' project exceeds the amount the Lads paid. There is no enrichment of the Defendants, or corresponding deprivation of the Plaintiff shown.

[155] It is also of note that the equitable remedy for unjust enrichment requires that the Plaintiff come to court “with clean hands”. In the case at bar, the Plaintiff is found to have deliberately lied to the court, fraudulently altered documents, created spurious invoices after the litigation arose, and falsely completed important governmental forms, all of which deception is specifically related to advancing its claim. The equitable remedy of unjust enrichment on that ground is therefore in any event unavailable to the Plaintiff.

RESULT

[156] In the result the Plaintiff's claim is dismissed, both on the contractual claim and its claim based on unjust enrichment. The lien registered against the Defendant's property, as described in the claim, shall forthwith be removed from title to the Defendants’ property.

[157] The Defendants' counterclaim is allowed in the amount of $65,112.86, as damages arising from the Plaintiff's breach of its oral agreement to repair the deficiencies shown.

COSTS

[158] The Defendants as the successful parties are entitled to costs. Written submissions on quantum may be delivered in three weeks from the Defendants, and in three weeks thereafter from the Plaintiff. Reply submissions, if any from the Defendants within two weeks thereafter.

[159] An appointment may be scheduled through the Brampton trial coordinator's office for submissions regarding the lien.

Judgment accordingly.

Seppi, J.

Released: May 29, 2018

Consultants v. Lad, 2018 ONSC 3273

COURT FILE NO.: CV-11-00306

DATE: 2018 05 29

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

MARCOS LIMITED BUILDING DESIGN CONSULTANTS

Plaintiff

• and -

ISHVER & SUMITRA LAD

Defendants

REASONS FOR JUDGMENT

Seppi J.

Released: May 29, 2018