Court File and Parties

COURT FILE NO.: DC 17-71-00 DATE: 2018 10 23 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: DEEPAK GURUNG, Plaintiff AND: NOSTCO CONSTRUCTION and PETER KHATAMI aka POZHANG KHATAMI, Defendants

BEFORE: Trimble J.

COUNSEL: Deepak Gurung, self-represented Plaintiff Nostco Construction, self-represented Defendant, not appearing Peter Khatami a.k.a. Phoozhang Khatami, self-represented Defendant, not appearing

HEARD: October 19, 2018

Endorsement

[1] Mr. Gurung, the Plaintiff, appeals from the assessment of damages of Deputy Judge D. J. Jenny dated 27 January, 2017, rendered in Brampton, Ontario. While both parties participated in the trial, the Defendants did not participate in the appeal.

The Facts

[2] Mr Gurung contracted with Peter Khatami, who carried on business as Nostco Construction (now incorporated), to construct a basement apartment, including a hallway and door to the exterior through the garage. The fixed price contract was entered into on 28 June 2013 (although executed on 3 July), at an all-inclusive price of $31,000. The contract was amended by change order dated 20 February 2014, for a further additional all-inclusive price of $12,802.75. Before the parties fell out and the contract ended, Mr. Gurung had paid the Defendant $25,440. With a few additional costs, the total job was priced at $44,002.75. The apartment was to be completed in May, 2014.

[3] Several problems arose before the change order. Notwithstanding, Mr. Gurung entered into the change order.

[4] By early 2014, a dispute arose over who was to communicate with the building department with respect to obtaining approval for, and of the apartment. For good reason, Mr. Gurung did not trust Mr. Khatami notwithstanding the latter’s advice that things were proceeding as planned with the City, even as late as 13 June, 2014. In fact, Mr, Khatami’s last communication with the City was on 4 March, 2014. Deputy Judge Jenny found that the Defendants abandoned the project on 4 March, 2014.

[5] Mr. Gurung was forced to hire another contractor to complete the job, at additional expense. The new contract was signed on 22 April, 2015 and the job completed in August, 2015.

The Claim

[6] Mr. Gurung claimed the full $25,000.00 Small Claims Court limit, waiving the excess of his claim.

[7] In order to complete the job, Mr. Gurung claims that he spent $15,377.99 in further materials, $2,800 in additional financing costs, $18,570.00 paid to another contractor, $1,300 for architectural services, $661.73 for an additional egress window well, $300 for a gas technician, $200 for repairs after a water pipe burst, $169.50 in further licence fees, and loss of rent for the period of May, 2014 to August, 2015. Mr. Gurung claimed that his additional costs were $22,317.22, before loss of rent.

The Judgment

[8] Deputy Judge Jenny awarded judgment to Mr. Gurung of $5,938.48. This figure represented the difference between the expenses and costs allowed, and the amount of the original contract. He reduced some of Mr. Gurung’s claims, denied the additional financing as too remote, and dismissed the loss of rent claim as unproved.

The Appeal

[9] Mr. Gurung says that the learned Trial Judge committed several "processing errors" as follows:

1. He awarded only $3,300 for additional materials to complete the whole job. The additional materials only for the garage egress door was $4,289. Mr. Gurung asked how was he to complete the job when the amount awarded for additional materials for the whole job was less than the cost of the garage egress door.
2. In calculating additional materials costs, he accepted Mr. Khatami as an "expert" when he should not have.
3. He accepted Mr. Khatami as an expert when he should not have, given his comments that Mr. Khatami’s evidence was inaccurate and ‘shooting from the hip’. Further, Mr. Khatami lied in the witness box.
4. He did not appreciate the evidence. He referred to the apartment as an "in-law suite".
5. He ignored the application of s. 100 of the Consumer Protection Act which said that Mr. Gurung was entitled to a 100% refund.
6. He ignored the loss of rent claim.

Jurisdiction

[10] This appeal is brought pursuant to s. 31 (a) of the Courts of Justice Act, R.S.O. 1990, c. C.43, and s. 2 of the Small Claims Court Jurisdiction and Appeal Limit, O. Reg. 626/00, the Divisional Court has jurisdiction to hear appeals from final orders of the Small Claims Court in excess of $2,500.

Standard of Review

[11] A Trial Judge’s findings of fact attract deference and can be overturned only on the basis of palpable and overriding error. Questions of law are reviewable on the standard of correctness. Questions of mixed fact and law fall on a spectrum. If the issues of fact and law can be extricated one from the other, then the appropriate standard applies to the extricated findings of fact and law. Where the issues of fact and law cannot be extricated one from the other, then the palpable and overriding standard applies. See: Krawchuck v. Scherbak, et al., 2011 ONCA 352, 106 O.R. (3d) 598 (C.A.) and Housen v. Nikolaisen, [2002] 2 S.C.R. 235, 2002 SCC 33.

[12] What do these different standards of review mean?

[13] The standard to overturn a Trial Judge’s findings of fact; namely, a "palpable and overriding error", is a high standard which says, in effect, that an Appellate Court will not disturb a Trial Judge’s findings of fact so long as there is any evidence which supports the challenged findings.

[14] In Waxman v. Waxman, 186 O.A.C. 201, the Court of Appeal said:

The "palpable and overriding" standard addresses both the nature of the factual error and its impact on the result. A "palpable" error is one that is obvious, plain to see or clear: Housen at 246. Examples of "palpable" factual errors include findings made in the complete absence of evidence, findings made in conflict with accepted evidence, findings based on a misapprehension of evidence and findings of fact drawn from primary facts that are the result of speculation rather than inference.

[15] A "palpable" error is one which is so over-arching as to discredit the result. See: Huisman v. MacDonald, 2007 ONCA 391, 280 D.L.R. (4th) 1.

[16] An "overriding" error is an error that goes to the root of the challenged finding of fact such that the fact cannot safely stand in the face of that error. See: Schwartz v. Canada, [1996] 1 S.C.R. 254 at 281[5]. Where the challenged finding of fact is based on a constellation of findings, the conclusion that one or more of those findings is founded on a "palpable" error does not automatically mean that the error is also "overriding".

[17] With findings of law, the standard of review is correctness. An Appellate Court does not need to show deference to the Trial Judge’s decision. In Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, the Supreme Court of Canada said at para. 50:

When applying the correctness standard, a reviewing court will not show deference to the decision maker’s reasoning process; it will rather undertake its own analysis of the question. The analysis will bring the court to decide whether it agrees with the determination of the decision maker; if not, the court will substitute its own view and provide the correct answer. From the outset, the court must ask whether the tribunal’s [court’s] decision was correct.

[18] In appeals from the Small Claims Court, further considerations apply. Section 25 of the Courts of Justice Act says that the Small Claims Court shall hear and determine questions of law and fact in a summary way and may make such order as it considers just and agreeable to good conscience. In other words, the purpose of Small Claims Court is to provide expeditious and low cost resolution of disputes involving relatively small amounts of money.

[19] What does this mean? In matters of Judicial Review (as opposed to Appeals), this Court should be reluctant to interfere with a decision of a Small Claims Court judge unless the order is one made without jurisdiction or in breach of the principles of natural justice. See: Peck v. Residential Property Management Inc., [2009] O.J. No. 3064 (Div. Ct.) and Wilson J. in Pardar v. McKoy, 2011 ONSC 2549, 201 A.C.W.S. (3d) 70, at paras. 3, 5.

[20] The comments of Molloy J. and Wilson J., respectively, are delivered in the context of judicial review applications to the Divisional Court. They apply equally, however, to appeals from the Small Claims Court. Such appeals must be heard in the context of the overall purpose of the court itself; namely, to provide timely, efficient adjudication of civil disputes involving small sums of money, at a cost proportional to the value of the file.

Result

[21] The appeal is allowed, and the amount varied as stated below.

[22] I address the individual allegations of error as follows:

1. He awarded only $3,300 for additional materials to complete the whole job. The additional materials only for the garage egress door was $4,289. Mr. Gurung asked how was he to complete the job when the amount awarded for additional materials for the whole job was less than the cost of the garage egress door.
2. In calculating additional materials costs, he accepted Mr. Khatami as an "expert" when he should not have.
3. He accepted Mr. Khatami as an expert when he should not have, having commented on his evidence was been inaccurate and ‘shooting from the hip’. Further, Mr. Khatami lied in the witness box.

[23] I address these three issues together. I find no merit in these three grounds of appeal.

[24] The Trial Judge did not qualify Mr. Khatami as an expert. The Trial Judge’s comment at page 10, line 130 of the transcript shows that the Trial Judge said that Mr. Khatami was the only expert in the trial concerning material costs. In context, the Trial Judge did not accept Mr. Khatami as an expert in the traditional sense; rather, he considered Mr. Khatami as the only person in the room with any expertise or knowledge about the costs of the materials required.

[25] With respect to Mr. Khatami’s being less than forthright, these comments were limited to specific instances, and not comments about his reliability, generally, as Mr. Gurung submits. It is Trial Judge’s job to determine the credibility of witnesses. It is open to a Trial Judge to accept all, none, or some of a witness’s testimony. The Trial Judge appropriately exercised his discretion in this regard.

[26] Finally, while Mr. Gurung clearly views Mr. Khatami as a liar, the Trial Judge made no such finding.

[27] I find no error by the Trial Judge on any of these three grounds of appeal. They are all findings of fact, with evidence to support them, or findings of credibility, all within the Trial Judge’s discretion, which requires deference on appeal.

4. He did not appreciate the evidence. He referred to the apartment as an "in-law suite".

[28] This ground of appeal has no merit.

[29] At page 111, line 30, the Trial Judge referred to the basement apartment as an "in-law suite", as opposed to an "additional living unit" or ADU. Mr. Gurung said that these terms are distinct, with separate regulatory frameworks.

[30] This choice of words, while inaccurate, is of no moment. The Trial Judge clearly appreciated that the basement apartment was a regulatory and by-law compliant, legal additional dwelling unit.

5. He ignored the application of s. 100 of the Consumer Protection Act which said that Mr. Gurung was entitled to a 100% refund.

[31] This ground of appeal has no merit.

[32] Section 100(2) of the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A says:

(2) If a consumer is successful in an action, unless in the circumstances it would be inequitable to do so, the court shall order that the consumer recover,

(a) the full payment to which he or she is entitled under this Act; and

(b) all goods delivered under a trade-in arrangement or an amount equal to the trade-in allowance. 2002, c. 30, Sched. A, s. 100 (2). (emphasis added)

[33] The Consumer Protection Act says that the consumer is entitled to recover "the full payment to which he or she is entitled under this Act". He is entitled to recover what the court adjudges, not a full refund.

[34] Mr. Gurung says that this provision entitles him to judgment against the Defendants of 100% of his payments. He argued, in effect, that he should be able to keep all of the materials and labour that the Defendants put into the job and obtain a 100% refund of the contract price. In addition, he says that he is entitled to all of the additional money he paid to have the job completed, and the rent that he lost. In other words, he says that because of the Defendants’ breach of the contract, the Defendants pay for his new apartment, all associated additional expenses, and the rent he lost.

[35] The law of damages seeks to put Mr. Gurung back into the same place he would have been in had the contract not been breached; in other words, to put him in the position of having a rentable additional dwelling unit by May, 2014, at a cost of $44,002. Therefore, he is entitled to recover as damages those additional proven expenses made necessary to complete the job, in excess of the original contract price. In addition, he is entitled to recover any legally proven losses or expenses that flow from the breach of contract. In order to calculate Mr. Gurung’s damages, the Trial Judge had to assess the various claims Mr. Gurung advanced.

[36] The Trial Judge reduced Mr. Gurung’s additional materials claim from $15,377.99 to $3,300. These are all findings of fact. I find no palpable and overriding error.

6. He ignored the loss of rent claim and financing expense.

[37] The Trial Judge rejected Mr. Gurung’s claim for loss of rent. In paragraph 26 of the Judgment, he held that Mr. Gurung led no evidence to prove that his apartment would have been rented earlier than November 2015, even if it had been completed and licenced as originally planned. In argument before me, Mr. Gurung conceded that he led no evidence before the trial judge as to when the apartment would have been rented had it been ready as originally contemplated, or with respect to the rent it would have commanded. I find no palpable and overriding error.

[38] After assessing each individual head of damage, in paragraph 28, the Trial Judge calculated the damages by deducting the original contract price of $44,002 from the total proven damages of $49,941.23, for a net cost of completing the job of $5,938.48 above the contract price.

[39] I find that the Trial Judge made two errors.

[40] First, in paragraph 23, he disallowed the claim for $2,800 in additional financing charges as being too remote. He held that there was no evidence that additional financing costs would not have been incurred in any event had the Defendants completed the contract.

[41] A finding of remoteness is a finding of law for which the standard of review is correctness. The Trial Judge erred.

[42] It is usual and reasonable that average people, undertaking this sort of work at this sort of expense, would have had to incur financing costs. It is also reasonable that any delay in the job would increase the financing costs of the work would increase.

[43] There was evidence of Mr. Gurung’s financing costs before the Trial Judge. It was not clearly identified, however, what financing charges arose in the period from May, 2014 when the original contract ought to have been finished, to August, 2015 when it was finished.

[44] A Trial Judge is required to do the best with the evidence he has before him. The Trial Judge erred in not approximating the financing costs for the May, 2014 to August, 2015 period.

[45] In rectifying this error, I arbitrarily award $1,000 for additional financing costs.

[46] Second, the Trial Judge did not award prejudgment interest. His reason for denying it, set out in paragraph 33 of the Judgment, is that Mr. Gurung did not ask for it.

[47] Under section 128(1) of the Courts of Justice Act, prejudgment interest is a right. The statute says “A person who is entitled to an order for the payment of money is entitled to claim and have included in the order the award of interest…”. Section 130 gives the Court has discretion to deny or vary prejudgment interest. The failure to request it is not included in the items that the Court can consider in denying prejudgment interest.

[48] Denial of prejudgment interest on the basis that ‘he didn’t ask for it’, does a disservice to the purpose and objective of the Small Claims Court. I find that the Trial Judge committed an error in law in denying prejudgment interest for the reasons stated.

Order

[49] I allow the appeal and vary it on two aspects.

[50] First, the quantum of the judgment is increased from $5,938.48 to $6,938.48.

[51] Second, the Plaintiff is entitled to prejudgment interest. As the additional costs to complete the work were incurred at various times after the breach of contract, interest is to be calculated at 50% of the statutorily mandated rate, from 4 March 2014 to 27 January 2017.

[52] The Brampton Court staff are directed to prepare an order giving effect to these reasons for my approval and signature, and without the need of Mr. Gurung’s approval.

[53] Mr. Gurung did not address the issue of costs. In order to maintain the costs proportional to the result, I award costs of the Appeal fixed at $500.

Trimble J. Date: October 23, 2018