A. Introduction and Overview

[1] In a construction lien action, the Plaintiff Haci Ahmet Demir sued for payment for the work he did in designing and overseeing a renovation of the Defendant Erdal Kilic’s home.

[2] In his action, Mr. Demir claimed $106,510.19. His claim was comprised of $32,006 for unpaid costs and $65,932.41 for an unpaid management fee plus HST of $8,571.78. By way of defence and counterclaim, Mr. Kilic denied that any money was owing, and he counterclaimed for $14,568.31 for construction deficiencies.

[3] The action was referred for a trial before Master Albert. She delivered a report dated August 11, 2016 in which she granted Mr. Demir a judgment for $31,556.

[4] The Master arrived at this judgment by finding that the parties had agreed to a cost-plus contract in which Mr. Demir had proven that he was entitled to be paid his costs, but that he had failed to prove that a management fee was a term of the contract, the onus being on him to do so. Thus, the Master awarded Mr. Demir $32,006 for unpaid construction costs, and she deducted $450 on account of Mr. Kilic’s counterclaim for deficiencies. Based on these findings, the Master concluded that she did not need to rule on Mr. Demir’s alternative claim in quantum meruit. She also awarded Mr. Demir costs of $5,000 all inclusive.

[5] In the motion now before the court, pursuant to rule 54.09, Mr. Demir opposes the confirmation of the report, and he seeks an order setting aside the report and ordering a new trial on all issues before a different Master. For his part, Mr. Kilic seeks an order confirming the report.

[6] For the reasons that follow, I would allow Mr. Demir’s motion and set aside the Master’s report and judgment, and in its place I grant him judgment for $106,060.19 ($106,510.19 less $450) on a quantum meruit.

[7] As I shall explain, based on her own findings of fact, which I accept as well-founded, the Master made a palpable and overriding error in concluding that any contract had been proven. There was a contradiction between her findings of fact and her conclusion, and this makes the judgment unreasonable and reversible.[^1]

B. Discussion and Analysis

[8] Mr. Kilic owned 5 Jedburgh Road, which he purchased for approximately $800,000, and he contacted Mr. Demir about renovating the property. Mr. Kilic and Mr. Demir came to an understanding, which the Master concluded constituted a contract. Their understanding was not memorialized in writing, and the fundamental dispute between the parties is about what the terms of the oral arrangement were.

[9] Mr. Demir’s position was that the arrangement, which was his first business venture as a renovator, was that there was a cost-plus contract in which Mr. Kilic had agreed to pay for the costs of Mr. Demir arranging for labour and materials plus a 20% management fee. Mr. Kilic’s position was that the arrangement was a fixed-price contract for $250,000 plus $18,000 for pre-construction costs (i.e., for the survey, building permit, etc.). At the trial, Mr. Kilic did not provide any evidence as to what the scope of work for the fixed-price contract was.

[10] There is no dispute that Mr. Demir arranged for and supervised the renovations. He himself did some labour and he designed the renovations. His uncontradicted evidence was that he worked 2,500 hours on the project for which he received nothing. He paid the workers for their labour and materials and, from time to time, he asked Mr. Kilic to reimburse him, which Mr. Kilic did. Mr. Demir worked on the project for about 15 months. His evidence was that the parties never agreed about a deadline for finishing the project.

[11] When the renovation was nearing completion, Mr. Demir asked Mr. Kilic for more money, but Mr. Kilic refused to pay, and their relationship ended shortly thereafter. On October 7, 2013 Mr. Demir registered a construction lien against the property. On November 19, 2013 Mr. Demir registered a certification of action.

[12] There was a one-day trial before the Master. She found neither Mr. Demir nor Mr. Kilic to be credible or reliable witnesses, and since this was an entirely oral arrangement, the Master had little but the parties’ conflicting uncorroborated accounts of the events, their conduct, and the undeniable fact that the parties must have come to some sort of arrangement in which Mr. Demir would oversee an expensive renovation of Mr. Kilic’s home and be paid something for what he did.

[13] The Master found as a fact that Mr. Demir offered his services and that Mr. Kilic accepted that offer. She found that Mr. Demir provided services of good quality. She found that Mr. Kilic paid $297,658.54, but that he refused to pay more than that because he said that the contract was for a fixed price of $250,000. She found, however, that there was not a shred of corroborating evidence that there was a fixed-price contract.

[14] The Master found that there was no evidence that the parties agreed to any particular price for labour. She found that there was no evidence that they agreed on materials of a particular type. She found that Mr. Demir did not produce any corroborating evidence to support an agreement that he should be paid a management fee. She found that there was no agreement as to contract price or contract terms but only a unilateral after-the-fact assertion of a charge after the parties were in a conflict over price.

[15] Based on the fact that Mr. Demir carried out the work and was paid, the Master concluded that there was a meeting of the minds as to the roles of each party and that there was a contract and that Mr. Demir should be paid for his costs but nothing for his management fee. Having made these findings, she concluded that it was not necessary to make findings on the alternative claim based on quantum meruit.

[16] A motion under Rule 54.09 is essentially an appeal and the court will scrutinize the report as if it was an appeal from a trial judgment,[^2] and thus the Master’s decision is entitled to considerable deference.[^3]

[17] Under Rule 54.09, the motion judge may dispose of the motion by requiring the Master to give further reasons or may confirm the report in whole or in part, or make such other order as is just.[^4]

[18] In the case at bar, sitting as an appellate court, I accept and defer to all the Master's findings of fact, but where those findings are tainted by palpable and overriding error, or more simply are unreasonable, appellate intervention is justified.

[19] For a contract to exist, the court must find the parties had a mutual intention to create a legally binding contract and reached agreement on all of the essential terms of the contract.[^5] An agreement is unenforceable if essential provisions intended to govern the contractual relationship are uncertain and have not been settled or agreed upon.[^6]

[20] In the case at bar, accepting all of the Master’s findings of fact, there was a strong evidentiary basis for her to conclude that the parties intended to create a legally binding contract, but there was no basis for her to find that they ever reached agreement on all of the essential terms of the contract. Indeed, her findings could only lead to the opposite conclusion; that they had not agreed on the essential terms of the renovation contract including price, methodology to calculate price, the scope of the contract, specifications, and deadline.

[21] In my opinion, the Master’s conclusion was unreasonable, because a contract requires that the parties come to a meeting of the minds about the fundamental terms of the contract, and here the Master’s own findings were that there was no meeting of the minds about the fundamental terms including the scope of the contract, the price of the contract, the pricing of labour, the selection of materials, and whether Mr. Demir was going to be paid for his own work. Having made these findings, she could only conclude that it was necessary to consider the alternative claim of quantum meruit, but she came to the opposite unsupportable and unjust conclusion.

[22] A claim for quantum meruit is, in its essence, a free-standing cause of action for unjust enrichment that does not depend upon the parties having reached an agreement. In Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc.,[^7] Justice Cronk explained at paras. 95, 98-99:

Such a claim is not dependant on the existence of a valid contract. Rather, it is a discrete cause of action, separate and apart from claims grounded in contract or tort, which contemplates a remedy for unjust enrichment or unjust benefit: see Beatrice C. Deglman v. The Guaranty Trust Company of Canada (Administrator of the Estate of Laura Constantineau Brunet, Deceased), 1954 CanLII 2 (SCC), [1954] S.C.R. 725 at 734-35.
First, the authorities make clear that services provided in reliance on "some underlying measure of agreement" and at the request, or with the acquiescence, of the beneficiary of the services are compensable, although a valid enforceable contract between the parties may not exist. Services provided in these circumstances are not viewed as having been given gratuitously, based on speculation. ….
Thus, where the claim for restitutionary relief is based on quantum meruit, as in this case, an explicit mutual agreement to compensate for services rendered is not a prerequisite to recovery. It suffices if the services in question were furnished at the request, or with the encouragement or acquiescence, of the opposing party in circumstances that render it unjust for the opposing party to retain the benefit conferred by the provision of the services. See Fridman, [G.H.L. Fridman, Restitution, 2d ed. (Toronto: Carswell, 1992)] at pp. 290-92; Nicholson v. St. Denis (1975), 1975 CanLII 393 (ON CA), 57 D.L.R. (3d) 699 (Ont. C.A.), leave to appeal to S.C.C. refused, [1975] 1 S.C.R. x.

[23] In the case at bar, the parties failed to reach an enforceable agreement, but Mr. Demir furnished services at the request and encouragement of Mr. Kilic, and it would be unjust for Mr. Kilic to pay nothing for receiving the benefit of over 2,500 hours of Mr. Demir’s good work.

C. Conclusion

[24] For the above reasons, I allow Mr. Demir’s motion, and I set aside the Master’s report and judgment, and in its place I grant Mr. Demir judgment for $106,060.19.

[25] If the parties cannot agree about the matter of the costs for the trial before the Master, they may make submissions in writing beginning with Mr. Demir’s submissions within 20 days of the release of these Reasons for Decision followed by Mr. Kilic’s submissions within a further 20 days. With respect to the costs of the appeal, having reviewed the costs outlines of the parties, I award Mr. Demir $6,000, the amount claimed.

Perell, J.

Released: February 8, 2018

COURT FILE NO.: CV-13-493167

DATE: 20180208

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HACI AHMET DEMIR

Plaintiff

– and –

ERDAL KILIC

Defendant

REASONS FOR DECISION

PERELL J.

Released: February 8, 2018

[^1]: 1162251 Ontario Ltd. v. 833960 Ontario Ltd. (c.o.b. M-Plan Consulting), 2017 ONCA 854. [^2]: Homewood Development Inc. v. 2010999 Ontario Inc., 2014 ONSC 4437. [^3]: Thyssenkrupp Elevator (Canada) Inc. v. 1147335 Ontario Inc., 2015 ONSC 503. [^4]: RSG Mechanical Incorporated v. 1398796 Ontario Inc., 2014 ONSC 3936. [^5]: A.C. v. Joyce, 2017 ONCA 49 at para. 65. [^6]: Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 1991 CanLII 2734 (ON CA), 79 D.L.R. (4th) 97 (Ont. C.A.); Mitsui & Co. (Point Aconi) Ltd. v. Jones Power Co., 2000 NSCA 95, leave to appeal to the S.C.C. refused, [2000] S.C.C.A. No. 526; Martel v. Mohr, 2011 SKQB 161. [^7]: 2007 ONCA 324.

Demir v. Kilic, 2018 ONSC 949

Case Summary

A. Introduction and Overview

B. Discussion and Analysis

C. Conclusion

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 1

Legal Tests 1