Court File and Parties

COURT FILE NO.: 5857/14 DATE: 2020/04/16 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Ian Michael McLarty Plaintiff – and – 2210961 Ontario Limited and Comerica Bank Defendants

COUNSEL: C. Whalman and N. Khangura, for the Plaintiff L. Moffatt, for the Defendant, 2210961 Ontario Limited

HEARD: January 6, 7, 9 and 10, 2020 in Chatham

JUSTICE A.K. MITCHELL

Overview

[1] In this action the plaintiff, Ian McLarty (“McLarty”) seeks payment of amounts owing under an agreement between he and the defendant, 2210961 Ontario Limited carrying on business as Great Lakes Food Company (“Great Lakes”), for the supply of labour, services and materials. The plaintiff’s claim is based in equity and he relies on the equitable principles of unjust enrichment and quantum meruit.

[2] Originally pleaded as a construction lien claim, the action was converted to a simple contract claim and, on consent of the parties, the action was dismissed against the defendant, Comerica Bank, by Notice of Discontinuance filed May 14, 2018.

[3] In the statement of claim issued March 20, 2014, the plaintiff sought damages of $203,400. At trial, the amount claimed was reduced to $120,000 plus interest and costs, representing only the value of the work performed and unpaid and the replacement cost of a trailer the plaintiff alleges was damaged by the defendant.

[4] Great Lakes defends this action alleging a delay in completing the work under the contract and deficiencies in the work performed. The defendant counterclaims against the plaintiff seeking damages in the amount of $200,000 together with damages pursuant to s. 35 of the Construction Lien Act (the “Act”).

The Evidence

The Witnesses

[5] The plaintiff testified and called 4 additional witnesses - Lorenzo Bosazzi, Daron DeLaurier, Elaine Vegotsky, and Robert Schweitzer.

[6] On behalf of the defendant, John Neate and Craig Chinnick testified.

The Parties

[7] The plaintiff is an individual trained and educated as a marine engineer, stationary engineer, millwright and steamfitter and carries on business as a general contractor in sole proprietorship as “Ian McLarty Contracting”.

[8] The defendant carries on business as a harvester, processor and wholesaler of freshwater smelt. In 2013, Tom Mullins was president and John Neate was CEO of Great Lakes. Tammy Campo was Mullins’ girlfriend and also worked for Great Lakes.

Background

[9] In January 2013, Great Lakes was in the process of purchasing a cold storage facility located at 135 Bothwell Street (the “Bothwell property”), Chatham from Versacold Logistics Services (“Versacold”), a supplier to Great Lakes. To operate from the Bothwell property, Great Lakes required licensing by the Canadian Food Inspection Agency (“CFIA”). Because of the intended transfer of ownership of the Bothwell property, Great Lakes was required to obtain its own license to process and package fish.

[10] To obtain CFIA approval, Great Lakes required retrofitting to be done to the Bothwell property whereby the cold storage room was converted into a packaging and processing room. Great Lakes solicited quotes for the required work. Three bids were received. The plaintiff’s bid was the lowest and ultimately accepted by Great Lakes.

[11] In January 2013, DeLaurier was employed by Versacold. DeLaurier had previously worked with McLarty on numerous projects and recommended McLarty to Great Lakes. Neate requested McLarty submit a quote for the Bothwell property project. In the Spring of 2013, DeLaurier left his employment with Versacold and was hired by Great Lakes as facility manager and chief engineer and reported directly to Mullins. DeLaurier was directly involved in the project and provided direction and instruction to McLarty throughout the project. DeLaurier’s employment with Great Lakes was terminated in November, 2013.

The Contract

[12] The initial “quote” was prepared by McLarty and provided to Great Lakes by email on March 1, 2013. The final terms of the contract were negotiated through an exchange of emails between Neate and McLarty. By email sent to McLarty on April 25, 2013, Neate on behalf of Great Lakes confirmed acceptance of the terms of the amended quotation (the “Contract”).

[13] The labour, services and materials to be provided under the Contract included:

(a) converting an existing 3,750 square foot cold storage room (Room D) into a packaging and processing room. The work in Room D included:

(i) the supply and installation of food grade wall and ceiling covering of the type and manufacture previously installed; (ii) enclosing existing evaporation unit; (iii) enclosing existing wall piping; (iv) performing concrete floor repair as needed; (v) shot blast, clean and cover floor with epoxy floor coating suitable to handle temperatures, moisture, and lift truck traffic; (vi) cutting approximately 250 feet of concrete two feet wide and 6 inches deep for forming of new open drain. Form and pour concrete for drain with removable grading suitable to handle heavy lift-truck traffic. Slope as necessary to encourage proper drainage into and along path of drain. To be located 8 feet from the walls or as determined by the customer. Tie into existing drain located outside of room using piping cut into floor and cemented in place; (vii) forming and pouring concrete curbing between bottom of the wall and floor roughly 4 inches and at 45° angle; (viii) connecting to existing 2 inch water supply and installing at ceiling height in an “E” formation, providing multiple expansion plugs to allow for drop lines as required. Lines to be PVC piping; (ix) running air line from existing compressor to room D with three drops for equipment as specified; (x) supplying and installing all piping and hot water supply for tub and wash station; (xi) supplying labour and material to install a new 30 amp power feed from existing 600 volt power splitter in the plant to the new location in Room D complete with 30 amp fused disconnect and a non-fused disconnect at the equipment; (xii) supplying labour and material to install 6-120 volt power drops to equipment, single phase drops. Equipment will be connected if on site and location identified; (xiii) supplying labour and material to install 6-208 volt power drops to equipment, single phase drops. Equipment is to be connected if on site and location identified; (xiv) supplying labour and material to install 1-600 volt 30 amp drop to equipment, three phase drops. Equipment is to be connected if on site; (xv) supplying labour and material to install 30 KVA transformer, 30 amp disconnect, fusing 30 amp, 30 circuit power panel complete with breaker for the lighting circuits and the power drops circuits; (xvi) supplying and installing T5 two lamp vapour tight light fixtures complete with lamps and 4 switches; (xvii) supplying ESA permit for electrical work upon completion; (xviii) supplying and installing two-man doors. Provide hardware and closures to allow for hand free operation; (xix) supplying and installing automatic insulated roll-up door; and (xx) providing power source and connection for new automatic door,

(b) work in room H to include:

(i) performing concrete floor repair as needed; (ii) adding approximately 20 feet to existing drain; and (iii) shot blast, clean and cover floor with epoxy floor coating suitable to handle temperatures, moisture, and lift truck traffic,

(c) work in room G to include:

(i) performing concrete floor repair as needed; (ii) shot blast, clean and cover floor with epoxy floor coating suitable to handle temperatures, moisture, and lift truck traffic; (iii) supplying and installing automatic roll-up door for access; and (iv) supplying and installing man-door,

(d) renovating the office to include:

(i) removing walls in existing office; (ii) providing new flooring for office, staff room and employee locker room; (iii) repairing, modifying and painting existing walls; (iv) providing new drop ceiling using 24” panels; (v) supplying and installing new lighting fixtures in office, employee rooms and locker room; and (vi) painting and upgrading bathrooms as required,

(e) addressing unforeseen issues arising with respect to the work in Rooms D, H, G and the office (McLarty agreed to complete this work at his own expense within the deadlines provided for under the Contract); and

(f) providing a pre-start health and safety review.

[14] Pursuant to the Contract, the work with respect to Room D was given top priority with a “guaranteed completion date” of May 30, 2013. Unlike the original quote presented by McLarty, the Contract did not contain a penalty clause should he fail to meet the deadline.

[15] Great Lakes agreed to pay McLarty $250,000 plus HST ($282,500) for the work under the Contract and an additional $9000 plus HST ($10,170) for additional work in Room H (collectively, the “Contract Amounts”). The Contract Amounts were payable as follows:

(a) Immediately upon acceptance of the Contract, $85,000 plus HST. (b) Upon completion of the work in Room D, $85,000 plus HST. (c) Upon completion of the additional work in Room H, $9000 plus HST. (d) Upon completion of the entire project and final inspection, $80,000 plus HST.

[16] The Contract provided that additional/extra work was to be calculated and paid on a “time and materials” basis.

[17] With respect to the commencement of the work, the Contract provided:

Upon receipt of the first draw, the General Contractor shall immediately order all necessary supplies, specialty equipment, and equipment necessary for the project and shall start work, with Room D being the top priority. Some delivery times are 6 weeks.

[18] With respect to the completion date for Room D, the Contract stated:

…The contractor will begin installation of the customers equipement (sic) according to their directions immediately upon finishing Room D. Due to the floor repairs and covering, it will not be possible to install equipement (sic) prior to complete finishing of the floor and proper cure time.

Performance under the Contract

[19] On April 26, 2013 Great Lakes paid $85,000 to McLarty, being the first installment payable under the Contract, and McLarty began work on April 29, 2013. The plaintiff subcontracted the assistance of three subcontractors - Bosazzi, Jeff Cole and Bob Wright. In addition, McLarty hired temporary employees through an agency to assist with the additional labour required to complete the work.

[20] Approximately a week after work began, CFIA conducted an inspection of the facility and ordered Great lakes to stop production. CFIA advised Great Lakes it required the building to be licensed and specific deficiencies remedied.

[21] In approximately mid-May 2013, the concrete was poured in Room D. On June 8, 2013, the work in Room D was completed and on June 13, 2013, the sale of the Bothwell property to Great Lakes closed.

[22] On June 17, 2013, Great Lakes received CFIA certification and on June 18, 2013 Great Lakes terminated the Contract and McLarty was not permitted to return to the Bothwell property.

[23] On July 5, 2013, Great Lakes paid the second installment under the Contract together with the HST payable on both the first and second installments. No further amounts have been paid to McLarty under the Contract.

Plaintiff’s Claim

[24] The plaintiff retained an expert to calculate his claim. Ms. Elaine Vegotsky was qualified as an expert in economic damage quantification. She calculated the value of the work performed as totalling $120,032 and being comprised of the following amounts:

Contract Price: $250,000 Room H extra: $ 9,000 Adjusted Price: $259,000 Additional Items: $ 40,360

New Pricing: $299,360

Less: Unfinished Items ($32,000)

Net Contract Price $267,360

HST $ 34,757

Total Revised Contract Price $302,117

Less: Payments Received $192,085

Contract Balance $110,032

Trailer Damages $ 10,000

Outstanding Balance $120,032

Defence and Counterclaim

[25] Great Lakes submits that it is entitled to damages exceeding the balance due to the plaintiff under the Contract arising from:

(a) the failure of the plaintiff to complete the work in Room D by May 30, 2013; and (b) deficiencies in the work performed by the plaintiff.

Issues

[26] The evidence at trial was focussed on four main issues:

(a) The delay in completing the work in Room D by May 30, 2013 and damages caused by the delay; (b) The extent and value of the extra work completed by the plaintiff outside the scope of the Contract (the “Extras”) and damage caused to the plaintiff’s trailer by the defendant’s employees; (c) The extent and value of the work not completed by the plaintiff under the Contract; and (d) the value of the deficiencies, if any, in the work performed by the plaintiff under the Contract.

Analysis

Delay in Completing Work in Room D by May 30, 2013

[27] Although the original quote was submitted on March 1, 2013, the final quote was not accepted by Great Lakes until April 25, 2013 – almost 2 months later. DeLaurier testified that the project was delayed due to a lack of financing and estimated that funding of the purchase price delayed the project 1-2 weeks. Neate admitted that delays in closing caused a delay in the start date of the project.

[28] Before work began, DeLaurier, Neate, Mullins and Campo established a temporary office on the premises to oversee the project. Campo was the point of contact with CFIA and was the most knowledgeable and experienced in matters of CFIA licensing. DeLaurier and Neate were on-site each day and oversaw the project from start to finish.

[29] After the quote was accepted and work commenced on April 29th, unforeseen issues arose and CFIA required certain additional items be completed following its inspection conducted in early May. These matters included:

(a) CFIA not “grandfathering” the license held by Versacold and requiring certification of the entire premises, not just Room D; (b) after the floor thawed in Room D, the corner of the room sunk requiring it to be levelled which added 2 days’ additional work; (c) once the panelling was removed it was discovered the walls were not structurally able to support the vinyl siding and required reinforcing. Both McLarty and Bosazzi estimated reinforcing the walls added 2 weeks’ additional work; (d) a separate room was required to house the heat exchange unit; (e) CFIA required curbing in Room H; (f) CFIA required 8 pillars to be wrapped; and (g) CFIA required an extra sink in Room D.

[30] DeLaurier described the work in Room D as “evolving significantly”. Bosazzi said that after the first week, weekly changes to the scope of work in Room D occurred and he “wanted out”.

[31] The work in Room D was completed on June 8, 2013 – 9 days later than the “guaranteed completion date”. McLarty says that the parties verbally agreed to extend the date for completion of the work in Room D to address the unforeseen issues, the issues identified by CFIA and to complete the additional work requested by Great Lakes. Furthermore, a completion date of May 30th was largely immaterial since as DeLaurier testified that, Great Lakes was not permitted to process fish at the Bothwell property until the sale of the property to Great Lakes was completed and CFIA had issued Great Lakes its own license.

[32] The plaintiff says that delays were also attributable to Great Lakes utilizing the plaintiff’s employees to do work not covered by the Contract. McLarty testified that both Mullins and Neate understood and agreed that an extension of the date for completion of the work was necessary to obtain CFIA certification.

[33] McLarty was challenged with respect to the reasonableness of the guaranteed completion date in the face of his evidence that concrete requires 30 days to cure before being subjected to heavy equipment and fork lift traffic and yet concrete was not poured until mid-May. However, I note that the Contract expressly states that the concrete poured in Room D requires additional time beyond completion of the work in Room D to cure.

[34] Neate denies Great Lakes agreed to extend the date for completion of the work in Room D. I find it significant that Neate did not mention delay as an issue until December 2013, long after the work had been completed and the CFIA license obtained.

[35] The defendant claims damages of $33,000 for lost revenues for the period May 30 through June 17, 2013. Aside from Neate’s evidence as to lost revenue, there is no corroborating evidence to support Great Lakes’ claim for damages. Financial information of revenue levels for this same two-week period in prior years was not produced and Neate admitted on cross-examination that Great Lakes failed to comply with its undertaking to produce its financial information. Neate further confirmed that Great Lakes’ profitability has increased steadily since 2013.

[36] I accept that all of the issues were well known to all involved, including Neate who was on site every day. I find that the situation was evolving daily and all issues were discussed among Neate, DeLaurier, Campo, Mullins and McLarty and a consensus reached on how best to address the issues as and when identified. I further find that the parties expressly, by their words, or impliedly, by their conduct, agreed to extend the time to complete Room D from May 30, 2013 to “as soon as possible after May 30th.” The plaintiff complied with that amended term by completing the work under the Contract together with the additional work in Rooms D and H by June 8, 2013.

[37] After considering all of the evidence, a clear picture emerges. Any delay in the start-up of operations at the Bothwell property was not caused by the plaintiff. Poor planning on the part of Great Lakes, financing issues and CFIA licensing issues resulted in the delay in the start of production. Furthermore, there is no evidence that Great Lakes suffered any damage arising from the work in Room D not being completed by May 30, 2013.

Extent and Value of the Extras

[38] By email dated July 3, 2013, McLarty listed the additional work performed outside the scope of the Contract. Six items were identified:

(a) Reinforcement of walls due to structural deficiencies; (b) Heating system; (c) Removal of trip and traffic hazards from dock area; (d) Make/install drip tray/drain for uninsulated re-fridge lines; (e) Supply, cut and form 81 pieces of aluminum; and (f) Add an inspection sink and drain to IQF room.

[39] By December 2013, the list of Extras had grown to nine items and, inexplicably, the time spent and cost of materials with respect to certain of the same items had increased, despite no further work having been performed over the 5-month period. For example, the labour component for reinforcing the walls increased from 3 men to 4 men. Similarly, the materials component associated with the sink and drain added to the IQF room increased from $1,941.80 in July to $3,800 by December.

[40] McLarty wrote to Neate on December 2, 2013 listing the Extras and their associated cost as follows:

(a) Reinforcement of walls due to structural deficiencies ($10,980); (b) Construct north wall of pack room ($1690); (c) Supply, cut and form 81 pieces of aluminum for Great Lakes ($2705.05); (d) Make/install drip tray/drain for uninsulated re-fridge lines ($1740); (e) Remove trip and traffic hazards from dock area ($920); (f) Quick dry IQF room ($2640, including overtime of $480); (g) Add inspection sink and drain to IQF room ($4360); (h) Repair trailer connector ($500); and (i) Curbing in wet room ($1410).

[41] McLarty testified that he did not charge Great Lakes for the heat recovery system or the cost to build the additional room.

[42] In December 2013, McLarty offered to accept the sum of $26,945.05 plus HST in satisfaction of the Extras and the cost of repairing the trailer. At trial, the plaintiff claimed $40,360 plus HST for the Extras and $10,000 for the trailer. The increased amounts appear to include overtime charges and the replacement, not repair, cost of the trailer.

[43] The plaintiff did not provide supporting documentation with respect to his out of pocket materials cost related to the Extras. He says that documentation and his computer on which he stored his documentation relating to the project was stolen from his vehicle in November 2017. The police report was filed as an exhibit.

[44] No explanation was provided by the plaintiff for not obtaining duplicate invoices directly from the supplier(s) of the materials. Nor was any explanation provided for not producing the credit card statements relating to the purchase transactions for the materials. However, Neate reviewed the list of Extras and confirmed that they had been performed although disputed the value ascribed to them.

[45] The significant difference between the value ascribed to the Extras by the plaintiff and the value ascribed by Great Lakes relates to the labour component. The plaintiff charged a “shop rate” of $60 per hour having regard to the overhead component built into the rate to account for the expertise of McLarty as general contractor and for administrative expenses, insurance, tools and equipment and other expenses of McLarty’s business. McLarty says he has charged this same rate for more than 6 years.

[46] The defendant submits the “shop rate” charged is unreasonable and a reasonable hourly rate is $21 per hour which provides for a 20% increase over minimum wage paid for temporary unskilled labour hired by the plaintiff to complete the work under the Contract. The defendant submits the value of the additional work performed outside the scope of the Contract is $17,938.

[47] Pursuant to the Contract, Great Lakes agreed to pay for any extras on a “time and materials” basis. An hourly rate for the “time” component is not specified in the Contract. The defendant submits it is an implied term of the Contract that any labour charge must be reasonable. I agree.

[48] The plaintiff calculated the value of the Extras using an hourly rate of $60 for labour. Furthermore, the plaintiff claimed an overtime rate calculated at “time and a half” for a portion of the additional work undertaken.

[49] I find that the rate charged by the plaintiff is reasonable and standard in the industry regardless of the actual wage paid by McLarty to his temporary employees. McLarty is a general contractor. In preparing the original quote, his estimate included labour charged at $60 per hour. The plaintiff’s out of pocket expense for labour is not relevant much the same way the out of pocket wage expense of an auto repair shop is not reflected in a quote for automotive repair. Similar to the situation at hand, the labour cost is the same for all customers regardless of the wage cost of the individual actually performing the repair work.

[50] However, this same logic disentitles the plaintiff to claim overtime. Whether the actual wage paid to the plaintiff’s employees was an overtime rate is not relevant. An enhanced hourly rate is not provided for in the Contract. Therefore, the plaintiff is allowed only his “shop rate for actual time spent to complete the Extras.

[51] McLarty seeks $10,000 as the cost to replace the trailer damaged by Great Lakes’ employees. He says the trailer was less than a year old and has a replacement value of $10,000. DeLaurier testified that the plaintiff owned more than one trailer. Bosazzi says he was not aware of any trailer owned by the plaintiff at the Bothwell property.

[52] There was a dearth of evidence to support this claim. A photograph of the trailer depicting the alleged damage was not produced. The original purchase invoice was not produced. A repair estimate detailing the alleged damage and the cost of repair was similarly not produced. Some independent evidence of the value of the trailer and the damage to the trailer is necessary to meet the burden of proof. This evidence is inexplicably absent. This damage claim is therefore limited to $500 being the amount estimated by the plaintiff in his December 2, 2013 email as the cost to repair the bullnose.

[53] Accordingly, I find the fair value for the Extras including the value of the repair of the trailer is $26,945 less overtime charged for the “Quick Dry IQF room” of $480 for a net amount of $26,465 plus HST.

Value of the Work Not Completed by The Plaintiff under the Contract

[54] The parties agree that the balance outstanding under the Contract should be reduced by the value of the uncompleted work. However, the parties do not agree to the value to be ascribed to the uncompleted work.

[55] DeLaurier testified that only the office and installation of the roll-up door were outstanding when the Contract was terminated. However, during preparation of her report, Vegotsky was advised by the plaintiff that the installation of both the roll-up door and the man door, and the office renovations were not completed. She valued these 3 items at $32,000.

[56] Great Lakes takes the position that the outstanding work under the Contract was more extensive and has a value of $54,000. Great Lakes submitted an internally-prepared “General Ledger - Transactions Listing” as evidence of amounts paid to complete the outstanding work under the Contract. These amounts include:

(a) Purchase of sink in the pack room $619.47; (b) Charges by King Door $1,585; (c) Charges from Rob’s Electric $8588.61 (less credit of $2106.88); (d) Costs to install door by King Door- $1,791.05; and (e) Cost of pre-inspection safety review - $5000.

[57] Invoices or copies of cheques issued to support the amounts listed in the General Ledger, were not produced. During cross-examination, Neate admitted that Great Lake incurred no cost to install the man door and further that the start-up inspection was unnecessary, was not conducted and no cost was incurred for same.

[58] McLarty testified that he purchased the sink for the pack room and it formed part of the materials left at the Bothwell property following termination of the Contract. I accept this evidence as Neate was unable to confirm Great Lakes purchased a sink.

[59] Schweitzer testified that he completed all electrical work required by the Contract. He confirmed that the work paid for by Great Lakes on August 1, 2013 was unrelated to the Contract.

[60] Therefore, I find Great Lakes is not entitled to a deduction for amounts paid to Rob’s Electric, or for the sink, or the cost of a pre-inspection report. However, Great Lakes is entitled to a deduction for amounts paid to complete the installation of the automatic door in the amount of $1500 as estimated by the plaintiff.

[61] With respect to the value of the work relating to the office, this cannot be determined with precision as the Contract does not break down the Contract price between the rooms (aside from the work in Room H). The defendant says the office work has a value of $40,000. The plaintiff says the office work has a value of $30,000. For ease, I have “split the difference” and value the office work at $35,000.

[62] Accordingly, I find that the value of the uncompleted work under the Contract to be $36,500. This amount shall be deducted from the balance due under the Contract.

Deficiencies in Work Performed under the Contract

[63] Great Lakes identified the following alleged deficiencies in the plaintiff’s work:

(a) the drains and covers installed by the plaintiff in Rooms D and H were not of suitable grade for heavy fork lift traffic; (b) the epoxy broke loose in Rooms D, G and H and required re-sealing; (c) the quality of the curbing in Room D was substandard causing water to pool due to improper sealing; (d) the caulking used was not “food grade”; and (e) the concrete slurry used in levelling the floor in the corner of Room D was deficient leading to water pooling underneath and the concrete breaking away.

[64] McLarty testified that it was not until December 2013 that Neate raised any issue with respect to the quality of his work. Moreover, he says none of Campo, Mullins or DeLaurier communicated any concerns with the quality of the work performed by the plaintiff.

[65] DeLaurier testified that CFIA would not have issued a license to Great Lakes if the work performed by the plaintiff had been deficient. Specifically, DeLaurier says that CFIA would not have approved caulking that was unsuitable for a food processing facility.

[66] Another concern was the quality of the concrete poured by the plaintiff in Room D including the concrete poured for the curbing in both Room D and Room H. Bosazzi, is the owner of Southwest Ornamental Concrete. He was hired by the plaintiff to put vinyl on the walls, cut drains in the floor, do the curbing and install the door in Room D. Bosazzi deposed an affidavit on February 9, 2017 which was filed as an exhibit.

[67] Bosazzi testified that, prior to this project, he had worked with McLarty on various projects over period of 15 years. He said McLarty was experienced, hard working and knowledgeable. Bosazzi deposed in his affidavit that there were no deficiencies in the work performed by the plaintiff. Like McLarty, Bosazzi did not receive any complaints from any of the Great Lakes’ representatives about the quality of his work or with the training and experience of the workers hired by the plaintiff.

[68] Like McLarty, Bosazzi says that concrete requires 30 days to cure, 28 days before being sealed and sealer (epoxy) requires 3-4 days before foot traffic. McLarty testified that he discussed the cure time for concrete with DeLaurier, Mullins and Neate many times. Neate denies being advised of the “cure time” for concrete and says he only discussed the cure time for sealer (epoxy). Neate admits he did not allow the epoxy sealer proper time to dry.

[69] The most significant alleged deficiency identified by the defendant related to the quality of the concrete drains and drain covers installed by the plaintiff in Room D. Pursuant to the Contract, McLarty agreed to “cut approximately 250 feet of concrete two feet wide and 6 inches deep for forming of new open drain. Form and pour concrete for drain with removable grading suitable to handle heavy lift truck traffic. Slope as necessary to encourage proper drainage into and along path of drain. To be located 8 feet from the walls or as determined by the customer”.

[70] Great Lakes submits that the materials and product used by McLarty to complete the work in Room D were not “suitable to handle heavy lift truck traffic” as required by the Contract. Neate testified that Great Lakes was required to replace 18 feet of the drain in Room H. He says the concrete used for the drains and the drains themselves were not correct for the type of application required by Room D. Neate says that Great Lakes will eventually be required to replace the full length of drain; however, by the time of trial, replacement had not taken place. Neate estimates the cost to replace the entire length of drain to be approximately $50,000.

[71] Chinnick sells construction products and is familiar with the characteristics of drains needed for specific uses e.g. residential, commercial or industrial. Chinnick recalls McLarty attending at his store to purchase trench-style drains. As is his usual practice, he said he explained to McLarty the different types of drains and their suitability depending on the application.

[72] Chinnick says McLarty purchased residential-type drains. McLarty does not dispute this evidence. Chinnick estimates the cost differential between residential and industrial drains to be $60 per meter for residential as compared to $300 per meter for industrial drain covers.

[73] Neate described the drains in Room D as having “turned to dust”. For reasons unknown, photographs of the condition of the drains in Room D were not filed at trial. This evidence would have been of great assistance and is readily available. I was asked to assume that the drains in Room D were similar in quality to the work and materials in Room H. I am not prepared to make that assumption.

[74] McLarty acknowledged he selected stainless steel versus cast iron drain covers to offset the cost of levelling the floor in the corner of Room D. McLarty says that this compromise was agreed to by Campo and Mullins. Neither Campo nor Mullins was called as witness at trial to dispute the evidence of McLarty. DeLaurier testified that a lot of processing equipment was purchased after the project began which significantly changed the layout of the equipment in Room D and therefore the direction of the fork lift traffic. This evidence is consistent with McLarty’s evidence.

[75] It is not disputed that levelling the floor in the corner of Room D was unanticipated additional work caused by the thawing of the ice under the floor. Levelling was necessary to ensure proper drainage and to avoid pooling. More importantly, it was necessary to obtain CFIA certification.

[76] McLarty does not dispute that stainless steel covers are not suitable for heavy fork lift traffic. Neate acknowledged that originally drains were to have been placed 8 feet from the wall and this was changed to 12-18 feet from the wall. The plaintiff relied on the defendant’s location of equipment which he says guided the direction of fork lift traffic and therefore the location of the drain covers. McLarty also relied on the direction of Neate as to the location for the placement of the drains.

[77] Neate has no construction experience. Both McLarty and Bosazzi have extensive construction experience. CFIA certified that the Bothwell property (as retrofitted by the plaintiff) met industry standards and Great Lakes was approved to operate from the premises. A copy of the CFIA approval was not filed with the court. I presume had the CFIA inspection report noted any of the alleged deficiencies in Room D, the report would have been filed with the Court. CFIA conducts 6 inspections per year. If the drains and concrete were of such poor quality, surely CFIA would have noted this and those reports would be before the court. They are not.

[78] I find that the defendant (plaintiff by counterclaim) has failed to establish a breach of the Contract and/or negligent performance in the quality of the work performed by the plaintiff in Room D.

[79] Photos of the drains installed in Room H were made an exhibit at trial. Chinnick confirmed the defendant purchased heavy duty drains in April 2014 at a cost of $2,440.80 to replace the drains in Room H. This evidence corroborates Neate’s evidence.

[80] The evidence does support a finding that the drain covers in Room H were not suitable for the application. However, the defendant had an obligation to mitigate its damages. The defendant denied the plaintiff the opportunity to replace the stainless steel covers with cast iron covers despite McLarty’s offer to do so. McLarty estimated his cost to replace the covers would have been $1700. Therefore, I find the defendant is entitled to credit for the repair/replacement of the drains covers in the amount of $1700.

Termination of the Contract

[81] The plaintiff has not claimed damages for wrongful termination of the Contract and so it is unnecessary to consider the issue. However, some comment is warranted.

[82] The defendant relies on the deficiencies in the work performed as justification for terminating the Contract. At no time did Neate complain about the quality of the plaintiff’s work until the plaintiff pressed for payment in December 2013. The evidence establishes that the defendant’s allegation of deficiencies is an after-the fact justification to avoid paying the balance due to the plaintiff under the Contract.

[83] On behalf of Great Lakes, Neate deposed an affidavit in these proceedings on February 14, 2014 to support the defendant’s request to vacate the lien registered by the plaintiff against the Bothwell property. In his affidavit, Neate swore under oath that McLarty had “abandoned” the Contract on June 18, 2013. There is no evidence that McLarty abandoned the Contract. In fact, the evidence establishes the opposite. The evidence establishes there were cost overruns and Neate, on behalf of Great Lakes, decided the office and the bathroom renovations were no longer feasible.

[84] I find it disingenuous on the part of Great Lakes that it made no mention of any concerns with the quality of the work undertaken by the plaintiff prior to ordering McLarty off the Bothwell property the day following CFIA approval.

[85] During cross-examination, Neate testified that, in his affidavit, he had been “mistaken” and had intended to state that McLarty had only abandoned the property, not the Contract. This evidence is not credible. Deposing a false affidavit is a serious matter. Such deception significantly undermines Neate’s credibility and my assessment of the veracity of his evidence overall.

[86] I find there was neither “abandonment” of the property nor the Contract by the plaintiff. Rather, Great Lakes wrongfully terminated the Contract on June 18, 2013 when it directed McLarty to leave the Bothwell property and not return.

Section 35 Construction Lien Act

[87] Great Lakes seeks damages in the amount of $25,000 pursuant to s. 35 of the Construction Lien Act on the basis the plaintiff registered a lien in an exaggerated amount.

[88] At the time the lien was registered on February 5, 2014, the plaintiff had received payment of $192,100. In the statement of claim, the plaintiff pleads that the total contract price was $316,400. At its highest, the value of the plaintiff’s lien claim was $124,300, not $203,400 as registered. Therefore, I conclude the lien claim was exaggerated.

[89] However, unlike the defendant in Landmark II Inc. v. 1535709 Ontario Limited, 2011 ONCA 567, the defendant has not filed any evidence to prove it suffered damages as a result of the exaggerated lien claim registered by the plaintiff. Accordingly, this claim is dismissed.

Disposition

[90] The plaintiff shall have judgment in the amount of $87,244 comprised of the following:

Contract Price: $250,000 Room H extra: $ 9,000 Adjusted Price: $259,000 Additional Items: $ 25,965

Less: Replacement Drain Cover Cost ($1,700)

Less: Unfinished Work ($36,500)

Net Contract Price $246,765

HST $ 32,079

Total Revised Contract Price $278,844

Less: Payments Received $192,100

Contract Balance $ 86,744

Trailer Damages $ 500

Judgment $ 87,244

[91] As claimed in the Statement of Claim, the plaintiff is entitled to pre-judgment and post judgment interest at the rates provided for in the Courts of Justice Act.

[92] The counterclaim is dismissed.

Costs

[93] If costs of the action cannot be agreed upon by the parties, I will receive written cost submissions as follows:

(a) the plaintiff shall serve and file his costs submissions not exceeding 10 pages in length (exclusive of time dockets, costs outline and case law) within 15 days; (b) the defendant shall serve and file its costs submissions not exceeding 10 pages in length (exclusive of time dockets, costs outline and case law) within 15 days thereafter; and (c) any reply submissions not exceeding 3 pages in length shall be served and filed 7 days thereafter.

“Justice A.K. Mitchell” Justice A. K. Mitchell

Released: April 16, 2020