2019 ONSC 2715

COURT FILE NO.: CV-14-178

DATE: 20190430

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

SANDRA POLLICE, personally and as Estate Trustee for THE ESTATE OF MICHAEL POLLICE

Plaintiffs/Defendants by Counterclaim

– and –

MUSKOKA CREATIVE CONSTRUCTION & RENOVATION INC., a.k.a. MUSKOKA CREATIVE CONSTRUCTIONS & RENOVATIONS INC.

Defendant/Plaintiff by Counterclaim

– and –

MICHAEL DOUCETTE

Plaintiff by Counterclaim

Counsel:

Julia Wilkes, for the Plaintiffs/Defendants by Counterclaim

David A. Morin and Peter Reinitzer, for the Defendant/Plaintiffs by Counterclaim

HEARD: November 28, 29, 30 and December 3, 4, 5, 6 and 10, 2018

REASONS FOR DECISION

VALLEE J.:

Introduction

[1] The word cottage means different things to different people. At one end of the spectrum, it could be a modest cabin with no plumbing or heating. At the other end, it could be a multi-million-dollar home, capable of year round occupancy with expensive finishes and every amenity imaginable. Cottage is not defined in the Ontario Building Code nor the Ontario New Home Warranties Plan Act.

[2] The building in this matter is a two storey 3,300 square foot dwelling with high end finishes, four bedrooms, two-and-a-half bathrooms, a custom kitchen, in-floor heating on both floors, air conditioning, an attached two car garage and a detached three car garage. It is located on a property that is approximately 1.4 acres and has 240’ of frontage on Sparrow Lake.[^1]

[3] In 2014, the plaintiffs Michael Pollice and Sandra Pollice hired the defendant Muskoka Creative Construction and Renovations Inc., (MCCR), the principal of which was Michael Doucette, to build a dwelling. I will refer to it as a dwelling because one of the legal issues in this matter relates to whether it was a seasonal cottage or a home. I will also refer to it as a dwelling when I refer to the witness’ evidence[^2]

[4] MCCR referred the Pollices to an architectural technologist, Mark Jones of Draftech Design, to design the dwelling and garage and prepare construction drawings. The foundation was excavated and some other preliminary work was done. Subsequently, the Township of Severn issued a building permit on April 14, 2014.

[5] At the Pollices’ request, MCCR prepared a construction contract. It was one page and set out eleven points. Mr. Pollice, as the client, and Mr. Doucette, as a representative of MCCR, signed it on May 28, 2014.

[6] MCCR carried on with construction until October 3, 2014 when it ceased work. The dwelling was approximately 50% completed. Some of MCCR’s trades and others finished it. The Township granted an occupancy permit on May 5, 2015.

[7] The plaintiffs claim damages for breach of contract, negligent misrepresentation, negligence, unjust enrichment, and repayment of management fees.

[8] The defendant, MCCR, and Michael Doucette, plaintiff by counterclaim, claim aggravated damages for breach of contract, or alternatively, damages for injurious falsehood which flow from public posts made by the plaintiff’s son, and from statements that Mr. Pollice made to Tarion.

[9] Mr. Pollice was fully involved in the construction process. He was examined for discovery on October 15, 2015. Unfortunately, he passed away prior to trial. The parties have agreed that the discovery transcript may be used as evidence.[^3]

Issues

(a) Which party breached the contract?

(b) If the plaintiffs breached the contract, is the contract unenforceable because Mr. Doucette did not comply with the statutory provisions of the Ontario New Homes Warranties Plan Act?

(c) Did MCCR misrepresent the cost of the project and its qualifications to build the dwelling thereby inducing the plaintiff to enter into the contract? If so, are the plaintiffs entitled to damages for negligent misrepresentation?

(d) Was MCCR negligent in performing the contract? Did deficiencies exist as of October 3, 2014? If so, what is the cost to rectify them?

(e) Was MCCR unjustly enriched by retaining a management fee without completing the whole contract? Was a charge for Mr. Doucette’s own labour in addition to the management fee justified?

(f) If the plaintiffs breached the contract, is MCCR and/or Mr. Doucette personally entitled to general and/or aggravated damages flowing from the breach of contract?

(g) Has the plaintiff by counterclaim made out the tort of injurious falsehood? If so, what are the damages?

(h) Are the plaintiffs liable for payment of MCCR and/or Mr. Doucette’s legal fees incurred to defend the charges laid by Tarion?

Background

[10] Mr. Doucette built his first home for himself in 1989. It was a small, two story two-bedroom home with a detached garage. After finishing this project, he decided to go into contracting and founded MCCR. He incorporated it in the late 1990s. After he met his wife, he sold the first home and built a second one. They lived there for 14 years. He built his third house in 2008. It was an investment. This house was 2,200 square feet with an attached garage. He described it as a high-end house. It was featured in a magazine. He and his wife lived there until 2015.

[11] MCCR started out doing decks and fences. Later, its work consisted of carrying out renovations and building boathouses. It was not a Tarion registered builder. MCCR did not solicit home-building work.

[12] Mr. Pollice’s brother-in-law introduced the Pollices to Mr. Doucette. Mr. Pollice told him that they had a cottage lot on Sparrow Lake. They wanted to build a seasonal cottage. They would use it in the summer and occasionally in the winter for snowmobiling.

[13] The Pollices went to Mr. Doucette’s own house that had been featured in the magazine. It had a lot of high-end finishes. They were impressed. They asked about the cost to build it. Mr. Doucette stated that he told them the cost to build this house was $600,000. He also stated that he told the Pollices that he could not build a year-round residence. Because they told him that they would use it part time, he believed he could build it without being a Tarion registered builder.

[14] The Pollices wanted an architect to design the dwelling. In January or February 2014, Mr. Doucette introduced them to Mark Jones, who he always used. He understood that Mark Jones was an architect.[^4] According to Mr. Doucette, he was at the meeting for short time and then left. He was not involved in any discussions about the layout or the design. He thought the Pollices were going to build something similar to his bungalow.

[15] Mrs. Pollice told Mr. Jones that she wanted all of the windows to have views of the water. She wanted in-floor heating. She wanted the interior to be wheelchair accessible. She did not discuss the budget. Her husband handled all of the finances. That was his expertise.

[16] Mr. Doucette stated that initially, he asked the Pollices for a $10,000 deposit for Mr. Jones’ fees. He stated that he would give them an invoice with all receipts attached so that they could see where their money was going. Once the deposit had been used up, he would request more funds. Mr. Pollice never refused to pay him and in fact, paid quickly. He reviewed all of the invoices carefully. He never complained about Mr. Doucette’s labour until after MCCR left the project.

[17] Mr. Pollice kept a log book. He had done this for years when he owned and operated a well drilling company. He used it to keep track of things.

[18] Mr. Jones recalled the initial meeting with Mr. Doucette and the Pollices in early 2014. Mr. Jones stated that they probably decided to call the dwelling a seasonal cottage at that meeting. He acknowledged that the title on his drawings was “Proposed Cottage Design”. He stated that he always calls waterfront dwellings cottages. It was just a generic title.

[19] Mr. Jones stated that Mr. Pollice was focused on blown insulation and in-floor heating. Mr. Jones took some notes. Page 2 of his notes state, “insulate exterior well, rigid insulation on exterior”. Page 6 of his notes state “heating in floor c/w boiler - radiant on upper no concrete”. There is also another note on page 6 which states, “SB – 12? (NO) “Cottage”?”

[20] Mr. Pollice’s priorities were to stay on budget and have good insulation in the dwelling.

[21] Mr. Doucette testified that in February, Mr. Pollice asked him about the details that he should put on the information form for the Builder’s Risk Questionnaire. Mr. Pollice sent him the form. Mr. Doucette filled in the answers in his own handwriting and wrote “seasonal cottage”.

[22] MCCR produced a document which shows that Mr. Pollice submitted a fresh copy of the Builder’s Risk Questionnaire to the insurer. On it, Mr. Pollice wrote “Single Family Cottage”.

[23] According to Mr. Jones, after the initial meeting, he created the preliminary design drawings, including floor plans and exterior elevations. They were done in the later part of January. He also prepared a proposed site plan which showed the location of the new buildings on the property.

[24] Mr. Jones explained that a section of the Ontario Building Code, SB-12, provides a limit to the area of glass can be used in a dwelling that is intended for occupancy on a continuous basis in the winter months. If it is not intended for winter occupancy, there is no limit to the area of glass that can be used. Mr. Jones stated that he believed that in the end, the glass area for a dwelling intended for winter occupancy was not exceeded.

[25] Mr. Jones explained that the dwelling was designed to have a poured perimeter foundation wall pinned to bedrock and an interior non-structural slab. There was no basement.

[26] Mr. Jones stated that he completed the final construction drawings for the detached three-car garage in April, 2014. He was satisfied that all of the drawings were in a proper form to attach to an application for a building permit.

[27] Mr. Doucette stated that he was familiar with the Building Code. He had reviewed it but he could not quote it. He did not know which provisions applied to seasonal dwellings. He did not know about SB-12. He understood that he was building a seasonal cottage.

[28] The building permit was issued on April 14, 2014. Mr. Doucette stated that he received the permit drawings and kept them at the site. He worked from them.

The Agreement

[29] Mr. Doucette stated that he started work on the project prior to preparing a written agreement. He had a verbal agreement with Mr. Pollice and shook hands on it. That was the way he operated with his other clients. The Pollices wanted a written agreement. The agreement for this project was the first one that he had ever done. His ex-wife prepared the agreement because he was not good at using a computer. It was a one-page agreement that set out eleven points and was entitled “Work Agreement/Memorandum of Understanding”. One of the terms stated that Mr. Doucette was to be paid a 20% management fee on labour, materials, and professionals on-site, such as surveyors. Another term stated that the Pollices could source out their own supplies if they wished. They were not bound to use MCCR’s suppliers. They would still pay a 20% management fee on any supplies that they sourced.

[30] A further term of the agreement was that the Pollices would provide their own builders risk insurance. MCCR was to have its own insurance such as WSIB and liability coverage. The agreement also stated that the Pollices would obtain the building permit. Mr. Doucette stated that he always required owners to obtain the permits.

[31] Another term of the agreement was that an industry standard warranty would apply for materials, fixtures, and supplies. Mr. Doucette stated that this was important. He always supplied a one-year warranty because he was not registered with Tarion. The Pollices did not raise any concerns about Tarion.

[32] Mr. Jones’ roof plan drawing for the dwelling shows that it was revised on June 11, 2014 and again on June 18, 2014. In the top left-hand corner, the text states, “This cottage is intended for occupancy on a continuing basis during the winter months so OBC SB -12(1.2.1.1(1)) is applicable.” [Emphasis added] Mr. Doucette stated that he did not recall receiving a separate set of drawings for the dwelling at a later date. He was not involved in any discussions or decisions with respect to revisions. He did recall that there was a change in the width of the roof dormers. He did not recall requiring drawings. He stated that he just moved the rafters to accommodate it. He was working from the March drawings.

End of MCCR’s work

[33] MCCR stopped work on the project on October 3, 2014, for reasons discussed below.

[34] Mr. Doucette stated that Mr. Pollice sent him an email on October 6, 2014, asking him to advise in writing as to his intentions with respect to the project. He stated, “We have a house in mid construction, which we would like to complete.” Mr. Doucette stated that he responded on October 7, 2014, stating, “It is my understanding that you have hired John Renner and he in turn has hired on Graham and Paul to continue with your build. I’m waiting for one more invoice from the supplier then I can complete my accounting and settle up with you. Good luck with your build.”

[35] Mr. Pollice responded to this email as follows, “I want to KNOW YOUR INTENTIONS. You just walked off the site. I have a home to complete, which you agreed to build.”

[36] Mr. Doucette stated that he received another email from Mr. Pollice on October 8, 2014. It stated that, “Mike Doucette, Muskoka Creative Construction and Renovations Inc., has acted to terminate the agreement entered into on May 28, 2014, verbally and by walking off the site.” Mr. Pollice stated that upon advice from legal counsel, he requested a number of documents including timesheets for labour charges, a final statement of accounts, all plans, drawings, product specifications, inspection reports, and any other information regarding the project.

[37] Mr. Doucette stated that after receiving this email, he went to see a paralegal for advice. He provided all the documents that Mr. Pollice had requested. He still had money on deposit so he refunded it to Mr. Pollice.

[38] Mr. Doucette stated that he provided the second to last invoice dated September 22, 2014. It was paid. He testified that his last invoice to Mr. Pollice was dated October 10, 2014. It showed a credit back to the Pollices of $8,693.31 because MCCR still had cash on hand.

[39] Mr. Doucette stated that he received a further email from Mr. Pollice on October 22, 2014, which requested certain invoices and the rates charged for each worker.

[40] Mr. Doucette testified that he received another email from Mr. Pollice on November 1, 2014. It requested further documents and raised an issue about a deposit which Mr. Pollice believed had not been taken into account. At the end of the email, Mr. Pollice stated that if he did not receive the information requested, he would commence legal action.

[41] The Pollices received an occupancy permit for the dwelling on approximately May 5, 2015.

Which Party Breached the Contract?

MCCR’s Position

[42] MCCR relies on Summers v. Harrower, 2005 50261, para 12, in which the court, relying on Greenwood v. Estevan School District No. 257 (1910), 15 W.L.R. 568 (Sask C.A.), stated, “Where an owner imposes conditions interfering with completion of a contract, such conduct may reflect an intention to repudiate the contract and entitle the contractor to terminate.”

[43] Mr. Doucette stated that Mr. Pollice wanted to be involved in the construction. Mr. Doucette gave him the job of dipping the cedar shakes that were to be installed on the gable ends of the dwelling.

[44] Mr. Doucette stated that Mr. Pollice was difficult from the start of the project. He did not like the way that Mr. Doucette was doing MCCR’s invoicing, specifically how he was accounting for the deposits that were paid. His final invoice would show the HST and then he would deduct the amount of the deposit. His accountant had never said there was a problem in doing it this way. He stated that Mr. Pollice did not want him to add HST to the deposits. Mr. Pollice insisted on having blank MCCR invoices. He would use them to rewrite Mr. Doucette’s invoices. Mr. Doucette provided several examples of this.

[45] Mr. Doucette stated that he and Mr. Pollice had a lot of confrontations on the site. Mr. Pollice was there every day. He had complaints. He wanted to know why there was no room over the attached garage.[^5] He thought the roof pitch should be changed. He wanted doors moved. He changed his mind about building materials. He added insulation to the foundation and the three-car garage. He wanted to change the size of the Muskoka room. He kept making changes. Mr. Doucette stated that Mr. Pollice constantly interfered in the project. He was asked to move walls and doorways. He recalled that he moved the upstairs closet six times and a wall in the mud room 12 times. He would be in the process of doing something and then have to rip it out and do it over again.

[46] Mr. Pollice’s diary confirms that he was on the construction site almost daily. Mr. Doucette testified that his conduct made MCCR’s ability to carry out its duties as a general contractor impossible. Mr. Doucette testified that Mr. Pollice questioned MCCR’s staffing choices, the number of workers it chose to have on site, the hours those workers spent on the site, and the amount of time that Mr. Doucette was present on the site. Throughout the construction, Mr. Pollice was crude and vulgar. He often swore at Mr. Doucette which demeaned him in front of his sub-trades.

[47] Mr. Doucette stated that Mr. Pollice always believed that he was right, and Mr. Doucette was wrong. He complained about the length of time that it was taking to build the roof. Mr. Doucette stated that the dwelling was stick framed with 12-foot rafters. It was not a truss roof. The weather did not cooperate. It seemed as though it rained every day. Mr. Pollice was upset because the inside of the dwelling was getting wet. He questioned choices and construction methods. He did not want any of the workers to park their vehicles on the grass. He required them to park next door and carry their tools over to the site.

[48] Mr. Doucette stated that Mr. Pollice swore at him and called him an “asshole”. On one occasion, a tool was not working properly. Mr. Pollice complained that he had poor equipment. Mr. Doucette referred to Mr. Pollice’s log dated June 23, 2014 in which he stated:

Backfill garage. Level Big O along front to discharge. Move to S west end. Forgot or didn’t bother leveling. Dig up and level. Not a great job at S E CNR. After re-digging didn’t go back to first joint. Asshole. I was in Pav when they fucked up. I told all of them it was very important to me grade the Big O to drain line. Mike D. says “it doesn’t matter.” Nothing fucking matters to him except me looking over his shoulder and taking responsibility.

[49] Mr. Doucette stated that this was typical of the way Mr. Pollice spoke to him. Mr. Pollice did not know that a level had been used. Mr. Doucette stated that Mr. Pollice called him an “asshole” and an “idiot” on numerous occasions. Throughout the project, Mr. Pollice told him that he thought Mr. Jones was an asshole. Mr. Doucette testified that carrying out the project was stressful. Mr. Pollice made it that way. If he had not been actively involved in it, the project would not have been stressful. Mr. Doucette also referred to Mr. Pollice’s log book dated July 15, 2014, in which he stated, “Called Mark Jones because I hadn’t heard from him. Asshole.”

[50] The entry in Mr. Pollice’s log book dated September 9, 2014, shows that he was tracking the workers’ hours. He was upset because the space above the master bedroom and the space next to the upper bathroom was wasted. He stated, “Thanks a lot Mark/Mike. Assholes.” Mr. Doucette agreed that there was some wasted space, but Mr. Jones designed the dwelling from pictures provided by Mrs. Pollice. Mr. Doucette stated that he simply built the dwelling in accordance with the design.

[51] Mr. Pollice stated that in 2015, he discovered that there would be no step from the garage floor into the dwelling when the garage door installer came to take measurements. He thought there was supposed to be a 10-foot ceiling in the garage, but it was only nine feet. He called the Township and asked, “Is this right?” The Township told him, “You can do it. It’s not against the Building Code.”

[52] Mr. Doucette stated that the attached garage does not have a step up into the dwelling. Mr. Pollice had insisted that there be one step from the grass to the dwelling for a specific reason. If Mr. Doucette had put the garage down two steps from the grade that Mr. Pollice insisted on having, water would have run into it. Mr. Doucette recalled having an argument with Mr. Pollice about this. He told Mr. Pollice that if he wanted to lower the dwelling, he would lose the step in the garage. Mr. Pollice told him that Mrs. Pollice wanted the dwelling to be wheelchair accessible. He stated that he agreed to do what Mr. Pollice wanted but was adamant that he would not go any lower. Mr. Doucette denied that he installed the attached garage at an improper elevation. He stated that there was no violation of the Building Code. The chief building official never told him that he had failed to comply. The Township inspected the footings and foundations. It had no concerns.

[53] Mr. Doucette stated that the Pollices’ interior designer, Liz Lehman tried to tell him how to build the dwelling. She questioned why there was no step from the garage into the dwelling. Mr. Doucette recalled telling her that Mr. Pollice made the decision. Ms. Lehman stated that he was not qualified to make decisions. Mr. Doucette’s reaction was that Mr. Pollice should then stay out of the matter. Mr. Pollice was acting like it was a big surprise that there was no step when he knew about it all along. He wanted the dwelling to be set as low as possible. This meant that there could be no step from the garage into the dwelling. His reaction was very upsetting to Mr. Doucette.

[54] Mr. Doucette testified that on approximately September 19, 2014, he had a conversation with Mr. Pollice in which he stated that the environment was toxic. He suggested that perhaps Mr. Pollice should find someone else to finish the dwelling. He said that it was starting to affect him emotionally. He did not want to go to a site where he was going to be criticized and yelled at. Some bickering at a jobsite was normal but swearing and yelling was unacceptable.

[55] Mr. Doucette stated that he decided he could not continue with the project because of Mr. Pollice’s conduct. Mr. Doucette called a meeting at the site with all of his trades to tell them that MCCR could not continue but that they could work directly for Mr. Pollice if they wished. They could continue to use MCCR’s equipment.

The Pollices’ Position

[56] Mr. Pollice also recalled this conversation. He said that Mr. Doucette described it as a toxic environment. He stated that Mr. Doucette also said he did not like being told how to build a house by a decorator. Mr. Pollice did not agree that the work environment was toxic.

[57] Mr. Pollice’s log book shows that he was on site for a number of days. At times, he was dissatisfied with the work. The May 30, 2014 log book entry states,

short about 1 wheelbarrow full of concrete 5m³; forgot rebar in footing in front middle 2 ft; should have ordered more than just enough; Mike D could have directed cement truck driver when other guys busy; used old rebar – left overs short straight on SW & front wall

[58] The June 20, 2014 log book entry states, “Mike D called to bitch that [illegible] over his shoulder and that Kevin @ Thermoseal doesn’t know who he’s quoting for.”

[59] The October 3, 2014 log book entry states, “Mike D – finished – toxic environment here – walked off see notes.”

Analysis

[60] As noted above, MCCR prepared a one-page construction agreement containing eleven points. It is short on details. There are no termination or default provisions.

[61] It is difficult to make a credibility finding when one party is deceased, and the court has only a rather limited written record of his evidence. Nevertheless, I find that the log book entries support Mr. Doucette’s testimony that Mr. Pollice was looking over his shoulder while the project was underway, that he was dissatisfied at times with the work, and that he used profanity.

[62] There is no dispute that Mr. Pollice had never built a house and was not in the construction business. He had a well drilling company. He was not qualified to comment on the construction methods used. MCCR’s work was inspected by the municipality at all the required stages. No deficiencies were noted on the reports. No orders such as stop work, uncover or comply were ever issued.

[63] MCCR provided only Summers in support of its breach of contract position. The Pollices provided no authorities. I note that in Summers, payment was the issue. The owner refused to pay the third draw and refused to pay GST on the first and second draws. Greenwood was about the sufficiency of the contractor’s bond. Both of these cases can be distinguished. Neither of them concerned a party’s behaviour or attitude during the course of the contract. However, at para. 13 of Summers, the court notes:

If the owner ceases to make payments under the contract or by other conduct makes it impossible for the contractor to complete, the contractor is justified in abandoning the work and is entitled at the same time to enforce a claim in quantum meruit to the extent of the actual value of the work performed and material supplied to that time.

[64] In Chris Nash Building Inc. v. Gibson, [2002] O.J. No. 1083, the contractor, Nash Building, entered into a contract with the homeowner, Gibson, for restoration of a home damaged by fire. In the action, Nash Building left the project alleging it was dismissed and claimed quantum meruit for labour and materials, while Gibson counterclaimed for breach of contract because Nash Building had abandoned the project. In characterizing the relationship between the parties, Métivier J. stated, at para. 9:

However, more serious was the growing feeling of mutual distrust and hostility, and an inability, or unwillingness, to communicate effectively. The plaintiff alleged that numerous changes were made and decisions as to what would go where were delayed. Specifications for the kitchen and for the bathroom fixtures were never finalized. This caused delays to Nash and interrupted the flow of work. All of this, the plaintiff states, occurred while the Gibsons second-guessed, criticized, and complained unduly. On one occasion, Mr. Gibson is alleged to have voiced his complaints by yelling at the company's supervisor, Mr. Hunter. Mr. Hunter, on the other hand, was said to be abrupt, uncommunicative, had a short fuse, and on one occasion blew up at Mrs. Gibson, although he apologized the next morning. I find as a fact that each party was rude to the other.

[65] Much like the facts of this case, the Gibsons closely monitored the construction, considering themselves knowledgeable on the subject of renovations. The court found that delays in making decisions and making changes to decisions already made prevented the project from running smoothly.

[66] The plaintiff alleged four breaches of contract relating to the conduct of the homeowner as follows: (1) failure to make timely choices; (2) interference with construction methods; (3) refusal to put price adjustment in writing; and (4) allowing contract payments to become overdue. Of these alleged breaches, the court found a breach of contract in relation to interference with construction methods.

[67] At para. 37, Métivier J. stated:

The law is quite clear on this point. As set out in Goldsmith on Canadian Building Contracts, fourth edition, Carswell, 1988, p. 5-6:

Subject to any express provision in the contract to the contrary, a contractor is entitled, whether the contract expressly so states or not, to carry out his work without interference from the owner or anyone claiming through or under him. A contractor is not a servant of the owner, and although the latter is entitled to tell him what to do, he is not entitled to tell him how to do it. Accordingly, an interference with the contractor's method of carrying out his work, which is not authorized by the contract, constitutes a breach of contract by the owner. In practice such interference is frequently the result of the activities of an overzealous supervising engineer or architect, whose duty it is to see that the result specified in the contract is achieved, but not to tell the contractor how to achieve such a result.

[68] I find that Mr. Pollice’s conduct and interactions on the job site created an environment in which MCCR could no longer carry out the work. Frequent design changes required Mr. Doucette to re-do completed work. Mr. Pollice repeatedly questioned methods of construction despite not having the requisite knowledge or skill. His manner of interacting with Mr. Doucette was clearly rude and unprofessional. Accordingly, I find that Mr. Pollice’s interference with construction methods constituted a breach of contract.

Is the contract unenforceable because Mr. Doucette did not comply with the statutory provisions of Ontario New Homes Warranties Plan Act?

MCCR’s Position

[69] Mr. Doucette stated that he was familiar with the Building Code. He had reviewed it, but he could not quote it. He did not know which provisions applied to seasonal buildings. He did not know about SB-12.

[70] Mr. Doucette stated that he did not need to be registered with Tarion in order to build the dwelling. The Pollices told him that they wanted to build a seasonal cottage. This is exempt from Tarion registration requirements. Mr. Doucette testified that he knew the plaintiffs would be using the dwelling in the winter. They had snowmobiles. He knew that Mr. Pollice and his son liked to come to the property in the winter for ice fishing. He understood that the property would be occupied seasonally, not year-round. He stated that the Pollices never said that they wanted to retire and live there. In fact, Mrs. Pollice said that she would never be up there in the winter because she had grandchildren in Waterloo where they lived.

[71] Mr. Doucette testified that he attended the Township office when Mr. Pollice filled out the building permit application; however, he did not supply any information for the application. He was sitting back on a bench 15 feet away while Mr. Pollice was at the counter. Mr. Pollice did not ask him to come to the counter to help fill in anything. The Chief Building Official was at the counter with him. Mr. Doucette stated that he did not tell Mr. Pollice to check “no” in the boxes with respect to the Tarion warranty. He left it up to Mr. Pollice to apply for the permit.

[72] On April 23, 2014, Mr. Pollice made a note in his log book which stated, “called Mike Doucette re-cottage as seasonal or year-round. Spoke w/ Jeff Katie[^6] re [illegible]. No extra cost. We are above standards. (If selling in future - better as year-round).” Mr. Doucette denied that Mr. Pollice called him about this. Furthermore, he never spoke to Mr. Pollice about whether the building permit should be changed.

[73] A number of documents and interactions between the parties show that the Pollices described the dwelling as a seasonal cottage:

(a) In February, in response to question number 19 on the questionnaire for the builder’s risk insurance, Mr. Pollice stated, “[the] Property will be used as a Single Family Cottage upon completion as it has been since purchase date of April 11, 2003.”

(b) The construction contract that the parties signed refers to the dwelling as a cottage.

(c) The building permit application completed and signed by Mr. Pollice states that the proposed use is a cottage.

(d) The cover letter to the design drawings by Draftech Design Inc., created pursuant to Mr. Pollice’s instructions, refer to the project as a cottage. A notation on the draft plans indicated that the cottage was not intended for use on a continuing basis during the winter months.

(e) Jim Oakley, the Township of Severn Chief Building Official, testified that Mr. Pollice confirmed that the project was to build cottage and that the project was inspected as a cottage.

(f) Mr. Pollice’s diary notes refer to the dwelling as a cottage.[^7]

(g) The Pollices’ statement of claim against MCCR refers to the dwelling as a cottage.

[74] Mr. Doucette stated that he believed that he did not have to be a Tarion registered builder in order to construct a seasonal use cottage that would not be occupied year-round. He noted that the contract stated, “Industry standard warranty will apply for materials, fixtures and supplies.” He testified that he always supplied a one-year warranty. Mr. Pollice never raised any concerns about Tarion.

The Plaintiffs’ Position

[75] The plaintiffs state that MCCR was not a Tarion registered builder. It was not legally permitted to build the dwelling. Mr. Doucette represented to the Pollices that MCCR could build the dwelling. As a result of the misrepresentation, the contract is unenforceable. MCCR should refund the Pollices all of the management fees that they paid for the project.

[76] The plaintiffs state that they wanted a dwelling that could be occupied at any time of the year. Mrs. Pollice stated that when the design was being done, they spoke to Mr. Doucette about building a winterized cottage. They called it a cottage because their primary residence was in Waterloo. Mrs. Pollice stated that she has neighbours on Sparrow Lake who live there year-round. There are approximately five families within walking distance. The road is plowed in the winter, there are post boxes, and there is regular garbage pickup.

[77] Mrs. Pollice testified that after she and her husband saw Mr. Doucette’s home, they had no reason to believe that MCCR was an inexperienced homebuilder. Mr. Doucette never said that he was not permitted to build a four-season home.

[78] Ryan Pollice testified that when the front row motel building was on the property, his family used it in the summer and in the winter. He stated that in the winter, he would go there with his father and friends for ice fishing and snowmobiling. There was no kitchen. In the winter, there was no running water. His mother would not go in the winter. His father promised to invest time and money into building a permanent year-round cottage that they could enjoy together. His father wanted to retire there and take his grandparents up for visits. He wanted to have the comforts of their permanent home.

Tarion: The Ontario New Home Warranties Plan Act

[79] The Ontario New Home Warranties Plan Act[^8] (the “Act”) provides warranties to owners of new homes for work done by builders. The Tarion Warranty Corporation is designated by regulation to administer the Act. It is consumer legislation that provides protection to purchasers of new homes. Only builders registered in accordance with the Act may construct homes. In order to provide the warranty, the Act requires new home builders to register and pay a fee.[^9] Specifically, s. 6 of the Act states, “No person shall act as a builder…unless the person is registered by the Registrar under this Act.” Section 12 of the Act states, “A builder shall not commence to construct a home until the builder has notified the Corporation of the fact, has provided the Corporation with such particulars as the Corporation requires and has paid the prescribed fee to the Corporation.”

[80] Section 1 of the Act defines “builder” as:

a person who undertakes the performance of all the work and supply of all the materials necessary to construct a completed home whether for the purpose of sale by the person or under a contract with the vendor or owner.

[81] Section 1 of the Act defines a “home” as:

a self-contained one family dwelling detached or an attached to one or more others by a common wall… and includes any structure or appurtenance used in conjunction therewith, but does not include a dwelling built and sold for occupancy for temporary periods for seasonal purposes.

[82] The phrase, “a dwelling built…for occupancy…or seasonal purposes” is not defined by the Act.

[83] The plaintiffs state that the Act does not define “cottage”. A home includes a dwelling colloquially referred to as a cottage which is built according to the Building Code requirements for year-round occupancy. In Ontario (Ministry of Consumer Services) v. K-Tech Building Systems Inc., 2012 ONCJ 219, the court found that the manner in which the dwelling is built, rather than its intended use, is what determines whether a dwelling is a home. At paras. 100 and 101, the court stated,

[The Tarion Corporation Website] indicates that a dwelling built for seasonal purposes would not fall under the coverage of the [Act] because a seasonal home is a home that does not meet the requirements of Part 9 of the Ontario Building Code [for] homes built for year-round occupancy. Further, the Tarion website also indicates that the determination of whether a home is a seasonal home is not dependent on whether the intended purpose for the home is for a seasonal use…

Therefore, the proposed cottage would appear to be a “home” that would have fallen within the jurisdiction of the [Act] since it would have been a dwelling that would have been built according to the Ontario Building Code for year-round occupancy and not constructed as a dwelling for temporary or seasonal purposes. More important, it would not have mattered if Engel [the owner] had not intended to use the proposed cottage during the winter because the roads to her property would not have been passable or usable in the winter, as long as the dwelling would have been built so that it can be occupied year-round.

[84] Section SB-12 of the Building Code sets out certain construction requirements for year-round occupancy, such as insulation for homes. The issued building permit shows that Mr. Jones specifically stated that the design included the requirements of SB-12. The plaintiffs state that the dwelling was always to be SB-12 compliant. It was being built for year-round purposes. The design and construction of the dwelling including its insulation, heating, cooling, and other features, make it a home built for year-round purposes. MCCR knew that it was not a registered builder. It did not have the qualifications to build the home.

[85] Mr. Pollice stated that question 19 on the Builder’s Risk Insurance Questionnaire asked about the use of the property. His written answer was, “The property will be used as a single family cottage.” His evidence was that “When you have a house and when you have two properties, one’s a cottage, one’s a house.” On the Builder’s Risk Insurance Questionnaire, Mr. Pollice indicated that the dwelling would not be a principal residence. Rather, it would be a seasonal cottage.

[86] Mr. Pollice stated that he made an application for a building permit on April 11, 2014. His handwriting is on the document. He stated that Mr. Doucette accompanied him to the Township office when he made the application. The total for the project was $600,000 but Mr. Doucette said to put down $500,000 so he did. The building would be new construction. He agreed that he was going to build a cottage. Page two, paragraph F, contains a section entitled Tarion Warranty Corporation (Ontario New Home Warranty Program) followed by several questions. The first is, “Is construction for a new home as defined in the Ontario New Home Warranties Plan Act?”; the second question is, “Is registration required under the Ontario New Home Warranties Plan Act?” He answered no to both questions. Mr. Pollice stated that he did this under direction from Mr. Doucette who said it was a cash grab and was not necessary. Mr. Doucette stood with him at the counter and told him to check off “no”. He said it was an insurance thing that the government had put together with contractors and was not mandatory. While he was completing the application, Mr. Doucette told him that he was not registered with Tarion. He was not aware of the importance of Tarion at the time. The building permit was issued on April 14, 2014.

[87] Mr. Pollice stated that he never went back to the Township to submit an amended application and alert them to the fact that he was building a house. He said that at one time, Mr. Jones said, “If sometimes you put it down as a cottage, they’ll let things go through.” Mr. Pollice stated that everything in the dwelling was over-designed, including heating. It was a house.

[88] Mr. Pollice’s log entries show that he referred to the dwelling as a house several times. This occurred on May 15, 16, June 25, 26, July 15, and 24.

Analysis

[89] The parties disagree on the issue of what was being built. MCCR focuses on the intended use. His evidence is that the Pollices intended to use the dwelling seasonally, not year-round. Tarion focuses on the nature of the dwelling that was constructed. If it is capable of year-round use, then it is a home. Only a registered builder may build a home.

[90] The term “cottage” is not helpful for this analysis. It is not defined in the Act nor the Building Code. The Building Code s. 9.36.2.1 refers to “buildings used or intended to be used as seasonal recreational buildings”. In Part 9, which sets out requirements for residential construction, s. 9.36.2.1 contains exemptions for seasonal recreational buildings. It states,

Except as provided in Sentence (4), thermal insulation, vapour barrier, air barrier construction, interior finishes, plumbing, heating, mechanical ventilation, air-conditioning and electrical facilities need not be provided, but where any of these are provided, they shall comply with the requirements of this Part.

[91] In other words, a seasonal recreational building can be built with no running water, heat, or ventilation. Another exemption is set out in s. 9.32.3.1 which states that if heating is provided, it does not have to be capable of “maintaining an indoor temperature of not less than 22 degrees C in all living spaces”. In other words, a seasonal recreational building can have a heating system which will not provide adequate heat for winter use.

[92] Mr. Doucette stated that he did not understand Tarion’s role. He stated that he knew what Tarion was about, but he did not know all of the ramifications. He just knew that he was not allowed to build year-round homes. He stated that his company would never have been big enough to do that kind of work. Even though the project was larger than his own home, he believed it was a cottage. He knew that it was illegal for an unregistered builder to build a home. He was never registered as a Tarion builder. He knew that a home under construction had to be registered. He stated that if the Pollices had said that they wanted to build a year-round home he would have told them that he could not build it. They came to him wanting a cottage. He believed that the Tarion definition of a home meant that it had to be occupied year-round.

[93] Mr. Doucette stated that he knew the Pollices would use the dwelling in the winter. Mr. Pollice had told him that they would come up for snowmobiling. He told Mr. Pollice not to put a sewer line underneath the driveway because if he was going to come up periodically in the winter, it would be crushed.

[94] The Supplementary Guideline to the Ontario Building Code sets out provisions for energy efficiency for housing. One of them is Supplementary Standard SB – 12. It includes design options regarding the energy efficiency of a building or part of a building of residential occupancy and is intended for occupancy on a continuing basis during the winter months.

[95] The relevant part of SB-12 s. 1.1.1.2 states:

The energy efficiency of a building or part of a building or residential occupancy that is within the scope of Part 9 of Division B of the Building Code and is intended for occupancy on a continuing basis during the winter months shall comply with (a) Subsection 2.1.1 (Prescriptive Compliance Packages) of Chapter 2. [Emphasis added]

[96] Section 2.1 is entitled Methods for Achieving Energy Efficiency Compliance. It contains “compliance packages” that are described by letters A to M. The various packages set out minimum R values for insulation in different parts of a building. They also contain requirements for windows and mechanical equipment.

[97] Pages three and four of the building permit application are documents entitled Schedule One Designer Information and Energy Efficiency Design Summary. On page three, under “Design Activities”, Mr. Jones indicated “house” and “small building”. Under “Description of designer’s work”, Mr. Jones stated, “New single family “Seasonal Cottage” (SB-12 Section 1.1.1.2(2) does not apply)”.

[98] On the Energy Efficiency Design Summary (page 4) under “Compliance Option”, Mr. Jones wrote “SB-12 Prescriptive [SB-12-2.1.1]” and Package “J”. Under “Building Specifications”, he set out the R values for insulation for the various parts of the dwelling among other things which correspond with the requirements of Package J.

[99] Compliance with a package is required for buildings intended for occupancy on a continuing basis during the winter months. Chief Building Official, James Oakley, testified that when a package is selected, compliance with all of its requirements is necessary. One cannot pick and choose.

[100] The building permit application also includes a page entitled “Guide to [illegible] Energy Efficiency Design [illegible] Form”. It states,

Beginning January 1, 2012, a house designer must choose one of four energy efficiency compliance options in the building code. The first and relevant one is “Comply with the SB-12 Prescriptive design tables.”

[101] The first set of drawings for the dwelling dated March 14, 2014, contain a comment in the upper left-hand corner which states:

This cottage is not intended for occupancy on a continuing basis during the winter months so OBC SB-12(1.2.1.1.(1) is not applicable. This building is intended to be used as a seasonal residential building and so conforms with the restrictions provided in OBC 9.36.2.1” [Emphasis added].

[102] Mr. Jones testified that as of March 2014, he understood that the cottage was not intended to be used for winter occupancy. It appears that these drawings were submitted with the building permit application in April. The building permit application includes a document entitled “Schedule 1 Designer Information”. In the “Description of designer’s work” section, Mr. Jones stated, “New single family “Seasonal” Cottage (SB-12 Section 1.1.2(2) does not apply).” He signed the document on March 27, 2014, certifying that the information contained in the schedule was true and to the best of his knowledge.

[103] On April 23, 2014, Mr. Pollice made a note in his log book which stated, “called Mike Doucette re-cottage as seasonal or year-round. Spoke w/Jeff Katie re [illegible]. No extra cost. We are above standards. (If selling in future - better as year-round”).

[104] Another set of drawings show that they were revised on June 11, 2014 and June 18, 2014. Mr. Jones stated that the Pollices requested some changes. They wanted wider roof dormers and additional insulation for the foundation. On June 20, 2014, Mr. Jones sent an email to the Pollices attaching the drawings with the revisions. These drawings include a comment in the upper left-hand corner, “This cottage is intended for occupancy on a continuing basis during the winter months, so OBC SB-12 (1.2.1.1(1) is applicable.” [Emphasis added]. Mr. Jones testified that he did not recall why the comment was changed.

[105] Mr. Jones testified that if the dwelling was constructed in accordance with his first set of drawings, it would meet the definition of a year-round dwelling under the Building Code. The dwelling could be lived in year-round. Nothing in the subsequent drawings affected this. Both versions of his drawings were very similar.

[106] The evidence clearly shows that although the dwelling was described as seasonal, and although the permit drawings and application state that SB-12 does not apply, the dwelling was designed so that it could be occupied year-round. There is no dispute that Mr. Doucette knew that it would be occupied at times in the winter when the Pollices were ice fishing and snowmobiling. He knew the insulation R factors that were specified in the design. He knew that he was building a dwelling that could be occupied at any time during the year.

[107] The difficulty is that he thought the intended use was the differentiating factor between a seasonal dwelling that he could build and a year-round, occupied dwelling that he could not build because he was not Tarion registered builder. He thought that even though the dwelling was capable of being occupied year-round, because the Pollices intended to occupy it for only various periods in the different seasons, this meant that he could build it without being a Tarion registered builder. He was wrong about that. As noted above, the legislation states that a builder who builds a home that is capable of year-round occupancy must be a Tarion registered builder. According to its design, this dwelling was always intended to be capable of year-round occupancy. If it could be used in the winter, it could be used at any time. Mr. Doucette’s confusion on this point is not an excuse. He had an obligation to correctly inform himself of the dwellings that MCCR could not build without Tarion registration.

[108] The question is, what difference does this make? Does it mean that the contract is unenforceable? The importance of Tarion registration is the $300,000 warranty provided to new home buyers/owners. Bryan Stott, a Tarion employee who worked in the enforcement department as an investigator at the relevant time, stated that when a builder who is registered with Tarion completes the construction of a new home and turns it over to the owner, the owner is entitled to the $300,000 warranty. The warranty is not available when a builder does not complete the construction of the home. When this happens, the owner is eligible to claim only for a financial loss up to $40,000 if the difference in the amount paid to the builder was more than the value of the work supplied.

[109] As will be discussed below, the Pollices made a financial loss claim. In the application, they described the dwelling as approximately 50% complete. They stated that they had paid $560,000 to the builder. According to Tarion, the Pollices provided proof of the payments to MCCR totaling $470,576.80. MCCR confirmed that it was paid $488,447.28 plus HST.

[110] Tarion reviewed the claim and determined that:

[T]here is no total contract price stated, no list of construction specifications, [and] no schedule of payments… The homeowners and builder disagree about the most significant term of the agreement - the price which makes it difficult to apply the criteria for entitlement to compensation… [The Pollices have not] demonstrated that the amount they paid to [MCCR] exceeded the value of the work and material supplied to [them] when the contract was terminated.

[111] According to Chung v. Idan[^10], in determining whether a contract may be enforced, notwithstanding a violation of public law, the following points are to be considered:

(a) the purpose of the statutory prohibition;

(b) the enforcement mechanisms within the statute;

(c) whether the statute is intended to make the contract inherently illegal or only illegal if performed outside of the scheme of the relevant statute;

(d) whether the violation of the statute was mere technical non-compliance without an accompanying intention to breach the policy of the statute; and

(e) whether the illegal provision can be severed.

[112] In Chung, the court found that the contractor did not comply with licencing and permit requirements. The violations were more than technical non-compliance. They were “advertent”. The contractor was not permitted to charge for items “tainted by illegality”.[^11]

[113] MCCR’s non-compliance with the Act was wrong; however, its non-compliance occurred because of MCCR’s belief that if the dwelling was intended to be a seasonal building, registration with Tarion was not necessary. I consider this to be more similar to technical non-compliance rather than an advertent attempt to breach the statute.

[114] In addition, I find that MCCR’s status as a non-registered builder does not support the plaintiffs’ claim that the contract is unenforceable. The Pollices had the benefit of the work. Tarion denied their claim for compensation stating:

Based on the documents submitted to Tarion to date, there is insufficient evidence to show that a financial loss exists. You have not demonstrated that the amount paid to Muskoka Creative Construction and Renovation Inc. exceeds the value of work and materials supplied to you at the time the contract was terminated.

[115] The Pollices are not entitled to a refund of the management fees that they paid to MCCR for work that was actually completed. This would violate the principle of quantum meruit.

Did MCCR misrepresent the cost of the project and its qualifications to build the dwelling thereby inducing the plaintiff to enter into the contract? If so, are the plaintiffs entitled to damages for negligent misrepresentation?

MCCR’s Position

[116] Mr. Doucette testified that he told the Pollices that the cost to build his bungalow was approximately $600,000. Pursuant to the contract, the Pollices were required to obtain builder’s risk insurance. Their insurer sent them a form to complete. On February 6, 2014, Mr. Pollice sent Mr. Doucette the form to complete in draft. Item number five on the form stated, “The separate costs of the work including all site prep work and landscaping to finish the job.” Mr. Doucette wrote, “Estimate $600,000.00”. He stated that at this point, he thought the Pollices were going to build something that was similar to his own bungalow. It was too soon to come up with a price. The design had not yet been done.

[117] On February 14, 2014, Mr. Pollice sent an email to the insurer with his own written answers on the builder’s risk form. With respect to item number five, he stated that the estimated cost of the work would be $750,000.

[118] Mr. Doucette stated that there was no estimated cost of construction in the agreement signed on May 28, 2014. It could not have been provided because the Pollices had not chosen the various finishes. The Pollices were still choosing items in August and September. Mr. Doucette recalled that when he took them to see Mr. Jones in February, Mr. Jones commented that the cost to build would be approximately $450 per square foot based on the pictures that Mrs. Pollice was showing him from a magazine. Mr. Doucette recalled that he stated it would be at least $350 per square foot. Mrs. Pollice never said anything about the budget.

[119] Mr. Pollice’s log book entry on July 8, 2014 states, “Mike Doucette - schedule will make up – spoke w/ Dean, everything good – budget - still looks good- $6-7K.” Mr. Doucette stated that Mr. Pollice was always talking about his budget but no cost to build was ever provided. Mr. Doucette stated that the only time the Pollices received breakdowns of amounts was after he obtained quotes from different subcontractors. There was never an overall project estimate. From just looking at the design and the fact that the dwelling would be 3,300 square feet, one would know that it was not going to be built for less than $1,000,000.

[120] Mr. Doucette stated that MCCR filed a Notice of Project, dated April 29, 2014, with the Ministry of Labour pursuant to the Occupational Health and Safety Act. The description of the project was “construction of cottage and garage”.

[121] Mr. Doucette stated that Mr. Jones’ design for the dwelling was significantly different from his own house. The project was a dwelling with an attached two-car garage and a separate three-car garage with a loft. The main dwelling was two storeys and 3,300 square feet with in-floor heating. It had a Muskoka room. The lake side of the dwelling was all glass. The Pollices installed an elaborate kitchen. The project was not at all comparable to his smaller bungalow with only a two-car attached garage.

The Pollices’ Position

[122] Mr. Pollice stated that he discussed a budget of $600,000 with Mr. Doucette.

[123] Ms. Lehman kept notes. One of them, which might have been made on September 22, 2014,[^12] states, “budget $600,000 + insulation; drawings accepted – MP’s mistake – nothing said it was over budget. 1^st build like this for MD – apologized. MP says must advise it will be more.” Further down on the same page, a note states, “Sq ftg $450”.

Analysis

[124] According to Mr. Doucette, Mr. Jones told the Pollices that the cost to build would be $450 per square foot. Ms. Lehman also noted this. The dwelling alone was 3,300 square feet. At $450 per square foot, the cost to build would be $1,485,000.

[125] I accept Mr. Doucette’s evidence that he told the Pollices that his own bungalow cost $600,000 to build. It appears from the note in Mr. Pollice’s log book dated July 8, 2014, that he was proceeding with this assumption for the project. Mr. Doucette stated that Mr. Pollice was always talking about his budget but that did not mean that the project could be built for that amount. If Mr. Pollice was always talking about his budget, one wonders why Mr. Doucette did not correct him and tell him that the dwelling with the two-car garage and the separate three car garage with a loft was significantly bigger and would be more costly to build in comparison to his bungalow. There is no evidence that he did.

[126] Despite this, I accept Mr. Doucette’s evidence that MCCR did not provide a budget or estimate for the project nor could it have provided one. Detailed specifications including finishes would have been required in order for a contractor to provide an accurate cost to build. Detailed specifications could only have been provided if the Pollices had chosen all of their finishes at the design stage. The evidence is clear that they did not do this. Rather, they were making choices as the project progressed.

[127] I find that MCCR did not misrepresent the cost of the project. MCCR did not misrepresent its qualifications. Mr. Pollice indicated on the permit application that Tarion did not apply.

Was MCCR negligent in performing the contract? Did deficiencies exist as of October 3, 2014? If so, what is the cost to rectify them?

Drainage

The Pollices’ Position

[128] The Pollices state that MCCR owed a duty of care to them in carrying out the project. MCCR fell below the standard of care due to its lack of knowledge. When MCCR left the project, deficiencies had to be remedied. These included a drainage problem which was remedied by the installation of a French drain and a problem with the roof ridge vent which was also fixed.

[129] Mr. Pollice stated that the Chief Building Official told him to install the French drain. He spoke to two contractors who told him that he needed to keep water away from the dwelling.

[130] Mr. Pollice acknowledged that the Township inspector did not raise any issues regarding drainage. There was nothing on his inspection reports. Everything passed the inspections.

MCCR’s Position

[131] MCCR states that there was no drainage problem. Pursuant to the Building Code, the dwelling did not require weeping tiles around the foundation because it had no basement. As noted above, it had a poured perimeter foundation wall pinned to bedrock and an interior non-structural slab. The foundation and the concrete slab were inspected by the municipal building inspector. No deficiencies were noted. No building official ever said that there should be perimeter drainage. As far as Mr. Doucette was concerned, there was sufficient drainage. Mr. Pollice never raised this as an issue during construction. Mr. Pollice decided to install a French drain at a much later date. There was no requirement for him to do so.

[132] Mr. Doucette stated that after he left the project, Mr. Pollice hired an engineer to consider surface water. He understood that the engineer had recommended that Mr. Pollice build a French drain and swale. Mr. Doucette stated that it was not required. It was just a precaution. Mr. Doucette stated that he never received any plans for the drain. It was not part of the project.

[133] Mr. Doucette stated that the Township raised no concerns about construction. There were no stop work orders or orders to comply. The dwelling passed all inspections up to October 3, 2014. There were no deficiencies. Mr. Doucette stated that he never received any evidence nor was there any concern that the building did not meet the requirements of the Building Code.

[134] MCCR also states that although the Pollices called a witness, John Jeffries, who testified that he performed work on the roof vent, there was no evidence to show that this work was required because MCCR had done something improperly. There is no evidence that this work was required for any reason but to complete construction. Furthermore, the Pollices’ expert engineer, Michael Flynn, who commented on other aspects of the dwelling, did not identify any deficiencies with respect to the roof.

Expert Reports

Michael Flynn, P.Eng.

[135] The Pollices retained Michael Flynn, P.Eng., to attend at the dwelling and provide an opinion regarding the overall construction of the dwelling, and deficiencies or oversights at the time of construction.

[136] Mr. Flynn’s main concern was with respect to drainage. He stated that the dwelling was built too low; therefore, the adjacent grades have insufficient fall. Surface water will not readily flow away from the foundations at all locations. Mr. Flynn was concerned that during flash floods, significant snow accumulation, melt and/or heavy sustained rainfall periods, flooding could occur which will infiltrate the dwelling and/or the dwelling’s structural systems. Without proper drainage, settlement of the footings will potentially occur. Displacement can be expected. He did not see any gravity operated weepers on the property. He did not know how the contractor had provided drainage along the footings.

[137] Mr. Flynn stated that the property appears to be subject to water table conditions. Section 9.14.5.1 of the Code requires that foundation drains shall drain to a sewer, drainage ditch or dry well. He noted that a dry well could be constructed; however, s. 9.14.5.3(1) of the Code requires that the natural groundwater level be below the bottom of the dry well.

Ron Koerth, P.Eng.

[138] MCCR retained Ron Koerth, P.Eng., to respond to the alleged deficiencies set out in Mr. Flynn’s report. He testified that weeping tiles were not required around the perimeter of the foundation. The Building Code does not require perimeter drainage when there is nothing on the inside of the foundation. He referred to s. 9.14.2.1(1) of the Building Code. There was no basement. There was soil on both sides of the foundation walls. Water can go from one side to the other. Mr. Koerth stated that there was no evidence of a high water table. He testified that on a construction site, grading would be done last because until the dwelling is complete, equipment is being driven around on the property. The purpose of final grading is to establish a smooth, sloping grade. He stated that the 2% slopes around the dwelling were good. This type of slope would ensure that any rain falling beside the dwelling would flow away. Mr. Koerth also testified that the slope from the dwelling toward the lake was satisfactory. Overall, the grade of the property is in compliance with the Building Code. There is nothing wrong with it.

Analysis

[139] Mr. Jones stated that he had not shown weeping tiles anywhere on the drawings. They were not specified because they were not required.

[140] I accept Mr. Koerth’s evidence that foundation drainage was not required for this dwelling because there was no basement inside the foundation. There was soil on both sides of the foundation walls. The Building Code does not require foundation drainage in this situation. The municipal building inspector inspected the foundation and did not identify any drainage deficiencies. I find that the Pollices installed the French drain on their own initiative. It was not a requirement. It was not part of the design. I find that there was no drainage deficiency.

Roof Vent

[141] Mr. Jeffries testified that he was retained by Mr. Pollice to do work on the dwelling after MCCR left. He did some work on the roof. There was a gap between the plywood and the roof vent. Snow was coming in. He had to tear the ridge vent off, put plywood up the sides of the roof and reinstall the vent. He recalled that the plywood was probably extended 2 ½ inches on either side to close the gap. He sent an invoice dated October 7, 2016 to Mr. Pollice for the work in the amount of $4,216.50.

[142] Mr. Doucette stated that he did not personally go up to the roof to look at the plywood. It was nailed on by the time he left and was up to the ridge. He did not understand why Mr. Jeffries had to extend it.

[143] Neither Mr. Flynn nor Mr. Koerth commented on the roof.

Analysis

[144] MCCR had not completed the roof when it left the project. If there was a gap between the plywood and the ridge vent, it may have existed because the roof was not finished. There is an inadequate evidentiary basis for me to conclude that any gap between the plywood and the roof vent was a deficiency.

[145] I find that MCCR was not negligent in the performance of its contractual duties. All inspections with the Township passed without any noted deficiencies. Therefore, nothing is owed to the Pollices.

Was MCCR unjustly enriched by retaining a management fee without completing the whole contract? Was a charge for Mr. Doucette’s own labour in addition to the management fee justified?

MCCR’s Position

[146] MCCR states that there was no evidence at trial to support the Pollices’ allegation that MCCR retained management fees to which it was not entitled. The Pollices received a substantial benefit from the work carried out by MCCR. It completed 50% of the project. Mr. Pollice carefully reviewed all of MCCR’s invoices. He changed the invoices if he did not agree with them and then paid them. MCCR carried out an accounting after leaving the project and refunded to the Pollices $8,693.21, being the unused remainder of the last amount that the Pollices paid.

The Pollices’ Position

[147] The Pollices state that pursuant to the agreement, MCCR was hired to oversee the entire project to its completion. It was a fixed scope project. The Pollices agreed to pay MCCR a management fee of 20% of the project based on the actual cost of the total project. MCCR did not complete the project; however, it was paid the 20% fee relating to material and labour for the project up until the date when MCCR ceased work. MCCR was required to finish the contract in order to be entitled to the management fee. Because the contract was illegal and/or unenforceable, MCCR was enriched by the payments made. The Pollices were correspondingly deprived. They are entitled to full reimbursement of the amount paid for the management fee.

[148] The Pollices also state that they paid management fees on deposits which were not earned. The deposits totalled $14,000 plus HST. The management fees paid on the deposits were $2,800 (20% of $14,000) plus HST totaling $3,164.

[149] The management fees were tied to MCCR’s obligation to be on site and able to supervise the project. Because it walked away from the project, it did not earn the management fees on these deposits.

Analysis regarding the overall management fee

[150] The Pollices were not deprived because they paid the management fee for the work that MCCR carried out. Rather, according to Mr. Pollice’s statement on the Tarion application form, the work was 50% completed. MCCR was entitled to be paid the management fee based on the labour and materials up to the date when it left the project. Given that Mr. Pollice’s conduct led to the breach of contract that prevented MCCR from finishing the project, the Pollices cannot rely on their own breach to make a claim, the basis of which is that the project was not completed.

Analysis regarding the deposits

[151] Regarding the deposits, Mr. Doucette testified that Mr. Pollice did not like the way that he prepared the invoices. The MCCR invoices show amounts paid for materials, the labour charge, and the deposits. On the total of those numbers, MCCR added the 20% management fee as well as HST. Mr. Pollice disagreed that he should be paying the management fee on the amount of the deposits. He re-wrote most of the invoices showing the amounts paid for materials and the labour charges. On the total of those numbers, he added 20% management fee and HST. After that total, he noted the amounts of the deposits. From the invoices that Mr. Pollice created, which are marked paid, it appears that no management fee was being paid on the deposits. Essentially, Mr. Pollice backed out the amounts of the deposits.

[152] Specifically, MCCR’s invoice dated September 22, 2014, shows three charges for materials and three deposits; to Lutz $8,000 (related to the kitchen), to Muskoka Overhead Door $3,000, and to Kerr Electric $3,000. These total $14,000. It also shows the labour charges and the 20% management fee charged on the above noted items including the deposits. This invoice is stamped “paid”. The last invoice dated October 10, 2014, prepared after MCCR ceased work, shows charges for materials and labour with the management fee added on. No deposits are shown on this invoice. The total with HST is $47,558.85. Below this MCCR accounts for cash on hand of $56,252.06. The invoice amount is then subtracted resulting in $8,693.31 and the text “owing to you [the Pollices]” is noted on the invoice. The invoice shows that it was paid.

[153] Mr. Doucette testified that he made arrangements for Eichhorn Custom Cabinetry & Design, the principal of which was Mr. Lutz, to design and install the kitchen. He also made arrangements for the electrical work carried out by Kerr electric and the garage doors to be supplied and installed by Muskoka Overhead Door. It is unclear whether the electrical work was completed and the overhead doors were installed prior to MCCR’s leaving the project. A management fee is typically paid for a construction manager to organize the work of the sub trades. MCCR organized some of this work. There is no evidence regarding the extent to which Mr. Pollice organized the work of these three trades after MCCR left the project. Accordingly, I find that MCCR is entitled to the management fee that Mr. Pollice paid with respect to these three deposits.

Management Fee on Mr. Doucette’s Labour

The Pollices’ Position

[154] The Pollices state that there is no provision in the agreement that allows MCCR to charge additional fees for Mr. Doucette’s own labour. To the extent that he intended to do so, it was incumbent on MCCR to make this clear in the agreement. The Pollices state that MCCR charged $5,220 for Mr. Doucette’s labour (116 hours x $45). The 20% management fee was $1,044. HST on the total was $814.32. Accordingly, they paid $7,078.32 for Mr. Doucette’s labour. They state that they are entitled to a refund for this amount.

MCCR’s Position

[155] Mr. Doucette stated that when he and Mr. Pollice were reviewing the written agreement, he advised Mr. Pollice that if he was wearing a tool belt and was doing manual labour, there would be a labour charge. It would be subject to the management fee. It was no different from any other person who was doing labour work on the project. Mr. Pollice agreed to this.

Analysis

[156] I do not accept the Pollices’ position that they are entitled to a refund for all of Mr. Doucette’s labour hours plus HST. His labour contributed to the work on the project which was of value to the Pollices. The real amount in issue is the management fee on Mr. Doucette’s labour being $1,044 plus HST.

[157] Mr. Doucette stated that after MCCR left the project, he received an email from Mr. Pollice on October 22, 2014, which requested certain invoices and rates charged for each worker. It further stated that Mr. Doucette’s personal time was not a chargeable item. He stated that he would not pay Mr. Doucette an hourly rate plus 20% on top. Mr. Doucette responded to this email by writing answers on the email itself. With respect to his own work, Mr. Doucette stated, “as was agree [sic] any time I do physical labour you would be charge [sic]. Makes no difference if it’s me or someone else. My management fee does not include any labour charges.”

[158] Mr. Pollice stated that a 20% management fee was charged on Mr. Doucette’s labour “which is not contemplated in the agreement or any other agreement”.

[159] The agreement states that “MCCR will be paid a management fee of 20% on the project; actual cost of the total project. Actual cost covers material labour and cell phone usage.” Mr. Pollice’s log book shows that he was closely monitoring the labour hours at the site. In fact, when he rewrote MCCR’s invoices, he used the number of labour hours set out in MCCR’s invoices which included Mr. Doucette’s labour hours. By doing so, he agreed that the labour hours were correct and were subject to the management fee.

[160] I find that the 20% management fee was properly charged on Mr. Doucette’s labour hours, and therefore, the Pollice’s are not entitled to a refund of this fee.

If the plaintiffs breached the contract, is MCCR and/or Mr. Doucette personally entitled to damages flowing from the breach of contract?

Mr. Doucette’s Position

[161] Mr. Doucette states that the Pollices intentionally caused him humiliation, anxiety and distress at two points: during the construction when Mr. Pollice’s conduct made MCCR’s continuation with the project impossible,[^13] and after construction, when the Pollices made the complaint to Tarion. Therefore, they caused him mental distress which flowed from the breach of contract.

[162] Mr. Doucette underwent a medical/legal psychological assessment to determine the psychological impact of the dispute with Mr. Pollice, any treatment recommendations and the prognosis. He attended on Arden McGregor, a registered psychologist who evaluated Mr. Doucette. She was qualified as an expert in psychological assessment, counselling and rehabilitation dealing specifically with depressive disorders and diagnoses that flow from them as well as post-traumatic stress disorder, psychometric assessments and diagnostic testing.

[163] Ms. McGregor stated that in her opinion, Mr. Doucette suffers from depression and anxiety. But for the relationship with Mr. Pollice, Mr. Doucette would not have suffered the functional impact and symptoms. She could not say how much of Mr. Doucette stress was caused by responding to the litigation, receiving the Tarion complaint or the Tarion prosecution. She agreed that the functional concerns predated his dealings with Tarion; however, it exacerbated them. Mr. Doucette’s depression and anxiety arose because of how he felt had been treated on the job site. That is where it started. The impact continued. Defending provincial charges would have been stressful. She agreed that if Mr. Doucette had only to deal with the Tarion complaint and nothing else, it would be highly unlikely that he would have suffered the depression and social anxiety. She agreed that ordinarily, individuals with depression and anxiety have better outcomes if they are treated right away after the incident giving rise to them. Mr. Doucette did not seek any treatment.

[164] Mr. Doucette argues that he personally was privy to the construction contract. While the parties to the construction contract are identified as MCCR and the Pollices, the first clause identifies “Michael J. Doucette of Muskoka Creative Construction (MCC)” specifically as the general contractor. The contract treats Mr. Doucette and MCCR as being interchangeable and binds Mr. Doucette personally.

[165] MCCR is essentially Mr. Doucette. It has no other officers, directors or directing minds. The general contracting and building services provided by MCCR are those provided by Mr. Doucette and the construction contract confirms this. As such, the harm inflicted by the Pollices does not distinguish between Mr. Doucette and MCCR.

[166] Mr. Doucette states that the facts in this matter support an exception to the principle of privity of contract. He relies on 1526806 Ontario Inc. v. Ellisdon Corporation, 2018 ONSC 4064, para. 28, in which the court referred to an exception set out in Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., 1999 654 (SCC), [1999] 3 S.C.R. 108 para 32. In that case, the court stated,

In terms of extending the principled approach to establishing a new exception to the doctrine of privity of contract relevant to the circumstances of the appeal… a new exception first and foremost must be dependent upon the intention of the contracting parties… the determination in general terms is made on the basis of two critical and cumulative factors: (a) Did the parties to the contract intend to extend the benefit in question to the third party seeking to rely on the contractual provision? and (b) Are the activities performed by the third party seeking to rely on the contractual provision the very activities contemplated as coming within the scope of the contract in general, or in the provision in particular, again as determined by reference to the intentions of the parties.

[167] In 1526806, para. 29, the court stated, “The intention of the parties to the contract at the time they entered it is a fundamental requirement for the application of this exception to privity.”

[168] Mr. Doucette states that if there is no privity of contract between the Pollices and Mr. Doucette, the contract is clear that “Michael Doucette of MCCR” will undertake the work identified in the scope of work in the contract. He will benefit from the contract. This is an appropriate case to extend privity to him.

The Pollices’ Position

[169] The Pollices state that there are no allegations in MCCR’s statement of defence nor in Mr. Doucette’s counterclaim regarding Mr. Pollice’s conduct. They did not allege that there was any conduct during the project that would give rise to a claim for aggravated damages. No claim has been made for aggravated damages. The contract was at an end prior to the Pollices’ making the Tarion complaint. There can be no breach of contract claim for post-contractual conduct.

[170] MCCR cannot seek aggravated damages based on personal humiliation and distress. A corporation is not entitled to compensation by way of aggravated damages because a company has no feelings and therefore cannot be injured in its dealings. It can only be injured in its pocket: see Walker v. CFTO Ltd., 1987 CarswellOnt 757 (ONCA), at para. 23.

[171] There is no privity of contract between Mr. Doucette and the Pollices. Mr. Doucette was not a party to the agreement. Therefore, he personally cannot seek any damages based on breach of contract.

[172] Ms. McGregor testified that he suffered from depression and anxiety but the Tarion claim was not the primary cause of it. His mental illness began before the Pollices made the Tarion complaint. In her professional opinion, Mr. Pollice’s conduct on the site caused Mr. Doucette’s depression and anxiety.

Analysis

Do the pleadings support Mr. Doucette’s claim?

[173] In the Amended Statement of Defence and Counterclaim, in paragraph 30(e) of the Statement of Defence, MCCR pleads that the plaintiffs “…interfered with the construction at the Property such that [MCCR’s] ability to manage the project was nonexistent.”

[174] In the Counterclaim, paragraph 36 (b) MCCR and Mr. Doucette claim “general and aggravated damages for reputational harm and distress in an amount not exceeding $25,000.

[175] I do not agree with the Pollices’ position that there are no allegations in MCCR’s statement of defence nor in MCCR and Mr. Doucette’s counterclaim regarding Mr. Pollice’s conduct. While paragraph 30(e) does not set out the specifics of Mr. Pollice’s conduct, it sets out the alleged result. Generally, pleadings are to be construed broadly. I do not agree with the Pollices’ position that no claim has been made for aggravated damages. Paragraph 36(b) clearly makes that claim.

Is MCCR entitled to general or aggravated damages as a result of the breach of contract?

[176] Damages for mental distress arising from the breach of contract are rare in the context of commercial contracts. As stated in Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, [2006] S.C.J. No. 30, at para. 45, “[in] normal commercial contracts, the likelihood of a breach of contract causing mental distress is not ordinarily within the reasonable contemplation of the parties.”

[177] At para. 49, the court goes on to state that before awarding damages for mental distress, the court must be satisfied,

(1) that an object of the contract was to secure a psychological benefit that brings mental distress upon breach within the reasonable contemplation of the parties; and (2) that the degree of mental suffering caused by the breach was of a degree sufficient to warrant compensation.

[178] In paras. 51 to 53, the court clarifies the difference between damages for mental distress and aggravated damages as follows:

It may be useful to clarify the use of the term “aggravated damages” in the context of damages for mental distress arising from breach of contract. “Aggravated damages”, as defined by Waddams (The Law of Damages (1983), at pp. 562-63), and adopted in Vorvis, at p. 1099, describ[e] an award that aims at compensation, but takes full account of the intangible injuries, such as distress and humiliation, that may have been caused by the defendant’s insulting behaviour.

As many writers have observed, the term is used ambiguously. The cases speak of two different types of “aggravated” damages.

The first are true aggravated damages, which arise out of aggravating circumstances. They are not awarded under the general principle of Hadley v. Baxendale, but rest on a separate cause of action — usually in tort — like defamation, oppression or fraud. The idea that damages for mental distress for breach of contract may be awarded where an object of a contract was to secure a particular psychological benefit has no effect on the availability of such damages. If a plaintiff can establish mental distress as a result of the breach of an independent cause of action, then he or she may be able to recover accordingly. The award of damages in such a case arises from the separate cause of action. It does not arise out of the contractual breach itself, and it has nothing to do with contractual damages under the rule in Hadley v. Baxendale.

The second are mental distress damages which do arise out of the contractual breach itself. These are awarded under the principles of Hadley v. Baxendale, as discussed above. They exist independent of any aggravating circumstances and are based completely on the parties’ expectations at the time of contract formation. With respect to this category of damages, the term “aggravated damages” becomes unnecessary and, indeed, a source of possible confusion.

[179] With respect to the damages claimed by MCCR for breach of contract, the court in Walker, at para. 31, states that a corporation is not entitled to damages for injured feelings:

By definition, compensatory damages are intended to compensate not to punish, and must not be confused with exemplary damages. Furthermore, the submission overlooks the fact that the plaintiff is a corporation and is not entitled to damages for injured feelings or to the aggravated damages which a natural person is entitled to when the damage to his or her feelings is increased by the wrongdoer's bad conduct. Many of the factual circumstances upon which the company relies to support its award are indeed directed, not to loss of reputation, but to personal humiliation, mental anguish and other injuries of this nature which may be compensable in the case of an individual but are not in the case of a corporation.

[180] Despite finding that Mr. Pollice’s conduct during construction breached the contract, damages for mental distress cannot be awarded in this case. A corporation is not entitled to damages relating to mental anguish. The contract between the Pollices and MCCR was not one that contemplated a psychological benefit.

Does privity of contract exist between the Pollices and Mr. Doucette? If not, should it be extended to Mr. Doucette?

[181] At the top of the agreement, the parties are stated to be Muskoka Creative Construction & Renovations Inc. (MCC) and Mike and Sandra Pollice. Mr. Doucette is not stated to be a party. With the exception of the first point which states: “Michael J. Doucette of Muskoka Creative Construction (MCC) will act as the general contractor and will coordinate and hire all sub trades” [emphasis added], the terms of the agreement refer to MCC. Notably, it states that MCC (not Mr. Doucette) will be paid a fee and has been hired to oversee the entire project. MCC (not Mr. Doucette) will register a Notice of Project with the Ministry of Labour.

[182] Mr. Doucette relies on 1526806 in support of his argument that privity should be extended to him. The facts in 1526806 are significantly different from this matter. The plaintiffs were 1526806 and 1198934 Ontario Inc., carrying on business as Basic Structure Engineering Glazing Contractors. The defendant contractor, Ellisdon, entered into a contract with Basic as a sub trade for a project. Both of the plaintiff numbered companies had the same principal. Ellisdon brought a motion for partial summary judgment. Part of the relief sought was an order dismissing all claims of 1198934 on the basis that Ellisdon had no privity of contract with 1198934. The court held that the exception to privity of contract as set out in Fraser could not apply because the intent in the contract was clear that only 1526806 was a party to it.

[183] Furthermore, 1526806 concerns two separate corporations. In this matter, there is only one corporation; MCCR, and its principal, Mr. Doucette. 1526806 does not address a situation where the principal of a company seeks to have privity of contract extended to him. Considering the factors set out in Fraser, I find that there is no evidence that the Pollicies and MCCR intended to extend the benefit of the agreement to Mr. Doucette personally. There is no contractual provision upon which Mr. Doucette seeks to rely. There is no basis upon which privity of contract can be extended to Mr. Doucette personally. Therefore, he is not entitled to claim damages relating to the manner in which Mr. Pollice treated him when MCCR was building the dwelling.

Has the plaintiff by counterclaim proved that the plaintiffs’ conduct constitutes injurious falsehood? If so, what are the damages?

[184] The tort of injurious falsehood contains three elements. The plaintiff must prove:

(a) [that the defendant] communicated an untrue statement about the plaintiff or the plaintiff’s property or business to a third party;

(b) that the defendant did so with malice; and

(c) that damage resulted to the plaintiff from such communication.[^14]

[185] In Fleming, The Law of Torts, (7th ed. 1987), the necessary elements to a claim of injurious falsehood are as follows:

Defamation is mostly actionable without proof of damage, falsehood is presumed, and liability is strict; whereas in an action for injurious falsehood the plaintiff must prove that he sustained actual economic loss, that the offensive statement was false and was made with intent to cause injury without lawful justification.

The Internet Posts

Mr. Doucette’s Position

[186] Mr. Doucette stated that a neighbour told him that there was a post on HomeStars, a website that permits clients to rate home professionals. The post was dated November 6, 2014, and indicated that it was placed by a homeowner from Severn Bridge[^15]. It stated:

Beware Muskoka Creative Construction & Renovations Inc. and Mike Doucette at all costs. Walked off of construction 1/3 complete. Numerous deficiencies in his project management and building skills resulted in many inconsistencies with blueprints. Horrible incomplete accounting has made for a paperwork mess. Mike Doucette should not be trusted with your build or any construction project. If you want more detail or are considering hiring Muskoka Creative Construction & Renovations and Mike Doucette I strongly suggest you contact me first. We are now seeking to recover damages caused by Mike Doucette and Muskoka Creative Construction and Renovation’s [sic] breach of contract.

[187] Mr. Doucette stated that on November 8, 2014, a relative saw a post on Kijiji. It had the same text as the HomeStars post. He did not know how long the posts were up.

[188] Mr. Doucette stated that these posts were made out of spite. He did not contact the Pollices to ask them to take down the posts because he had been advised not to have contact with them. He did not want to have any contact with them. He did not request that his counsel send them a letter requiring them to be taken down. He did not go online to see whether the posts had been taken down.

[189] He did not know how many people in his small community saw the posts. He was devastated by them. He stated that he went into a shell. Going forward, he did only small jobs. He had no more employees. He just worked for friends. As of November 6, 2014, he had no business. He did not have anything else lined up for the winter.

[190] In para. 40 of the Counterclaim, MCCR and Mr. Doucette state:

…the advertisement and review posted by the Pollices on November 6, 2014 and the complaint made to Tarion contain false information and have caused distress and reputational harm to [MCCR] and to Michael Doucette personally. The plaintiffs by counterclaim seek general and aggravated damages accordingly.

The Pollice’s Position

[191] Ryan Pollice testified that he made the posts. He did this without his parents’ knowledge. When they learned of it, they told him to take down the posts. Ryan Pollice is not a party in this action.

[192] Ms. McGregor, who examined Mr. Doucette, had no knowledge of the internet posts; therefore, any claim relating to them cannot be proven.

Analysis

[193] As noted above, Ms. McGregor testified that Mr. Pollice’s conduct on the site was the primary cause of Mr. Doucette’s depression and anxiety. On the evidentiary record before me, I have no basis to conclude that the posts on HomeStars and Kijiji caused any damage to MCCR and Mr. Doucette. On this basis, no damages can be awarded for injurious falsehood.

[194] Mr. Doucette did not make a claim against Ryan Pollice.

The Tarion Complaint

Mr. Doucette’s Position

[195] Mr. Doucette states that the Pollices knew that MCCR was not a Tarion registered builder. They always stated that they wanted to build a seasonal cottage. A number of the documents support this. Nevertheless, on February 13, 2015, when the home was 95% complete, they made a financial loss claim to Tarion, alleging that they had paid MCCR “fees for services and materials not completed”. They alleged that the cottage was, in fact, a home. As a result, Tarion laid provincial offence charges against MCCR and Mr. Doucette.

[196] Mr. Doucette stated that he did not understand why anyone would charge him. He had been in business since 1989. His clients were always happy with his work. Tarion did not give him any warning. It just served a summons on him. Nobody from Tarion interviewed him.

[197] The Information relating to the charges in the first count alleged that MCCR acted as a builder of a new home without being registered by the registrar pursuant to s. 6 of the Act. In the second count, it alleged that MCCR commenced construction of a new home, failed to notify the Corporation of the fact, failed to provide the required particulars, and failed to pay the prescribed fee pursuant to s. 12 of the Act.

[198] The Summons that required Mr. Doucette to attend before the Ontario Court of Justice stated that Mr. Doucette knowingly and concurringly, as an officer or director of MCCR, acted as a builder of a new home without being registered by the registrar pursuant to s. 6 of the Act.

[199] Prior to trial, Tarion’s prosecutor, Mr. J. Kennedy, sent Mr. Doucette’s counsel a letter stating that it was unfortunate that he would not plead guilty to the charges because if he was found guilty, he could be ordered to pay a fine of $25,000. He could also be incarcerated. Mr. Doucette stated that the way the prosecutor had dealt with him was upsetting. Mr. Kennedy never spoke to him. The charges were withdrawn on the day of trial with no explanation after MCCR had incurred $44,040.64 in legal fees to defend them.

[200] Mr. Doucette states that Tarion laid charges against MCCR and himself personally because Mr. Pollice reported MCCR to Tarion. The prosecution caused him to suffer mental distress. Mr. Pollice had nothing to gain by reporting MCCR. He did this just to cause trouble. Mr. Doucette states that this entitles him to damages.

The Pollices’ Position

[201] The Pollices state that the complaint to Tarion was warranted. MCCR and Mr. Doucette have not proven, on a balance of probabilities, that Mr. Pollice made any false statements to Tarion. Further, there is no allegation in the pleadings of intent to cause injury without lawful justification or of malice. There is no evidence of the quantum of damages that can be attributed to the Tarion complaint alone. Ms. McGregor testified that the complaint to Tarion was not the primary cause of Mr. Doucette’s depression and anxiety. It occurred as a result of Mr. Pollice’s conduct on the project site.

[202] The Pollices also state that Mr. Doucette is barred from making a claim because the doctrine of absolute privilege applies. Citing Gala v. Homs Inc. v. Flisar, 2000 29059 (ON SC), 48 O.R. (3d) 470, aff’d 2000 CarswellOnt 3584 (Ont. C.A.), they state that an action against them for making a complaint about MCCR under the Ontario New Home Warranty Plan Act, is precluded under the doctrine of absolute immunity.

Analysis

[203] On February 13, 2015, Mr. Pollice submitted documentation to Tarion to enable Tarion to determine if the dwelling was covered by the Act, and therefore had warranty coverage, or alternatively, if Mr. Pollice was entitled to make a financial loss claim. Mr. Pollice then completed a document required by the enforcement department entitled “Consumer Inquiry Package” and signed it on March 1, 2015. He stated that he had entered into discussions with MCCR “with respect to constructing a new home on the property”.

[204] Bryan Stott, who worked in the Tarion enforcement department as an investigator at the relevant time, testified that Tarion responded to this third-party request for an investigation. Mr. Stott stated that he was not concerned about the proposed intent or use for the dwelling. Rather, he had to determine whether the dwelling had been built so that it was habitable on a year-round basis.

[205] Mr. Stott stated that he carried out a telephone interview with Mr. Pollice on March 13, 2015. A transcription of that interview was provided. In the interview Mr. Stott stated:

Mr. Stott: Now I keep seeing the phrase seasonal cottage used, and that’s on the building permit, and in a couple of other things where they use the term cottage. Is this like a house that you guys are just calling a cottage, because I see there is a three car.

[Mr. Pollice appears to have interrupted Mr. Stott].

Mr. Pollice: It is a house. It is not a cottage. It is a house, I mean there was some discussion at some point at the beginning, and the guy the draftsman said something about well if we call it a cottage then whatever, it like I mean it’s not a cottage, it’s a frigging house, it’s worth almost 3 times what my house is worth in Waterloo.

[206] Mr. Stott stated that as a result of his investigation, he determined that the dwelling was built for year-round occupancy. There was no requirement that it be a primary residence. The dwelling was a home and should have been registered with Tarion.

[207] As noted above, Tarion decided to lay charges against MCCR and Mr. Doucette. The information was sworn March 18, 2015. The prosecutor, Mr. J. Kennedy, wrote to Mr. Doucette’s counsel setting out what could occur if Mr. Doucette were found guilty.

[208] Mr. Stott stated that the charges were withdrawn on the trial date, March 14, 2016. He had no role in deciding whether to withdraw the charges. There was no letter from the prosecutor to Mr. Doucette explaining why the charges were withdrawn. He disagreed with the suggestion that the charges were withdrawn because Tarion would not get a conviction. He stated that Mr. Doucette had made an effort to comply, and from Tarion’s perspective, that was a good outcome.[^16]

[209] In considering the test for the tort of injurious falsehood, I find that there is insufficient evidence to conclude that Mr. Pollice communicated an untrue statement to Tarion. As noted above, the builder’s understanding of the owners’ intended use of the dwelling is not a factor that Tarion considers. Rather, Tarion’s concern is whether the dwelling can be used year round. Furthermore, even if Mr. Pollice knew that the dwelling was not registered with Tarion, there is insufficient evidence for me to find that (1) he knew he could not qualify for a financial loss claim, and (2) he made the complaint to Tarion out of malice. MCCR was not a registered builder with Tarion. Registration was required for construction of the dwelling.

[210] On the third element of the test, Mr. Doucette is required to prove that the damage he suffered was directly caused by the statements made to Tarion.

[211] While I find that Mr. Doucette has suffered mental anguish as a result of this construction project, I cannot conclude that the damage is a direct result of the statements made to Tarion.

[212] Mr. Pollice is protected by the doctrine of absolute privilege. As cited in Gala Homes Inc., at para. 16, if homeowners were not able to make reports to Tarion without fear of reprisal, the purpose of the statute would be frustrated.

The object of the Plan would be effectively thwarted if the entities, which are the subject of the Plan's supervisory role, were able to advance claims against owners who made complaints to the Plan. Owners would be deterred from invoking the Plan’s assistance if they realized that the making of a complaint could give rise to an action for damages against them. It seems to me that there is, therefore, a strong public policy argument underlying the finding generally that the quasi-judicial attributes of such tribunals extend to the initial complaint registering and information gathering functions.

[213] I conclude that the complaints made by the Pollices are protected by absolute privilege. Mr. Doucette’s claims related to those statements, cannot succeed.

[214] I find that the tort of injurious falsehood has not been made out in relation to the complaint made to Tarion and subsequent enforcement action.

Are the plaintiffs liable for payment of MCCR and/or Mr. Doucette’s legal fees incurred to defend the charges laid by Tarion?

[215] Tarion’s prosecution of MCCR and Mr. Doucette arose from Mr. Pollice’s complaint. Without a complaint, Tarion probably would not have discovered that MCCR built a home without registration.

[216] Tarion’s enforcement department made the decision to prosecute MCCR and Mr. Doucette. Mr. Pollice had no control over that. Bryan Stott only speculated as to the reason why the prosecutor withdrew the charges on the day of trial.

[217] If Tarion’s prosecution was wrongful, the Pollices are not liable to pay MCCR/Mr. Doucette’s legal fees to defend the charges. That liability, if any, would fall on Tarion[^17].

Conclusion

[218] Mr. Pollice breached the contract.

[219] Although Mr. Doucette did not comply with the statutory provisions of the Act, the contract was not rendered unenforceable.

[220] MCCR did not misrepresent the cost of the project, nor its qualifications to build the dwelling.

[221] MCCR was not negligent in performing the contract up to October 3, 2013. The Pollices have not proved that any deficiencies existed relating to MCCR’s work.

[222] MCCR was not unjustly enriched by retaining the management fee for the work that it completed. Mr. Doucette was entitled to charge for his own labour.

[223] Neither MCCR nor Mr. Doucette are entitled to damages with respect to the breach of contract.

[224] Mr. Doucette has not proved that the Pollices’ conduct constitutes injurious falsehood.

[225] The Pollicies are not liable to pay for MCCR/Mr. Doucette’s legal fees to defend the Tarion charges.

[226] As a result, neither party is liable to pay the other any damages.

Costs

[227] If counsel cannot agree on costs, I will receive written submissions on a 14-day turnaround, commencing with the plaintiff, followed by the defendant’s submissions, then reply submissions, if any. The 14 days shall begin 30 days from the date of release of these reasons. Cost submissions shall be no more than 3 pages in length (14 pt. font size, regular 1 inch margins, 1.5 spacing), exclusive of any costs outline or offers to settle. All costs submissions shall be delivered via email through my assistant at BarrieJudSec@ontario.ca. If no submissions are received within 21 days from the above date, the issue of costs will be deemed to have been settled between the parties.

Madam Justice M.E. Vallee

Released: April 30, 2019

[^1]: The property was originally part of the Stanton Resort. Two buildings were located on it when the Pollices purchased it, being a pavilion, which was a bar and entertainment area for the resort, and a number of attached motel type rooms with bathrooms, referred to as the front row. Prior to starting this project, Mr. Pollice tore down the front row. The pavilion remained. It is referred to by Mr. Pollice as “the pav”. [^2]: Mr. Doucette referred to it as a cottage. Mr. Pollice referred to it as a seasonal cottage and a home. [^3]: When I refer to Mr. Pollice’s evidence, it is taken from the transcript. [^4]: Mr. Jones is not an architect. He is an architectural technologist. [^5]: The garage drawings showed trusses. [^6]: Township employee. [^7]: In several places they also refer to a house. [^8]: R.S.O. 1990 c. O. 32. [^9]: Tarion Warranty Corp. v. Kozy, 2011 ONCA 795, para 2. [^10]: Chung v. Idan, 49 C.L.R. (3d) 216 (Ont. S.C.J.), affd 2007 ONCA 544. [^11]: Ibid, para. 54. [^12]: Ms. Lehman wrote “Sept 22” three pages ahead of these notes. [^13]: This conduct is set out above in Issue 1. [^14]: Boehringer Ingelheim (Canada) Ltd. v. Bristol-Myers Squibb Canada Inc., 1998 14787 (ON SC), [1998] 81 CPR (3d) 114, para. 10. [^15]: Severn Bridge is a town in the Municipality of Severn. [^16]: MCC made efforts to enrol. [^17]: The plaintiffs have commenced a separate action against Tarion.