Court File and Parties

COURT FILE NO.: CV-16-566209 DATE: May 5, 2020

ONTARIO SUPERIOR COURT OF JUSTICE

IN THE MATTER OF the Construction Act, R.S.O. 1990, c.C.30

BETWEEN:

THE GATTI GROUP CORP., Plaintiff Peter J. Mitchell, for the plaintiff, Tel.: 416-361-0024, Fax: 416-361-1992.

AND:

JOHN ZUCCARINI and CLAUDIA ZUCCARINI, Defendants Marco Drudi for the Defendants Tel.: 905-850-6116, Fax: 905-850-9146.

HEARD: March 3, 4, 5, 6, 10, 12 and 13, 2020.

Master C. Wiebe

REASONS FOR JUDGMENT

I. INTRODUCTION

[1] This reference concerns the claim for lien of contractor, The Gatti Group Corp. (“GGC”), in the amount of $343,429.76 that GGC registered on a residential lot in Etobicoke owned by the two defendants, John and Claudia Zuccarini, known municipally as 3 Grimsby Court, Toronto (“the Property”). GGC worked as a general contractor for the defendants concerning the demolition of an existing house and the construction of a new house on the Property. The defendants deny this claim and at the trial hearing asserted a set-off and counterclaim in the amount of $382,371.50.

II. BACKGROUND

[2] I begin with a summary of the facts of this case that are undisputed.

[3] The principals of GGC are Tony Gatti and Joe Gatti. Tony Gatti, who I will call Mr. Gatti in these Reasons, was the one who ran the project in question. He has been a contractor most of his life. Ms. Zuccarini, on the other hand, worked in the travel industry and owned a fruit import and distribution business for ten years. Mr. Zuccarini worked as a business technology consultant. Neither were working at the time, and neither had experience in construction.

[4] The defendants owned and lived in another property, 4 Grimsby Court, Toronto (“4 Grimsby Court”). In 2013 they inherited the Property which was just across the street. They decided to renovate it and sell it.

[5] GGC and the defendants met first in March, 2013 at the National Home Show. At this time the defendants talked only about renovating only 4 Grimsby Court. The two met again at the National Home Show in 2014. At this time the defendants advised GGC that they intended to renovate their home with a budget limit of $300,000 to $400,000. The defendants decided to hire GGC to do both projects.

[6] The defendants met with Joe and Tony Gatti on April 9, 2014. At this time, the defendants advised that they planned to renovate the Property in addition to 4 Grimsby Court. They advised that they had a budget limit of $300,000 plus HST for the Property (total $339,000) and $400,000 plus HST for 4 Grimsby Court (total $452,000). Tony Gatti advised that GGC typically entered into two contracts for each project, first a design contract whereby the design for each project was developed up to and including approval and municipal permitting, and then a construction contract for each project based on an estimate developed from the approved design. Mr. Gatti advised that one Steve Hamelin would do the design.

[7] On May 4, 2014 Mr. Gatti emailed two design contracts (one for each project) to the defendants. Each contract was for the fixed price of $15,000 plus HST and indicated that the design was going to be developed by an “architect.” The permit was to be obtained by GGC. The defendants signed both design contracts on May 28, 2014. The defendants then met with Mr. Hamelin on several occasions to discuss the design. They advised Mr. Hamelin of their budget.

[8] On June 15, 2014, Mr. Gatti emailed the defendants advising that he was working on the two construction contracts, both of which required refundable deposits of 10%. It is disputed as to which party asked for these contract documents at this early stage. In the email Mr. Gatti indicated that the deposits were usually much higher, but that the deposits had been reduced to 10% “given that we are only working with budgets at the moment.”

[9] On July 3, 2014 Mr. Hamelin produced a set of drawings concerning the Property. The subject line read: “Issued for Tender.” Ms. Zuccarini responded the next day stating that she loved the drawings but wanted to make sure they stayed within budget.

[10] On July 11, 2014 Mr. Gatti emailed the defendants two contract documents, one for the Property showing that GGC would do the work in the “attached specifications” for a “contract price” of $395,000, and the other for 4 Grimsby Court showing that GGC would do that work for $508,500. The document concerning the Property contained a process for making changes through change orders. The document contained a Schedule “B” which inter alia specified that the purpose of the document was to “secure the services” of GGC for a September, 2015 start date to “carry out the full house renovation” for the defendants. Schedule “B” also stated that the contract “shall be revisited and revised as necessary upon completion of the final building working drawings by Steve Hamelin Architect and agreed to by the OWNER(s).” Schedule “B” referred to an attached estimate. The document did not have specifications, estimates or drawings attached.

[11] Ms. Zuccarini objected to the documents as the “contract prices” did not match with the defendants’ budget of $339,000 (for the Property) and $452,000 (for 4 Grimsby Court). On July 13, 2014, Mr. Gatti emailed versions of the document with only the contract prices changed to $339,000 and $452,000 respectively.

[12] On July 21, 2014, Mr. Gatti and Ms. Zuccarini signed both contract documents. I will call the signed contract document concerning the Property, “the Contract Document.” I will call the project concerning the Property, “the Project.” The defendants paid GGC deposits of $33,900 for the Project and $45,200 for the project concerning 4 Grimsby Court.

[13] On July 24, 2014, Mr. Gatti emailed the defendants advising that “what has been proposed is more in the area of $450,000 to $500,000.” He added that he knew this was not what the defendants were prepared to spend. He said that he had asked Mr. Hamelin to “take another look” as a result. Ms. Zuccarini responded the same day reiterating that the defendants “cannot spend that much.”

[14] On July 27, 2014 Ms. Zuccarini emailed Mr. Hamelin and GGC advising that the defendants “have decided to postpone #4 to the spring and focus on #3.” The defendants had planned to move out of 4 Grimsby Court in the fall to facilitate both projects. They now decided to remain in 4 Grimsby Court and focus on the Project.

[15] On August 11, 2014 Mr. Hamelin delivered what he called “revised design drawings” and “tender set” for the Project. He stated in the covering email that he believed that these were “bang on your budget.” He stated that he had had checked the zoning, which “looked great.”

[16] On August 12, 2014 Mr. Zuccarini emailed advising that the defendants wanted to “go back to the flat roof and the exterior materials.” On August 13, 2014 Mr. Gatti emailed advising that the revised Hamelin design plus John’s comments would cost “closer to the $370/$380 range.” These figures were derived from a takeoff Mr. Gatti had done the day before on August 12, 2020. This was GGC’s first takeoff and was done with no subtrade and supplier quotes. This takeoff was not provided to the defendants.

[17] On August 26, 2014 Mr. Zuccarini emailed GGC advising that the defendants, after an internal debate, wanted the flat roof and exterior elements from the first design. He then listed several changes to the interior design which he described as cut backs in cost.

[18] On September 5, 2014 Ms. Zuccarini emailed GGC advising that the defendants understood that the further design revision would be “closer to $400K.” She added that she would have a “better comfort level” if the number was below the $400,000.

[19] On September 16, 2014 Mr. Hamelin emailed what he called a “revised tender set” of drawings. On September 17, 2014 Ms. Zuccarini emailed GGC and Mr. Hamelin advising of the defendants’ approval of this design “as long as we can keep within budget, understanding there will be tweaks here and there. Aside from that, we are good to go.”

[20] On November 4, 2014 Mr. Gatti emailed the defendants the drawings (and supporting documents) GGC had submitted to the City for approval and permit. The defendants paid the permit fee of $4,140.96. Demolition started.

[21] It took much longer than expected to get the building permit. There were zoning issues. Mr. Hamelin submitted a revised permit set of drawings to the City on April 15, 205. Ms. Zuccarini intervened to help move the process forward. On September 3, 2015, the building permit was issued. Construction began.

[22] On request, the defendants paid draws totaling $80,000 on November 30, 2015, December 21, 2015 and January 8, 2016. Marco Ricchio, who joined GGC in 2015 and who performed financial functions, emailed Ms. Zuccarini on January 7, 2016, copying Mr. Gatti, asking for post-dated cheques for the remainder of the “contract price.” The defendants agreed to pay the post-dated cheques in return for a construction schedule. On January 19, 2016, Mr. Ricchio sent another email enclosing the payment schedule, which he said he had confirmed with Mr. Gatti. The payment schedule showed contract and non-contract payments. It showed the total “contract price” as being $339,000. The remaining cheques were shown as being ten bi-weekly cheques of $19,210 each and one last cheque dated June 8, 2016 in the amount of $33,000. On the same day, Mr. Ricchio undertook not to deposit cheques if GGC delayed its work. The defendants delivered the cheques. All cheques were deposited on the dates of the cheques.

[23] On February 29, 2016 GGC provided the defendants with a schedule that showed that the project would be completed by June 17, 2016.

[24] Starting in March, 2016 Ms. Zuccarini, using her company Benefruits Canada Inc., provided services to GGC at the rate of $20 per hour. These services were administrative and varied. Ms. Zuccarini also worked with an interior designer recommended by GGC to complete the interiors. She emailed Mr. Gatti regularly asking as to “budget amounts” for interior items.

[25] On March 21, 2016 GGC rendered Change Order No. 1 in the amount of $39,747.74. Most of change order concerned extra work on the basement and garage slabs. There was one item where the charge was for “additional cost” for the windows and doors over the “original budget.” GGC required payment before the work was done, and the defendants did so.

[26] On May 2, 2016 GGC rendered Change Order No. 2 in the amount of $46,187.67. This change order contained 18 items. 9 of these items were for additional cost over “budget.” Mr. Gatti explained the additional cost items as being due to delay. The defendants were unhappy with these additional cost items, but they paid the change order before the work was done.

[27] On May 31, 2016 GGC rendered Change Order No. 3 in the amount of $14,394.71. This change order contained 2 items of extra work. Again, the defendants paid up front.

[28] On July 4, 2016 GGC rendered Change Order No. 4 in the amount of $28,651.88. This change order contained 9 items. 4 of these items were for additional cost over “budget.” The defendants delivered the following cheques in late June and July, 2016: one for $19,210, three for $20,000 each, and one for $15,000.

[29] By September, 2016 the Project was not done. On September 28, 2016 Mr. Gatti emailed the defendants advising that he and Mr. Ricchio wanted to meet with the defendants to discuss “the financial status” of the Project. In another email that day Mr. Gatti advised that the Project had “gone over budget” and that there were further costs to complete. In a separate email that day Mr. Ricchio stated that “we will prepare everything” for the defendants to review and will then meet with them.

[30] On October 31, 2016, over a month later, Mr. Ricchio emailed the defendants a document that described the work to be done, the total cost of the Project and the monies paid to date. In the covering email Mr. Ricchio advised that GGC “can no longer extend itself until further funds are received.” The attached document described a considerable amount of work to be done in all areas of the house. There was then a tabulation of the costs to complete the entire Project. The total was $907,195.59 (HST inclusive). The tabulation showed a total cost of $676,424.32 for subtrades and suppliers, another total cost of $112,441.41 for labour, and a management fee of 15% on both totals. The total expressly excluded the basement, bathroom accessories and landscaping. The final part of the document showed the payments made to date, namely $481,330.12.

[31] GGC ceased working on or about November 3, 2016, as indicated on its claim for lien and its statement of claim.

[32] On November 7, 2016 Ms. Zuccarini met with Mr. Ricchio and Mr. Gatti in the office of Ms. Zuccarini’s accountant, Michael Spigelman. Mr. Spigelman was present. There was a heated conversation. At one point, Mr. Ricchio threatened not to finish the Project due to alleged non-payment. Mr. Gatti at one point stated that GGC would be registering a claim for lien, and that numerous trades were unpaid.

[33] On November 9, 2016 Mr. Ricchio emailed another version of the document he distributed on October 31, 2016. The document now showed the total cost of the Project (without basement, bathroom accessories and landscaping) as being $925,564.02 (HST inclusive). The document valued the remaining work at $100,804.14 and stated that the defendants “owed” GGC $298,229.76 for its “costs to date” and $444,233.90 to complete the Project. This tabulation accounted for the $45,200 deposit on 4 Grimsby Court. In the covering email, Mr. Ricchio stated that GGC required payment of the entire $445,233.90 to complete the project and asked for the defendants’ decision.

[34] On November 15, 2016 Ms. Zuccarini emailed GGC. In this email, she expressed her profound disappointment in GGC, resigned from her work for GGC and demanded payment of Benefruits’ outstanding accounts, which she alleged totaled $9,333.80.

[35] In early November, 2016 the defendants hired the Geofocus Group to complete the project. Initially, the Geofocus point person was Roger Altobelli. Later it became Mike Williams. The defendants obtained occupancy of the Property in the late summer of 2017.

[36] On December 1, 2016 GGC registered a claim for lien in the amount of $343,429.76. This is the amount of the Ricchio November 9, 2016 accounting for GGC’s costs to date without accounting for the 4 Grimsby Court deposit. GGC purported to perfect its lien by commencing this action on December 16, 2016. On February 28, 2017 the defendants delivered their statement of defence and counterclaim. They subsequently amended this pleading. The counterclaim ended up being primarily for $436,952 in damages for breach of contract.

[37] On January 15, 2018 the parties obtained a consent order from Justice James F. Diamond referring this action to a master in Toronto for trial. I issued the order for trial on March 16, 2018. I became seized of the reference when I conducted the first trial management conference on May 14, 2018. At that time I gave directions for various interlocutory steps including a site visit, a Scott Schedule, and examinations for discovery. I conducted subsequent trial management conferences on November 14, 2018, April 8, 2019, July 29, 2019 and August 6, 2019.

[38] In the course of this reference, the defendants sought and obtained leave to bring two motions for security for costs. The first motion was argued before me on May 30, 2019. At the same time the defendants also brought a motion for an order requiring that Mr. Gatti answer certain discovery questions. The discovery motion eventually proceeded by way of written submissions. On May 31, 2019 I dismissed the motion for security for costs but without prejudice to the defendants’ right to bring it back with further and better evidence. On June 28, 2019 I ordered that Mr. Gatti answer several of the disputed questions.

[39] At the trial management conference of August 6, 2019 I scheduled the trial hearing to take place in this matter by way of a summary trial over seven days on October 6, 7, 8, 9, 13, 14 and 16, 2020. I double-booked the same trial hearing over another trial in my calendar on March 3, 4, 5, 6, 10, 11 and 13, 2020. On November 6, 2019 I ordered that the trial hearing proceed on the double-booked days.

[40] On December 2, 2019 the defendants brought the motion for security for costs back with further evidence seeking $128,753.45 in security. On December 4, 2019 I granted an order requiring that GGC post $95,000 as security for costs in 30 days.

[41] The trial hearing commenced on March 3, 2020. GGC’s first witness was Mr. Gatti. At the end of his cross-examination, Mr. Mitchell sought leave to have Mr. Gatti brought back to give viva voce evidence concerning exhibits X and Y in his affidavit for evidence in chief. These were two schedules which Mr. Gatti in his affidavit simply described as an accounting prepared for GGC by “an international accounting firm, MNP LLP.” There was nothing more. GGC had no one from MNP LLP on its witness list to explain and prove the document. Mr. Mitchell argued that he had made a mistake in assuming that this accounting (which concerned GGC’s project costs) was “not controversial” and did not have to be proven as to its truth and merit. Pursuant to Rule 52.10 he wanted me to allow Mr. Gatti to give further evidence in chief on exhibits X and Y which he said Mr. Gatti helped prepare. On March 5, 2020 I heard argument on this motion. I stated that I was very much disinclined to grant the requested leave. Nevertheless, I ruled that, as the proof of this accounting was relevant only if GGC succeeded in establishing entitlement to be paid, I would defer my decision on this motion until I rendered my judgment on the trial itself.

[42] Another issue came up at the trial hearing. At the first trial management conference on May 14, 2018 Mr. Mitchell advised me that the relatively small claim for lien of Bramalea Tile Ltd., a supplier to GGC on the project, had been resolved by GGC. On the first day of the trial, March 3, 2020, Mr. Mitchell informed me that he had been mistaken, and that the Bramalea Tile claim for lien remained on title. This concerned me as Bramalea Tile had not been a part of this reference. Both counsel, however, showed me evidence that satisfied me that the Bramalea Tile claim for lien had not been perfected either by itself or by sheltering. I required that GGC bring a motion on notice to Bramalea Tile for an order declaring that lien expired. That motion was brought on March 12, 2020. I was advised that Bramalea Tile did not oppose the motion, and I gave the order.

[43] Another issue came up on the first day of the trial hearing, March 3, 2020. Two of the witnesses on the defendants’ witness list were Messrs. Williams and Spigelman. Mr. Drudi advised me that both were cooperative witnesses. He said that he had not been able to get affidavits from these two in time to meet my deadline for the defendants’ affidavits for evidence in chief. Therefore, he said he delivered two statements concerning the anticipated evidence of Messrs. Williams and Spigelman in accordance with my August 6, 2018 directions. They were in the form of what are generally known as “will say” statements.

[44] Mr. Drudi said he eventually got affidavits from both men, but that GGC refused to consent to the late delivery of the affidavits. I ordered that Mr. Drudi deliver the affidavits to GGC in order to allow GGC to take an informed position on whether to allow them to be filed. On March 10, 2020 Mr. Mitchell stated that GGC refused to consent stating that I should abide by my directions. I ordered that the statements of anticipated evidence take the place of the affidavits in strict compliance with my August 6, 2018 directions. In the end, Mr. Drudi called Mr. Williams but not Mr. Spigelman.

[45] At the trial, Mr. Mitchell called only 2 witnesses from the list of 6 witnesses he gave me on August 6, 2018. He had filed an affidavit sworn by one Dale Borley, but Ms. Borley did not appear and her affidavit was returned. Mr. Drudi called only 3 witnesses from the list of 14 defendant witnesses he gave me on August 6, 2018.

III. ISSUES

[46] Based on the evidence and submissions, I believe that the following issues are the ones to be determined:

a) Was there a contract, and, if so, what was it? b) If there was a fixed price contract, was it waived by the defendants? c) Was there a repudiation of the contract, and, if so, by whom? d) What are the damages? e) Should Mr. Gatti be allowed to give evidence on the MNP documents?

IV. WITNESSES

[47] Before I analyze the issues, I will comment on the credibility of the witnesses.

[48] Mr. Drudi provided me with a helpful decision of Justice Cameron in Prodigy Graphics Group Inc. v. Fitz-Andrews, 2000 CarswellOnt 1178 (SCJ) wherein in paragraphs 46 and 47 His Honour outlined criteria to be applied to the evidence to determine credibility. With oral evidence, here are the factors he listed: lack of testimonial qualification; demeanor of the witness (ie. honesty, forthrightness, openness, spontaneity, firm memory, accuracy, evasiveness); bias or interest in the outcome of the case; relationship to a party; inherent probability in the circumstances (ie. “air of reality”); internal consistency (ie. with other parts of the witness’ evidence and on prior occasions); external consistency (ie. with other credible witnesses and documents).

[49] With written evidence, namely affidavits, His Honour listed the following factors: presence or absence of details supporting conclusions; artful drafting that shields equivocation; use of language inappropriate to the witness; indications that the witness has not read the affidavit; the lack of best evidence; lack of precision and factual errors; omission of significant facts; and disguised hearsay. His Honour added that the court can draw an adverse inference from the failure of a party to call a relevant witness or submit relevant evidence which would be expected to be called to support a party’s case. The adverse inference is that the evidence was not proffered due to fear it would not support that party’s case. This inference may be drawn “notwithstanding the witnesses’ availability to be subpoenaed by either party.” I will use these factors as guides in my assessment of the credibility of the witnesses in this case.

[50] GGC called as its primary witness Mr. Gatti. I found him lacking in credibility. There was the obvious fact that he was, and remains, a principal of GGC and therefore has a stake in the out of this case. But there were more specific problems with his evidence.

[51] There was the Gatti affidavit for evidence in chief. It was profoundly lacking in detail and corroboration. For instance, it did not attach the signed construction contract, most of the Hamelin drawings, the takeoff that Mr. Gatti did on August 12, 2014 that led to Mr. Gatti’s last estimate, any of the change orders, the January 19, 2016 payment schedule that GGC provided to the defendants, the February 23, 2015 email Mr. Gatti sent to Mr. Hamelin criticizing his performance, any of the change orders, and most importantly the correspondence surrounding the financial disclosure in October and November, 2016. This absence left me with the impression that Mr. Gatti’s affidavit was grossly incomplete and weighted in favour of the plaintiff. The avoidance of any detailed discussion of the events in October and November, 2016 was most telling. Mr. Gatti simply stated that Ms. Zuccarini terminated GGC on November 15, 2016 when it was clear from all the correspondence at that time that GGC was not prepared to proceed without further payment.

[52] This affidavit suffered from other problems. There was equivocation. For instance, and most importantly, Mr. Gatti repeatedly used the phrase “place keeper” contracts to describe two documents he and Ms. Zuccarini signed on July 21, 2014. The words “place keeper” do not appear in any of the primary documents. They struck me as artful lawyer words, not those of Mr. Gatti.

[53] The affidavit also contained conclusions that had no air of reality about them. For instance, Mr. Gatti asserted that he interpreted Ms. Zuccarini’s email of September 5, 2014, where she said the defendants believed that the latest design would be “closer to $400K,” as establishing a new budget for the defendants. The email makes no mention of budget and indicates nothing more than Ms. Zuccarini’s aspiration that the evolving scope would cost less than $400,000. In addition, Mr. Gatti indicated at one point that the failure of the defendants to ask for a final estimate when the permit drawings were approved made him assume that the defendants had agreed to a cost-plus contract. This is illogical when it was Mr. Gatti who had the costing information and had generated all previous estimates, and when the defendants had their $339,000 budget enshrined in a signed contract document. Finally, Mr. Gatti insisted in his affidavit that he had a clearer recollection of which party asked for the contract document when he swore his affidavit on January 3, 2020 (stating that it was Ms. Zuccarini) than when he said at discovery a year earlier that he did not recall. In other words, he asserted that he had a clearer recollection of an event after the passage of a year, which makes no sense.

[54] There were issues with the Gatti reply affidavit as well. First, it was almost as long as the Gatti affidavit for evidence in chief. It contained many statements that should have been contained in the affidavit for evidence in chief. There was no objection in this regard, but I read the Gatti reply affidavit with a critical eye to be fair to the defendants. Second, there were statements in the affidavit that were more argument than fact, such as Mr. Gatti’s constant descriptions of Ms. Zuccarini’s state of mind, and his constant attempts to reinterpret documents. Third, he again made illogical assertions such as the assertion that Ms. Zuccarini abandoned her budget by buying expensive items. How could she have abandoned her budget when GGC did not provide her with an overall project cost breakdown? Fourth, I noted that Mr. Gatti blamed Mr. Ricchio for what Mr. Gatti alleged was a mistake in the January 19, 2016 payment schedule, namely the alleged mistake of having it structured to accord with the $339,000 contract price. In this regard, Mr. Gatti went so far as to attack Mr. Ricchio’s character stating that he “would have chosen the easier of two routes every day of the week.” Then GGC chose not to call Mr. Ricchio to explain his conduct. This all shows disingenuousness and a lack of integrity in Mr. Gatti. His credibility suffered as a result.

[55] Many of these issues continued with Mr. Gatti’s oral evidence in cross-examination. But there were others as well. Mr. Gatti struggled constantly with discovery evidence that contradicted his trial evidence. For instance, he asserted at discovery that Mr. Hamelin was an architect, and at trial conceded that he was not. He said at discovery that he had done an internal takeoff when he prepared the contract document that contained the $395,000 contract price, and at trial stated that he had not done so. He said at discovery that the contract was cost plus from the beginning, and at trial stated that it morphed into one. He said at discovery that the defendants relied on him to produce a final cost estimate at the time of the permit, and at trial asserted that they did not. He said at discovery that he recalled that the defendants threatened to sue Mr. Hamelin for delay, and at trial asserted that he did not recall this. These contradictions seriously undermined Mr. Gatti’s credibility.

[56] Mr. Gatti had other significant issues. He made unreasonable statements. For instance, he conceded that he helped Mr. Ricchio prepare the January 19, 2016 payment schedule, and then asserted astonishingly that the word “contract price” in the document did not actually mean that. He admitted not providing the defendants with cost documentation, but then insisted that they did not need it despite claiming the contract was cost plus. Mr. Gatti also conceded deliberately not telling the truth at times. He said that he was lying in his email to Mr. Hamelin dated February 23, 2017 wherein he heavily criticized Mr. Hamelin. He said he lied in this email to “get things going.” This showed that Mr. Gatti is capable of lying to suit his purpose. Mr. Gatti was nervous, evasive and unsure of himself throughout his oral testimony, particularly when he encountered these issues.

[57] The only other witness that was called by GGC was the expert Stephen Karst of Arbitech Inc. He was proffered by GGC as an expert to give an opinion on the value of GGC’s work-in-place at November 1, 2016. This is relevant if GGC establishes an entitlement to be paid. Mr. Karst was also proffered to give an opinion as to the cost of the defendants’ deficiencies. His qualification to give this opinion was challenged, but I ruled in the end that he could give this opinion evidence.

[58] Mr. Karst’s evidence in chief was his report. It was dated April 30, 2019. The report contained a chart called a “Project Valuation.” The report stated that Mr. Karst used the permit drawings to value the cost of the entire project using an industry estimating tool called RSMeans weighted to account for the Toronto area market. These location factors, Mr. Karst stated, came for his own data of what was contained in the Toronto area. The report then stated that Mr. Karst determined the percentage of completion of each item of work as of November 1, 2016 using historical photographs and a video and totaled these individual percentages to produce a total percentage of completion as of November 1, 2015 of 78.12%. The report then applied the individual percentages to the underlying project cost valuation to produce a total valuation of cost-in-place as of November 1, 2016 of $794,882.84. Concerning deficiencies, Mr. Karst stated that he used his own costing experience to value the deficiencies claim at $14,141.19. I note that he only commented on 3 out of the 4 deficiencies claimed.

[59] There were significant issues of credibility with this evidence. This came out during the cross-examination. First, and most importantly, neither Mr. Karst nor GGC put into evidence the photographs and video he said he relied upon to assess the percentage of completion on November 1, 2016. How can the court assess the accuracy of the percentage assessment without this evidence? Second, the location weighting factors Mr. Karst applied to the RSMeans costs for material, labour and equipment were questionable. The 21% increase for material Mr. Karst stated came from the Home Depot site, but it was not made clear that Toronto builders in general, or GGC in this case, in fact pay retail prices. The 12% increase for labour came from union rates when there was no evidence that there was union labour on the project. The 12% increase for equipment came from OPSS Rental Rates when there was no evidence that such government rates apply to home renovations. In addition, Mr. Karst stated that he used 2017 RSMeans pricing when the project occurred between 2014 and 2016. Also the contingency gross-up, 12%, seemed excessive for a project that was ¾ done. Finally, I noted that Mr. Karst was not a quantity surveyor. For all these reasons, I discounted the credibility of Mr. Karst’s evidence.

[60] The defendants, on the other hand, called three witnesses. Their primary witness was the defendant, and co-owner, Claudia Zuccarini. I noted that, as party to the action, she would have a natural bias. Nevertheless, I found Ms. Zuccarini to be a credible witness. Her affidavit was coherent and detailed, touching on all aspects of the relevant events. In particular, she went into considerable detail about the events concerning the cessation of GGC’s work in November, 2016, an area that Mr. Gatti conspicuously avoided in his affidavits. She also went into considerable detail about the change orders and dealt forthrightly with a potential weakness in the defendants’ case, namely the defendants’ payment of items for increased cost over budget.

[61] In addition, Ms. Zuccarini was a careful witness. She made statements that she corroborated. For instance, she stated that the basement was always a part of the project scope, which she supported with drawings from Hamelin that included the basement. She took the time on November 9, 2016 to make notes of the critical meeting between the parties two days earlier on November 7, 2016 concerning the Project financial issues. This not only corroborated her recollection of that meeting but showed her respect for the accuracy of the evidentiary record.

[62] Ms. Zuccarini generally made statements that seemed reasonable. For instance, she openly admitted that the defendants’ budget was based on the anticipated resale value of the Property, not on construction costs. This makes sense as the defendants initially wanted to sell the Property and had no construction experience. Ms. Zuccarini stated that she assumed that the contract prices contained in the contract documents Mr. Gatti provided to her were the result of Mr. Gatti’s estimating work. This also seems reasonable since GGC was the contractor, had the costing information, and drafted the contract documents. She explained her reference to “$400K” in her September 5, 2014 email to Mr. Gatti as being no more than her recognition that there may be extras on construction projects, which also makes sense. Ms. Zuccarini openly admitted being overly trusting of GGC in providing the post-dated cheques for the contract price and by paying up front for the change orders. Again, this makes sense given the defendants’ lack of construction experience.

[63] Ms. Zuccarini withstood cross-examination well. Mr. Mitchell tried to corner her with term definitions, but she understandably insisted that she understood Mr. Gatti’s prices in his two contract documents as being the result of his estimates. Understandably she stated that she was puzzled by Mr. Gatti’s words that he had “no real hard prices” in his August 13, 2014 email, as the parties had a signed contract document and were negotiating the scope to reach the contract price of $339,000. She went through a lengthy review of the scope changes in the design development in 2014, and showed that there were indeed scope reductions to meet the contract price.

[64] The defendants also called Joseph Emmons, a quantity surveyor with O’Keefe & Associates Limited, as an expert to give an opinion on the value of GGC’s work-in-place when it ceased work in November, 2016. He also gave an opinion on the cost to remediate the defendants’ deficiencies. He was produced primarily to respond to Mr. Karst. GGC accepted Mr. Emmons as qualified to give this opinion evidence.

[65] Mr. Emmons’ evidence in chief was two reports that he authored on September 23, 2019 following a site visit on September 9, 2019. The reports stated that Mr. Emmons reviewed the construction drawings, the signed contract and change orders, the Scott Schedule and photographs he took of the site. In addition, the reports stated that Mr. Emmons reviewed three reports, one authored by Care Engineering & Design Services Inc. on August 14, 2015 concerning structural issues, one authored by The GeoFocus Group on November 28, 2016 entitled “Punch List for 20161101 – Claudia and John Zuccarini,” and one authored by Pinchin Ltd. on February 8, 2017 entitled, “Construction Cost Analysis and Performance Audit..” In his value of work-in-place report, Mr. Emmons indicated that he did an estimate by division of work and concluded that the total construction cost when GGC left the site was $646,939 (tax inclusive). In his deficiencies report, Mr. Emmons estimated the total cost to remediate the deficiencies at $54,407.

[66] The Emmons reports had significant issues. First, and most importantly, none of the three reports Mr. Emmons reviewed (and attached to his reports) were proven in the evidence. The Care report appears to have been a report produced to obtain the permit, but that was not clear. The GeoFocus and Pinchin reports appear to have been assessments of the deficiencies to be remediated and the work to be done shortly after GGC left the site. No one was produced to prove and explain these reports. Second, the Emmons reports do not indicate how Mr. Emmons himself used these earlier reports. In his work-in-place report, Mr. Emmons simply stated that he reviewed these documents and made an estimate based on 2015 to 2016 contractor pricing. Third, the deficiencies report was particularly baffling. Here Mr. Emmons made no reference to the Scott Schedule that contains the claimed 4 deficiencies. Instead, he created a schedule based on the GeoFocus and Pinchin reports containing 67 deficiencies that he assessed as costing $54,407. I had difficulty giving credence to the Emmons reports as a result.

[67] These issues were not allayed by Mr. Emmons’ cross-examination. Mr. Emmons confirmed that he relied upon the Pinchin and GeoFocus reports to assess the GGC work-in-place, but again did not explain how he did so. He confirmed that he used these two reports to assess the deficiency claims without consulting the Scott Schedule. Mr. Emmons became argumentative and defensive in answering these questions. In the end, I had difficulty giving the Emmons evidence any weight.

[68] The defendants’ final witness was Michael Williams, the project manager from GeoFocus who assisted the defendants in completing the project. Mr. Williams’ statement of anticipated evidence indicated that he assessed the state of completion of the Project and deficiencies. The statement also indicated that Mr. Williams had great difficulty both in getting the GGC trades to return to complete their work, and in getting other trades to do the work. There was very little detail in the statement concerning the costs the defendants incurred to complete the work, as this was essentially a bare “will say” statement. In cross-examination, Mr. Williams was taken to the Scott Schedule and the issue of valuing the deficiency claims. I ruled that that this gave Mr. Williams the opportunity in re-examination to expound on the Scott Schedule, which he did. I found Mr. Williams generally a credible witness. He had no stake in this action and was honest and forthright in his evidence.

[69] Based on this analysis of credibility, I preferred the evidence of Ms. Zuccarini over that of Mr. Gatti whenever the two conflicted. As to the two expert witnesses, I had trouble giving either weight. On the other hand, I gave Mr. Williams, whose evidence was uncontradicted, weight.

V. ANALYSIS

a) Was there a contract, and, if so, what was it?

[70] In his opening statement Mr. Mitchell argued that there was a contract between the parties and that it was a cost-plus contract, namely one based on the defendants paying GGC its costs of construction without a budget limit. In closing argument, Mr. Mitchell argued that there was in fact no contract between the parties, and that the GGC relies primarily upon its quantum meruit claim.

[71] It is well established law that for there to be a binding construction contract there must be an agreement, a meeting of the minds between the parties, on three elements: the scope of the work; the schedule; and the price. In Rafal v. Legaspi, 2007 BCSC 1944 Madame Justice Fisher stated the following in paragraph 23: “However, for building contracts, it is not sufficient for both parties to have agreed on the building of a house. For the contract to be enforceable, the parties must also agree on the exact type of house, the timeline for completion and the price: Fame Construction Ltd. v. 430863 B.C. Ltd., [1998] B.C.J. No. 2300 (C.A.) (QL) ; affirming Smith J.'s decision, (1997) , 30 B.C.L.R. (3d) 68 (S.C.).” In Goulimis Construction Ltd. v. Smith, 2014 ONSC 1239 in paragraph 17 I quoted at length from the Rafai decision in determining whether there was a binding construction contract in that case. I found that there was not such a binding contract as there was no meeting of the minds as to scope and price. The Goulimis decision was referred to with approval by Justice Healey in the recent decision in Kalogon Spar Ltd. v. Stanley Papageorge, 2020 ONSC 710 (SCJ) at paragraph 188. The judge went on to find that there was no contract in that case stating in paragraph 190 the following: “The evidence is so vague and contradictory that I am unable to find any clear, mutual understanding of the terms regarding price, exact scope of work or timeline for completion that would meet the requirements of contract formation.”

[72] Should the court find that there is no enforceable agreement, there is a strong argument to be made by the contractor for recovery on the basis of quantum meruit. In Goulimis I stated the following in paragraph 41: “The courts generally will grant recovery on the basis of quantum meruit where a party supplies services and materials to another at their request, encouragement or acquiescence, whether under a quasi-contract or no contract, and where it would be unjust for this other party to retain the benefit.”

[73] What makes the case before me interesting, and what distinguishes it from many of the cases involving a dispute over the existence of a construction contract (such as Goulimis), is that here there was a document that was signed by both parties on July 21, 2014, namely the Contract Document. There is no dispute that this was a form of construction contract that was prepared and delivered by GGC. It is entitled, “Renovation and Construction Agreement,” and is under GGC letterhead. There is no dispute that the document was signed and dated in three places by both parties, Mr. Gatti on behalf of the “contractor,” GGC, and Ms. Zuccarini on behalf of the “owners.” There is no dispute that neither party signed the document under duress or on account of unconscionable conduct by either party. Nevertheless, Mr. Mitchell argued at length that this document was not enforceable as there was too much uncertainty as to the essential elements of scope and price.

[74] This means that I must consult the established principles of contract interpretation. Mr. Drudi provided me with authority in this regard. In Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53 (S.C.C.) the Supreme Court of Canada was dealing with a dispute concerning a fee agreement. The Court had to interpret the agreement. In paragraph 47 the Court stated the following about contract interpretation: “The overriding concern is to determine “the intent of the parties and the scope of their understanding” (Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744 (S.C.C.), at para. 27 per Lebel J.; see also Tercon Contractors Ltd. v. British Columbia (Minister of Transportation & Highways), 2010 SCC 4, [2010] 1 S.C.R.69 (S.C.C.), at paras. 64-65 per Cromwell J.). To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract.”

[75] The Court explained the use of surrounding circumstances to interpret contracts and the parole evidence rule. Concerning the use of surrounding circumstances, the Court stated in paragraph 57 that, “while the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement . . . . The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract.” The Court added in paragraph 58 that the evidence of surrounding circumstances must be objective evidence of the background facts, namely knowledge that was or reasonably ought to have been within the knowledge of both parties at the time of the contract. Concerning the parole evidence rule, the Court reiterated in paragraphs 59-61 that this rule promotes the finality and certainty of contract obligations by precluding the admission of evidence outside the words of the written contract that would add to, subtract from, or contradict a contract that has been wholly reduced to writing. The Court did not override the parole evidence rule. It stated only that the rule does not preclude evidence of surrounding circumstances, as such evidence is an interpretation tool.

[76] In Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007 (CA) the Ontario Court of Appeal was dealing with the interpretation of an indemnity agreement. It reiterated the principles referred to in Sattva and added the following. In paragraph 65, the Court stated that the evidence of surrounding circumstances may concern the genesis of the agreement, its purpose, and the commercial context in which the agreement was made. It then added that, “the factual matrix cannot include evidence about the subjective intention of the parties.” The Court also stated that the decision-maker must “read the text in a fashion that accords with sound commercial principles and good business sense, avoiding a commercially absurd result, objectively assessed.”

[77] There are other rules of contract interpretation to be kept in mind. First, there is the contra proferentum rule. This is the rule that requires the court to interpret ambiguous contract terms against the interest of the contract drafter on the basis that the drafter has the responsibility to be clear in his or her use of words; see Hillis Oil and Sales Ltd. v. Wynn’s Canada Ltd., 1986CarswellNS 147 (S.C.C.) at para. 17. Second, the court has jurisdiction to imply terms in the following circumstances: (1) based on custom and usage; (2) as the legal incidents of a particular class or kind of contract; or (3) based on the presumed intention of the parties where the implied term must be necessary to give business efficacy to a contract or as otherwise meeting the “officious bystander” test as a term which the parties would say, if questioned, that they had obviously assumed; see M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., (1999), CarswellAlta 301 (S.C.C.) at paragraph 27.

[78] Did the Contract Document have certainty as to price? In my view, it did. The Contract Document stated that GGC agreed to complete the project as described in Schedule B to the document for a fixed “price” or “sum” of $339,000. Schedule B, which was signed by both parties, described the project as the “full house renovation” of 3 Grimsby Court. The price was confirmed by Schedule A, which contained a payment schedule ending in a “total contract amount” of $339,000. Schedule A was also signed by both parties. In addition, it is undisputed that the defendants paid the 10% deposit on July 21, 2014 as stated in the Schedule A payment schedule. This deposit was 10% of the contract price of $339,000, namely $33,900. The remainder of the contract document had all the indicia of a fixed price contract. Most importantly, it provided for a change order process for all changes to be made to the contract price.

[79] There was a caveat on the price in Schedule B, as there was a caveat on all aspects of the Contract Document. Schedule B stated that, “this contract document shall be revisited and revised as necessary upon completion of the final building working drawings by Steve Hamelin Architect and agreed to by the Owners [the defendants].” It is undisputed that the parties had not obtained the permit at this time. Therefore, as it concerned the price, this clause on its face stated simply that the parties would “revisit and revise” the contract price “as necessary” once the permit was obtained. Furthermore, the clause, in my view, explicitly or implicitly put the onus on GGC to initiate the price change and that the price would remain the same if it did not do so. The only stated obligation placed on the defendants by this clause was to “agree.” As a result, I find that the clause required that GGC initiate the change at the time of the permit. This interpretation also makes sense as it was GGC that had the cost information and the construction experience necessary to make the price change, not the defendants.

[80] The evidence of the surrounding circumstances bolstered my view of the certainty of the price in the Contract Document. The stated contract price reflected the defendants budget limit of $339,000. This is undisputed. In fact, the first version of the Contract Document that Mr. Gatti sent to Ms. Zuccharini on July 11, 2014 contained the contract price of $395,500. It is undisputed that the parties agreed to reduce the price to accord with the defendants’ budget.

[81] Mr. Gatti tried to obfuscate this issue of price in the Contract Document. He insisted that he did not intend to agree to a fixed price contract. Rather, he insisted, the reference to “price” in the document really meant to him “budget,” which he stated was significant as “budgets” could always be changed as the scope changed. He said he inserted wording into the contract accordingly, such as the phrase in Schedule A, “this contract is based on the verbal budget amount provided by the OWNERS to the CONTRACTOR.”

[82] In my view, this is a distinction without meaning. That the contract price was based on the defendants’ budget does not diminish from the fact that the core clauses of the Document showed and referred to a fixed price for the work, a fixed price that could be changed at the initiative of GGC once the permit drawings were approved. What Mr. Gatti may or may not have intended subjectively with words he inserted into the document does not change this fundamental character of the Contract Document when read as a whole. Furthermore, Mr. Gatti contradicted this position in cross-examination when he admitted that he in fact chose a fixed price form of contract for signing and said he felt comfortable in doing so.

[83] Was there certainty as to scope in the Contract Document? This issue was more complicated. The document referred to “attached specifications,” but none were attached. The document referred to an “attached estimate,” but none was attached. No drawings were attached. There is no doubt that at the time of the Document the parties had not agreed upon a scope. Mr. Hamelin had produced his first design on July 3, 2014, and Mr. Gatti was in the process of estimating the cost of that design at the time of the Contract Document.

[84] Nevertheless, I have concluded that there was certainty of scope as well, at least enough certainty to create a contract. This certainty was created by the caveat in Schedule B I referred to above, namely the provision that stated that the contract would be “revisited and revised as necessary upon completion of the final building working drawings” with the onus being on GGC to initiate the contract revision. This clause reflected the agreement between the parties that the contract scope would be whatever was contained in the “final building working drawings” with the onus being on GGC to change the contract price “as necessary” to suit those drawings.

[85] This interpretation makes the most sense in the circumstances. The evidence showed that GGC’s normal process was to wait for the completion of the design before estimating the contract price. For reasons that were not clear in the evidence, the parties embarked upon a “fast track” process, namely the signing of a construction contract before the completion of the design. As stated above, the price agreed upon was understandable as that was the defendants’ steadfast budget limit. In these circumstances, it would make sense for the contractor to commit to doing the construction at that price but only with an “out” to get a higher price if that was necessary once the design was finalized. That is what is reflected in the caveat in Schedule B. I note that the notion of the scope being the future permit drawings was captured in another clause in Schedule B: “The CONTRACTOR is responsible for all labour and materials unless otherwise stated in the final estimate to be completed upon completion of the final permit drawings by Steve Hamelin Architect and agreed to by the OWNER(s).” As Mr. Drudi stated in closing argument, the contract was like a design build contract with GGC committing to design and build a scope to meet a target fixed price.

[86] GGC argued at length that there was such a divergence between the value of the evolving scope and the contract price from the beginning that I should find that the parties never in fact reached an agreement. Essentially, the argument boiled down to the submission that I should disbelieve Ms. Zuccarini in her evidence that she relied upon the Contract Document (and the contract price), and that I should believe Mr. Gatti in his evidence that the Contract Document was nothing but a “place keeper” contract and that GGC never agreed to the contract price. There was much evidence, particularly from GGC, about the changing design following the Contract Document, and the estimates Mr. Gatti generated that exceeded the contract price in that Document.

[87] I do not accept this argument. First, the concept of “place keeper” contract was difficult to understand much less apply. The concept does not appear in any of the primary documents, and, as I stated earlier, it appeared to me to be lawyer’s words, not Mr. Gatti’s. In paragraph 32 of his affidavit in chief Mr. Gatti described the concept as being a commitment by GGC to do the construction if the parties could agree on “the parameters of a construction phase contractual arrangement.” This struck me as a description of an agreement to agree that was unenforceable due to uncertainty. In argument, however, Mr. Mitchell confused me by denying that the document was an unenforceable agreement to agree. He said it was a “promise [by GGC] to be available once the scope was finalized.” This only made sense to me as another description of an unenforceable agreement to agree, namely a nebulous promise by GGC to “be available” once the construction contract was agreed upon. I proceeded accordingly.

[88] I reject the position that the contract document was an unenforceable agreement to agree. As stated earlier, I find that the Contract Document had the necessary certainty of a fixed price construction contract. I will not repeat my analysis here. I will add though reference to the following important part of Schedule B of the Contract Document which, in my view, expressly contradicts the “place keeper” theory: “The intent of this contract is to secure the services of the CONTRACTOR, for an approximate Sept 2014 start date, to carry out the full house renovation of the OWNER(s)’ property at 3 Grimsby Court, Etobicoke.” In other words, the Contact Document itself expressly stated that its purpose was to secure GGC’s construction services, not its future “availability” to construct once the contract was finalized.

[89] Second, a divergence between the value of the scope and the contract price was contemplated and accounted for by the contract document. Under Schedule B, GGC had the right to seek a higher contract price once the permit drawings were approved. That it did not do so meant in accordance with Schedule B that the existing contract price remained unchanged. It did not mean that the contract was dissolved or rendered unenforceable.

[90] Third, I believe Ms. Zuccarini in her evidence that the defendants relied upon, and never ceased relying upon, the contract document and contract price. The Zuccarinis’ budget, $339,000, was based on their assessment of resale recovery, not the cost of construction. Therefore, it was critical for the Zuccarinis to agree to a contract price change even when they became aware of increased construction cost.

[91] The evidence indicated that they did not do so. Mr. Gatti gave the defendants several estimates of construction cost around the time of the Contract Document that exceeded the contract price. There was $395,500 estimate of the cost of construction of Mr. Hamelin’s first design that appeared in Mr. Gatti’s first version of the contract document on July 11, 2014. There was the $450,000 to $500,000 estimate of the cost of construction of the same design that appeared in Mr. Gatti’s email of July 24, 2014. There was the $370,000 to $380,000 estimate of the cost of constructing Hamelin’s second design (with Mr. Zuccarini’s additions) that appeared in Mr. Gatti’s email dated August 13, 2014. In each case, I find that the defendants did not agree to the estimate and required reductions and changes to meet the contract price. This was the case with Mr. Zuccarini’s email of August 26, 2014 containing a list of reductions in the interior design. This also included Ms. Zuccarini’s email dated September 5, 2014 where, in responding to Mr. Gatti’s August 13, 2014 email, she stated that the defendants understood that the design “will be closer to $400K.” But she added that she would have more “comfort” if the number was lower.

[92] The evidence also indicates that when Mr. Gatti stopped providing cost estimates, the Zuccarinis believed and reasonably believed they had a design that accorded with the contract price. Mr. Hamelin produced his third and final design on September 16, 2014. This was the design that formed the basis for the application for a building permit in early November, 2016. Mr. Gatti never estimated the cost of that final design and never produced another estimate. On September 17, 2014 Ms. Zuccarini emailed the Gattis and Mr. Hamelin stating the following: “Tony, Joe, as long as we can stay within budget, understanding there will be tweaks here and there. Aside from that, we are good to go.” Ms. Zuccarini stated in her affidavit that the “tweaks” here referred to the small changes that Mr. Gatti told her invariably occur in construction. This email, therefore, confirmed that, as far as the defendants were concerned, the parties had succeeded in completing an acceptable design at the contract price.

[93] Ms. Zuccarini said that this belief continued thereafter. She said that she was careful to ask Mr. Gatti for budget limits when she made purchases, as she did in her September 22, 2014 and December 12, 2014 emails to him. Since Mr. Gatti did not disclose his takeoff or any contract price breakdown and did not produce further estimates, I find believable Ms. Zuccharini’s evidence that the defendants assumed that Mr. Gatti’s responses all related back to the original contract price.

[94] There is one small area of Ms. Zuccarini’s evidence that appeared to be inconsistent with her reliance on the fixed price contract. GGC delivered four change orders. In change orders 1, 2 and 4 there were items described as being cost over budget. Most of these were described as due to time lapse. Four items were described as simply due to cost over budget. Ms. Zuccarini did not deal with these four in her evidence. With a fixed price contract, there should have been no liability for these four items. Yet the defendants paid them. However, I do not accept this as being fatal to Ms. Zuccarini’s overall evidence about reliance on the fixed price. These four items totaled only $7,339,53. Such a relatively small amount does not amount to a contradiction in evidence or waiver.

[95] Fourth, I do not believe Mr. Gatti’s evidence that GGC never agreed to the contract price. In addition to the Contract Document itself, surrounding circumstances suggested GGC’s agreement on the price. There was the fact that Mr. Gatti’s estimates at the time of the contract were not radically different from the contract price. They all were within $100,000 to $200,000 of the contract price. They were certainly not $600,000 greater than the contract price, as was the case with construction cost disclosure GGC presented to the defendants on October 31 and November 7, 2016. This suggests that Mr. Gatti grossly underestimated the construction costs to the point where he believed he could do the project for the contract price subject to the Schedule B caveat. That would explain why he did not produce an estimate for the third design in 2014.

[96] Then there were the change orders that GGC generated. Had there been no contract, there would have been no need for change orders. In fact, GGC produced four changes after the work commenced. The first one was on March 21, 2016 and the last one was July 4, 2016. There were two features to these change orders: charges for extra scope; charges for increased cost over “budget.” The charges for extra scope presumed that there was an agreed upon contract scope. The charges for cost over budget presumed that there was an agreed upon fixed contract price. Furthermore, the process whereby these change orders were obtained accorded with the change order clause of the Contract Document, clause 8. Clause 8 required that the change orders be prepared, approved, signed and paid in advance of the extra work. That is what happened with these change orders. Therefore, these change orders, which were prepared by GGC, affirmed the agreement reached between the parties in the Contract Document.

[97] In his reply affidavit Mr. Gatti tried to explain his use of change orders as a mistake, as “my perhaps ill-considered decision.” But he added that it “was the first thing that I thought of.” I find that his use of change orders was not a mistake. It was the first thing Mr. Gatti thought of doing because it was required by the Contract Document.

[98] Then there was the payment schedule that GGC produced to the defendants on January 19, 2016, namely well after the construction began. This was a most telling document. On January 7, 2016 Marco Ricchio of GGC emailed Ms. Zuccharini, copying Mr. Gatti, stating the following: “I am preparing a payment schedule going forward outlining the contract price versus the payments received from January 8, 2016 to June 10, 2016 . . . .” He asked for post-dated cheques for the future payments. This email confirmed the existence of a “contract price.”

[99] On January 19, 2016 Mr. Ricchio emailed Ms. Zuccarini, copying Mr. Gatti, a schedule of past and future payments. In the covering email, Mr. Ricchio stated that he had confirmed the attached schedule with Mr. Gatti the previous night. The attached schedule differentiated between contract and “non contract” payments. In the contract payment column, GGC confirmed that the defendants had made four payments to date totaling $113,900 (including the deposit). The document expressly stated at the bottom that the “total contract price” was $339,000, namely the contract price in the Contract Document. The future contract payments were shown to be ten payments of $19,210 each and a final eleventh payment of $33,000. In the covering email Mr. Ricchio promised to stop depositing cheques if there was a delay. This schedule was almost the same payment schedule that was in Schedule A of the Contract Document. The only difference between the two was that the Zuccarinis paid two earlier draws in amounts that were a little larger than what was shown in Schedule A. This document, therefore, is an emphatic affirmation of the existence of the agreement embodied in the Contract Document.

[100] GGC tried unsuccessfully to explain this document away. Mr. Gatti and Mr. Mitchell asserted that Mr. Ricchio was the sole author of this document and that he acted without authority from GGC. Mr. Gatti also went further attacking Mr. Ricchio’s character as being sloppy. In cross-examination he even asserted incredibly that the words “total contract price” at the bottom of the document did not mean what they said.

[101] I do not accept these explanations. Mr. Ricchio stated in his covering email that he had reviewed the document with Mr. Gatti and obtained Mr. Gatti’s approval. Mr. Gatti did not deny this point. Furthermore, it would make no sense for Mr. Ricchio to approach a GGC customer about payment without getting GGC’s authority. Also, I note that GGC chose not to call Mr. Ricchio as a witness to have him explain his conduct. I draw an adverse inference against GGC as a result, namely an inference that Mr. Ricchio would have given evidence confirming his full authority from GGC to present the payment schedule as drafted to the defendants. I find that the January 19, 2016 payment schedule was GGC’s official position and that it confirmed in the middle of the construction work the agreement embodied in the Contract Document.

[102] Then there was the issue of payment itself. Significantly, it is undisputed that the defendants provided GGC with the requested post-dated cheques. It is undisputed that GGC deposited all of the defendants’ post-dated, biweekly cheques on the dates of the cheques despite Mr. Ricchio’s promise in his January 19, 2016 email not to do so if there was a delay. There was undoubtedly a delay as GGC was not anywhere near finished by June, 2016, the end of the nine-month project schedule. Mr. Gatti himself in cross-examination admitted that GGC was only 50 to 60% complete by July, 2016. In short, GGC effected full payment from the defendants based on the payment schedule and contract price in the Contract Document. Indeed, it did so without being entitled to do so due to Mr. Ricchio’s promise to withhold deposits with a delay. This all was further and emphatic confirmation of the existence of the agreement in the Contract Document.

[103] Mr. Mitchell in closing argument raised briefly the point that the schedule in the Contract Document was too uncertain to create an enforceable contract. This point was not stressed. I do not accept it. The Contract Document specified an “estimated start date” of “Sept 2014” and an “estimated completion date” of “April/May 2015.” That was a maximum nine-month construction schedule. It was sufficiently certain to create a contract.

[104] Incidentally, I note that, after much delay, Mr. Gatti produced a construction schedule to Ms. Zuccarini on February 29, 2016 that showed, after some five months of construction, about four months remaining in the construction work. While probably quite inaccurate at that time given the state of completion in October, 2016, this schedule accorded with the nine month schedule in the Contract Document. I note also that the January 19, 2016 GGC payment schedule accorded with this February 29, 2016 project schedule. As a result, the February 29, 2016 project schedule affirmed the nine-month project schedule in the Contract Document.

[105] GGC made the alternative argument that the contract morphed into a cost-plus contract. A cost-plus contract is one where the price is based on the contractor’s actual cost plus a fee, whereas a fixed price contract is where the parties agree in the contract to a price for the work and “the contractor assumes the risk of underpricing the contract and enjoys the benefits of completing the contract for less than the fixed price;” see Dominion Drywall Systems Limited v. Volta Lofts Inc., 2018 ONSC 1918 (Ont. Master) at paragraph 20. GGC’s original main position, as pleaded, was there was a cost-plus contract from the beginning. At trial, on the other hand, Mr. Gatti took the position that the contract may have been fixed price originally, but that it changed into a cost-plus contract when the parties abandoned the fixed price contract. According to GGC, this explained the constant use of the word “contract” in the primary correspondence documents, including correspondence from Mr. Gatti.

[106] I do not accept this position. As stated earlier, Ms. Zuccarini’s evidence was that the defendants always relied upon the Contract Document as it enshrined their budget and as Mr. Gatti ceased providing estimates, including the absence of an estimate at the time of the permit in September, 2015. I also do not believe that GGC believed at the time it had a cost-plus contract. Most telling in this regard was the undisputed fact that GGC never provided the defendants with cost information or documentation. This is something any reasonable cost-plus contractor would do as costs trigger the owner’s obligation to pay. Mr. Gatti could not explain GGC’s failure to provide this information and documentation. I reject the argument about a cost-plus contract.

[107] I, therefore, find that there was a contract between the parties, that it was a fixed price contract, and that this fixed price contract was embodied in the Contract Document. I also find that the only changes made to this contract document were in the four approved change orders. The GGC quantum meruit and cost-plus arguments fail.

[108] As a result, the most critical set of events in this case were the ones around the time of the permit approval in September, 2015. In accordance with Schedule B, GGC had the right at that time to “revisit and revise as necessary” the contract price. It failed to do so. Therefore, by operation of the Contract Document, the base contract price remained unchanged.

[109] Mr. Gatti’s explanation for failing to revisit and revise the price (namely that he believed that the parties had by that time abandoned the contract) was not credible for the reasons stated above. The court could speculate as to the real reasons GGC failed to “revisit and revise” the price, such as perhaps the embarrassment for and increased costs of the one-year delay caused by Mr. Hamelin; but the court will not go further on that subject.

b) Was the fixed price contract waived by the defendants?

[110] Mr. Mitchell made a brief argument that the defendants had waived the fixed price contract with their conduct. In his casebook he provided some authorities on the doctrine of waiver. In Saskatchewan River Bungalow Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490 (S.C.C.) the Supreme Court of Canada discussed waiver of contractual rights. On page 500 the Court stated the following: “Waiver will be found only where the evidence demonstrates that the party waiving had (1) a full knowledge of rights; and (2) an unequivocal and conscious intention to abandon them. The creation of such a stringent test is justified since no consideration moves from the party in whose favour a waiver operates.” The doctrine is meant to protect the other party when it reasonably relied on the waiver.

[111] The GGC’s main argument was that by paying cost over budget items in the change orders and by discussing “budget” amounts in excess of the contract price, the defendants waived the Contract Document and led Mr. Gatti reasonably to believe that the defendants had done so. I have discussed both points previously in these reasons and will not reiterate the analysis here. Suffice it to say that I do not accept these points. Most of the cost over budget items in the change orders were attributed by Mr. Gatti himself to delay, which eliminates them as relevant to the waiver argument. The other such items in the change orders were so small in amount as to be irrelevant to the waiver argument. As to the discussions of “budget” amounts in excess of the contract price, as I stated earlier, none showed evidence of the defendants unequivocally and with knowledge abandoning the Contract Document. In fact, in the end these discussions showed that the defendants reasonably believed they had achieved an acceptable design at the agreed upon fixed price, particularly since Mr. Gatti stopped providing estimates. I reject the GGC argument about waiver.

c) Was there a repudiation of the contract, and, if so, by whom?

[112] Mr. Drudi provided me with authority concerning the issue of contract repudiation. In Kaplun v. Mihhailenko, 2005 CarswellOnt 1945 (Ont. Master) Master Sandler reviewed in paragraphs 114 and 115 the common law of contract repudiation. After listing key case decisions on this point, he then made the following observation in paragraph 115: “[These authorities] show that where each party to a contract is alleging fundamental breach and repudiation by the other, the court must determine which party committed a substantial breach which amounts to a repudiation, i.e. evidencing an intention no longer to be bound by the terms of the contract. In making this assessment, the test is an objective one, and even a direct or indirect intention by a party allegedly in breach that it wished to continue the contract is not necessarily conclusive in rebutting a finding of a repudiation of the contract.”

[113] In the case before me, the defendants allege that GGC fundamentally breached the contract by demanding payment not required by the contract and stopping work well before completion. GGC does not allege breach of the original fixed price contract. It either alleges recovery by quantum meruit or that the defendants fundamentally breached the alleged cost-plus contract by failing to pay the GGC past costs. As I have denied the GGC quantum meruit and cost-pus arguments, the issue boils down to whether GGC fundamentally breached the fixed price contract I have found.

[114] I find that GGC did fundamentally breach the contract. By October, 2016, with the work unfinished, the defendants had paid GGC the entire contract price and all of the issued change orders. Indeed, they paid most of these monies in advance of the work. There were no invoices from GGC. On September 28, 2016 Mr. Gatti sent the defendants an email advising of the need to meet to discuss the “current financial status of the Renovation for 3 Grimsby Crt.” The next day Mr. Ricchio sent an internal email to the Joe and Tony Gatti stating that, “if they [the defendants] are refusing a meeting then we must stop work immediately.” That day Mr. Gatti emailed the defendants advising that “the project has gone over budget and there are still some costs that will be incurred to complete the project.”

[115] It took over a month for GGC to provide the promised accounting. On October 31, 2016 Mr. Ricchio sent the defendants an email enclosing three documents, a list of the work remaining to be done, a schedule of the total costs of the project, and a schedule of the defendants’ payments. The schedule of the total costs of the project showed a figure of $907,195.59, which was three times the contract price and almost twice as much as what the defendants had paid to that date. This total did not include bathroom accessories, the basement and landscaping. In the covering email Mr. Ricchio stated the following: “The Gatti Group Corp has been covering the true costs of this renovation and can no longer extend itself until further funds are received.”

[116] It is undisputed that GGC ceased working on or about November 5, 2016. The parties met on November 7, 2016. As indicated in Ms. Zuccharini’s email of November 9, 2016, which recounted what happened at this meeting and which Ms. Zuccarinin confirmed and I accept as being accurate, Mr. Ricchio stated that the Gatti’s underestimated the contract costs. He reiterated that GGC could not finish the project without further payment. Mr. Gatti threatened to have GGC lien the project.

[117] Two days later, on November 9, 2016, Mr. Ricchio sent another email containing updated versions of the same three documents. The total costs of the project were now shown to be $925,564.02. There was now an additional document estimating the costs to complete at $100,804.14. The payments schedule now contained a total of unpaid costs to date, $298,229.76, which total accounted for the $45,200 deposit concerning 4 Grimsby Court. In the covering email, Mr. Ricchio demanded payment of the $100,804.14 as that was what was required to have GGC “remain as the General Contractor to complete the project.” He added that he trusted the information was sufficient to allow the defendants to make a decision “on whether or not to proceed with The Gatti Group Corp.”

[118] I find this action by GGC to be an abandonment of the agreement in the Contract Document. As such, it was a fundamental breach and repudiation of that agreement. GGC had been paid the entire contract price and the change orders, namely more than it was entitled to be paid under the agreement. Now it wanted further huge payment it was not entitled to as a condition of completing the work. It stopped working. Such conduct was an unequivocal statement of GGC’s intention not to be bound by the terms of the contract.

[119] That is not, however, the end of the issue. In Kaplun in paragraph 122 Master Sandler stated that, at common law, unless the contract otherwise specifies, the party entitled to terminate a contract on account of the other party’s fundamental breach must in fact elect to terminate the contract. To do so, he stated, “a method that shows the owner [the innocent party] has accepted the repudiation and has terminated the contract, i.e. has brought it to an end, will suffice.” He added that there is no particular form for such a step, namely there does not have to be list of the alleged breach or breaches and a notice period for curing the breach.

[120] In the case before me, the Contract Document did have a termination clause, namely clause 7. Clause 7 gave both parties the right to terminate the contract on seven days written notice. But this clause, as I read it, provided only for termination without cause. It did not apply to termination arising from fundamental contract breach. Therefore, in my view, the common law as described by Master Sandler applies to the issue before me.

[121] The evidence was not clear on this point. Nevertheless, I have found that the defendants did indeed elect to terminate the contract. When the construction began, Ms. Zuccarini stated that she had a good relationship with Mr. Gatti. She stated that in March, 2016 she started working for GGC doing odd administrative jobs with the intention of investing in and working together with GGC on other renovations. She did this work through her company, Benefruits Canada Inc. This relationship was obviously based on good will and trust between the parties originating from the Project.

[122] On November 15, 2016 Ms. Zuccarini sent an email to Mr. Gatti, Joe Gatti and Marco Ricchio wherein she resigned her position. She enclosed her outstanding account, demanded payment and threatened legal action. In the covering email, Ms. Zuccarini went further than a simple resignation. She stated the following: “Again, I cannot [over]stress my disappointment. I honestly believed in each of you, your corporation, and your ability to act responsibly and professionally. I placed my full trust in you and hoped that we could develop a long standing business relationship.” Looked at objectively and realizing that Ms. Zuccarini was neither a lawyer nor one with construction experience, this email communicated such a profound loss of confidence in GGC in general that the only reasonable interpretation to be given to it is that it terminated the contract as well. I give such an interpretation. The parties obviously gave it such an interpretation, as they went their separate ways thereafter.

[123] I, therefore, find that GGC repudiated the contact in the Contract Document, and that the defendants elected to accept this repudiation and terminated the contract effective November 15, 2016.

d) What are the damages?

[124] As GGC was paid the entirety of the contract price and the change orders, I have no hesitation in dismissing the entirety of its claim. GGC was in fact paid more than it was entitled to as it was far from completion. Furthermore, as GGC abandoned and repudiated the contract well before substantial completion, the law is clear that it is in any event not entitled to damages, either damages for lost profit or unpaid contract price; see Kaplun at paragraph 23. GGC is also not entitled to recovery on a quantum meruit basis; see Kaplum at paragraph 130.

[125] I, therefore, do not have to deal with the evidence of Messrs. Karst and Emmons as to the value of GGC’s cost-in-place at the time of its departure. I will not do so.

[126] On the other hand, the defendants are entitled to be paid the damages they prove. I note that they did not claim damages on account of delay, despite the delay of over a year in the commencement of the project and the delay in 2016. I will focus on the damages they have claimed.

d.1) Change order overpayment

[127] As I stated earlier, the four GGC change orders contained items of cost over budget. Four of these items, totaling $7,339,53, were simply for cost over budget. Seven of these items, totaling $22,610, were described as cost over budget “due to time lapse.”

[128] The defendants deny these eleven charges, despite the fact that they paid them. Ms. Zuccarini’s evidence dealt only with the “time lapse” items. She stated that the defendants reluctantly paid these items under a form of duress. She stated that Mr. Gatti advised the defendants that although Mr. Hamelin was responsible for the delay, GGC would not do accept responsibility. This meant that the defendants would have to sue GGC to get recovery from Mr. Hamelin. As a result and as the project was delayed and well underway, the defendants, according to Ms. Zuccarini, made the strategic decision not to pursue the matter and paid the charges. Mr. Gatti denied the duress. On account of my analysis of credibility, I accept Ms. Zuccarini’s evidence.

[129] I have decided to accept the defendants’ position on these items. These are my reasons. First, while the defendants paid these items, GGC was not entitled to these payments. Second, the duress GGC put the defendants under to pay the time lapse items should not be condoned by the court. GGC should have accepted responsibility for Mr. Hamelin’s delay as Mr. Hamelin was GGC’s subcontractor. Finally, and most importantly, I note that the defendants are not claiming repayment of any of the contract price despite the obvious fact that GGC should not have deposited many of the post-dated defendant cheques due to the GGC delay in 2016. Despite the February 29, 2016 GGC project schedule, which called for a June, 2016 completion, the project was far from complete in June. GGC promised not to deposit post-dated cheques in the event of delay, yet they did so. This breach of promise should not be condoned.

[130] Concerning the other change order items the defendants are challenging, I will deal with them individually. The defendants have the onus of proving these items:

• Concrete pads for new staircase; $1,800 (change order 1): It is undisputed that this was an alleged scope change and that the defendants paid for it. Ms. Zuccarini did not directly deal with this item in her evidence. Therefore, I deny this back-charge.
• Skylight; $518 (change order 1): This also was an alleged scope change that the defendants paid. It was not directly dealt with in Ms. Zuccarini’s evidence. I deny the back-charge.
• Tree hoarding; $1,109.52 (change order 2): This also was an alleged scope change that the defendants paid. Ms. Zuccarini simply stated that she did not recall being advised of this item. Yet the defendants paid it. I deny the back-charge.
• Electrical extras; $3,655 (change order 2): There are seven electrical extras in change order 2. They all appear to be for scope change, and they were paid by the defendants. Ms. Zuccarini simply stated that she did not recall being advised of these items. Yet the defendants paid them. I deny the back-charge.
• Home alarm; $2,133.86 (change order 3): Ms. Zuccarini denied that GGC installed the alarm system. This was not denied by Mr. Gatti. I accept this back-charge as a result.
• Maibec wood siding; $8,943 (change order 3): Ms. Zuccarini stated in her affidavit that this item related to what Mr. Gatti told her was a mistake in measurement of the siding by either Maibec or GGC. Nevertheless, despite protesting, the defendants paid the item. Mr. Gatti did not deal with this issue. There is no dispute that the Maibec siding work was done. As a result, and given the defendants original decision to pay this item, I am not prepared to accept this back-charge as it was a scope change.
• Caesarstone countertop; $1,175 (change order 4): Ms. Zuccarini did not deal with this issue in her evidence. It was undisputedly a scope change. It was paid by the defendants. I see no basis for this back-charge and I deny it.
• 15% Management fee and HST (all change orders): This issue was not expressly discussed. The change clause in the Contract Document, clause 8, did not specify how change orders were to be calculated. The four change orders were structured as cost-plus change orders, namely cost plus a 15% management fee plus HST. They were paid as such without issue. Therefore, in my view, the final tally must include a 15% markup for management fee. Of course, there must be HST on the entire result.

[131] What this means is that there must be the following calculation of what was properly paid by the defendants for the change orders:

• Proper change order payments: $47,685.30 (undisputed items) + $1,800 (staircase) + $518 (skylight) + $1,109.52 (tree hoarding) + $3,655 (electrical extras) + $8,943 (Maibec siding) + $1,175 (countertop) = $64,885.82;
• 15% Management fee on proper change order payments: $64,885.82 x 0.15 = $9,732.87;
• HST on the total: ($64,885.82 + $9,732.87) x 0.13 = $9,700.43;
• Total proper payments on change orders: $64,885.82 + $9,732.87 + $9,700.43 = $84,319.12.

[132] The defendants paid a total of $128,982 on the four change orders. This means that they overpaid on change orders in the following amount: $128,982 - $84,319.12 = $44,662.88.

d.2) Deficiencies

[133] The defendants claim as damages the costs they incurred to correct deficiencies in GGC’s work. What they are claiming was, however, a moving target. As I stated earlier, Mr. Emmons commented on lists created by Pinchin and GeoFocus, not the Scott Schedule. Initial iterations of the Scott Schedule seemed to contain a longer list of deficiencies than what the defendants claimed in the final iteration of the Schedule.

[134] In the end, I was guided by the Scott Schedule that appeared in the Trial Record, as this is the document that binds the parties. It also accords with the defendants’ claim as summarized in Ms. Zuccarini’s affidavit. The Scott Schedule showed a list of the following four deficiencies with the following claimed costs to correct:

• Replace hardwood flooring: $12,100.67;
• Level hardwood flooring: $8,531.50;
• Mechanical deficiencies: $2,268.48;
• Flashing: $5,026.24;

TOTAL: $27,926.89

[135] The first item concerns the replacement of the hardwood flooring in the master bedroom and upper floor foyer. There was a hump in the floor that was created by a misplaced joist. In the Scott Schedule GGC accepted the entirety of this claim. Therefore, this is a valid deficiency claim with the cost of correction at $12,100,67.

[136] The second item concerned the work of demolishing the old flooring, correcting the misplaced joist, and replacing the plywood on the floor. The correction cost claimed was $8,531.50. In the Scott Schedule GGC accepted only $1,130 claiming that the evidence showed that the offending joist had been left alone thereby leaving only the wood removal as a valid claim. However, Mr. Williams stated in re-examination that, while the offending joist was not replaced, it was leveled with plaining equipment. Ms. Zuccarini’s affidavit contains two invoices from BB Homes Services for this work, with the bulk of the work shown as being the leveling. There is also a cheque from the defendants to BB Home Services for $8,531.50, which is the amount of the claim. Both experts were unhelpful in their opinions on this subject. I could not correlate their reports to the Scott Schedule item. Due to the BB Homes Services invoices and cheque, I have decided that the defendants have proven this deficiency claim in the amount of $8,531.50.

[137] The third item concerned mechanical issues. According to the Scott Schedule, the defendants allege that GGC’s mechanical trade incorrectly used ball valves and incorrectly installed an outside gas meter thereby requiring that it be changed to an inside meter to meet City of Toronto requirements. GGC’s response was that the description needed clarification and that, in any event, the claimed cost was excessive as the gas meter was near the mechanical room. Mr. Williams stated that the gas meter was not tagged properly, and that the gas meter had to be reinstalled as required by Enbridge. Ms. Zuccarini’s affidavit contains a quote from Clima Mechanical dated April 3, 2017 specifying the work of “deficiencies” noted by Enbridge, namely “change ball valve to CGA; Retest all piping; Change gas line from outside meter to inside with steel pipe.” The Clima invoice dated April 6, 2017 was for $2,268.48, which is the amount of this claim. There is also a cheque from the defendants to Clima proving payment. Mr. Karst did not deal with this item. Mr. Emmons’ evidence, as stated earlier, was undecipherable on the issue of deficiencies. In the circumstances, I find that the defendants have proved this deficiency claim in the amount of $2,268.48.

[138] The fourth item concerned the exterior flashing. In the Scott Schedule, the defendants claimed that the flashing was “oil canned” and incorrectly installed, and that it had to be totally replaced. GGC’s response was that the flashing rippling was “minor,” and that the claimed costs were excessive as only the front flashing had to be replaced. Mr. William stated that the flashing was indeed deficient, namely that it was “oil canned” and wavy. The front flashing, he said, had to be replaced. Ms. Zuccarini’s affidavit contained a quotation from Pollard Enterprises Ltd. dated May 18, 2017 for the supply and installation of flashing in two places for a price of $2,542.50. There is also an invoice from Pollard dated July 19, 2017 for $5,026.24 for the supply and installation of flashing as stated in a Pollard quote “dated June 12, 2017.” That June 12, 2017 quote was, however, not provided. I note that Mr. Karst quantified the costs of this item at $3,881.16. As a result, I find that the defendants have established a claim for the cost of correcting this item at the amount of Mr. Karst’s valuation, namely the amount of $3,881.16.

[139] This means that the defendants have established a deficiency claim in the following amount: $12,100.67 (hardwood replacement) + $8,531.50 (floor leveling) + $2,268.48 (mechanical issues) + $3,881.16 (flashing) = $26,781.81.

d.3) Completion costs

[140] As the defendants have paid GGC the entirety of the contract price and all the change orders, they have a valid claim in damages for any further reasonable costs they can prove they incurred to complete the project. Ms. Zuccarini identified 28 costs the defendants are claiming they incurred to complete the project. These 28 costs totaled $206,688.95. They are included in the Scott Schedule.

[141] In the Scott Schedule GGC accepted the costs of 8 of these 20 items as being reasonable. These 8 items totaled $24,678.69. The remaining 20 items GGC challenged as having either “nil” value or a reasonable amount below what the defendants claim. GGC valued these 20 items at a total of $84,169.48, whereas the defendants claim a total of $182,010.26 for these items, namely a difference of $97,840.78.

[142] The evidence given by the defendants in support of these costs appears in paragraph 138 of Ms. Zuccarini’s affidavit. In this paragraph Ms. Zuccarani stated that the documents in support of the claimed completion costs appear at Exhibit 77 to her affidavit. I have reviewed these documents and compared them to the list of completion costs outlined in the Scott Schedule. I am satisfied that all the necessary purchase orders, invoices and proofs of payment in support of the claimed costs are there and establish that the defendants in fact paid these costs.

[143] The only evidence supporting the GGC position that the claimed costs on the above noted 20 items are unreasonable is the one document Mr. Ricchio emailed to Ms. Zuccharini on November 9, 2016 entitled, “Remaining Work to be Completed as Part of the Cost Spreadsheet Attached, Dated: November 8, 2016.” This document was GGC’s estimate of the cost to complete at that time and showed a total of $100,804.14. This is a little less than that $108,848.17 that represents the total of GGC assessment of the defendants’ completion cost in the Scott Schedule.

[144] I have decided to accept the defendants’ claim of completion costs. First, GGC’s ability to estimate accurately has been caste into serious doubt by this entire case. The original contract price and Mr. Gatti’s estimates in 2014 all were radically lower than what GGC later claimed it actually cost to complete the construction. Mr. Ricchio himself stated at the November 7, 2016 meeting that the GGC price was too low. Second, GGC’s $100,804.14 estimate assumed that GGC would be completing the Project. After GGC abandoned the project, the costs of completion would inevitably be significantly higher as the work would be done by others. Mr. Williams was clear that getting the original GGC trades to return to complete the work was very difficult as they said they were unpaid and wanted to be paid. Others did not want to interfere with the uncompleted work of the original trades. In this environment, there would have been an inevitable and significant premium on any cost of completion. Getting competitive quotes would have been difficult at best. Given all of these uncertainties, it is not surprising that GeoFocus charged for its management services on an hourly basis, and not on a percentage basis as GGC stated in the Scott Schedule it should have done. Third, and finally, there was no other evidence from GGC on this issue. Mr. Gatti did not address this issue, and neither did Mr. Karst.

[145] I am, therefore, driven to the conclusion that the defendants have established their claim of damages for completion costs in the amount of $206,688.95.

d.4) Benefruits debt

[146] It was not disputed that the GGC owes Benefruits $9,333.80. With her email of November 15, 2016 that I found terminated the contract, Ms. Zuccarini enclosed a statement of the outstanding account. Exhibit 47 of Ms. Zuccarini’s affidavit contains all of the Benefruits invoices.

[147] At Exhibit 48 of the same affidavit there is a December 14, 2017 assignment of the $9,333.80 debt from Benefruits to Ms. Zuccarini, an assignment that she as sole officer of Benefruits signed. This was a rather self-serving document. Clearly, Ms. Zuccarini gained a benefit from operating through her company, and now purports to assign the debt to herself as that suits her present interest. But there was no dispute as to the enforceability of this assignment, and I will, therefore, give it full effect. GGC after all should pay Ms. Zuccharini for the services she provided.

[148] I, therefore, find that GGC must pay the defendants the assigned Benefruits debt of $9,333.80.

d.5) 4 Grimsby deposit

[149] On July 21, 2014 the defendants paid GGC the 10% deposit of $45,200 for the construction contract concerning 4 Grimsby Court. The contract document for this property simply confirmed the payment. However, in an earlier email Mr. Gatti sent Ms. Zuccarini on June 15, 2014, he stated the following: “The deposit for #4 will be $40,000 and for (sic) $30,000 for #3. Please note that the deposits are refundable (minus any costs we incur related to the project ie purchasing materials etc.) in the event that you do not go through with the projects.” Just over a month later, on July 28, 2014, Ms. Zuccharini emailed stating that, “we have decided to postpone #4 to the spring and focus on #3.”

[150] Undoubtedly the events of October and November, 2016 brought any prospect of the project on 4 Grimsby Court to an end. I find that Ms. Zuccarini’s email of November 15, 2016, which expressed such complete loss of faith in GGC, did just that. There was no evidence of any costs having been incurred by GGC on account of the construction of 4 Grimsby Court, which makes sense as that project was suspended only one month after the contract was signed.

[151] As a result, I find that the deposit of $45,200 must be repaid.

d.6) Damages calculation

[152] As a result, I find that the defendants have proven the following damages: $44,662.88 (change order overpayment) + $26,781.81 (deficiency correction costs) + $206,688.95 (completion costs) + $9,333.80 (Benefruits debt) + $45,200 (4 Grimsby Court deposit) = $332,667.44. This is what I find GGC owes the defendants.

e) Should Mr. Gatti be allowed to give evidence on the MNP documents?

[153] In light of my ruling, I find that there is no point in having Mr. Gatti recalled to give evidence on the MNP documents that appear as Exhibits X and Y to his affidavit of evidence in chief. Mr. Mitchell advised that these documents pertain to the GGC costs of construction. As I have found that GGC has no entitlement to damages or a lien, there is no point to this evidence, and I will not have Mr. Gatti recalled.

VI. CONCLUSION

[154] In conclusion, I rule that the GGC claim is dismissed and its claim for lien be discharged, and that GGC must pay the defendants $332,667.44 in damages for breach of contract.

[155] As to costs, I required that the parties deliver cost outlines for the reference including the trial hearing. They did so. The GGC costs outline shows $189,446.69 in substantial indemnity costs and $137,754.28 in partial indemnity costs. The defendants’ costs outline shows a partial indemnity amount of $121,299.42.

[156] If the parties cannot otherwise agree on costs and interest, the defendants must deliver written submissions on costs and interest of no more than five (5) pages on or May 19, 2020. GGC must deliver written submissions on costs and interest of no more than five (5) pages on or before June 2, 2020. Any reply written submissions on costs and interest cannot be longer than two (2) pages and must be delivered on or before June 5, 2020.

[157] These written submissions must in addition to any issues the parties may wish to raise, deal with the following issues:

• the costs for the reference that should be awarded, and the basis for doing so;
• the settlement discussions between the parties, if any; and
• the prejudgment and post-judgment interests that should be applied, the date or dates from which the interest should run, and the per diem amount.

[158] If the parties are unable to agree on the form of my final report, an attendance may be required to settle the report.

Released: May 5, 2020

MASTER C. WIEBE