Court File and Parties

COURT FILE NO.: CV-13-490162 COURT FILE NO.: CV-16-544027 DATE: 20200103

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Court File No.: CV-13-490162

IET INTERNATIONAL ENERGY TECHNOLOGIES CANADA LTD. Plaintiff

– and –

M&R PROPERTY MANAGEMENT LIMITED and PARK WILLOW MANAGEMENT LIMITED Defendants

AND BETWEEN:

Court File No.: CV-16-544027

M&R PROPERTY MANAGEMENT LIMITED and PARK WILLOW MANAGEMENT LIMITED Plaintiffs

– and –

IET INTERNATIONAL ENERGY TECHNOLOGIES CANADA LTD. and HARRY FRIEDRICH Defendants

Counsel: Antonio Conte, for the Plaintiff Bruce Jaeger, for the Defendants Bruce Jaeger, for the Plaintiffs Antonio Conte, for the Defendants

HEARD: May 13-17 and June 25, 2019

Reasons for Judgment

Cavanagh J.

Introduction

[1] There are two actions before me which were tried together.

[2] In the first action, the plaintiff, IET International Energy Technologies Canada Ltd. (“IET”), claims damages for breach of contract from the defendants M&R Property Management Limited (“M&R”) and Park Willow Management Limited (“Park Willow”) for unpaid amounts in respect of electrical services which IET claims were provided to M&R and Park Willow.

[3] M&R and Park Willow are building managers for buildings at which IET claims that it provided services. I refer to M&R and Park Willow together as “M&R”.

[4] M&R denies that IET is entitled to the damages claimed. M&R also claims that it is entitled to set-off amounts owed to it by IET against any amounts which may be found to be owing to IET.

[5] In the second action, M&T claims damages from IET and its principal, Harry Friedrich, for fraudulent misrepresentation or, in the alternative, negligent misrepresentation, together with costs incurred as a result of the alleged misrepresentations.

[6] For the following reasons, I grant judgment in favour of IET against M&R and Park Willow in the amount of $123,339.06. The action by M&R and Park Willow against IET and Mr. Friedrich is dismissed.

Analysis

Background to work done by IET for M&R

[7] IET is a company that provided electrical services, in particular, in relation to energy efficient lighting. The principal of IET is Harry Friedrich. IET started carrying on business in 1995.

[8] IET met the criteria of the Electrical Safety Authority (“ESA”), the regulating authority in Ontario, and was entitled to carry on business as an electrical contractor as of January 19, 2012. IET needed to provide services using a licensed master electrician. For a period of time, IET employed a licensed master electrician, Lebert Reid, whose licence was put into evidence. Mr. Reid became ill and after 2012 he moved to Florida. Mr. Friedrich testified that IET used other master electricians from other companies to provide electrical services to its customers and I accept this evidence which was not contradicted.

[9] Mr. Friedrich first became involved with M&R through Larry Dinally, a person who Mr. Friedrich knew because he had represented a business called Realstar Management. Mr. Friedrich was asked by Mr. Dinally to do work for Realstar, through IET, on several buildings owned by Great West Life Assurance Company. This is how Mr. Friedrich first came to know Mr. Dinally.

[10] Mr. Friedrich later received a call from Mr. Dinally in approximately 2009. He was then working for M&R. He asked Mr. Friedrich whether IET would be willing to do work for M&R. Mr. Friedrich testified that IET worked on about 15-18 buildings at the request of Mr. Dinally. The work was in respect of energy efficient lighting including doing “heat scans” on some buildings. Mr. Friedrich testified that there were no serious complaints with respect to the work done for M&R at the request of Mr. Dinally and, where service problems arose, he would arrange to take care of these problems promptly. I accept this evidence which was not contradicted. Mr. Dinally did not testify at the trial.

[11] In September 2012, Mr. Dinally, who had been on a leave of absence, informed M&R that he would not be returning. Jeff Ross, a principal of M&R, stepped in to cover Mr. Dinally’s areas of responsibility until Randy Daiter was hired for this position in March 2013. Mr. Ross undertook a review of work that had been done by IET and its unpaid invoices.

[12] IET claims that it provided electrical services to buildings at which M&R was the property manager and that it has not been paid for these services. M&R disputes the amounts claimed and, in addition, M&R claims that it suffered damages as a result of the services performed by IET and that it is entitled to set these amounts off against IET’s claims. In its action, M&R claims damages and other relief from IET and from Mr. Friedrich personally.

Issues

[13] The following issues arise in these actions:

a. What is the amount of IET’s claim for non-payment of charges for provision of electrical services to M&R, subject to M&R’s defence of set-off.?

b. Is M&R entitled to set-off amounts owing by IET to M&R against IET’s claim?

c. Is M&R entitled to damages against IET and Mr. Friedrich in its action commenced on January 7, 2016?

[14] I address these issues in turn.

What is the amount of IET’s claim for non-payment of charges for provision of electrical services to M&R, subject to M&R’s defence of set-off?

[15] IET claims that it is entitled to payment of $133,771.06 in satisfaction of its charges for services provided to M&R. This is comprised of (i) unpaid invoices that M&R acknowledges it received and did not pay in the amount of $71,414, (ii) a disputed discount taken by M&R for early payment on invoice 1142 in the amount of $832, (iii) unpaid invoices (7) that M&R does not acknowledge receiving in the amount $21,302.06, (iv) work performed for M&R in accordance with purchase orders issued by M&R which were not invoiced in the amount of $39,623; and (v) profit on one job where a purchase order was issued by M&R but IET could not confirm having done the work in the amount of $600.

Invoices that M&R acknowledges were received and are unpaid

[16] M&R acknowledges that it received invoices for amounts totalling $71,414 and denies that it received other invoices that are unpaid.

[17] There is a dispute concerning payment of invoice 1142 dated August 27, 2012. This invoice is in the amount of $30,810.58. IET claims that $3,912.95 remains unpaid. The invoice shows that $29,978.69 was paid on September 26, 2012. IET offered a discount of 3% for invoices paid within 10 days. Although the date of the invoice is August 27, 2012, the copy of the invoice in evidence shows that it was received on September 19, 2012. I find that this date of receipt of the invoice is accurate, and that the invoice was paid within 10 days. Accordingly, M&R is entitled to the 3% discount for early payment. There is no balance owing on this invoice.

[18] The amount owing to IET for invoices that M&R acknowledges receiving is $71,414, subject to M&R’s claim for set off.

Invoices in records of IET but not in records of M&R

[19] The difference between the IET’s claims for invoices sent to M&R and M&R’s records, $21,302.06, is accounted for by seven invoices which are supported by purchase orders issued by M&R. Mr. Friedrich testified that the work described in these invoices was done and these invoices were sent to M&R. Mr. Dinally was the person who authorized the work that IET maintains was done in respect of these invoices.

[20] Mr. Ross testified that M&R does not have records of unpaid invoices other then those that it acknowledges it received that total $71,414. Mr. Ross testified that he is not aware of additional invoices that Mr. Friedrich testified were sent to M&R and remain unpaid. He explained that M&R has a process for determining whether work has been properly done so that invoices can be approved and, because that process was not followed, he does not know whether the work that Mr. Friedrich testified was done in respect of these invoices was or was not performed. M&R submits that IET has failed to prove that it performed services in respect of these invoices.

[21] Invoice 1137 is stated to be in respect of work done at the Montcrest Apartments, 10 Hogarth Ave. in Toronto. The invoice describes installation of fixtures at this location and the total amount charged is $9,567.71. IET put into evidence through Mr. Friedrich a purchase order from M&R number 469 dated April 20, 2017 for the following work: “Supply and install motion detectors for lighting in garbage chute rooms and laundry rooms. The same for locker rooms and other utility rooms will be at the direction of the property manager.” Mr. Friedrich testified that this work was done, and the invoice was rendered, but it was not paid. Mr. Dinally did not testify and no one else contradicted Mr. Friedrich’s evidence in this regard. I accept Mr. Friedrich’s evidence that this work was requested by M&R and that its purchase order was accepted. I accept that this work was performed. IET is entitled to charge M&R for this work in the amount $9,567.71, subject to M&R’s claim for set off.

[22] Invoice 1136 is in the same category. This invoice is stated to be in respect of services provided at the Montcrest Apartments, 655 Broadview Ave., Toronto. The description of the services in the invoice states that fixtures were supplied and installed in the garbage chutes, laundry rooms, and utility rooms at this location a purchase order from M&R number 467 dated April 20, 2012 was put into evidence. I accept Mr. Friedrich’s evidence that IET contracted with M&R to do this work, performed the services, and was not paid. IET claims $5,402.68 in respect of this invoice (although it is stated to be in the amount of $5,617.23). I allow IET’s claim in the amount of $5,402.68, subject to M&R’s claim for set off.

[23] Invoice 1527 dated January 18, 2013 in the amount of $193.51 is for supply of replacement lamps to Wynford Tower, 35 Wynford Heights Crescent, Don Mills. Mr. Friedrich testified that IET supplied these replacement lamps and it charged the amount that it paid to its supplier, Independent Electric, and added a 15% charge. I accept this evidence. IET is entitled to payment of 193.51, subject to M&R’s claim for set off.

[24] The remaining four of invoices that IET says were sent to M&R, numbers 1821, 1397, 1398, and 1399, are for heat scans. Mr. Friedrich testified that Mr. Dinally asked IET to perform heat scans on a number of M&R buildings and that it did so. He testified that the heat scans for the buildings identified on each of these four invoices were performed and that the invoices were sent. IET used a business called Electrical Testing and Maintenance Services to perform the heat scans using a person named Richard Sobhraj. Mr. Friedrich testified that Mr. Sobhraj was highly qualified to do this work. IET paid for these services, and charged M&R.

[25] One of M&R’s employees, Marg Fundarek, sent an email to Mr. Friedrich dated October 19, 2012 in which she confirmed that heat scans had been requested and that reports for 9 buildings had been received but reports for 11 buildings had not been received. Mr. Friedrich responded to this email that he would provide the heat scans for the remaining buildings. Mr. Friedrich’s evidence is that heat scans were all done as requested and reports were provided to M&R. He testified that IET was not asked to do any corrective work for these heat scans. M&R did not tender evidence that the heat scans were not done.

[26] I accept Mr. Friedrich’s evidence that IET did heat scans for the 20 buildings as requested and that it was not paid for these heat scans for the buildings identified in invoices 1821, 1397, 1398 and 1399 which Mr. Friedrich testified were sent to M&R. These amounts total $6,138.16.

[27] I conclude that IET is entitled to payment in this category of $21,302.06, subject to M&R’s claim for set off.

M&R Purchase Orders but not invoiced by IET

[28] Mr. Friedrich testified that other work was done by IET pursuant to purchase orders issued by M&R and accepted by IET, but in respect of which invoices were not sent by IET. He explained that the IET employee responsible for invoicing was not able to keep up with her work because of child care responsibilities after the birth of twins, and that she mistakenly failed to send invoices to M&R for some of the jobs. These purchase orders are numbers 403, 405, 245, 150, 443 and 952.

[29] Several of the items in this category are supported by purchase orders from M&R and sales orders (internal IET documents created to prepare materials for electricians) which do not show any estimated amount or an amount to be charged on an invoice. These are purchase orders numbered 405, 245, and 150. Mr. Friedrich testified that this work was done but not invoiced. He estimated that the work was not big. Mr. Friedrich was asked whether he knew the value of the work was worth, and he responded that he did not. He was then asked to give his “best estimate”, and he responded that “it could be $2,000 to $3,000 maximum”. In respect of purchase order 150 at 69 Gamble Avenue, Mr. Friedrich could not recall whether the work was done. I am not satisfied that IET has proven that this work was done or the amounts to be paid and I do not allow its claims in respect of services described in these purchase orders.

[30] The documents in evidence with respect to M&R P.O. 403 show a quote of $13,200 plus taxes and the sales order shows a total price of $14,916 comprised of the price of $13,200 and $1,716 for HST. M&R purchase order number 443 is in respect of exterior work at 265 Cassandra Blvd., Don Mills. The quote shows an amount of $13,900 plus taxes. The IET sales order shows an amount of $15,707 including HST. Mr. Friedrich testified that IET did this work, but it was not invoiced. I accept Mr. Friedrich’s evidence, which was not contradicted. IET is entitled to payment for this work, subject to M&R’s claim for set off.

[31] I conclude that M&R owes IET the amount of $30,623, inclusive of HST, for these services supported by M&R purchase orders 403 and 443, subject to M&R’s claim for set off.

Total owing by M&R to IET, subject to claim for set-off

[32] I find that the total amount that M&R owes to IET for services performed by IET is $123,339.06, subject to M&R’s claim for set off.

Is M&R entitled to set off against IET’s claim amounts owing by IET to M&R?

[33] In order to evaluate the merit of M&R’s set-off claim, I first address the events that occurred when Mr. Dinally left M&R, after which M&R withheld payment of IET’s outstanding invoices.

[34] Mr. Friedrich testified that the problems with respect to payment of invoices began when Mr. Dinally left M&R. This was around October 2012. Mr. Friedrich sent an email to Mr. Dinally on October 15, 2012 asking about payment of outstanding invoices. He received a response from Marg Fundarek of M&R advising that she was covering for Mr. Dinally while he is away, and asking Mr. Friedrich to deal directly with Lynette Tavares, M&R’s controller, regarding any invoice payment issues. Before her response to Mr. Friedrich, Ms. Fundarek had sent an internal email dated October 9, 2012 to property managers at M&R, and copied to Mr. Ross, which directed the property managers that, “[e]ffective immediately, do not use IET for any jobs. If you have any questions, please contact Jeff directly”. She did not give this information to Mr. Friedrich in her email to him.

[35] Mr. Jeffrey Ross stepped in to replace Mr. Dinally. He testified that when he did so, he had to find out what projects were underway, the status of the projects, and any follow-up that was required. The only major project underway at the time was the energy efficient lighting retrofit being conducted by IET. Mr. Ross testified that he became aware of problems with IET’s work within a short period of time, including many failed bulbs at 375 Bay Mills, failing ballasts, insufficient light levels with two lamp fixtures at 240 Cosborne, and failures with emergency exit lighting installed at the building at 6061 Yonge St. In November 2012, Mr. Ross instructed the property managers not to use IET for any new work because he did not have confidence in IET’s work because of product failures, IET’s failure to address his inquiries concerning rebates, and the concerns that had been expressed by property managers concerning the quality of IET’s work.

[36] Mr. Friedrich sent an email to Ms. Fundarek on November 1, 2012 in which he advised that Rafael Tablada, one of M&R’s property managers, had confirmed that purchase orders from M&R had been put on hold. Mr. Friedrich requested a meeting with the owners of M&R to discuss the benefits of the lighting project conversions. The meeting was arranged with one of the owners, Jeff Ross, which was held on November 6, 2012. Only Mr. Ross and Mr. Friedrich attended.

[37] Mr. Friedrich testified that Mr. Ross had a small list of deficiencies on a piece of paper which he reviewed with him, and he advised Mr. Ross that these were not a problem, and IET would address them promptly, but that IET wanted to be paid for work it had already done. Mr. Friedrich testified that he also asked about getting more work from M&R.

[38] Mr. Ross testified that he indicated to Mr. Friedrich that they had concerns about some of the installations. He gave him information about his concerns. They had a discussion about the rebates. They discussed premature failure of bulbs and ballasts and the failure of the emergency lighting systems at 60/61 Yonge Street. Mr. Ross testified that Mr. Friedrich assured him that he would take care of any deficiencies. Mr. Ross testified that Mr. Friedrich was also looking for more work. He testified that the meeting lasted about fifteen minutes.

[39] I accept the evidence of both Mr. Friedrich and Mr. Ross with respect to this meeting. Their evidence does not conflict in any significant way.

[40] Mr. Friedrich received an email dated November 9, 2012 from one of the property managers at M&R, Gerald O’Grady, in which he advised that Mr. Ross had issued a work stoppage to all ongoing work and all work being contemplated by IET in any of M&R’s buildings. Mr. Ross followed up with an email dated November 9, 2012 to Mr. Friedrich advising that, short of warranty work, he was waiting for the list of projects so that he can review and approve before he contemplates any additional work.

[41] Lynette Tavares, M&R’s controller, sent an email dated November 28, 2012 to the property managers asking for information regarding IET’s work.

[42] Mr. O’Grady advised Mr. Ross on November 28, 2012 that there are a couple of Montcrest garage fixtures that need repair, Mr. Friedrich had been advised of this and IET had started repairs which were not complete, and that he has no information from Mr. Friedrichs on “lux levels” or whether he was able to achieve any specific “lux levels”. Another property manager, Josee Di Corpo, advised on November 28 that IET had completed the installation of lighting at 240 Cosburn and had remedied any issues brought forth by the City Inspector. She advised that she was awaiting one final item to be completed before inviting the inspector to return to confirm that the lux reading levels are acceptable. She advised that other work previously scheduled had been completed with no issues. These were only minor problems. The other two property managers did not send written responses.

[43] Mr. Friedrich testified that IET attended at two buildings and remedied deficiencies that had been identified by Mr. Ross at the November 6 meeting. IET asked that the building manager at each site sign an acknowledgment form indicating that the work had been completed to his or her satisfaction. Two such forms were signed on January 10, 2013. Mr. Friedrich testified that when IET went to the third building, the building manager refused to allow the electricians to come into the building and do the work. He testified that IET was not allowed to perform any other remediation work at other buildings. I accept Mr. Friedrich’s evidence in this regard.

[44] Mr. Friedrich sent an email to Ms. Wilson on January 16, 2013 and advised that IET had sent a service technician to all of the buildings to ask if there are any warranty issues and he confirmed that M&R had stopped the building managers from signing off and called IET’s work “unprofessional”. Mr. Friedrich stated that he expected payment by the end of the week. Ms. Wilson forwarded this email to Mr. Ross who responded that his feeling is that she is not obligated to sign anything, and she may want to advise Mr. Friedrich that he was out of town and unable to deal with Mr. Friedrich’s email until the following Monday. Mr. Friedrich testified that IET never failed to attend an M&R building if requested to do so. I accept this evidence, which is supported by the record of email correspondence.

[45] A demand letter was sent by lawyers representing IET dated February 11, 2013 demanding payment of amounts owing for unpaid invoices. On April 5, 2013, M&R sent a deficiencies list to IET’s lawyer, which was updated on April 15, 2013. There was further correspondence between IET’s lawyer and Mr. Daiter, the Vice President of residential properties at M&R. Mr. Daiter sent a letter dated June 10, 2013 in which he advised that M&R stopped paying invoices after receiving complaints related to IET’s installations and after M&R realized that IET “was not in control of rectifying the raft of problems we were experiencing”. In his letter, Mr. Daiter also addressed issues in relation to IET’s failure to provide advice relating to various incentive programs, its failure to arrange for final inspections by ESA, and concerns about whether the products installed by IET had been approved through field evaluations. Mr. Daiter advised that M&R was in the process of determining the overall additional costs that it had incurred or will incur as a result of the services provided by IET.

[46] IET’s action was commenced by a statement of claim issued on October 4, 2013. M&R’s statement of defence was delivered on November 14, 2013.

[47] I address M&R’s claims for set off in the three categories of claims advanced by M&R.

Rebates not received

[48] M&R claims that it relied on the expertise of IET to receive energy rebates from Ontario Hydro, but it did not receive this added value from the services provided by IET. M&R claims that the value of the “lost rebates” is $49,850.

[49] Mr. Friedrich testified that on the jobs that IET did for M&R, IET would do an analysis and perform an energy audit for each building. These audits were provided to Mr. Dinally. A spreadsheet was prepared showing pricing, payback on investment, return on investment and available Ontario Hydro incentives based upon existing and proposed electrical installations. IET would give the recommendation to the customer, M&R, and M&R would have to submit the application for a rebate to Ontario Hydro, based upon the information provided by IET. Mr. Friedrich testified that this would be done for each building before a purchase order was issued by M&R. After completion of the project, a final report would be prepared for the incentives which had to be submitted to Ontario Hydro by the owner. Mr. Friedrich testified that IET provided these reports to Mr. Dinally for each project.

[50] Mr. Ross testified that he was not able to locate spreadsheets as described by Mr. Friedrich in the records of M&R. IET also did not produce these spreadsheets in this litigation. Mr. Friedrich testified that before this litigation was commenced, IET had to move from its premises because of financial difficulties. He testified that IET tried to get a bank loan, but it was turned down. As a result, IET reduced its space from 10,000 square feet to 3,000 square feet at the end of 2012 or beginning of 2013. As part of this process, because of space limitations, IET discarded many of its records, except for needed records such as tax records. I accept Mr. Friedrich’s evidence that IET discarded some of its records and I do not draw an adverse inference from the absence of some records including the absence of copies of spreadsheets.

[51] Mr. Ross testified that when he stepped into Mr. Dinally’s role, he found that there were no applications for prescriptive rebates for any of the M&R buildings in which IET had installed new energy efficient lighting and equipment. He explained that he conducted research at the time including a review of literature from the Ontario Power Authority. Mr. Ross testified that he concluded that there were prescriptive rebates available based upon an order installing certain types of equipment, such as a new type of light fixture. He testified that prescriptive rebates were not dependent upon achieving increased energy efficiency. Mr. Ross testified that the only rebate that was applied for during IET’s work for M&R was an energy efficiency rebate for one building, 375 Bay Mills, for which M&R received a rebate of $3,984. He testified that all of the M&R buildings were essentially the same with similar common areas to those at 375 Bay Mills.

[52] There was email correspondence between Mr. Friedrich and Mr. Ross with respect to rebates. Mr. Ross advised on December 3 that, based upon his research, fixture replacement should have been eligible for a prescriptive rebate. Mr. Friedrich responded that he had contacted Toronto Hydro to receive updated information on any available incentive programs, past and future, which apply to these buildings. On December 10, 2012, an employee of IET, Chris Wcislo, provided information to Mr. Ross by email with a contact name at Toronto Hydro and he recommended that Mr. Ross contact her further to discuss his questions. On December 18, 2012, Mr. Friedrich sent an email to Mr. Ross in which he explained the process followed by IET with respect to rebates. Mr. Friedrich stated in this email that the LED products supplied by IET do not qualify for a rebate, but they are considerably less costly than the products that do qualify for a rebate. He stated that Mr. Dinally chose the lower price option. Mr. Friedrich’s conclusion, as expressed in this email, was that there are no incentives available for the lighting projects completed in the M&R buildings. On March 18, 2013, Mr. Wcislo at IET forwarded to Mr. Tablada at M&R an email from Toronto Hydro in response to a request from IET concerning the availability of rebates for lamps supplied by IET. In its email, Toronto Hydro responded that the retrofit lamp is not eligible for a rebate under the “prescriptive track”.

[53] The onus is on M&R to prove that it did not receive rebates to which it was entitled under its contractual arrangements with IET because of the failure by IET to perform contractually required services in relation to rebate applications. Mr. Friedrich testified that he dealt with Mr. Dinally in respect of the services to be provided by IET in respect of rebates, and that IET performed these services to Mr. Dinally’s satisfaction. If there was a problem with respect to rebates on any of the buildings, I would have expected that Mr. Dinally would have informed Mr. Friedrich. This did not happen. It was open to M&R to call Mr. Dinally to testify at trial, but it did not do so. Mr. Dinally now lives in Florida but, other than the inconvenience and expense associated with his attendance to give evidence, I was not provided with a reason why he could not have testified at trial. Mr. Dinally was the person with whom Mr. Friedrich dealt in respect of the M&R buildings, and he would have been able to say whether IET failed to honour any of its contractual obligations in respect of rebates.

[54] M&R also did not call a witness from Toronto Hydro or Ontario Hydro to explain whether the bulb fixtures installed by IET qualified for prescriptive rebates. Mr. Ross is not qualified to give an opinion on this question.

[55] I conclude that M&R has failed to discharge its onus of proving that IET breached its contracts with M&R by failing to ensure that M&R received rebates to which it was entitled.

[56] M&R is not entitled to a set off based upon its claim for damages for rebates that it did not receive.

Replacement costs to convert 45 Wynford, 265/275 Cassandra and 6061 Yonge to LED

[57] M&R claims the costs of replacing fixtures, ballasts and exit signs at certain buildings on the basis that they were defective and/or uncertified. M&R used other electrical contractors for this work, and it claims the following amounts, which total $122,994.65:

a. Fixtures replace by OZZ Electric, net of rebates - $68,613.85

b. Fixtures replace by Multilogic, net of rebates - $31,649

c. Ballast replaced by Lisburn - $17,332.07

d. Exit signs replaced by TMT at 1275 Danforth - $5,395.75.

[58] Mr. Ross testified that M&R received Investigation Inspection Defect Notices from the ESA dated January 9, 2014 in respect of four properties. These notices state that it had come to the attention of ESA that M&R had engaged an external contractor who is not licensed by ESA to perform electrical work, and an application for inspection had not been filed for work at these sites.

[59] It was not disclosed in the evidence at trial what prompted ESA to send the notices. These notices were sent more than one year after IET had stopped doing work for M&R. Mr. Friedrich’s evidence is that IET always used licensed electrical contractors, either an outside contractor or Mr. Reid when he was employed by IET. I accept Mr. Friedrich’s evidence in this regard which was not contradicted.

[60] Mr. Ross testified that he was concerned after receiving these notices, and M&R hired an outside consultant, Giffen Koerth, to attend at the affected buildings and assess and report on what M&R needed to do in response to the notices. Giffen Koerth attended at M&R’s building at 35 Wynford Heights Crescent on February 5, 2014. It provided reports to M&R on April 1 and June 24, 2014. According to these reports, a number of the fixtures installed by IET did not have certification stickers affixed to them from approved certification authorities, the Canadian Standards Association (CSA) or the Underwriters Laboratory (ULC). Giffen Koerth reported that without such stickers, the fixtures is not considered to be certified and approved and that the fixture cannot be used according to the Ontario Electric Safety Code (OESC). Giffen Koerth also reported that it had concerns about the general workmanship of the work performed by IET personnel.

[61] Mr. Ross testified that M&R relied upon these reports and proceeded to replace fixtures that were supplied by IET because they were uncertified or because of faulty workmanship.

[62] Mr. Ross testified that at the time the replacement fixtures were installed, the technology had changed and the cost of using LED technology was comparable to the cost of florescent technology that IET had installed, and LED was the better technology. Mr. Ross and Mr. Daiter explained that it was prudent and appropriate for M&R to use the LED technology. M&R’s claim is for the costs of the replacement fixtures.

[63] The replacement fixtures were installed at 45 Wynford in June 2016, at 265/275 Cassandra in December 2016, and at 6061 Yonge in June 2018. The fixtures in these buildings were converted from florescent to LED a number of years after the florescent fixtures were installed by IET in 2012. IET submits that M&R received the benefit of the fixtures it supplied for many years. IET relies on a document marked as an exhibit at trial which shows a summary of lighting retrofits for M&R buildings as at May 19, 2019. IET submits that this shows that M&R intends to retrofit other buildings as part of its business plans.

[64] Daniel Pelkman testified as a fact witness and as an expert witness for M&R. He is employed with 360 Forensics (formerly Giffen Koerth). He was an electrical contractor for 9 years and he worked as a licensed electrician for 7 years. He was contacted by M&R to investigate issues relating to the installation of lighting fixtures. Mr. Pelkman was not a certified electrical inspector at the time he did his inspections. He was a licensed electrician and a licensed master electrician at the time of his inspections. Mr. Pelkman was qualified to give expert evidence on electrical issues including the requirements for certification of electrical fixtures.

[65] Mr. Pelkman attended at 35 Wynford Heights on February 5, 2014. In the common areas on the ground floor he went to each fixture and inspected it, but he did not remove all fixtures. On floors 2-21, he did an audit and checked light fixtures on about 7 floors selected randomly.

[66] I first address M&T’s claim that it needed to replace the fixtures because many of them did not have a sticker showing that the fixture was certified by CSA.

[67] Mr. Pelkman testified that a number of fixtures did not have a sticker showing certification by an approved certification authority which is required by the OESC, section 2-022. On the seven random floors that he checked, the fixtures in the garbage chutes were missing these stickers. In other rooms in common areas, there was a random mix of fixtures that did have fixtures and others that did not. He testified that of the fixtures that he checked, approximately 40% (45) had stickers and 60% (70) did not have stickers, based on counts from his notes.

[68] Mr. Friedrich testified that IET supplied fixtures that were approved and had stickers applied, and it also supplied other fixtures which did not have stickers applied by the manufacturer. In respect of these fixtures, IET practice was to obtain field certifications from CSA. Mr. Friedrich testified that this is a permissible practice that IET had followed many times in the past, including for customers other than M&R. Mr. Friedrich testified that field evaluations can take place in one of two ways. Either the fixture is brought to CSA and they would do the inspection there, or CSA would come to the site and check the fixtures and apply the sticker. Mr. Friedrich testified that 90% to 95% of fixtures which needed field certification were done at the offices of CSA or at his plant, and that IET did not conduct field certifications at the M&R buildings, although this could easily have been arranged and done, if needed based upon an inspection by ESA. Mr. Friedrich agreed that IET did not have certifications done at M&R’s buildings; they were always done in-house or at CSA. Mr. Friedrich agreed that without a sticker, the fixture is not certified.

[69] Mr. Friedrich testified that when CSA attended at a site, CSA would charge for the time for its representative to attend the site ($150 to $200) and a charge of $2 per sticker for these attendances. He testified that the fixtures installed by IET were built to comply with required standards and that CSA always approved the fixtures. He testified that if ESA identified a problem because fixtures were missing stickers, it would have been easy for IET to remedy this by arranging for field certification by CSA. Mr. Friedrich testified that he has used the field certification process many, many times, and there was never a case where CSA did not approve the fixture.

[70] Mr. Pelkman agreed that fixtures which did not have a sticker affixed can be inspected and field certified by the certifying authority such as CSA. He agreed that there is a process for obtaining special stickers through a field evaluation which involves the contractor showing the fixture to the CSA person who inspects the fixture and, if it is approved, provides a sticker which is affixed by the contractor. If there are deficiencies noted upon inspection, these must be remedied, and the inspector would have to come back. Mr. Pelkman agreed that he has followed this process himself. He agreed that sometimes the inspector follows more of an audit procedure and exercises discretion in this regard.

[71] Mr. Pelkman testified that typically the field evaluation method for approval is used in low volume applications and less than 500 units of a specific model per year. Mr. Friedrich accepted this limit. He testified that he has not encountered any problem with the 500 unit limit. He testified that the field evaluation process is much cheaper, and he has used this process many times. The inspector does spot checks and goes from fixture to fixture.

[72] Mohammad Aziz testified as an expert witness for IET. He is the founder of a company called Emtron Inc., which is in the business of electrical engineering and installations He is a professional engineer and a certified engineering technologist and an Ontario master electrician and a registered Canadian electrician. He was qualified to give expert evidence in the areas of electrical engineering, the designing and building of electrical systems, and certifications of electrical fixtures.

[73] With respect to certification of fixtures, Mr. Aziz testified that with increased movement in the market of manufacturing of fixtures (and other industrial products) to other countries, it is common for fixtures to be certified through field certifications. He testified that based on his knowledge of the industry, on these field inspections, the inspections are done randomly, and not every fixture is separately inspected. Mr. Aziz testified that the inspector relies on the profile of the contractor. Mr. Aziz identified photographs which showed a CSA special inspection stickers affixed to a fixture.

[74] I accept the evidence of Mr. Friedrich that IET followed a field certification process for certification of fixtures supplied at the M&R buildings. Mr. Friedrich’s evidence is that he followed the same practice with respect to IET’s work on M&R’s buildings when Mr. Dinally was responsible for this work. Mr. Dinally did not testify, so there was no evidence that he was not satisfied with the process followed by IET on those buildings which are not the subject of this action. It appears from the evidence that not all of the fixtures at the buildings which are the subject of this action had stickers applied.

[75] M&R submits that I should find that IET never intended to address any issues in relation to certification stickers. I do not accept this submission. I accept the evidence of Mr. Friedrich that it is a permissible practice for CSA certifications to be done by field evaluations in either of the two ways that he described. Mr. Pelkman confirmed this evidence. I accept Mr. Friedrich’s evidence that the fixtures supplied met CSA standards and if an issue arose about CSA certification of fixtures or missing stickers, IET’s practice was to arrange for field certifications to be done by CSA to address the problem, and that IET would have done so for the buildings which are the subject of this action.

[76] I do not accept the evidence of Mr. Ross that the reason that M&R converted the lighting installations at 45 Wynford, 265/275 Cassandra and 6061 Yonge was because the fixtures supplied by IET did not all have CSA stickers affixed. M&T did not tender evidence from ESA or CSA that the fixtures installed by IET were unsafe. M&R did not provide evidence of any attempts to use the field certification process to address any issues about stickers. M&R could have addressed any issues relating to missing certification stickers by using the field certification process itself, at a modest cost.

[77] I am not satisfied that M&R has proven that it incurred expenses to convert the buildings at 45 Wynford, 265/275 Cassandra and 6061 Yonge to LED lighting that were caused by breaches of contract by IET through the supply of fixtures that were not properly certified.

[78] I next address M&R’s claim that the work done by IET had many deficiencies and, as a result, M&R was justified in undertaking remedial work to address these deficiencies and that its expenses in this regard are damages which should be set off against IET’s claims.

[79] In addition to the evidence from three building managers, Mr. Ross, and Mr. Daiter, Mr. Pelkman gave evidence of various problems that he observed in the course of his inspection at 35 Wynford Heights. Mr. Pelkman explained why he considered that some of the work was deficient, and he used photographs taken during his inspection to support his evidence. Mr. Aziz testified on behalf of IET in response, and he explained why he disagreed with Mr. Pelkman’s evidence in respect of a number of the examples.

[80] When he was cross-examined, however, Mr. Aziz was taken to his reports in which he had written that the installation deficiencies presented in the Giffen Koerth reports are “in agreement with OESC [Ontario Electrical Safety Code] and the corrections must be made”. Mr Aziz agreed that he reported that the installation deficiencies reported in the Giffen Koerth reports are in agreement with the requirements of the OESC and that these reports show installation deficiencies which must be addressed.

[81] Mr. Friedrich testified that IET provided a warranty for its work and that it always honoured its warranty obligations. Mr. Friedrich testified that for all products, the manufacturer’s warranty applies which would usually provide for a one year warranty for replacement materials. IET extended the warranty to two years for materials. In addition, IET gave warranty for everything, including labour and materials, for one year. Mr. Friedrich testified that there are often minor problems which arise on jobs. He testified that he never had serious complaints from Mr. Dinally or building managers and he would always attend to fix any complaints, which he described as little things. I have described Mr. Friedrich’s evidence concerning his meeting with Mr. Ross to discuss the outstanding invoices, and his attendance at two M&R buildings at fix problems that had been identified. After this work was done, IET was not asked to honour warranty obligations with respect to other complaints. Instead, long after IET’s work was done, M&R proceeded to undertake a program of replacement of fixtures using the services of other electrical contractors.

[82] In Jozsa v. Charlwood-Sebazco, 2016 BCSC 78, the court cited at para. 73 the following passages from Obad v. Ontario housing Corp., [1981] O.J. No. 282 at paras. 47-48 in respect of the measure of damages where a construction contract is terminated by an owner:

47 With reference to the counterclaim or claim of set-off for damages arising from non-completion of the work, the effect of the defendant, Ducharme, telling the plaintiff to “get off the job” was to revoke the plaintiff’s license to continue working there. Furthermore, in a practical way, engaging other persons to do the work of the plaintiff, effectively prevented the plaintiff from completing his contract. The defendant, Ducharme, having thus prevented completion cannot obtain damages for failure of the plaintiff to complete.

48 With respect to the claim for damages resting on expenditures to correct the plaintiff’s work, it would seem that, although the defendant, Ducharme, is entitled to have a set-off for defective work, its obligation to mitigate its damages would require that it allow the plaintiff to continue, having in mind the reasonable probability that the plaintiff would correct its own work in order to obtain payment of the price. On that basis the defendant, Ducharme, is not entitled to have damages based on its own costs of correction. Alternatively, the plaintiff was obliged to correct its defective work and the defendant, Ducharme, having prevented the plaintiff from fulfilling that obligation, cannot have damages in the ordinary way based on its having undertaken itself to carry out such corrections.

[83] In my view, these principles apply here. Mr. Friedrich told M&R that IET was willing to correct any deficiencies in its work, and it did so on two buildings. After completing this work, IET was not asked to re-attend at M&R’s buildings to correct any deficiencies in its work.

[84] I do not accept that M&R was required to do this work because of deficiencies in the work done by IET. It was incumbent on M&R to ask IET to honour its warranty obligations before using other electrical contractors to undertake a program of replacement of fixtures. I accept Mr. Friedrich’s evidence that IET honoured its warranty obligations in respect of other work done at the request of Mr. Dinally, and I find that IET would have attended to fix any problems that were identified by M&R, had it been given the opportunity. IET did not fail to comply with its contractual warranty obligations.

[85] M&R has not proven that it incurred expenses for replacement of fixtures, ballasts, and exit signs that were caused by any misrepresentation or breach of contract by IET. M&R is not entitled to set off these expenses against the amount owing to IET.

Claim for charges by Giffen Koerth Inc.

[86] The third category of claims made by M&R is for costs incurred for services provided by Giffen Koerth Inc. to inspect the electrical work at the buildings and determine what was needed to satisfy the ESA deficiency notices which were issued on January 9, 2014. These notices stated that electrical work had been performed in violation of the OESC because it was not performed by a licensed electrician.

[87] M&R claims payment of the amount of $39,234.53 comprised of the aggregate of costs incurred for services performed by Giffen Koerth Inc. for (i) inspection work and determining what was required to satisfy ESA deficiency notices and assist with communications with ESA, and (ii) providing expert opinions and reports describing required remediation steps and costs of remediation.

[88] The four ESA Investigation Inspection Defect Notices dated January 9, 2014 (in respect to buildings at 35 Wynford Heights Crescent, 45 Wynford Heights Crescent, 265 Cassandra Boulevard, and 275 Cassandra Boulevard) include notices that the installations did not meet the requirements of the Ontario Electrical Safety Code and provide instructions for correcting defects. The section entitled “defect details” reads:

It has come to our attention that you have engaged an external Contractor/person at your facility who is not a licensed by ECRA/ESA to perform electrical work, and an application for inspection has not been filed for this work. You are hereby notified that by permitting an unlicensed ECRA/ESA Electrical Contractor to perform electrical work in/on your facility, you are not in compliance with Ontario Regulation 570/05 and section 113.2(1) made under Part VIII of the Electricity Act, 1998. YOU ARE HEREBY REQUIRED to have all electrical work stopped immediately. As the owner/occupant of the facility, you or a permanent employee at your facility is permitted to complete the electrical work and file an application for inspection, or, if you or one of your employees is not completing the work, you are required to engage an ECRA/ESA Licensed Electrical Contractor to complete the electrical work and file for an application for inspection.

[89] M&R did not call a witness from ESA to give evidence in respect of these notices. No one from ESA testified that the notices were given in relation to services performed by IET. The circumstances which led to the issuance of these notices were not explained. Mr. Friedrich testified that IET always complied with ESA requirements by using a licensed contractor and I accept his evidence.

[90] M&R has not proven that IET failed to use licenced contractors when it provided its services, or that the ESA notices referred to IET. I am not satisfied that Giffen Koerth’s charges for consulting services to perform inspections and advice concerning the steps needed to comply with the ESA notices were caused by any breach of contract or misrepresentation by IET. Further, to the extent that Giffen Koerth’s invoices are for charges for providing expert opinions and evidence at trial, such charges are disbursements incurred by M&R in this litigation, and recovery of these disbursements would depend upon the order as to costs made in these actions.

[91] I do not allow M&R’s claim for set off based upon payments made to Giffen Koerth.

[92] For these reasons, IET is entitled to payment for charges for services provided to M&R in the amount of $123,339.06. I do not allow M&R’s defence of set off.

Is M&R entitled to the relief it claims against IET and Mr. Friedrich in its action commenced on January 7, 2016?

[93] M&R Property Management Limited and Park Willow Management Limited commenced an action against IEP and Mr. Friedrich by a statement of claim issued on January 7, 2016. As noted, I refer to the plaintiffs, together, as “M&R”.

[94] In this action, M&R claims (a) damages for fraudulent misrepresentation or, in the alternative, negligent misrepresentation, in the amount of $500,000; (b) payment of all costs incurred as a result of the defendants’ fraudulent or negligent misrepresentations including expert costs, consulting costs, legal costs and all other costs arising from the actions of IET and/or Mr. Friedrich with respect to the supply and installation of lighting fixtures and other electrical equipment and products at M&R’s buildings; (c) a declaration that IET and Mr. Friedrich are liable to M& R for its damages and costs; and (d) a declaration that IET and Mr. Friedrich are liable to M&R for their fraudulent and/or improper use of IET to avoid the responsibilities of IET and Mr. Friedrich to M&R arising from their fraudulent misrepresentations and/or fraudulent and/or negligent supply and installation of electrical fixtures, materials and equipment at M&R’s buildings.

[95] In its statement of claim, M&R pleads and relies on the allegations contained in the statement of defence in IET’s 2013 action. The statement of claim and statement of defence in the 2013 action are appended as schedules to the statement of claim issued by M&R on January 7, 2016. M&R pleads that as a direct and foreseeable result of the fraudulent or, alternatively, negligent misrepresentations by Mr. Friedrich and IET, M&R has incurred and will incur damages for the costs to correct the deficiencies in IAT’s work, remove non-compliant lighting fixtures and purchase and install compliant fixtures and a number of the buildings. MNR also pleads that it has incurred and will continue to incur additional costs for inspecting and assessing the light fixtures and electrical materials and equipment supplied and installed by IET, including engineering, consultant and legal costs. M & R relies upon the January 9, 2014 notices issued by ESA and the inspections and assessments conducted by Giffen Koerth.

[96] In its statement of defence to IET’s 2013 action, M&R pleads that IET made certain representations which were fundamental to its decision to use IET for work on its buildings. M&R alleges in its statement of defence that (i) IET delivered invoices for work that had not been performed, (ii) IET did work which was unauthorized, (iii) IET installed defective and/or unsuitable lighting products, (iv) lighting products were installed improperly and services were supplied in a poor and inefficient manner, and (v) IET did not provide required services to enable M & R to obtain rebates. M&R pleads that if it is determined that any amount is payable to IET on account of its invoices or otherwise, it is entitled to set-off, as against any such amounts, all amounts owing by IET to M&R.

[97] The issues that arise in relation to M&R’s 2016 action are:

a. Are the claims made in M&R’s 2016 action statute barred?

b. If not, is M&R entitled to the relief sought against IET or Mr. Friedrich?

Are the claims made in M&R’s action statute barred?

[98] The Limitations Act, 2002, S.O. 2002, C. 24, Schedule B provides in s. 4 that a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

[99] Section 5(1) of the Limitations Act provides:

A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

[100] IET submits that an M&R discovered its claims no later than November 2013 when it delivered a statement of defence in the action commenced by IET. IET submits that the 2016 action was commenced more than two years after M&R’s claims were discovered and, for this reason, M&R’s claims are statute barred.

[101] M&R submits that it did not discover its claims made in the 2016 action until after it received the ESA Investigation and Inspection Defect Notices which were issued on January 9, 2014. Giffen Koerth first attended at M&R’s building at 35 Wynford Drive on February 5, 2014, and it provided its first written report to M&R on April 1, 2014. M&R submits that it first discovered its claims against IET on one of these three dates, and it commenced its action against IET and Mr. Friedrich within two years of all of these dates.

[102] The claims made by M&R in its 2016 action overlap with the claims made by way of set-off by M&R in its statement of defence dated November 14, 2013. M&R had alleged that IET breached its contracts with M&R and made misrepresentations in Mr. Daiter’s June 10, 2013 letter to IET’s lawyer. M&R knew that Mr. Friedrich was the principal of IET and its directing mind.

[103] Discovery does not depend on the plaintiff’s awareness of the totality of the defendant’s wrongdoing: see Tender Choice Foods Inc. v. Versacold Logistics Canada Inc., 2013 ONSC 80 at para. 60. It is clear that M&R first knew the matters referenced in s. 5(1) of the Limitations Act at least by November 14, 2013, the date of its statement of defence in the 2013 action, if not earlier.

[104] I conclude that M&R’s action against IET and Mr. Friedrich was commenced more than two years after its claims were discovered and, accordingly, this action is statute barred.

Is M&R entitled to the relief sought against IET or Mr. Friedrich?

[105] I have concluded that M&R is not entitled to set-off against IET’s claims in the 2013 action the claims for rebates, replacement of fixtures, ballasts and exit signs, and investigation costs which are based upon documents introduced into evidence in M&R’s Damages Brief. If I am in error that M&R’s action against IET and Mr. Friedrich is statute barred, I would conclude that M&R has failed to prove that it suffered damages that were caused by misrepresentations by IET.

[106] M&R also makes claims in the 2016 action against Mr. Friedrich personally. M&R submits that IET was a single person company which was completely dominated and controlled by Mr. Friedrich. M&R relies upon evidence that Mr. Friedrich caused IET to transfer its business to another entity, Techni-Lite Systems Inc. (“Techni-Lite”), effective November 25, 2013. M&R submits that by doing so, Mr. Friedrich used IET as a shield against an M&R for the fraudulent and improper purpose of insulating IET’s business and its revenue which effectively eliminated M&R’s ability to recover damages for IET’s failure to supply and install certified legal lighting fixtures and equipment. M&R submits that it would be unjust to deprive it of its right to recovery of damages by limiting responsibility for payment of damages to IET, a now inactive company.

[107] M&R submits that it discovered that Mr. Friedrich caused IET to transfer its business to Techni-Lite when IET produced a consulting agreement between Techni-Lite and Mr. Friedrich effective November 25, 2013 which was produced after IET’s affidavit of documents sworn March 11, 2014 was delivered.

[108] In support of these submissions, M&R relies on Transamerica Life Insurance Company of Canada v. Canada Life Assurance Company (1996), 1996 CanLII 7979 (ON SC), 28 O.R. (3d) 423. In Transamerica, Sharpe J. (as he then was) held that “the courts will disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and being used as a shield for fraudulent or improper conduct”. In Yaiguaje v. Chevron Corporation, 2018 ONCA 472 the Court of Appeal addressed the Transamerica decision and the majority held at para. 70:

The Transamerica test is consistent with the principle reflected in the various business corporation statutes in Canada that corporate separateness is the rule. Where the corporate form is being abused to the point that the corporation is not a truly separate corporation and is being used to facilitate fraudulent or improper conduct, the law recognizes an exception to this rule. It is important that courts be rigorous in the application of the Transamerica test because the rule is provided for in statute and stakeholders of corporations have a right to believe that, absent extraordinary circumstances, they may deal with the corporation as a natural person.

[109] Mr. Friedrich testified that IET was unable to attract funding from banks in late 2012 and early 2013 and he had no choice but to close IET. He testified that to save jobs for employees of IET, he made an agreement with another company, Techni-Lite, that if it took over IET’s employees, he would help Techni-Lite as a consultant and provide any orders he received. Mr. Friedrich entered into a consulting agreement with Techni-Lite effective as of November 25, 2013. Mr. Friedrich was entitled to profit sharing fees under his consulting agreement by which he was paid $1,500 per month plus reimbursement of expenses. Mr. Friedrich testified that other than his draw, he did not receive profit sharing payments from Techni-Lite under his consulting agreement. Mr. Friedrich testified that Techni-Lite took over the vehicles of IET but did not buy other assets. I accept Mr. Friedrich’s evidence with respect to his arrangement with Techni-Lite.

[110] M&R has not proven that IET was completely dominated and controlled by Mr. Friedrich and that it was being used for fraudulent or other improper conduct. IET is a small company whose shares are owned by one person and whose operations were managed by the same person. This is how many small companies are owned and operated. The fact that IET went out of business does not show that IET was operating fraudulently or improperly in any way.

[111] M&R has failed to prove that these are exceptional circumstances in which the corporate veil of a company should be pierced according to the principles in Transamerica. If I had held that M&R was entitled to damages against IET, I would not hold that Mr. Friedrich is personally liable for payment of these damages.

Disposition

[112] For these reasons, I grant judgment in favour of IET against M&R Property Management Limited and Park Willow Management Limited in the amount of $123,339.06, together with prejudgment interest in accordance with the Courts of Justice Act. The action by these parties against IET and Mr. Friedrich is dismissed.

[113] If the parties are unable to resolve costs, IET may make written submissions within 20 days. M&R may make responding submissions within 20 days thereafter. IET may make brief reply submissions, if so advised, within 5 days thereafter.

Cavanagh J.

Released: January 3, 2020