Court File and Parties

COURT FILE NO.: CV-11-438361 DATE: 20180921

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Fermar Paving Limited Plaintiff – and – 567723 Ontario Limited Defendant

Counsel: Charles C. Chang, for the Plaintiff Marco Drudi, for the Defendant

HEARD: April 3, 4, 5 and 9, 2018

REASONS FOR DECISION

CAROLE J. BROWN, J.

[1] The plaintiff brings this action for breach of a written agreement dated September 1, 2010 for the purchase by Fermar Paving Limited (“Fermar”) and supply by 567723 Ontario Limited (“567”) of gravel or aggregate from the defendant’s gravel pit in the amount of 140,000 tonnes of Granular “A” material and 335,000 tonnes of Granular “B” material for purposes of construction of a highway commissioned by the Ministry of Transportation. The plaintiff claims that the defendant terminated access to the gravel pit, instructed the plaintiff to remove its equipment and, after unsuccessful attempts to renegotiate the contract, the plaintiff was required to obtain gravel and aggregate from other sources at higher cost to the plaintiff.

Positions of the Parties

[2] It is the position of the plaintiff that this is a straightforward case involving a contract between the parties and a breach by the defendant. The plaintiff maintains that Fermar entered into a contract with the Ministry of Transport for construction of a road between Wasaga Beach and Collingwood and, for that purpose, entered into a contract with the defendant to extract Granular “A” and “B” from their gravel pit (Winter’s Pit).

[3] It is the position of the plaintiff that the agreement entered into on September 1, 2010 was binding, was signed by both parties and was breached by the defendant, such that Fermar had to source the required aggregate from elsewhere at a higher cost. The plaintiff seeks damages of $942,372.80. The plaintiff claims damages in the amount of $800,000 for breach of contract, plus interest pursuant to the Courts of Justice Act, and taxes under the Excise Tax Act.

[4] It is the position of the defendant that the action is not straightforward, but rather complicated. It is the position of the defendant that there was not a binding agreement, but rather that the September 1 document was statutorily illegal. The defendant had a license to extract a maximum of 100,000 tonnes of aggregate per year, which the defendant says was known to the plaintiff. The representations and warranties in the contract regarding the amount of aggregate to be extracted from Winter’s Pit, being much more, was not legally binding and could not be fulfilled.

[5] It is the position of the defendant that the plaintiff refused to renegotiate terms of the agreement in good faith and repudiated the agreement, although the defendant was prepared to proceed with the agreement for the maximum amount of its extraction license, i.e. 100,000 tonnes.

Issues

[6] The issues to be determined by this Court are as follows:

1. Was there a legally binding agreement between the parties?
2. If so, was it breached?
3. If so, by whom was it breached?
4. Were damages incurred and, if so, the quantum of damages.

The Evidence

Agreed Statement of Facts

[7] The parties agreed to the following facts:

1. The plaintiff, Fermar Paving Limited (“Fermar”), is in Ontario Corporation that carries on business as, among other things, a road builder in the construction industry.
2. The defendant, 567723 Ontario Limited (“Winter’s Pit), is an Ontario Corporation which operates under the tradename “Winter’s Pit” and is the legal and beneficial owner of certain lands legally described as Lot 23, Concession 6, Municipality of Grey Highlands (formerly Township of Osprey), County of Grey, SAVE AND EXCEPT Part 3 on Plan 17R-1300; and SAVE AND EXCEPT the Northerly 17.16 feet of the said Lot expropriated by Deposit Plan 31669 (the “Subject Lands”).
3. Winter’s Pit had a license which limited the extraction of aggregate from the Subject Lands to 1000 tons per calendar year (see Tab 6 of the Joint Book of Documents).
4. On July 29th, 2010, Fermar entered into a construction contract with the Ministry of Transportation of Ontario (the “MTO Contract”) see Tab 33 of Joint Book of Documents) respecting a certain portion of Highway 26 near the Town of Collingwood, in the County of Simcoe (the “Project”).
5. As part of its scope of work, Fermar required two types of aggregate gravel material: granular “B” and granular “A”, both of which had to match the specifications for the Project as set out in the MTO Contract (see Tab 1 of the Joint Book of Documents).
6. Given the Subject Lands proximity to the Project location, Fermar sought to purchase the suitable aggregate material from Winter’s Pit.
7. On August 30th, 2010, Winter’s Pit provided written authorization to Fermar to enter the Subject Lands and to conduct applicable testing of the granular material (see Tab 2 of the Joint Book of Documents). On August 31st, 2010, Fermar attended the Subject Lands and extracted aggregate to be tested at Fermar’s laboratory.
8. On September 1st, 2010, Fermar tested the samples of granular material from the Subject Lands (see Tabs 3 & 4 of the Joint Book of Documents).
9. Fermar then prepared a document dated September 1, 2010. That document was sent to Winter’s Pit on September 2, 2010. On September 3rd, 2010, that document was revised and was signed by Ashton Martin, for Fermar, and Rocco Buono, for Winter’s Pit on September 3rd, 2010 (the “September 1 Document” – see Tab 5 of the Joint Book of Documents).
10. On or about September 7, 2010, the Tuesday after the long weekend, counsel for Winter’s Pit, Robert Palmateer, sent an email message to Steve Clay of Fermar (see Tab 8 of the Joint Book of Documents).
11. Fermar’s legal counsel, Malcolm Martin, responded to Mr. Palmateer’s said email message by letter dated September 15, 2010 (see Tab 9 of the Joint Book of Documents).
12. Mr. Palmateer responded to Mr. Martin’s letter by email sent September 15, 2010 (see Tab 8 of the Joint Book of Documents).
13. Fermar and Winter’s Pit continued to deal with one another in October and November 2010 resulting in further draft documents.
14. Fermar and Winter’s Pit investigated applying for a temporary annual tonnage increase in the applicable extraction limits on the license for the Subject Lands. In this respect, Fermar received an email message from the firm, Geological Investigations, on or about November 12, 2010 (see Tab 13 of the Joint Book of Documents). Geological Investigations was then retained by Winter’s Pit on or before December 13, 2010 to apply for the increase to the amount of aggregate which could be extracted from the Subject Lands.
15. On and shortly after November 15th, 2010, Fermar attended the Subject Lands and began to strip the topsoil and overburden. (see Tab 15 of the Joint Book of Documents).
16. One or more disputes arose between Fermar and Winter’s Pit which will be dealt with by the witnesses at trial resulting in Fermar leaving the Subject Lands.
17. Mr. Martin sent to Mr. Palmateer a letter dated January 6, 2011 (see Tab 17 of the Joint Book of Documents).
18. Other than the applicable testing samples, Fermar did not extract or obtain any granular gravel material for the Project from the Subject Lands
19. Fermar sourced the granular gravel material for the Project from alternate sources (see Tab 31 of the Joint Book of Documents).
20. Starting in February, 2011, there were communications between the lawyers for the parties.
21. In March, 2011, the lawyers for Winter’s Pit sent a draft Gravel Supply Contract to the lawyers for Fermar for review and negotiations (see Tab 22 of the Joint Book of Documents).
22. The lawyers for Winter’s Pit emailed the lawyers for Fermar on March 31st without response. The lawyers for Winter’s Pit emailed the lawyers for Fermar on May 19th, 2011, to which the lawyers for Fermar responded on July 15th, 2011. (See Tabs 21, 23, 24 & 25 of the Joint Book of Documents).
23. On July 15th, 2011, the lawyers for Fermar advised that Fermar had sourced the aggregate material elsewhere. (Tab 25 of the Joint Book of Documents)
24. Fermar registered a Caution against title to the Subject Lands on January 19th, 2011 which Caution was subsequently withdrawn.

The Plaintiff’s Case

Steven Clay

[8] Steven Clay has been the Senior Operations Manager at the plaintiff since 2014. Prior to that, he variously held positions of Construction Manager and Superintendent from 2003. His responsibilities included overseeing field operations for the plaintiff, scheduling, manpower, equipment and contracts. The plaintiff is generally involved with construction of highways and roadways, parking lots, commuter stations and other large construction projects.

[9] The plaintiff entered into a contract with the Ministry of Transport (MTO) for construction of a new four-lane highway from Wasaga Beach to Collingwood (the new Highway 26) which included three roundabouts. The plaintiff was to commence construction immediately after entering into the contract.

[10] The specifications for the material to be used in the construction of the highway were set forth in the Ontario Provincial Standard Specification (OPSS) for Aggregates, a standard specification document from the MTO, filed in evidence. The aggregate material to be used was Granular A and B.

[11] As regards the sourcing of the material, Mr. Clay testified that the owner of the defendant, Rocco Buono, approached him to discuss an agreement. Mr. Clay testified that testing of the gravel pit had to be undertaken to ensure that the material in the pit would meet OPSS specifications and that there was sufficient stone in the Granular B to manufacture Granular A. Seven test holes were dug. Granular B stone is coarser and is used for the highway bed or the sub base and Granular A is finer and is used for the top layer. Granular B aggregate is run through the manufacturing plant to crush it down to Granular A material. The material has to be graded to the proper tolerances.

[12] During this time, Mr. Clay and Mr. Buono had numerous conversations in order to coordinate and accomplish things that needed to happen preliminarily.

[13] The pit needed to be stripped, i.e. the unsuitable material had to be removed from the surface and placed in a designated area, shown on a plan which Mr. Clay was given along with the September 1 agreement. For the stripping, Mr. Clay used McIntyre Aggregates Inc., a subcontractor that Mr. Buono knew. The stripping continued through November 19, 2010. Some areas were not stripped.

[14] Mr. Clay received email correspondence dated September 7, 2010, from Robert Palmateer, a lawyer for the defendant regarding the September 1, 2010 agreement between 567 and Fermar. The correspondence indicated that prior to the agreement, his client did not note the quantity requirements of the agreement, could not comply with the agreement and was not prepared to fulfil its obligations under the agreement unless Fermar was prepared to amend the letter agreement to acknowledge that the license of Winter’s Pit was limited to extraction of 100,000 tonnes per year. The letter indicated that whether or not his client would be successful in an application to amend the license to permit extraction of at least 475,000 tonnes over the potential two-year period of the letter agreement was an open question. It further stated that his client was not prepared to warrant that there would be 335,000 tonnes of Granular B and an additional 140,000 tonnes to be manufactured into Granular A and that no testing had been undertaken to determine the capacity of the Pit. Mr Palmateer inquired as to whether Fermar would be prepared to amend the agreement and indicated that if not, his client was prepared to release Fermar from the agreement, but that the defendant was not prepared to proceed with the agreement as written.

[15] From the chain of emails between Mr. Palmateer and Malcolm Martin, counsel for the plaintiff, it appears that there was discussion about selling the Pit to the plaintiff, but that the parties could not reach an agreement regarding price.

[16] Mr. Clay testified that he spoke with Mr. Buono, went to meet with him in an attempt to salvage the deal, they discussed some means of dealing with restrictions but that there was no agreement as to any alternative.

[17] Mr. Clay testified that after November 19, 2010, he received a telephone call from Mr. Buono who was upset, and told Mr. Clay to get everything off site or he would charge the plaintiff with trespass. He did not mention the license, the extension application or that there was no contract between the parties. He did not say that he was angry because they were taking Granular A and B. Mr. Clay had the equipment removed from the site and they never went back to the site.

[18] Mr. Clay testified that in the past, he had had good results applying for an extension regarding restrictions on extraction limits, but that he was not involved in any such application as regards Winter’s Pit. In this case, he does not know whether an application for extension was made and never saw such an application. He first saw the application for extension at the time of preparing for the litigation. The document filed in evidence was prepared by a geologist, William Fitzgerald, who Mr. Buono knew. While one can apply for an extension, there is no guarantee that it will be approved. The documentation was sent to Rob Gosselin at the plaintiff who was the then-project manager and is now deceased.

[19] After they were told to leave the Winter’s Pit site, the plaintiff sourced material elsewhere, in order to complete the contract with MTO.

Cross-examination

[20] Fermar had been in business over 40 years and, in 2010, owned a pit in Ayr, Ontario. The plaintiff had a Quality Control Department in 2010.

[21] Mr. Clay was given the drawing of the site along with the contract, but only kept the drawings.

[22] In order to operate a pit, one must have a license. He did not ask for or see a copy of the license for Winter’s Pit.

[23] After the agreement was signed, the plaintiff was to attend the site in order to test for the size and extent of the granular materials. He does not know if the plaintiff received anything from the defendant warrantying the size and extent of the material in Winter’s Pit.

[24] On August 30, they were given permission to enter the property to ensure that the quality of the material was suitable. The authorization, signed by Mr. Buono, indicated that they were authorized to test for size and extent of granular materials on the site. Testing was done on August 31, 2010 and the initial results, which he was told came from Winter’s Pit, failed the test. He did not advise Mr. Buono and does not know whether anyone else did. He had believed that tests were also done later in September or October, and testified to such at examinations for discovery, but was not correct, as all tests were done at the same time, on August 31, 2010.

[25] He testified that when he was first provided the September 1 document, he was not aware of the 100,000 tonne extraction restriction on the Winter’s Pit license, but became aware around that time that there was a restriction of 100,000 tonnes per year extraction of aggregate at Winter’s Pit, and that it was illegal to extract a greater quantity. He attempted to determine if an extension application had been filed or whether someone should proceed with such an application.

[26] In order to create a stockpile of Granular A material, the material has to be crushed and a stockpile created. When Granular A material is manufactured, there is a residue. What doesn’t pass as Granular A material, comes off the side on a conveyor belt. The contract did not speak to who would have these tailings or residue.

[27] As regards the September 1 agreement, it was understood that it was the responsibility of the defendant to screen the aggregate and load the aggregate, although there is not a comma between “aggregate stockpile and load in the contract” (paragraph 4(b)). The paragraph reads as follows:

4(b) Winter’s Pit agrees to screen the aggregate stockpile load and to make same conform to the MTO specifications for the project.

[28] Paragraph 5(b) clearly reiterates this and states that “Winter’s Pit shall load material”. The defendant was to load and haul the material as required. For 100,000 tonnes of material, it may require six months of digging.

[29] As regards progress payments, paragraph 7 reads as follows: FPL agrees that all payments due to Winter’s Pit shall be paid promptly upon “FPL receiving progress payment from MTO”. While paragraph 7 of the agreement only said “progress payment”, it should be “progress payments”. While it did not say when payments would be made, Mr. Clay testified that on a project such as this, progress payments are received each month from MTO.

[30] In the September 1 agreement, Winter’s Pit “warrants and represents that a minimum of 335,000 tonnes of Granular “B” material is available to FPL”. There are no other documents that make this representation in the evidence adduced and filed before the Court. He did not know what dealings may have gone on prior to the agreement being signed by Ashton Martin for the plaintiff and Rocco Buono for the defendant. He was not involved in any of the preliminary negotiations.

[31] On September 7, Mr. Buono’s lawyer sent a letter indicating that, as regards the September 1, 2010 letter agreement between the parties, his client had failed to note the quantity requirements of the agreement and was unable to comply given the extraction restrictions on his license. On October 10, Mr. Clay testified that he had further dealings with Mr. Buono to attempt to resolve the issues. Draft amendments to the initial agreement were exchanged between the parties, but no resolution was reached. They attempted to work things out but were unable to.

[32] Mr. Clay was not aware of the application for extension.

[33] There were no written instructions as regards the stripping. At the time that the stripping took place, Mr. Buono told Mr. Clay that they were taking his granular material. He wanted to keep the Granular A residue. Mr. Buono subsequently told them to get off the site.

[34] At a meeting at Nobleton Arbours between Mr. Buono, Mr. Clay and Mr. Watt, he does not recall that Mr. Buono told him that he was not happy with the stripping on the Winter’s Pit site. He did not tell Mr. Buono that he was not concerned about the Granular B material as he could get it elsewhere. His major concern was to get the material stockpiled and to get prepaid. This was early to mid-November. In order to obtain Granular A material, they had to process the Granular B material. He does not recall Mr. Buono telling him that he was taking Granular A and B material and was upset that he only wanted Granular A material. He was not treating the Granular A and Granular B differently. He testified that he only needed the Granular A material during the winter.

[35] He recalls saying to Rocco Buono that they were going to move the crusher of the subcontractor to the site, but does not recall when he told Mr. Buono. Rocco Buono told him in a telephone conversation “You’re taking my gravel”. Mr. Buono thought that they were pushing him around to take his gravel and wanted him to remove the crushing machine. Mr. Buono wanted the machinery off his property until there was a signed contract, which Mr. Clay understood to mean a signed, amended contract. Essentially, he was saying not to go any further until something else was signed.

[36] Fermar received correspondence from counsel for the defendant on January 18, 2011, indicating that their client’s ability to carry out the strict terms of the letter agreement had been frustrated by the license limitation, which, the defendant maintains, the client knew prior to the letter agreement being signed. He does not recall being asked to enter into further discussions with Mr. Buono regarding an amended contract at that time.

[37] As at July 15, 2011, the plaintiff had not signed any other agreements with aggregate suppliers. He is not aware of any contracts entered into.

Charles Ezomo

[38] Charles Ezomo has been the Senior Project Manager with the plaintiff for the last three years. Prior to that he was a Project Manager and, prior to that had been Superintendent and Project Manager with other national and international construction firms. He has a university education in civil engineering. He is responsible for planning of all assigned projects, preparing contracts, progress certificates, payments, and works with the team to complete the projects on schedule. He has worked on road projects, resurfacings, and construction of structures. He has worked on 5 to 7 projects per year over the last 10 years and estimates that he has worked on 50 to 60 projects altogether.

[39] In 2010, he was the Project Manager, filling in for Rob Gosselin, when he was on leave. He became the Project Manager in 2011, when Mr. Gosselin left the firm and finished the project using the gravel required, sourced from other aggregate pits. They obtained the required Granular A from Brock Pit and the required Granular B, as well as some additional Granular A, from Walker’s Pit.

[40] He prepared a cost summary in the total amount of $3,917,188.92 for the alternate sources of Granular A and Granular B, which was filed in evidence.

[41] He had been aware that they were to obtain the Granular A and B from Winter’s Pit and that there was an agreement in place for that purpose. However, the defendant did not supply the requisite Granular A and B.

[42] He prepared the cost analysis which compared the costs differential between Winter’s Pit and the final sources of Granular A and B. The sources of information were obtained from the defendant’s contract and from the agreement between the plaintiff and the two other sources used. The haulage fees per tonne were higher for Granular A and Granular B. The fees depend on distance, among other things. He was not aware of why they were higher.

Cross-examination

[43] Mr. Ezomo is not an accountant. He has no other accounting experience than the day-to-day accounting which he is required to use in his position. To prepare the cost analysis, he relied on the costs that were prepared, analyzed and put together by the Accounting Department. He did not do an independent analysis himself, as the information came from a reliable source. He reviewed the financial statement and documentation as regards the costs from the alternate sources provided by his Accounts Department. In the summary, the Accounts Department ran all costs by supplier. He believes that the dates on the Cost Summary were those that were on the original invoices. The costs analysis includes amounts incurred by Fermar beyond September 1, 2012, which was the completion date for the contract between the parties.

[44] Mr Ezomo testified that he had to approve all invoices received. When he prepared the cost comparison summary, he did not review all invoices again. Most costs were taken from invoices. Some of the costs may have been estimated or were averaged.

The Defendant’s Case

Rocco Buono

[45] Rocco Buono is 67 years old. He was born in Aquila (Abruzzi) Italy. He has a grade 6 education. He came to Canada in 1965 when he was 14. They landed in Montréal and he began to work in the textile industry. He worked in Montréal for one year and then they moved to Toronto, where he worked in the same industry. On September 18, 1967, his father was working as a roofer in construction. He was involved in an accident and died. Mr. Buono became the head of the family and continued working.

[46] He is married, with three adult sons.

[47] He purchased a truck in 1974 and worked for eight years in the gravel transport business. He got into the stone slinging business, buying, selling and hauling stone/aggragate, and sold to customers. He acquired Metro Stone Supply in 1985 with another individual, and bought out that individual in 1986, remaining as sole owner, officer and director. Two of his sons work with him at Metro Stone Supply, an aggregate company which services residential home builders.

[48] He purchased another company, the defendant (“Winter’s Pit”), in 2004. His sons are not involved in the Winter’s Pit company. He is the sole officer and director. It was a wayside pit, used temporarily to build roads. He hired someone to produce stone in 2004-2005. Between 2005 and 2010, no work was done at Winter’s Pit.

[49] In 2010, he was introduced to Fermar by David Kennedy, who called him and advised that there was a highway project in Collingwood. He called Fermar 1½ to 2 weeks later.

[50] He met with Ashton Martin of the plaintiff company at Winter’s Pit. Ashton Martin told him what Fermar needed. They were looking for 335,000 tonnes of Granular B. He told them that he had a license and could only provide 100,000 tonnes. Ashton Martin told him that it would be easy to get an extension to the license. It was a good deal for both of them. The plaintiff would take the “fines” (fine granular material).

[51] The plaintiff went to look at the Pit and saw the bank of the Pit. He asked if Mr. Buono could sell 140,000 tonnes and Mr. Buono said to him that if Fermar purchased 335,000 tonnes of Granular B, he would sell them 140,000 tonnes of Granular A. He was to help with the MTO slips. He recalls nothing else about their meeting.

[52] He never saw the MTO contract between MTO and Fermar or the MTO grading specifications.

[53] Mr. Buono was asked to sign a release to permit Fermar to enter the property to dig test holes to verify the quality of the aggregate and to determine if there was enough to satisfy the contract. He went to the Pit on August 31 and Fermar was doing the testing. He saw a backhoe and they were digging test holes. He asked to speak with Steven Clay, but was told that he had left the site. He did not see Mr. Clay that day. He was never shown the test results.

[54] He received a telephone call from Ashton Martin on September 3. Mr. Martin indicated to him that he wanted to conclude the deal as he was leaving for Europe. He went to Mr. Martin’s office at about 1 PM. He signed the agreement, but told Mr. Martin that the letter with agreement was not clear enough for a contract. The agreement did not say who was to do what. He understood from Ashton Martin that there would be further modifications to the agreement.

[55] He gave a copy of the MNR license to Ashton Martin with plans of the Pit before the agreement was signed, and believes it must have been September 1.

[56] Mr. Buono testified that after the document was signed, Ashton Martin inquired as to whether Mr. Buono was sure there would be enough aggregate to complete the job. Mr. Buono told him that Fermar had tested the Pit and Ashton Martin said don’t worry, this is just “legal mumbo-jumbo”.

[57] He testified that all weekend he was distraught and his blood pressure was high as regards the document he had signed. It was a long weekend and he was unable to reach his lawyer. He went to his lawyer, Robert Palmateer, when the offices opened the following week. His lawyer sent the email indicating that “Prior to signing the agreement, our client did not note the quantity requirements of the agreement. Our client cannot comply with the agreement and is not prepared to fulfil its obligations under the agreement unless Fermar is prepared to amend the letter agreement to acknowledge that.” He testified that while the agreement had indicated that the defendant warranted the amount of aggregate in the Pit, no one had mentioned that to him.

[58] The plaintiff’s lawyer sent a response on September 15, 2010, which indicated that “Your email letter makes it perfectly clear that all parties are faced with the fact that an “agreement” was reached between our respective clients. Your client now wishes to resile from that agreement.… My client is prepared on a completely without prejudice basis to engage in further discussions. These discussions are based on the premise that the agreement of September 1, 2010 is a valid and subsisting agreement”. Mr. Buono authorized his lawyer to prepare a response which was sent September 15 indicating that the defendant would be prepared to sell the Pit at a reasonable price and requested that an offer be made. The letter further indicated that the defendant was prepared to continue with the letter agreements, amended on certain terms including that they would only take a maximum of 100,000 tonnes per year and that there was no warranty as to capacity of the Pit.

[59] Mr. Buono indicated that Steven Clay contacted him and wanted to meet. It was the first time Mr. Buono had met Mr. Clay. He never met with Ashton Martin again. After the end of October, he did not speak with Mr. Clay again, but spoke with the foreman, Ken Watt.

[60] As regards amendments, he indicated that they were to screen the material and the course stone was to be his.

[61] He recalls a discussion with Fermar making application for an extension to the defendant’s license. This was discussed with William Fitzgerald, who looks after his license. Fermar later wanted Mr. Buono to apply and he said that if that was to be the case, Fermar would have to pay. He thought that Fermar was to hire Mr. Fitzgerald to do the application for an extension. There was also to be an application for amendment to install the scale on the site.

[62] He believes he learned that Fermar was stripping the land on November 18. He heard this from Steven Clay. There was no permission to do so. He attended the site, saw trucks hauling earth and rocks. He did not see Steven Clay. The stripping was not done in accordance with the plans.

[63] The meeting with Steven Clay, Ken Watt and himself at Nobleton Arbours occurred thereafter. He advised them that the stripping had not been finished and it had not been done as it should have. They told him that they had run out of room. Steven Clay told him that it was difficult to make the Granular B, but they wanted the A and did not want the B. They told him that they could have gotten the B cheaper from the quarry. He called and left a message for Ashton Martin the next day. Ken Watt called back and said Ashton Martin was also on the line. He told them that they had agreed to the Granular B in the first place and had to honour the agreement. According to him, Mr. Martin told him not to kick them from the Pit or that he would have to pay more.

[64] He and a worker went to the Pit the next day and produced and piled Granular B in the amount of 500 to 600 tonnes. He says it was done to the best of his knowledge, as he does not know how to produce Granular B. He called Steven Clay and advised him that they had produced the Granular B and that he should get samples. He went up the next day and saw shovel marks as if some B had been taken. When he left, he locked the gate. A couple of days later Steven Clay called and stated that they were moving in with the crusher and that the tests had failed miserably. Mr. Buono told Steven Clay to slow down that he was going too fast and told him not to bring any equipment onto the site.

[65] When he went to the site, they had broken the chain and moved equipment in; a crusher, loader and stacker. He disagreed with Steven Clay’s evidence and said that he did not meet with him there and tell him to move the equipment in. During their telephone call, he told him not to move the equipment in and the telephone conversation ended.

[66] He called Steven Clay, told him to stop moving equipment in until the “bugs” were ironed out and stated that otherwise, Fermar would be trespassing. Steven Clay called the following day to inquire as to whether they could go in to move the equipment out.

[67] Mr. Buono testified that he never told them that the deal was off. He still wanted to do a deal. It was an excellent price for him. They picked up the equipment soon thereafter.

[68] Between that telephone call and January 6, 2011, there was no further conversation. He was still ready to continue with the deal. There was an application for an extension on the extraction restriction and no one from Fermar had contacted him to tell him to stop that application. He was still prepared as at March 2011 to continue the contract. His counsel heard from their counsel, Brendan Bissell on July 15, 2011 indicating that the proposed agreement was unworkable. Mr. Buono testified that this was the first he had heard that they did not want to continue with the deal.

[69] On April 9, 2013, he received a letter from MNR denying the application for the amendment, indicating that this was because he was unable to obtain municipal support for the tonnage increase. The application for an increase in the extraction restrictions was cancelled.

[70] He testified that his Pit is 4 to 5 km from the Brock Pit and is closer to the construction site. Walker’s Pit is closer to the construction site by 12 to 15 km.

[71] The driveway from the road to the Pit is one lane. There was no discussion with Ken Watt regarding difficulty in accessing the Pit for purposes of haulage.

[72] Mr. Buono is still prepared to honour the contract for the restricted extraction limit at the same price.

Cross-examination

[73] Rocco Buono received a draft of the agreement on September 2 and attended at the offices of FPL on September 3. After revisions were made on September 3, he signed the agreement. The issue revised or amended was the pricing of the Granular A and B. He does not recall any other items being amended. He noted the quantities and the pricing before signing the agreement. He had wanted the agreement to be clearer, but did sign it. He did not ask that further changes be made or that he be permitted to sign the agreement later, didn’t ask for a provision that the agreement would be amended in greater detail, did not request any provisions regarding further negotiations.

[74] He pointed to the provision indicating that they would both sign all necessary documentation to give effect to the agreement, suggesting that that meant that there would be further negotiations. Clause 8 of the agreement states as follows:

FPL and Winter’s Pit hereby agree to execute such further and other documentation as may be necessary to give effect to this agreement.

[75] There were no other agreements signed between the parties.

[76] Mr. Buono testified that when he and Ashton Martin met at the Pit, they spoke for an hour and went through all of the agreement orally, prior to his signing the written agreement on September 3. They discussed what would be acceptable to Mr. Buono and Ashton Martin said that he would put their discussion in writing and send it to Mr. Buono.

[77] Mr. Buono was taken to all of the correspondence regarding the agreement which use the word “agreement” and confirmed that he did not, at any time, challenge the use of that word. He had no one, on his behalf, challenge the use of the word “agreement” and did not send correspondence or have anyone send correspondence challenging the use of the word. He agreed that his lawyer also used the word “agreement”. He did not send any communication or have anyone send any communication challenging use of the word “contract”.

[78] He confirmed that on September 3, 2010, he signed the agreement and, only as he was leaving, had some anxiety due to something Ashton Martin had said which triggered a concern. Mr. Martin had said that he hoped Mr. Buono had enough material in the Pit. That caused Mr. Buono some concern. He thought that there may not be enough in that area, but that they may have enough elsewhere. His concern was that there may not be enough in that area. It caused him stress and anxiety which he suffered over the weekend, after signing the initial agreement.

[79] He did not propose any amendments or have anyone do so in writing. There was no other agreement than the agreement he signed dated September 1, 2010.

[80] When asked whether the only promises made by the plaintiff were that the plaintiff would take all Granular A and B from the defendant’s Pit and that the defendant would support or assist the application for a temporary tonnage increase, Mr. Buono denied this and stated that he was supposed to screen all Granular B, but that everything else was true. However, on examination for discovery, he had testified that the promises made were that the plaintiff would purchase all Granular A and B, and would assist with the application for an extension. At examination for discovery, he stated that he did not have any basis as to why the plaintiff was obligated to support the application.

[81] As regards the allegation that the plaintiff was to assist in obtaining the extension, he knew that they were not obligated to, but stated that they made a commitment to help. There was no other obligation.

[82] As regards Mr. Buono’s education and work experience, he confirmed that he started in the truck transportation business for himself and then incorporated 567 in 1985 or 1986 for purposes of the truck transportation business. He thereafter got into the business of stone slinging with Metro Stone, which he incorporated in 1985 with his brother-in-law. In 1986, he bought out his brother-in-law and, since then, has been the sole business owner of Metro Stone. In 2004, he expanded 567 into Pit ownership. He runs 567 by himself. His wife and sons only work in Metro Stone.

[83] He made two applications, one to amend the plan and one to obtain an extension regarding the extraction restriction. William Fitzgerald looks after his license and did the applications. Before he signed the agreement, he learned from Mr. Fitzgerald and Ashton Martin that he could obtain an extension. He knew prior to signing the agreement that he had a license limit as regards extraction.

[84] He confirmed that after November 2010, the plaintiff never returned to the Pit. He confirmed that when he called Ashton Martin, Ken Watt called him back in the afternoon and indicated that Ashton Martin was also on the phone. Mr. Buono told them that they had to honour the agreement regarding the Granular B. He thereafter went up to the site and produced 400 to 500 tonnes of Granular B and called the plaintiff to advise him. Thereafter, he again went to the site and observed shovel marks. Thereafter, Steven Clay called to advise them that they had moved equipment into the Pit and, thereafter, he went up to the Pit, saw the equipment and locked the gate. He advised Mr. Clay that he was not to bring any more equipment on site. He denied that he told Mr. Clay to get the equipment off the site. He confirmed that in examination for discovery, he had told the plaintiff to stop everything, not to bring equipment on site and that he was not happy with what he had heard at the meeting at Nobleton Arbours. He confirmed that Mr. Clay called him to ask if the plaintiff could go on the property to get the equipment off the property.

[85] As regards the aerial shot of the Pit, filed in evidence at trial, he does not know who took the photograph or when.

[86] As regards his complaint concerning stripping of the area, his complaint was not that the plaintiff was stripping the area, but that it was not to his liking, was not according to the plan and they did not strip all of the area that they were supposed to. There were no other complaints.

[87] Counsel for the defendant read in the following portions of the transcript:

1. page 71 question 235 to 237;
2. page 84, question 277 to 279; and
3. page 117, question 421 to 243 and tab 32.

Analysis

[88] The issues to be determined in this case are as set forth above at paragraph 6.

Was there a legally binding agreement between the parties?

[89] It is the position of the plaintiff that the agreement was legally binding and enforceable. It is the position of the defendant that the agreement was only an agreement in principle and, further, was rendered illegal by virtue of the license held by the defendant, which restricted extraction to 100,000 tonnes.

[90] In determining this issue, I have considered the principles applicable to interpretation of commercial contracts, as well as the case of Weyerhaeuser Co. Limited v Ontario (Attorney General), 2017 ONCA 1007 at para 65, as well as the terms of the September 1, 2010 document.

[91] I am satisfied that the agreement was legally binding and enforceable.

[92] Rocco Buono, on behalf of Winter’s Pit, approached Fermar, which he had been advised was going to undertake an MTO construction project in the area. He met with the principal, Ashton Martin, and they discussed Fermar’s needs for aggregate (Gravel A and Gravel B) for the project. They discussed the work to be done and the amounts required. Prior to signing the agreement, testing of the gravel pit had to be undertaken to ensure that the material in the pit would meet OPSS specifications and that there was sufficient stone in the Granular B to manufacture Granular A.

[93] The tests were done on September 1 and it was determined that the material would meet OPSS specifications and that there was sufficient stone in the Granular B to manufacture Granular A.

[94] On September 2, Ashton Martin forwarded the agreement to Rocco Buono with this message “Please review agreement. If acceptable, I will send hard copies to you today. Thank you, Ashton Martin.”

[95] Mr. Buono met at FPL offices on September 3. He testified that he had reviewed, but not “read” the contract. He nevertheless requested an amendment to increase the price of the two aggregates (Gravel A and Gravel B). The new price was agreed to by the plaintiff, the amendment was made and the agreement was signed. The plaintiff was to commence construction immediately after entering into the agreement.

[96] On September 7, Steven Clay, Construction Manager and Superintendent of Fermar received the following email from Robert Palmateer:

As discussed earlier today, we are solicitors for Rocco Buono and 567723 Ontario Limited. We have been consulted in connection with a September 1, 2010 letter agreement between 567723 Ontario Limited and Fermar Paving Limited.

Prior to signing the agreement, our client did not note the quantity requirements of the agreement. Our client cannot comply with the agreement and is not prepared to fulfil its obligations under the agreement unless Fermar is prepared to amend the letter agreement to acknowledge that:

1. The license of Winter’s Pit is currently limited to extraction of 100,000 tonnes per year. Whether or not our client would be successful in an application to amend the license to permit extraction of at least 475,000 tonnes over the potential two-year period of the letter agreement is an open question.
2. Our client is not prepared to warrant that there will be 335,000 tonnes of Granular B and an additional 140,000 tonnes to be manufactured into Granular A. No testing has been undertaken to determine the capacity of the pit.

Please advise if Fermar is prepared to amend the agreement as above. If not, our client is prepared to release Fermar from the agreement. In any event, our client is not prepared to proceed with the agreement as presently written.

[97] It is of note however that this position is contradicted by the testimony, at trial, of Mr. Buono, in cross-examination, who conceded that before signing the September 1, 2010 agreement, he noted, among other things, the stated quantities.

[98] The lawyer for Fermar responded on September 15, 2010 stating that:

“Your email letter makes it perfectly clear that all parties are faced with the fact that an “agreement” was reached between our respective clients. Your client now wishes to resile from that agreement.

As you are no doubt aware from discussions with your client, Fermar is engaged in a very major project in the Collingwood area which includes a need to import approximately 335,000 tonnes of Granular “B” and 140,000 tonnes of Granular “A”. If Fermar is obliged to obtain these materials from a source other than Winter’s Pit, its damages will easily exceed the sum of $500,000 and probably more. Obviously my client simply cannot afford to walk away from a claim of this size.

My client is prepared on a completely without prejudice basis to engage in further discussions. These discussions are based on the premise that the agreement of September 1, 2010 is a valid and subsisting agreement.

[99] The evidence indicates that following the conclusion of the agreement, correspondence between counsel for the parties continued to refer to the September 1, 2010 document as an agreement. Based on the evidence, it was not until after the dispute and litigation began that the defendants began to refer to the September 1 document as a “letter of understanding” or an “agreement in principle”. Indeed, following signing of the agreement, the defendant wanted the agreement to be amended or would resile from the agreement.

[100] Following signing of the agreement, the parties continued to conduct themselves as if the agreement continued to be in place. Fermar began to strip the pit by removing the unsuitable material from the surface and placing it in a designated area. Some of the areas were not stripped. Mr. Clay testified that he retained McIntyre Aggregates Inc., a company known to Mr. Buono, to undertake the stripping.

[101] It is the position of the defendant that the agreement is not complete, does not include all necessary terms, is ambiguous and unclear. The defendant submits that, as regards the first issue, the contract, if there is a contract, it is void for illegality, vagueness and uncertainty, and that the principles of contra proferentum and frustration should apply.

[102] It appears from all the evidence that the owner could have applied for an extension of the license to increase, on a temporary basis, the amount of aggregate that could be extracted from the pit. However, it appears that no application was submitted in a timely fashion. The parties agree that Geological Investigations was retained to apply for an extension on December 13, 2010. There is one letter from the MNR which refers not to an extension of the application but rather to an amendment to the application which was in evidence and was dated April 9, 2013. This correspondence of April 9, 2013, appears not to have any applicability to the agreement of September 1, 2010.

[103] Having read the agreement, I do not find it void for vagueness or uncertainty. I am satisfied, based on all of the evidence, that the seminal terms and clauses were included. Further, I find it clear and not ambiguous. Contra proferentum does not apply.

[104] I do not find the doctrine of frustration to apply. The agreement is not frustrated by an annual removal limit which was known to the defendant prior to entering the agreement.

[105] The agreement was entered into after there had been “a lot of discussion” about the proposed deal, according to Mr. Buono and, also as he testified, he and Ashton Martin went through the agreement “line by line” The agreement was entered into, after changes as regards the pricing of the granular materials, which were requested by the defendant, were made. It was signed by both parties, and the defendant, Rocco Buono, signed on behalf of his corporation, 567723 Ontario Limited, under the line reading “Agreed, accepted and understood this 3rd day of September 2010.”

[106] I do not find the doctrine of non est factum applicable. The agreement was signed, as above mentioned, after the parties discussed the agreement and after the defendant requested changes regarding an increase in the pricing to be charged for the granular material, which changes were accepted by the plaintiff and made. Mr. Buono admitted that he had reviewed and signed the agreement, but had not “read” it. In such circumstances, where the defendant fails to read the document or to provide it to his lawyer for comment, the doctrine of non est factum is not applicable.

[107] I am satisfied, based on all of the evidence, as well as the case law, and having considered the written submissions of both counsel, that the agreement of September 1, 2010, is both binding and enforceable.

[108] While the defendant suggested that Mr. Martin had taken advantage of Mr. Buono in concluding the agreement, and suggested that Mr. Buono was an immigrant, vulnerable and understood and read English with difficulty, I do not accept this argument. Mr. Buono testified that he immigrated to Canada in 1965. He worked in the gravel transport business from 1974 and then began buying, selling and hauling stone and aggregate. Some 25 years ago, in 1985 he purchased Metro Stone Supply, an aggregate company, which services residential homebuilders. He purchased Winter’s Pit and incorporated the defendant company to own the pit in 2004. For the most part, he has been in business on his own during that period of time and has served as the sole officer, director and president of his companies throughout his business career. As someone who has been in business in this country for 36 years, I do not accept that he is a vulnerable individual who is not able to conduct business and enter into contracts in English.

[109] I am satisfied that the plaintiff bargained in good faith with the defendant and attempted to seek resolution of the seeming impasse that presented after the agreement was signed. Unfortunately, the plaintiff was unable to find a solution that was acceptable to the defendant.

Was the September 1, 2010 agreement breached, and if so by whom?

[110] Based on the evidence, there was initial discussion about the defendant applying for a temporary tonnage extraction increase for purposes of the contract. The evidence indicates that the parties continued to proceed to work under the contract, while the lawyers continued to communicate between themselves.

[111] Mr. Clay testified that he spoke with Mr. Buono, went to meet with him in an attempt to salvage the deal, discussed various means of dealing with restrictions, but that there was no agreement as to any alternatives.

[112] In order to obtain Granular A material, they had to process the Granular B material. Mr. Clay testified that he only needed the Granular A material during the winter. He recalls Mr. Buono saying that Fermar were taking his gravel and he thought they were pushing him around.

[113] Mr. Clay testified that after November 19, 2010, he received a telephone call from Mr. Buono who was upset and told Mr. Clay to get everything off the site or he would charge the plaintiff with trespass. He told him to stop everything.

[114] That, in the end, is what happened; everything was stopped.

[115] Mr. Buono testified that he went to the site on November 18, saw Fermar stripping the site, but the stripping was not done in accordance with the plans. He so advised Fermar. Thereafter, Mr. Clay called Mr. Buono and advised that Fermar had moved a crusher onto the site in order to make the Granular A material. Mr. Buono advised Mr. Clay to slow down and not to bring any equipment onto the site.

[116] Mr. Buono testified that he advised Mr. Clay that he was not to bring any more equipment on site, and told the plaintiff to stop everything. He denied that he told Mr. Clay to get off his property. However, he did concede that he threatened Fermar with trespass, that he told Mr. Clay to “stop everything” and that he locked the gate to Winter’s Pit, which he had never done before. And that put a stop to everything with Fermar.

[117] Despite the discrepancies in testimony and particularly Mr. Buono’s testimony as regards what he told Fermar and when, I prefer the testimony of Mr. Clay as I found Mr. Buono’s testimony to be inconsistent and, in some instances, contradictory and self-serving.

[118] I am satisfied that Fermar attempted several times to find a solution for the issues, but that ultimately, there was no agreement on a solution and it was made clear by Mr. Buono that they were not to continue further with obtaining any aggregate. Indeed, no aggregate was ever extracted and transported from the pit.

[119] I am satisfied that, by his conduct, Rocco Buono made clear that he would no longer be bound by the contract and that the contract was at an end.

[120] I find that the defendant breached the agreement by repudiating it.

Damages

[121] As a result of the defendant’s repudiatory breach of contract, the plaintiff is entitled to be restored to the same position it would have been if the contract or agreement had been honoured.

[122] In this case, the plaintiff was required to find other sources of granular material/aggregate in order to fulfil its contract with MTO.

[123] The plaintiff was able to secure alternate sourcing of their requisite material, but at a greater cost than it had been able to obtain with the defendant. In addition, the plaintiff incurred other direct costs, equipment rental and labour, for which it is entitled to reimbursement.

[124] Charles Ezomo, the Project Manager, was responsible for planning of all assigned projects, preparing contracts, progress certificates, payments and completion of the projects. As regards the MTO project, he oversaw the completion of the project, using gravel sourced from alternate aggregate pits. After they were unable to access the granular material at Winter’s Pit, they obtained the requisite Granular A from Brock Pit and Granular B, as well as some additional Granular A from Walker’s Pit.

[125] For purposes of the litigation, he prepared a cost analysis summary which compared the costs differential between Winter’s Pit and the final sources that Fermar found to supply Granular A and Granular B. He testified that he is not an accountant and has only the accounting experience that he has gained in the day-to-day accounting which he is required to use in his position. He prepared the cost analysis using the costs that were prepared, analysed and collated by the Accounting Department of Fermar. He stated that he did not do an independent analysis himself, as the information came from a reliable source, namely Fermar’s Accounting Department. He testified that he had had to approve all of the invoices used in the analysis when they were originally received, and did not review them again for purposes of preparing the summary.

[126] In undertaking the analysis, a small proportion of the Granular A material was captured in the Brock Aggregates haulage costs rather than in the Walker Aggregates haulage costs. The error was noted and corrected at trial and the total cost incurred was reduced from $812,925.22 to $762,849.92.

[127] It was the position of the plaintiff that these costs were owing and payable. It was the position of the defendant that these costs were not valid and should be rejected, given that they were not prepared by an accountant or an expert in the area, but rather by the Project Manager of Fermar, who was not an accountant. Further, it was the position of the defendant that the evidence given was opinion evidence and he had not been qualified as an expert. Finally, the defendant submits that the evidence was not “business record evidence” and no backup material was provided in support of the summaries. This was argued at the time of trial and it was the position of the plaintiff, and acknowledged by the defendant that approximately 1000 backup documents had been provided by the plaintiff as regards the cost summary but not produced at trial.

[128] I do not find the evidence adduced by the plaintiff pursuant to the testimony of Mr. Ezomo to constitute “opinion evidence”. He presented evidence in the form of a cost summary based on Fermar accounting information, including the invoices he had previously reviewed and approved for payment, on the basis of which approval, said invoices had been paid and that he had compiled with the assistance of the accounting department. This was substantive evidence. While it would have been useful to have the supporting documentation, I am not satisfied that this was necessary in the circumstances of this case. I find Mr. Ezomo’s evidence to be credible. He testified in a straightforward clear, uncontradicted manner.

[129] The total amount of reconciled additional direct costs for purchases of Granular A and B from alternate sources amounted to $762,849.92. Other costs were $53,586.25, for a total of $816,436.37.

[130] The plaintiff also seeks additional costs for extended site and office overhead (based on the Hudson Formula) in the amount of $75,861.16. However, I am not satisfied, based on the evidence adduced, that there is sufficient evidence to support the attribution of these costs, as claimed, to this project. As a result, I do not award this sum of money.

[131] I am satisfied, based on all of the foregoing conclusions, that the plaintiff is entitled to payment by the defendant of $816,436.37 plus pre-judgment interest and costs.

Costs

[132] I would urge the parties to agree upon costs, failing which I would invite the parties to provide any costs submissions in writing, to be limited to three pages, including the costs outline. The submissions may be forwarded to my attention, through Judges’ Administration at 361 University Avenue, within thirty days of the release of this Endorsement.

Carole J. Brown, J.

Released: September 21, 2018

COURT FILE NO.: CV-11-438361 DATE: 20180921

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Fermar Paving Limited Plaintiff – and – 567723 Ontario Limited Defendant

REASONS FOR DECISION Carole J. Brown, J.

Released: September 21, 2018