COURT FILE NO.: CV-16-128-00 DATE: 2019-06-28 ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
WILLEM VANDER MEER HOLDINGS INC. Kathryn Ritsma, for the plaintiff Plaintiff/Defendant by Counterclaim
- and -
THOMAS TERRY RICHARDSON, KYLE RICHARDSON, and MICHAEL RICHARDSON Cherolyn R. Knapp for the defendants/plaintiffs by counterclaim Defendants/Plaintiffs by Counterclaim
HEARD: June 20, 2019, at Guelph, Ontario, and on June 27, 2019, by teleconference Price J.
Reasons For Order
OVERVIEW
[1] Vander Meer is a general contractor who built a dairy barn for the Richardsons, dairy farmers who own and operate a dairy farm in Minto Township, in the County of Wellington, Ontario, in 2015. The construction lien action that ensued was before the Court in Guelph on June 20, 2019, for a Pre-Trial Conference. For the reasons that follow, the Court is appointing an expert to provide an opinion to the parties, and to the Court.
BACKGROUND FACTS
[2] In April 2015, the parties entered a written fixed price contract for the construction of a dairy barn for $709,640 including HST, later amended in writing to $732,353 including HST. The parties agree that the amended contract price was paid in full. The main source of the dispute is Extras charged in addition to the fixed price.
[3] A lesser part of the dispute relates to claims by the Richardsons for credits, damages and deficiencies. The Richardsons claim $41,057.29 in credits, for money that they paid directly to sub-trades, which they say related to items of work provided in the main fixed price contract. Vander Meer concedes $13,294 of these. The Richardsons claim $23,300 for deficiencies, but acknowledge that those items are likely resolvable with further discussion.
[4] Mainly, it is a dispute about the Extras. Vander Meer includes a claim for breach of contract, quantum meruit, and unjust enrichment as an alternative relief so that it would be paid for all additional work and materials on the Richardsons’ barn.
[5] Construction of the barn began in May 2015 and was completed by December 2015. Vander Meer asserts that throughout the construction, there were major and minor changes that the Richardsons requested, resulting in changes to the labour and materials as provided in the fixed price contract, and that the changes resulted in significant costs for Extras set out in an additional invoice dated December 1, 2015, for $219,760.51 plus HST, bringing the total to $248,329.38.
[6] The Richardsons say that the barn that was built is essentially the barn in the drawings supplied by Vander Meer, and that the project changed very little from its inception, and there were very few Extras. None of the Extras requested by the Richardsons and claimed by Vander Meer were listed in written the Change Orders. Vander Meer asserts that there were various discussions and “gentlemen’s agreements” to provide those Extras at additional cost, on the understanding that the Richardsons would pay those costs.
[7] Vander Meer gave the Richardsons a handwritten list of items considered to be Extras, at their request, in October 2015. No costs or estimates were included at that time. The Richardsons had directly paid certain costs that were included in the contract directly to sub-trades, for which they claim credits. The Richardsons take the position that, based on the handwritten list and the precedent that major changes would be dealt with by signed amendment, they expected the Extras and Credits to come close to a “wash.”
[8] Vander Meer issued its final invoice on November 5, 2015. In early December 2015, at the Richardsons’ request, Vander Meer gave them a letter for their lender confirming that the contract was complete and that all sub-trades were paid. As a result, RBC advanced the final portion of the construction financing, including holdbacks, to the Richardsons.
[9] In fact, at least one of the subtrades, Gulutzen Concrete, remained unpaid. The amended contract between Vander Meer and the Richardsons had estimated $156,601.16 including HST for concrete costs, including Vander Meer’s mark-up. However, Gulutzen issued invoices to Vander Meer totaling $200,795.63, including HST, of which $134,319.99 remained unpaid. Gulutzen brought a civil action against Vander Meer and the Richardsons, which was resolved by a payment of $100,000 shared equally by the Richardsons and Vander Meer. Both Vander Meer and the Richardsons reserved the right to continue litigating the issue of who was responsible for what aspects of that payment.
[10] Around mid-December, after the above letter, the Richardsons received a one page bill for Extras in the amount of $291,771.58, including HST, from Vander Meer. They requested more details of the Extras, and two further versions of the invoice were produced. Vander Meer reduced the Extras invoice to $248,329.38 and registered and perfected a construction lien in the amount of $258,616.34, representing the $248,329.38 invoice amount plus $10,286.96 interest for the month of December. Vander Meer has conceded that the interest was not properly included in the lien. The parties’ contract provided for interest at a lower rate.
[11] The Richardsons’ issues include an allegation that the lien registration was not timely, and that the amount of the lien was exaggerated, by including interest and by miscalculation of the charges for Extras. The services and materials supplied were described in the lien as “custom steel gates, electrical work, garage door up-grade, timber, drywall, labour and materials”, which the Richardsons say does not correspond to the major items claimed in the Extras invoice. Additionally, the amount claimed to be owed for vinyl was not included in the invoice on which the lien is based.
[12] The Richardsons assert that another issue is the approach Vander Meer has taken in calculating Extras. The Richardsons say that rather than maintaining a list of all aspects of the project that were “Extra” to the contract and providing a price for them with mark-up, Vander Meer subtracted its estimated costs from its actual costs and called the remainder Extras.
[13] The Richardsons say that Vander Meer is only entitled to claim for the Extras set out in Invoice 614 and is not entitled to claim individually for various sub-trades or Extras over and above the amount shown in that invoice.
[14] Vander Meer acknowledges that the Scott Schedule information does not match its Invoice 614 for Extras. It notes that the Extras claim at page 3 of the Invoice is $106,810 with respect to Watson’s Home Hardware, but in the Scott Schedule, it shows that the Extra materials used in the barn was $86,879.88 with no mark-up ($95,567.87 with mark-up).
[15] Vander Meer claims for additional labour charges respecting the Extras for materials in the amount of $53,632.39. It says that it is entitled to claim Extras for materials and labour as actually provided at the Richardsons’ request, and should not be limited to the amounts set out in the Extras Invoice 614 as the Scott Schedule reflects all of the Extra materials used in the barn construction. Vander Meer also relies on its claim of quantum meruit or unjust enrichment if the Richardsons were allowed the benefit of all the Extra materials and labour without properly compensating Vander Meer for its efforts.
[16] The parties prepared a Scott Schedule outlining their positions on Extras. The major Extras described in the Scott Schedule are:
a. Concrete Extras provided by Gulutzen Concrete Construction Ltd; b. Framing and interior work that Vander Meer completed with considerable materials purchased by it from Watson’s Home Hardware and others, and increased labour; c. Gating provided by Steelkore; d. Electrical work by Ron Lockie, a sub-contractor; e. GM Blue Plan Engineering; f. Jason Garage Doors; g. Thalen Enterprises for the roofs or chimneys for the vents located on the barn roof.
[17] The details of each parties’ position are set out in the Scott Schedule, but their position can be summarized as follows:
a. Extra concrete work by Gulutzen Concrete Construction Ltd. Vander Meer asserts that the Richardsons made six major requests during the construction of the barn: (i) A major area of concrete approximately 270 feet along the north wall of the entire barn, and extended back pad areas of the barn 24 feet wide; (ii) Front porch cement area expanded from the original quote and plan; (iii) Expanded back pad in an area on the east side of the barn; (iv) Increased concrete area around the straw pack in the barn; (v) Extra concrete with epoxy for the milk house; and (vi) Groomed finish completed to the front area in the interior of the barn. Vander Meer’s analysis of the Gulutzen Extras takes into consideration the settlement of the Gulutzen Concrete claim at mediation. The Richardsons assert that originally, Vander Meer claimed concrete Extras of $75,426.83, but that the difference between the amount estimated for concrete costs in the amended contract and the amount actually charged by Gulutzen was only $30,000.00 before HST. Following Gulutzen’s settlement with the parties, the issue remains how to allocate the “credit” given by Gulutzen in reducing its account in order to be paid. The Richardsons say that the difference between the amount allocated to concrete in the amended contract and the reduced Gulutzen payment, plus 15% for Vander Meer’s mark-up, is $27,823.02 before HST. The Richardsons paid an additional $50,000.00 for the Gulutzen settlement, and seeks to recover $22,176 plus their legal fees. Vander Meer asserts that when comparing the bills received from various sub-trades for Extras, including the Gulutzen bills, it is necessary to add 20 per cent to those bills to reflect Vander Meer’s 15% mark-up. Vander Meer says that it did $12,000 of work for Gulutzen Concrete after the Richardson barn contract on the basis that this work would be a credit against the final bills owed to Gulutzen. It claims this additional amount so that its final position on the Gulutzen claim for Extras, as shown in the Scott Schedule, is $24,041.00.
b. Vander Meer includes almost $80,000 as Extras for vinyl used on the interior, and the labour to install it. The Richardsons claim that the vinyl issue has a number of sub-issues, namely: (i) Does vinyl rightfully form any part of Vander Meer’s claim? The Richardsons say that it was not included in the Extras invoice, which formed the basis of the lien and the lien action; (ii) What did the contract include regarding vinyl? The contract states that “installation of vinyl siding on ceiling” and “installation of vinyl trims” is included. The Richardsons say they understood that the fixed price included all aspects of the barn construction, the drawings for which were supplied by Vander Meer based on specifications provided by the Richardsons. They say that they did not understand that no interior cladding was provided for in the contract; (iii) What was meant by “vinyl siding”? Vander Meer contends that the board and batten siding product used was an Extra requested by the Richardsons and that he had originally intended to use a corrugated “high rib” vinyl sheeting which was less expensive. The Richardsons contend that the board and batten vinyl product was shown to them by Vender Meer from the outset and did not constitute an Extra; (iv) What quantum of damages should be allowed for vinyl in light of the above? and (v) Where mark-up of 15% is being added to the cost of materials, is it appropriate to also charge labour at an amount equal to the material charge rather than charging for actual labour charges incurred? Vander Meer asserts that the original contract provided for vinyl to be placed on the ceiling on the interior of the barn and the material that it quoted was a product known as 29 gauge ultra-vic high rib interior vinyl. It states that when it was on site to begin installing the material, the Richardsons did not like its appearance and wanted an up-graded vinyl material referred to as board and batten. This resulted in a price difference of approximately $35,000.00. Additionally, the board and batten material required extra labour because of the size of the sheeting and additional joining due to the various seams required in the installation process.
c. Vander Meer says that the Richardsons requested, as an Extra, an increased number of doors of a higher quality than the contract provided for.
d. Vander Meer invoiced Extras from Watson’s Home Hardware at $106,810. When the Richardsons requested details of the Extras, Vander Meer described the charges as changes due to building a 2nd floor office and changes due to engineering specifications. This included charges for framing and finishing the office, 2nd floor railings, roof of a robot room, siding, lumber/truss changes of $77,043.24, and engineering fees. The Richardsons assert that Vander Meer’s later analysis included $86,879.88 for Extra materials from Watson’s Home Hardware, plus a further $53,632.39 in labour charges, for a total of $140,512.27. It says that this was $33,702.27 more than the amount claimed for Watson’s Home Hardware on the amended Extras invoice. Vander Meer says that the Richardsons changed the location of the office from the centre of the barn in the upper floor to the south sidewall of the barn. It asserts that this resulted in extensive railings being requested along the entire balcony or mezzanine area outside of the office. Vander Meer says that the whole office construction was not quoted in the original fixed contract because the Richardsons had not determined exactly what they wanted in the office, and that its materials and work, and the electrician’s work in regard to the office were all Extras. Vander Meer states that the Richardsons also requested, as an Extra, that a catwalk be built from the mezzanine or balcony area to the top of the roof of the robot room, which required railings and additional labour.
e. Framing and interior finishes for the barn. Vander Meer asserts that the engineered plans completed in May 2015, as the barn was just under construction, required Extra trusses and extra 2 x 6s, 2 x 4s and 2 x 8s which resulted in substantial additional materials and labour, as detailed in the Scott Schedule. The Richardsons say that Vander Meer has abandoned its claim that $47,000 was owing for extra trusses.
f. Vander Meer asserts that the Richardsons requested steel finishes on the various posts on the north and south walls, which was an Extra. Vander Meer further asserts that the Richardsons requested, as an Extra, the board and batten material to be installed on the east, north and south walls, which walls were to be painted aspenite. Vander Meer further asserts that there is a dispute as to whether the board and batten material was originally ordered for the front/west side of the barn and around the exterior of the office.
g. The electrician, Ron Lockie, provided electrical services as per the quote included in the original contract, but Vander Meer says that the Richardsons requested additional electrical services for additional lighting at the back of the barn, wiring for an electric fencer, complete wiring of the office, wiring for circulation fans and wiring in relation to curtains for the dairy barn.
h. GM Blue Plan Engineering for the cost of the engineered plan. Vander Meer says that the Extra billing for these materials which were considered an Extra under the contract, was $9,000.
i. Jason’s Garage Doors. Vander Meer asserts that this sub-trade provided roll-up gate openers for the various gates leading into the pack area, where the cows are located, and were Extras not requested as part of the fixed contract, but were requested by the Richardsons as the construction proceeded. It says that the Richardsons also requested that all of the overhead roll-up doors have electric openers as opposed to chain hoists and this was an Extra charge not included in the original quote. Vander Meer additionally says that an additional door was ordered, over and above the number specified in the original contract.
j. Thalen Enterprises, a sub-trade, submitted an invoice for just over $10,000 for roof chimneys or caps on the vents located on the roof of the barn. Originally, it says, only the vents, and not the caps or chimneys, were part of the quoted contract. After the barn roof was complete and the vents were installed, Michael Richardson said that he liked the look of caps in other barns and requested that the roof chimneys be added. Vander Meer states that when the billing was completed for Extras, the invoice for Thalen Enterprises, by oversight, was not included.
[18] Vander Meer and the Richardsons each estimate that they will require five days to examine their own witnesses at trial. I therefore estimate that the trial will require 10 days for witnesses, and a further day for argument. The issues to be determined at trial center in large part on whether the amounts that Vander Meer invoiced beyond the fixed contract price were properly charged as Extras and, if so, the value of those Extras.
[19] Neither party intends to call experts at trial. The Court does not possess the necessary expertise in construction costing that is clearly necessary to address the issues raised in the Scott Schedule.
ISSUES
[20] At the Pre-Trial Conference in this action, the Court proposed that it appoint an expert to provide an opinion to the parties and to the Court regarding what the Extras were in this project and their value. The Court offered counsel the opportunity to agree on the expert to be appointed. At their request, the Pre-Trial Conference was adjourned for a week to give them the opportunity to discuss the matter and canvass available experts.
ANALYSIS AND EVIDENCE
Legislative Framework
[21] Rule 52.03 of the Rules of Civil Procedure provides:
52.03 (1) On motion by a party or on his or her own initiative, a judge may, at any time, appoint one or more independent experts to inquire into and report on any question of fact or opinion relevant to an issue in the action.
(2) The expert shall be named by the judge and, where possible, shall be an expert agreed on by the parties.
(3) The order shall contain the instructions to be given to the expert and the judge may make such further orders as he or she considers necessary to enable the expert to carry out the instructions, including, on motion by a party, on order for,
(a) inspection of property under Rule 32;….
(4) The remuneration of an expert shall be fixed by the judge who appoints the expert, and shall include a fee for the expert’s report and an appropriate sum for each day that attendance at the trial is required.
(5) The responsibility of the parties for payment of the remuneration of an expert shall be determined in the first instance by the judge.
(7) The expert shall prepare a report and send it to the registrar and the registrar shall send a copy of the report to every party.
(8) The report shall be filed as evidence at the trial of the action unless the trial judge orders otherwise.
(9) The judge may direct the expert to make a further or supplementary report, and subrules (7) and (8) apply to that report.
(10) Any party may cross-examine the expert at the trial.
(11) The liability of the parties for payment of the remuneration of the expert shall be determined by the trial judge at the end of the trial, and a party who has paid the expert in accordance with a determination under subrule (5), if not the party determined to be liable for payment under this subrule, shall be indemnified by the party determined to be liable.
Jurisprudence
[22] McCarthy J., in Proxema Limited v. Birock Investments Inc. et al, 2018 ONSC 2552, addressed the issue of Extras as follows:
[118] The Alberta Supreme Court set out what constitute valid extras to a constructive contract in Chittick v. Taylor, [1954] A.J. No. 23:
When a contractor performs work or supplies materials not called for by the contract without instructions, express or implied, from the owner, or the consent of the owner, it is not entitled to charge for this additional work or materials as an “extra”. However, when the contractor performs work or supplies materials not called for by the contract on the instructions, express or implied, of the owner, it is entitled to charge for additional work or materials as an “extra”. What amounts to instructions from the owner depends on the circumstances relating to each item. If the owner, without giving definite instructions, knows that the contractor is doing extra work or supplying extra materials, and stands by and approves of what is being done and encourages the contractor to do it, that will amount to an implied instruction to the contractor, and the owner is liable [citation omitted] (Catan at para. 13).
[119] I adopt that passage as an accurate statement of the law of construction extras. Where an owner has knowledge that extra work is being done and fails to object, but is passive, he is deemed to be acquiescing and is thus liable to pay the contractor for that work.
[120] The law is clear that extra work entitling the contractor to additional payment must be work which is substantially different from, and wholly outside the scope of the work contemplated in the contract: see Ron’s Trenching & Hauling Ltd. v. Estevan (City) (1985), 11 C.L.R. 148 (Sask. Q.B.) at paras. 8-9, citing with approval Goldsmith, Canadian Building Contracts (3erd ed., 1983), p. 83.
Applying the legal principles to the present case
[23] The parties in the present case do not dispute what work was done. The issue is whether the work, consisting of materials and labour that is claimed as Extras, was outside the contract and its value.
[24] This Court has commented on the usefulness of Rule 52.03 to assist the parties and the Court where the case is complex and dependent on expert evidence. Justice Janet Wilson, in Colenbrander v. Savaria Corporation, 2018 ONSC 3829, stated:
[4] In light of the diametrically opposed views of the parties’ experts, and as this is a question of law, I requested the parties to appoint a Court appointed expert pursuant to Rule 52.03(1) of the Rules of Civil Procedure to assist the Court with the fair determination of the appropriate remedy in this case applying Québec law.
[5] Rule 52.03(1) so important yet so infrequently used states:
On motion by a party or on his or her own initiative, a judge may, at any time, appoint one or more independent experts to inquire into and report on any question of fact or opinion relevant to an issue in the action.
[6] I am of the view that this rule can and should be widely used in civil litigation to assist the parties and the Court where the case is complex and dependent on expert evidence. So often the experts’ opinions align with the party who is retaining them.
[25] Counsel have been unable to agree on what sort of expert is needed and on the selection of the expert to be appointed. An opinion from an expert in construction costing would, in my view, assist the parties toward a settlement of their dispute. If settlement cannot be reached, the opinion will be of substantial assistance to the trial judge and will likely reduce the time required for testimony and argument.
[26] A construction costing expert was employed to good effect In RPC Construction Ltd. v. Zhiyi Zhou, 2017 ONSC 4044. In that case, Master Wiebe stated at para. 31:
Joseph Emmons was qualified to give expert opinion evidence on construction costs as a quantity surveyor and on construction practices as a project manager. He attended on a site visit and drafted his report (which was his evidence in chief) commenting on the cost of the alleged RPC extras and the defendants’ back-charges. He used the site visit, Base Contract and Addendum, Chiu drawings and the pleadings to perform a quantity survey and material take-off. He also signed a will-say statement, which was entered as an exhibit, wherein he asserted that the custom in the residential building industry in Toronto is to exclude the basement, garage, exterior and soft costs from per square foot tender pricing.
[27] Similarly, in Rayment v. Lane, 2007 ONSC 37684, Sostna J., stated:
[76] I have considered the evidence of James Barchard, qualified as an Expert in construction costs and also rely on his opinion outlined in the Expert Brief, Exhibit 2, prepared by him. The Court concurs with his conclusion in paragraph seven of the Expert Brief when he noted, “The Contractor grossly underbid the contract. The materials alone would have exceeded $60,000 as quoted before taking into account labour and profit.” However, as will be outlined later in this Judgment, the Court cautions himself as to the degree of underbidding. Mr. Barchard then further opined that this underbidding may be based on the contractor’s lack of experience, or as suggested by the Plaintiffs, the contractor intended to allege portions of the work were outside the scope of the contract as “extras” to grossly inflate extra charges. Mr. Barchard then concluded the fact that the contractor failed to get the building permit and draft a proper contract, clearly putting in issue the contractor’s experience.
[77] The Court accepts the first conclusion proffered by Mr. Barchard that the undervalued contract price of $60,000 was the product of inexperience as opposed to a hidden agenda by the Defendants to increase the contract price by seeking recovery for “extras” in the renovation.
[28] Having regard to the amounts at stake in this action and the likely cost of an 11 day trial, the cost of retaining an expert in construction costing is proportionate to the issues and is likely to result in a greater cost saving in the long run. It will also avoid the cost to the public of an unnecessarily long trial.
[29] There are several witnesses whom Courts and tribunals have recognized as experts in estimating construction costs. For example, Gerard McCabe was held to be an expert in Inzola Group Limited v. The Corporation of the City of Brampton, 2019 ONSC 7632, per Sproat J., at para. 309, and in Oulahen v. Toronto (City), 2018 (ON LPAT) 78787, at para. 35(e)). The Court has accepted as experts consultants from Altus Group, who publish the Altus Guide to Construction Costs in Canada (See: Salit Steel v. Mondale Development Ltd., 2009 ONSC 9746, per Master Carol Albert, at para. 20 to 21).
[30] In Brookfield Multiplex Construction Canada Limited v. 21 Avenue Road Building Group Inc., 2016 ONSC 3060, the parties agreed, in the dispute resolution section of their construction contract, to jointly appoint a suitably qualified expert from Altus Group (or equivalent organization) and instruct them to make an independent assessment and determination which would be binding on the parties.
CONCLUSION AND ORDER
[31] For the foregoing reasons, it is ordered:
The Plaintiff shall, by July 15, 2019, submit to the Defendants a list of three experts in construction costs, with their qualifications, availability, and estimated fees for providing a report as to whether the Extras claimed in the present case were outside the parties’ fixed price contract and as to the value of each Extra, and their estimated fees for testifying at trial.
The Defendants shall, by July 25, 2019, select one of the experts proffered by the Plaintiff and notify the Plaintiff accordingly.
The parties shall, by July 31, 2019, jointly retain the expert selected, whose fees shall be paid from the funds standing in Court to the credit of this action. They shall give these reasons to the expert, together with such affidavits as may be necessary to inform the expert of the facts, and shall attach the relevant documents as exhibits, together with the Scott Schedule. If the parties wish, and they agree on the terms of reference, they may retain the expert to mediate the dispute, or to mediate/arbitrate.
The Plaintiff and the Defendants shall each be responsible for half the experts’ fees, subject to re-apportionment by the trial judge in a costs order. If funds have been paid into court to the credit of this action, the fees shall be paid from those funds, and each of the Plaintiff and the Defendants shall forthwith repay their half share of the amount paid out to the expert and provide proof to the other party/parties that they have done so.
If the expert needs to inspect the barn, the Richardsons shall facilitate this.
The expert shall prepare a report and send it to the registrar and the registrar shall send a copy of the report to every party.
The report shall be filed as evidence at the trial of the action unless the trial judge orders otherwise.
If any of the parties require any further Order with regard to the experts’ services, they may apply to the Court for such Order.
The parties shall attend a further in-person Pre-Trial Conference in this action on September 16, 2019, at 10 a.m. at the Courthouse in Guelph.
The parties shall attend the Assignment Court on November 4, 2019, at 2 p.m.
Price J.
Released: June 28, 2019