COURT FILE NO.: 10-19874, 11-26349 & 12-38697

DATE: 2020-09-16

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

HOMES OF DISTINCTION (2002) INC.

Plaintiff

– and –

ELISA ANGELA ADILI and THE TORONTO-DOMINION BANK

Defendants

David Thompson, Gary Kuzyk and Mike Grant, for the Plaintiff

J. Barry Eakins, for the Defendant Elisa Angela Adili[^1]

AND BETWEEN:

ANTHONY ADILI and ELISA ANGELA ADILI

Plaintiffs

– and –

HOMES OF DISTINCTION (2002) INC., ROBERTO VENIER and CITY OF HAMILTON

Defendants

J. Barry Eakins, for the Plaintiffs[^1]

David Thompson, Gary Kuzyk and Mike Grant, for the Defendants Homes of Distinction (2002) Inc. and Roberto Venier

Daron L. Earthy, for the Defendant City of Hamilton

AND BETWEEN:

ANTHONY ADILI and ELISA ANGELA ADILI

Plaintiffs

– and –

HOMES OF DISTINCTION INC., ROBERTO VENIER and CITY OF HAMILTON

Defendants

J. Barry Eakins, for the Plaintiffs[^1]

David Thompson, Gary Kuzyk and Mike Grant, for the Defendants Homes of Distinction Inc. and Roberto Venier

Daron L. Earthy, for the Defendant City of Hamilton

HEARD: October 9, 10, 11, 12, 15, 16, 17, 18, 19, 22, 23, 24, 25 & 26, 2018; September 16, 17, 18, 19, 20, 23, 24, 25, 26, 27, October 15, 16, 17, 18, 21, 22, 23, 24, 25, 28, 29, 30, 31 & November 1, 2019; January 6, 7, 8, 9 & 10, 2020; written closing submissions March 10-26, 2020

Corrected Decision on December 10, 2020: Reference to file no. 12-26349 in the citation information has been corrected to 12-38697. No change to content has been made.

R. A. LOCOCO j.

REASONS FOR JUDGMENT

I. Introduction

[1] Three related actions arise from a construction project carried out from 2008 to 2010 at a residential property in the Ancaster area of Hamilton, Ontario (the “Property”). The actions were tried together in instalments totaling nine weeks in the period from October 2018 to January 2020, followed by written closing submissions.

[2] In the first action (the “construction lien action”), the builder/general contractor seeks over $575,000 from the owner as the balance claimed as owing for construction work performed, plus interest and costs. By way of counterclaim in the second and third actions (the “construction deficiency actions”), the builder also claims those amounts against the owner’s husband.

[3] The owner and her husband deny there is any amount owing to the builder, alleging incomplete and deficient work. In the construction deficiency actions, they claim over $1,450,000 (plus interest and costs) from the builder and related parties for amounts spent or to be spent to complete the construction work and rectify deficiencies. They also claim a credit of over $250,000 against the contract price for amounts they paid directly to suppliers for material and services they say were part of the contract. They claim further amounts for punitive, exemplary or aggravated damages as well as damages for mental distress. They also claim in negligence against the City of Hamilton, whose building department personnel were involved in the building permit and inspection process for the project.

[4] The builder and related parties deny liability for incomplete or deficient work. They say that construction was substantially complete and not deficient when the builder left the project. They also say that their workers and subcontractors would have performed any further required completion and rectification work had their relationship with the owner and her husband not broken down.

[5] The City denies it is liable on the merits for negligent review, inspection or failure to enforce applicable building requirements. The City also says that the claim against it is statute barred.

[6] For the reasons below, I find the owner and her husband liable to the builder for most of the amount claimed against them. I am dismissing the claims against the builder and its related parties. The claim against the City, while brought within the limitation period, is also dismissed.

II. Factual background

A. The Parties

[7] The parties to the litigation are the Property owner (Elisa Adili), her husband (Anthony Adili), the builder/general contractor (Homes of Distinction (2002) Inc.), a related dormant company (Homes of Distinction Inc.), the builder’s principal (Roberto Venier), and the City of Hamilton.

[8] Elisa Adili owns the Property, where she resides with her husband, Anthony Adili. The Adilis have three sons (now young adults), who also resided at the Property at the time the dispute developed. Ms. Adili is a high school teacher, who has been on leave from work since 2014. Mr. Adili is an orthopedic surgeon. Before attending medical school, Mr. Adili obtained a university degree in electrical engineering.

[9] Roberto Venier is the principal of Homes of Distinction (2002) Inc. (“HoD”), a residential and commercial builder based in Burlington. HoD was the contracting party for the Ancaster construction project. Mr. Venier previously operated his construction business through Homes of Distinction Inc., now a dormant company. In these Reasons, Mr. Venier, HoD and Homes of Distinction Inc. are sometimes referred to collectively as the “HoD parties”.

[10] Mr. Venier has a BCIN (Building Code Identification Number) from the Ontario Ministry of Municipal Affairs and Housing, which is required to qualify for a design designation under Ontario’s Building Code, O. Reg. 332/12 under the Building Code Act, 1992, S.O. 1992, c. 23. Mr. Venier prepared the design drawings that accompanied the building permit application for the Ancaster construction project. Mr. Venier previously held a Master Renovator licence issued by the City, which lapsed in 1995, when the focus of his business shifted to new home construction.

[11] The City of Hamilton was involved in the building permit application process for the Ancaster construction project. Personnel of the City’s Building Department processed the building permit application and carried out on-site inspections of the Property during and after the construction.

B. Preliminary project design discussions

[12] Elisa Adili purchased the Property in 2005. The pre-existing house faced west on a large ravine lot, with an outdoor swimming pool on the east (back) side of the house. The house was built in 1937 as a Tudor-style estate house, with over 3,000 square feet of living space. The house included: (i) a living room, dining room and kitchen on the main floor; (ii) four bedrooms on the second floor, (iii) a finished room and small bathroom on the attic level, (iv) a partially finished basement; and (v) a single-story two-car garage attached to the south (right) side of the house, with double garage doors and a flat roof.

[13] In 2007, the Adilis decided that they wanted to substantially expand and renovate the house. They approached Mr. Venier, whom Mr. Adili had known since high school. In 1995, Mr. Venier’s company had been the builder for the Adilis’ previous home on Malton Drive, Hamilton, under a new-home building contract dated March 8, 1995. Given the good relationship (and mutual trust) between the Adilis and Mr. Venier from the previous project, the Adilis did not canvas other potential builders for the Ancaster construction project.

[14] The 1995 Malton Drive building contract had a stated price, with allowances for specified aspects of the project, as set out in an attached schedule. Where the cost of the work performed on specified aspects of the project exceeded the allowance, the excess amounts were charged as “extras” to the owner. Where an allowance was not fully used, the balance was credited to the owner.

[15] Initial discussions between the Adilis and Mr. Venier about the proposed Ancaster construction project occurred in the latter part of 2007, continuing into 2008. The Adilis met with Mr. Venier on several occasions, both at the Adilis’ residence and at Mr. Venier’s residence in Burlington, where he maintained an office.

[16] By spring 2008, Mr. Venier prepared proposed design drawings that contemplated demolishing the existing one-storey garage and building a substantial two-story addition attached to the south side of the original house. The plans reflected the Adilis’ desire for a large kitchen, a laundry room, a dinette, a larger garage, and a new master bedroom suite. It was understood that the Adilis wished the addition to mimic the design and theme of the original house.

[17] Although not reflected in the proposed design drawings, the contemplated construction also included plans to renovate and refresh the original house. Among other things, the Adilis wanted certain existing rooms to be reconfigured and windows in the original house to be replaced.

[18] By late May 2009, Mr. Venier applied to the City for a building permit for the proposed addition to the Ancaster residence. Mr. Venier prepared the design drawings submitted with the application. Those drawings depicted the entire residence (including both the original building and the proposed addition) but did not indicate any proposed construction activity in the original structure (other than the removal of the existing single-story garage), nor did the drawings indicate any interior passages between the addition and the original building. Following the City examiner’s request for additional information, Mr. Venier provided supplemental documents, including sketch drawings and calculations prepared by Jiri Tichy, a professional engineer HoD consulted on an “as needed” basis for construction projects.

C. Contractual discussions and commencement of work

[19] By May or June 2008, the Adilis and Mr. Venier reached an initial oral agreement with respect to construction of an addition and renovations to the existing house. The agreed contract price was $945,000 plus Goods and Services Tax (GST), then at the rate of five per cent.

[20] By June or July 2008, the Adilis discussed expansion of the project to include construction of an outdoor cabana at the north-east end of the original house, adjacent to the swimming pool. The expanded project was to include "Q-decking" to be added at the rear (east) side of the house, creating a large covered patio area on the main level and a basement walkout from the addition.

[21] By August 1, 2008, the City assigned a building permit number and issued a building permit, which allowed demolition of the existing garage and excavation for the addition to commence. The first inspection by the City’s building inspectors occurred in September 2008, while the demolition of the existing garage was occurring.

[22] By the fall of 2008, the Adilis and Mr. Venier agreed on a revised contract price of $993,689 plus tax for the expanded project (to include the outdoor cabana and the Q-decking). The revised contract price was included in a draft contract entitled Custom Home Contract (“CHC”) that Mr. Venier provided to the Adilis. The parties named in the draft CHC were HoD as the builder and the Adilis as the customers/property owners. The CHC was similar in structure to the 1995 Malton Drive building contract, with an attached schedule that included allowances for various components of the project.

[23] Mr. Venier testified that he provided the draft CHC to the Adilis at a meeting in October 2008. Mr. Venier and his office manager (Terry-Jo Toth) also testified that they followed up with the Adilis several times to obtain a signed contract, but to no avail. In his testimony, Mr. Adili did not dispute receiving the CHC with the new contract price in October (or perhaps November) of 2008, but he did not believe he received iterations of the proposed allowances schedule until later that year.

[24] In any case, it is common ground that a written building contract was never finalized and signed. While the Adilis and HoD agree there was a binding building contract, the terms of the contract are in dispute in these proceedings.

D. Construction progress and falling out between HoD and the Adilis

[25] HoD commenced work at the Property in the summer of 2008. Work began with demolition of the existing garage and the installation of armour stones in the backyard, followed by excavation for construction of the addition. Work progressed through the balance of 2008 and all of 2009. HoD's last work was performed in March or April 2010. The quantity surveyor that the Adilis called as an expert witness testified that the construction work was 90 to 95 per cent complete when HoD’s workers left the site.

[26] It is evident from the testimony of HoD’s witnesses and from the documentary evidence (which included several large volumes of email messages, some of which documented telephone conversations) that the Adilis were demanding clients, with whom Mr. Venier and his workers had significant interactions, sometimes several times in the same day. From the evidence, I am satisfied that Mr. Venier and his workers made a significant effort to respond to the issues that were raised, including changes in previous instructions, in order to accommodate the Adilis’ wishes.

[27] A payment dispute developed between HoD and the Adilis in the latter part of 2009, following Mr. Venier’s request for further payments for the ongoing construction work. The Adilis requested a detailed breakdown of the amounts claimed as owing under the contract and as extras. Mr. Venier prepared a series of spreadsheets that were provided in response to issues the Adilis raised. The Adilis were not satisfied with the explanations provided and declined to make any further payments. HoD withdrew their workers and materials from the construction site by March or April 2010 and did not return. On April 21, 2010, HoD registered a construction lien against the Property pursuant to the Construction Lien Act, R.S.O. 1990, c. C-30.[^2]

[28] By letter dated May 12, 2010, the Adilis’ counsel wrote to HoD’s counsel to “officially terminate the contract between [the Adilis] and Homes of Distinction (2002) Inc.” The letter also referred to HoD’s “repudiatory breaches of contract”, including abandonment of the project, unwarranted payment demands, deficiencies and incomplete work. The letter also stated that HoD was not to return to the Property.

E. Progress of the litigation and trial

[29] On May 7, 2010, HoD commenced the construction lien action against Elisa Adili, claiming more than $600,000 as the amount owing for work performed on the Property. Ms. Adili defended the action and counterclaimed, alleging incomplete and deficient work.

[30] In March 2011, Elisa Adili and Anthony Adili commenced a separate action against HoD and Roberto Venier, claiming $1,100,000 for construction deficiencies and $500,000 as general damages to complete contracted work. The Adilis also claimed $50,000 for punitive, exemplary or aggravated damages and a further $50,000 for mental distress. In December 2012, the Adilis commenced a parallel action seeking essentially the same relief against Mr. Venier and Homes of Distinction Inc., a related dormant company.

[31] In April 2012, HoD’s then counsel passed the trial record in the construction lien action. The action was struck from the trial list in July 2012, as not being ready for trial. In January 2013, the construction lien action was administratively dismissed by Registrar’s order. HoD’s lien against the Property was discharged and the certificate of action vacated in August 2013 upon the ex parte motion of Elisa Adili.

[32] By decision dated April 3, 2014, Ramsay J. set aside the Registrar’s dismissal order and restored the construction lien action to the trial list. Ramsay J. also found that the construction lien had been improperly vacated. (The lien and certificate of action were reinstated on title in February 2016 by subsequent consent order of Turnbull J. That order also confirmed the lien’s priority over registered mortgages with The Toronto-Dominion Bank, a defendant in the construction lien action.) In May 2014, on consent, the three actions were ordered to be tried together or one after the other.

[33] In late June 2014 (after the Adilis changed counsel), as part of document production in the litigation, counsel for the HoD parties provided the Adilis’ counsel with over 2,300 photographs (in electronic format) taken at the Property during the construction process.

[34] By notices of motion dated September 16, 2015, the Adilis sought leave to amend the statements of claim in the construction deficiency actions to add the City of Hamilton as a defendant. By order of Turnbull J. dated February 26, 2016, the Adilis were granted leave to add the City of Hamilton as a defendant in those actions.

[35] The trial of the three actions was scheduled for the long trial sittings in Hamilton in October 2017. Due to illness of the City’s counsel, the trial was rescheduled to commence on October 9, 2018, for a period of four weeks. Before the scheduled trial date, Arrell R.S.J. (as case management judge) established the order of presentation at the trial, starting with the Adilis as the plaintiffs in the construction deficiency actions.

[36] On the first scheduled date of trial, at the unopposed request of the Adilis, I went to Ancaster (along with the parties’ counsel) to “take a view” of the Property, as provided for in r. 52.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The Adilis commenced their case in the construction deficiency actions the following day.

[37] By the second week of the trial, the parties’ counsel advised that (contrary to their prior expectations) multiple additional weeks would be required to complete the trial. The case management judge again became involved to set a schedule for trial continuation, taking into account counsel’s commitments and available court time.

[38] At the end of the third week, the trial was adjourned. At that point, only Mr. Adili had testified. The case management judge set the trial to continue for three weeks in July 2019 and two additional weeks in September 2019, followed by written submissions. In doing so, the case management judge provided directions relating to the trial’s conduct, including time allocations for the remaining stages of the trial (subject to the trial judge’s discretion) and the use of affidavits (or expert reports) to provide evidence in chief for the witnesses other than Mr. Venier and Mr. Adili.

[39] In early 2019 (while the trial was in hiatus), the Adilis brought a motion seeking leave to provide additional expert reports outside the time otherwise permitted by r. 53.03. In the prior course of the litigation, the parties had commissioned and served reports from proposed expert witnesses, including in the areas of structural engineering and quantity surveying. In their motion, the Adilis sought leave to provide a further expert report from a new structural engineer, as well as supplemental reports from their existing engineering expert and their existing quantity surveying expert. I heard and denied that motion in April 2019. My oral reasons for that ruling are being released in writing separate from these Reasons for Judgment.

[40] In May 2019, the case management judge heard and granted a motion by the Adilis’ counsel to be removed from the record. At the Adilis’ request, continuation of the trial (with new counsel for the Adilis) was deferred. The case management judge set the trial to resume in September 2019 for two weeks, followed by three weeks the next month.

[41] During the balance of the trial, there were a series of challenges to the contents of witnesses’ affidavits and expert reports, which required evidentiary rulings (provided orally). An additional week was required to complete the evidence in January 2020, followed by written closing submissions. The closing submissions were completed in March 2020, after suspension of regular court operations due to the COVID-19 health emergency.

III. Positions of the parties and matters to be determined

A. Elisa Adili and Anthony Adili

[42] The Adilis say that in their early discussions with Mr. Venier, he offered a "design/build" process in which the Adilis would have input into the design and work to be completed and the finishes to be used in both the addition and the renovations in the existing home. They say the parties understood that the addition and renovations were to be completed on an "upscale" standard usual to a custom home project, with a "seamless" transition on finishes in the new addition which would mimic the finishes and look of the older existing home. The Adilis say that their discussions led to a verbal building contract, the terms of which were finalized in late 2008 at a meeting at Mr. Venier’s residence.

[43] The Adilis say that the building contract included the following terms:

a. Construction of an addition (including a separate pool cabana) and renovation of portions of the existing house.

b. A total contract price of $993,689 plus tax, which included $90,482.72 paid in October ($65,482.72) and December ($25,000) 2008, pursuant to two HoD invoices rendered in October and November 2008. Those invoices related to an armour stone retaining wall and landscaping on the east (back) side of the house.

c. The addition and renovations were to be completed on an "upscale" standard usual to a custom home project, with materials and workmanship equivalent to that of Mr. Venier’s residence. That standard of construction is beyond the standard imposed by the implied term of a construction contract that requires the builder to perform its work in a good and workmanlike manner and meet the mandatory requirements in the Building Code.

[44] In his testimony, the Adilis both described the verbal building contract as a fixed-price, “turn-key” contract. Mr. Adili also described the construction as it progressed as an “iterative process”, in which certain changes were made to the contract’s scope that affected the amount due. The Adilis say that they are entitled to certain credits for work that they instructed HoD not to perform (for example, replacement of the roof of the existing house) and agree that they are liable for certain limited extras with respect to additional work not contemplated in their verbal contract. They say that HoD is liable for the cost of certain components of the construction that HoD later declined to complete and which the Adilis undertook (through service providers with whom the Adilis contracted directly), including HVAC (heating, ventilation and air conditioning) and electrical. They also characterize the “allowances” included in the CHC as being designed to download costs from HoD to the Adilis.

[45] The Adilis also say that, contrary to the terms of the building contract:

a. Prior to substantial completion, HoD refused to continue work under the contract unless it received payment in full of an excessive amount relative to the agreed-upon price, as adjusted for payments made by them, other credits due to them, and acknowledged extras. Among other things, the payment HoD was seeking failed to provide the Adilis with appropriate credit for the amounts they paid directly to service providers.

b. HoD abandoned the project in its incomplete state, when the Adilis refused to comply with HoD’s demand for payment in full.

c. HoD completed many items to a deficient state with respect to both materials and workmanship, without complying with the Building Code in many cases.

[46] The Adilis claim that they have suffered damages as a result of HoD’s contract breaches. They say those damages include the cost to complete incomplete items and the cost (already-incurred and anticipated) to rectify deficient items.

[47] The Adilis say that the City is liable for damages arising from Building Code non-compliance with respect to certain components of the construction. They say that City personnel were negligent in their building permit review, inspections and Building Code enforcement.

[48] The Adilis also say that they did not discover their claim against the City until after receiving over 2,300 construction photographs from HoD as part of their document disclosure in June 2014. The Adilis provided those photographs to a structural engineer (Giancarlo Lancia), who issued an engineering report in October 2014 with respect to structural deficiencies and other concerns relating to the construction. The Adilis say that the limitation period for their claim against the City did not start to run until they became aware of those deficiencies and concerns, as set out in the engineering report. Thereafter, they moved to add the City as a defendant well within the limitation period, according to the Adilis.

B. Homes of Distinction

[49] HoD says that the terms of its contract with the Adilis are set out in the unsigned CHC that Mr. Venier provided in October 2008, which set out allowances for specified components of the project. HoD says that although the Adilis never executed the CHC, the parties acted in accordance with it. The Adilis are therefore bound by its terms, by virtue of significant part performance, according to HoD.

[50] HoD agrees that the contract price was $993,689 (plus tax) but says that the price did not include $90,482.72 that the Adilis paid in late 2008 pursuant to two invoices relating to the armour stone retaining wall and landscaping. HoD says that those matters were contracted separately and did not form part of the building contract.

[51] HoD says that in the course of the contract’s performance, some items were excluded by agreement, and many were added or changed, resulting in a large number of debits and credits. HoD says that where extras were added or allowances exceeded, it provided the Adilis with quotations from subcontractors/suppliers, with the result that the Adilis were aware of extra costs that they were incurring (beyond the stated allowances and after credits).

[52] HoD says that incomplete items and any deficiencies are the Adilis’ sole responsibility. Many alleged deficiencies were not deficiencies at all, since they were (i) not mandated by the contract, (ii) did not in fact require remediation, or (iii) were not caused by or the responsibility of HoD. While HoD acknowledges that there were incomplete and deficient items when its workers left the Property, HoD says that most or all were minor in nature. HoD would have completed or rectified those items had the Adilis made a substantial payment toward the monies HoD claimed as owing. HoD says that when it discontinued further work, it gave the Adilis fair and adequate credits for incomplete and deficient items known to it at the time.

C. City of Hamilton

[53] The City denies any negligence. The City says that its inspectors met the standard of care with respect to ensuring compliance with the Building Code. The City also says the Adilis have not established the need for remediation work as a result of any non-compliance with the Building Code. Accordingly, the Adilis have not met their burden of establishing consequential damages for which the City is responsible.

[54] The City also says that the Adilis’ claims against it are statute-barred. By the time the Adilis issued their construction deficiency action against HoD and Mr. Venier in March 2011, the Adilis had actual knowledge sufficient to base an actionable claim alleging loss by reason of construction deficiencies under the Building Code. The Adilis did not seek to add the City as a defendant until September 2015, after the limitation period had expired.

D. Matters to be determined

[55] The matters to be determined are as follows:

a. Building contract: What are the terms of the building contract between the Adilis and HoD?

b. Disputed contract changes: Did HoD breach the building contract by failing to carry out components of the construction included in the contract’s intended scope?

c. HoD’s departure from the construction project: Did HoD breach the building contract by leaving the project prior to its completion?

d. Deficient or incomplete work: To what extent is HoD liable to the Adilis for deficient or incomplete work performed at the Property?

e. The City’s building permit review: Is the City liable on the merits for negligence relating to the City’s building permit review, inspections and Building Code enforcement?

f. Limitation period for claim against the City: Is the Adilis’ claim against the City statute barred?

g. Amount the Adilis owe HoD for construction work: What amount (if any) is due to HoD from the Adilis for HoD’s construction work?

h. Amount HoD owes the Adilis for deficient or incomplete work: What amount (if any) is due to the Adilis from HoD for incomplete or deficient work (or on other bases)?

i. Amount the City owes the Adilis for negligent review/inspections: What amount (if any) is due to the Adilis from the City for negligent building permit review, inspections and Building Code enforcement?

[56] Each of these matters is addressed below.

IV. Building Contract

[57] What are the terms of the building contract between the Adilis and HoD?

A. Position of the parties

[58] While a written building contract was never finalized and signed, it is common ground that there was a binding contract for the construction of an addition to the Adilis’ Ancaster residence (including a separate cabana at the north end of the Property) and for renovations to the existing house. What are in dispute are the terms of the building contract.

[59] HoD says that the contact’s terms are set out in the unsigned CHC the Mr. Venier provided to the Adilis in the latter part of 2008. The draft CHC is a three-page document, consisting of a simple two-page (12-clause) main section, with Schedule “A” (described below) as a one-page attachment. The CHC includes the following terms.

a. Parties: The Adilis (as customers/homeowners) and HoD (as the builder).

b. Scope: Construction of an addition to the existing house and a cabana as set out in design drawings forming part of the agreement. Those design drawings depict the entire residence (including the original building and the proposed addition) but do not indicate any proposed construction activity in the original structure (other than the removal of the existing single-story garage), nor do the drawings indicate any interior passages between the addition and the original building. The CHC’s two-page main section makes no reference to renovations to the original structure, but Schedule “A” (under “Allowances included in price”) refers to roofing and wiring for the “existing house”. Both sides agree that the building contract was intended to include renovations to the existing house.

c. Contract price/progress payments: $993,689 plus tax, with progress payments upon completion of specified stages of the construction.

d. Inclusions/allowances: Schedule “A” sets out what is included (and not included) in the contact, as well as the amounts of “Allowances included in [contract] price” for specified components of the construction.

e. Construction standard: In “a good and workmanlike manner” and conforming to “all local codes … and municipal bylaws and to the National Housing Act Standards”.

f. Subcontracts: HoD has the right to subcontract any part of the work but is responsible for work quality of the subcontractor.

g. Extras: The Adilis are to pay HoD for extras not included in the contract.

h. Entire agreement: The CHC is the entire agreement between the parties. There is no representation, warranty, collateral agreement or condition not included in the CHC.

[60] While the Adilis agree that the unsigned CHC correctly set out the agreed contract price, they dispute that the terms of the CHC constitutes the agreement between the parties. Among other things, they take exception to the allowances in Schedule “A”, which they say they never agreed to. At the same time, in the Adilis’ closing submissions, their counsel relied on certain provisions of the CHC as supporting the Adilis’ position relating to the terms and scope of the contract (for example, they rely on the “entire agreement” clause to support their position that the contract price included amounts they paid in late 2008 pursuant to two invoices relating to the retaining wall and landscaping).

[61] The Adilis say there was a verbal building contract, which they describe as a fixed-price, “turn-key” contract, the terms of which were finalized in late 2008 at a meeting at Mr. Venier’s house. Mr. Adili also described the construction as it progressed as an “iterative process”, in which certain changes were made to the contract’s scope that affected the amount due.

[62] The Adilis say that the oral building contract generally contained the following terms.

a. Scope: Construction of an addition (including a separate pool cabana) and renovation of certain portions of the existing house.

b. Contract price: $993,689 plus tax, which included $90,482.72 paid in late 2008 pursuant to two invoices relating to the amour stone retaining wall and landscaping.

c. Construction standard: The addition and renovations to be completed on an "upscale" standard usual to a custom home project, with materials and workmanship equivalent to that of Mr. Venier’s residence.

B. Legal principles – contract formation/part performance

[63] As noted above, HoD says that although the Adilis never executed the CHC, the parties acted in accordance with it. The Adilis are therefore bound by its terms, by virtue of significant part performance, according to HoD. Among the authorities that HoD relies on are Erie Sand and Gravel Limited v. Seres’ Farms Ltd., 2009 ONCA 709, 97 O.R. (3d) 241, and Deglman v. Brunet Estate, 1954 2 (SCC), [1954] S.C.R. 725.

[64] In Erie Sand, two parties reached an oral agreement that the proposed vendor would sell land to the proposed purchaser at a stated price, with an agreed closing date. A third party had a right of first refusal on the land. The first two parties agreed that the proposed purchaser would make a written offer (on the agreed terms) to the proposed vendor, who would present it to the third party. If the third party did not match the offer, the proposed vendor would sell the land to the proposed purchaser on the agreed terms. The third party did not match the proposed purchaser’s offer, but the proposed vendor nonetheless sold the land to the third party and returned the deposit that the proposed purchaser had provided. The proposed purchaser sought specific performance of its oral agreement with the proposed vendor. The third party argued that the oral agreement was a non-binding “agreement to agree” relating to the sale of land and relied on s. 4 of the Statute of Frauds, R.S.O. 1990, c. S.19, to excuse the proposed vendor from its performance obligations.

[65] In the Erie Sand trial decision, the court found that there was a valid and binding oral agreement between the first two parties, since they had agreed on the essential terms of the agreement and intended the agreement to be binding. The court relied on Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 1991 2734 (ON CA), 79 D.L.R. (4th) 97 (Ont. C.A.) in coming to that conclusion. The trial judge also held that there were sufficient acts of part performance to take the agreement outside s. 4 of the Statute of Frauds, taking into account both parties’ conduct. In doing so, the trial judge found that the acts of part performance met the requirement that the acts "must unequivocally refer to and support the alleged agreement and be amenable to no other interpretation": see Erie Sand (C.A. reasons), at para. 32.

[66] On appeal, the Court of Appeal upheld the Erie Sand trial decision, finding no palpable and overriding errors in the trial judge’s conclusions. Dealing first with the issue of contract formation, the court (at para. 42) noted with approval the trial judge’s reliance on the Court of Appeal’s previous decision in Bawitko, which held that there is a valid and binding oral agreement where the parties (i) agree on the essential terms of the agreement and (ii) intend the agreement to be binding. In Bawitko, the parties met to discuss a proposed franchise arrangement and agreed on certain terms. The proposed franchisor left the prospective franchisee with a 50-page standard-form franchise agreement. The trial judge found that (i) the parties had reached a binding oral agreement, and (ii) there were sufficient acts of part performance to take the oral contract outside s. 4 of the Statute of Frauds (which had broader application at that time, applying to “any agreement that is not to be performed within the space of one year from the making thereof”). The Court of Appeal in Bawitko overturned the trial decision, holding that although some terms of the franchise had been determined, the parties’ oral agreement was subject to the settling of detailed contractual arrangements of the nature set out in the draft franchise agreement, which the parties had not even discussed. The Court of Appeal therefore concluded that the trial judge erred in finding that the requirements for a binding oral agreement had been met. The Court of Appeal also indicated that it agreed with the trial judge that there were sufficient acts of part performance to avoid the application of the Statute of Frauds, but still found against the proposed franchisor, since the requirements for a binding oral agreement had not been met.

[67] In Erie Sand, at para. 43, the Court of Appeal also referred to its more recent decision in UBS Securities Canada, Inc. v. Sands Brothers Canada Ltd., 2009 ONCA 328, 95 O.R. (3d) 93. In that case, applying the same principles as in Bawitko, the Court of Appeal held that the trial judge did not err in finding that there was a binding agreement for the purchase of shares of a private company based on an oral agreement that established the price, quantity and closing date for the share transaction. The Court of Appeal found that in these circumstances, the trial judge did not err in holding that a written share purchase agreement was not a condition of the bargain.

[68] In Erie Sand, the Court of Appeal also affirmed the trial judge’s conclusion that s. 4 of the Statute of Frauds did not render the oral agreement unenforceable by reason of the principle of part performance. The Court of Appeal held that the trial judge did not err in concluding there were sufficient acts of part performance to take the oral agreement outside s. 4 of the Statute of Frauds, taking into account both parties’ conduct. Applying the test in Cartwright J.’s majority judgment in Deglman, the Court of Appeal noted that it was not necessary for the acts of part performance to “unequivocally refer to and support the alleged agreement and be amenable to no other interpretation” (the test in Rand J.’s minority reasons in Deglman). It was sufficient if the acts of part performance were "unequivocally referable in their own nature to some dealing with the land" (the less stringent test in Cartwright J.’s majority reasons): see Erie Sand, at paras. 32, 87 and 92.

[69] In Erie Sand, at para. 49, Court of Appeal explained the rationale for the part performance principle as follows:

The purpose of s. 4 of the Statute of Frauds is to prevent fraudulent dealings in land based on perjured evidence. However, Equity will not allow the Statute of Frauds to be used as an "engine of fraud". It created the doctrine of part performance to prevent the Statute of Frauds from being used as a variant of the unconscionable dealing which it was designed to remedy: see Hill v. Nova Scotia (Attorney General), 1997 401 (SCC), [1997] 1 S.C.R. 69, at para. 10. The requirements in s. 4 of the Statute of Frauds must give way in the face of part performance because the acts of part performance fulfill the very purpose of the written document – that is, they diminish the opportunity for fraudulent dealings with land based on perjured evidence.

[70] In Erie Sand, at para. 64, the Court of Appeal goes on to state as follows:

Hill stands for this principle: if one party to an otherwise unenforceable agreement stands by while the other party acts to its detriment by performance of its contractual obligations, the first party will be precluded from relying on the requirements in the Statute of Frauds to excuse its own performance.

[71] Applying the principles in Hill, the Court of Appeal in Erie Sand rejected the third party’s argument that given the return of the proposed purchaser’s deposit, it suffered no detriment that would render it unconscionable for the third party to rely on s. 4 of the Statute of Frauds to avoid enforcement of the oral sale agreement. The court noted that the proposed purchaser acted to its detriment in delivering its written offer to the proposed vendor, as it had agreed to do. The proposed vendor was able to use the offer to provoke a written offer from the third party, which the proposed vendor accepted. As a result, the proposed purchaser lost the opportunity to buy the land. The Court of Appeal held that in these circumstances, the trial judge did not err in concluding that it would be unconscionable to allow the third party to rely on s. 4 of the Statute of Frauds to render unenforceable the proposed vendor’s oral agreement to sell the land to the proposed purchaser: see Erie Sand, at para. 68.

C. Analysis

[72] In their evidence at trial and the submissions of their counsel, the Adilis and the HoD parties were consistent in their position that there was a binding building contract relating to the Ancaster construction project. That position is also reflected in their pleadings, with the exception that in HoD’s Statement of Claim in the construction lien action, there is a single, two-line paragraph advancing “quantum meruit and unjust enrichment” as alternative bases for its claim. The only reference to that alternative theory of liability during the trial (including in the written closing submissions) came during the cross-examination of Mr. Venier by the Adilis’ counsel, when Mr. Venier acknowledged that HoD’s pleadings included quantum meruit and unjust enrichment as alternative bases for its claim.

[73] While the Adilis characterized the building contract as a fixed price, “turn-key” contract, in the end, the parties’ positions on the nature of the contract are not that far apart. Both agree that the amount due to HoD for the work performed (as agreed in their contract) was subject to adjustment, taking into account (i) matters the parties subsequently agreed to exclude from the contract (which would reduce the amount payable to HoD), and (ii) any additional work HoD performed as an “extra” at the Adilis’ request (for an additional charge not included in the contract price). In essence, that is the “iterative process” Mr. Adili referenced in his testimony.

[74] Applying general principles relating to contract formation, and consistent with the parties’ positions at trial, I find that there was an oral contract for the construction of an addition to the Ancaster residence (including a separate pool cabana) and renovation of portions of the existing residence. While I do not accept HoD’s position that the unsigned CHC in its entirety constitutes the agreement between the parties (as explained further below), I find that the parties’ oral building contract reflects the CHC’s general structure, which follows the general structure of the 1995 building contract with Mr. Venier’s company for construction of the Adilis’ previous Malton Drive residence.

[75] In reaching the conclusions I have, I considered the case law that HoD referenced to support its position that acts of part performance bound the Adilis to the terms of the CHC in its entirety. In the circumstances of this case, I do not consider the principle of part performance to take us that far.

[76] As the Court of Appeal indicated in Erie Sand, Bawitko and UBS Securities, the threshold issue is whether the parties’ oral agreement meets the requirements for a binding contract, that is, the parties have agreed on the essential terms of the agreement and intend the agreement to be binding. If those requirements are met, Erie Sand and Bawitko indicate that it is appropriate to consider whether there were sufficient acts of part performance to take the oral agreement outside the Statute of Frauds (if that statute applies to the contract). However, if the requirements for a binding oral agreement are not met, “there is no cause of action, even if part performance is established”: see Neighbourhoods of Cornell Inc. v. 1440106 Ontario Inc. (2003), 11 R.P.R. (4th) 294 (Ont. S.C.), at para. 58; aff’d (2004), 2004 19378 (ON CA), 187 O.A.C. 218 (C.A.).[^3] In my view, that is the take-away from the Court of Appeal’s decision in Bawitko. I see nothing in Erie Sand that contradicts that conclusion.

[77] Applying those principles, the first obvious point is that the Statute of Frauds has no application in the circumstances of this case. The building contract between the Adilis and HoD does not involve a contract for the sale of land (s. 4) or other legal commitment subject to that statute. But even if the Statute of Frauds were engaged, I have difficulty seeing how the principle of part performance would assist HoD.

[78] Applying the principles that the Court of Appeal affirmed in Erie Sand and Bawitko (where the Statute of Frauds applied) and UBS Securities (where it did not), I have already found that there is a binding oral contract between the parties that reflects the draft CHC’s general structure but does not incorporate all its terms. Notably, given the parties’ dialogue about allowances extending into at least early 2009, the parties evidently contemplated some reasonable limit on the extent to which expenditures on various construction components were included in the contract price. As discussed further below, to the extent that HoD subsequently provided credits to the Adilis against the contract price that were consistent with the allowance levels set out in the unsigned CHC, I have generally accepted those credits as being reasonable in the circumstances, consistent with the construction standard that HoD was required to meet under the building contract. However, in my view, the evidence indicates that there was no “meeting of the minds” with respect to the specific amounts of the allowances.

[79] In all the circumstances, I do not see how acts of part performance can be used to bootstrap the draft CHC in its entirety into the oral agreement.

D. Terms of the contract

[80] With that background, the terms of the oral building contract are described further below.

(i) Parties

[81] I am satisfied that the parties to the building contract were the Adilis (as the customers/property owners) and HoD (as the builder), as set out in the draft CHC.

[82] In the Amended Amended Statement of Claim in the construction deficiency actions, the Adilis advanced their contractual claims against Mr. Venier, HoD and Homes of Distinction Inc. (the related dormant company) collectively. The Adilis also allege that Mr. Venier in his personal capacity was negligent in his preparation of the deficient design drawings for the construction, falling below the requisite standard of care in doing so. However, the trial evidence did not indicate that Mr. Venier was a party to the building contract in his personal capacity. As well, I accept Mr. Venier’s uncontradicted evidence that Homes of Distinction Inc. (through which Mr. Venier carried on his construction business at the time of the 1995 Malton Drive building contract) was dormant and no longer operating at the relevant time.

[83] In these circumstances, I am satisfied that the Adilis contracted with HoD, and not with Homes of Distinction Inc. or Mr. Venier personally.

(ii) Contract price/progress payments

[84] Consistent with the position taken by both HoD and the Adilis, the evidence supports the conclusion that the contract price for the project was $993,689.00 plus GST. Including tax, the total contract price was $1,043,373.40. As noted above, the actual amount payable for the work performed was subject to adjustment, taking into account (i) aspects of construction the parties subsequently agreed to exclude from the contract (which would reduce the amount payable to HoD), and (ii) any additional work HoD performed as an “extra” at the Adilis’ request (for an additional charge not included in the contract price).

[85] I am also satisfied the parties agreed that the contract price would be payable in instalments generally tied to the progress of the work, as contemplated in the draft CHC and consistent with the structure of the 1995 Malton Drive building contract. The Adilis disputed that the schedule set out in the unsigned CHC was actually followed; rather, Mr. Venier would periodically ask for payment of a stated amount and the Adilis would provide it. However, I agree with HoD’s counsel that the evidence of payments made until the fall of 2009 suggests that the schedule of payments set out in the draft CHC was generally followed. In any case, the timeliness (or otherwise) of the payments was not an issue between the parties until after payments ceased in the fall of 2009.

[86] As previously noted, the Adilis also say that included in the contact price were payments totaling $90,482.72 in the latter part of 2008, pursuant to two HoD invoices relating to the armour stone retaining wall and landscaping on the east (back) side of the house. The first invoice was for $65,482.72, which the Adilis paid in full by cheque. The second invoice was for $27,623.03, which was settled (at the Adilis’ request) by cash payments totalling $25,000. According to Mr. Venier’s testimony (which the Adilis’ dispute), it was clear from his discussions with the Adilis that the work and material covered by those invoices did not form part of the building contract and was not included in the contract price. I accept Mr. Venier’s testimony in preference to that of the Adilis on this point. To the extent there is documentary evidence (in particular, a typed, boldface notation on the face of the first invoice), it supports Mr. Venier’s position. The Adilis deny reading the notation or being aware of Mr. Venier’s position until the litigation was commenced. I do not find that denial credible. The Adilis are careful people. Based on the trial evidence, it is fair to conclude there is little that escapes their notice.

(iii) Scope

[87] There was no dispute that the original contract price of $945,000 plus tax was intended to cover the two-story addition together with renovations to the existing house. By the fall of 2008, the project was expanded to include an outdoor pool cabana and Q-decking, for a revised contract price of $993,689. The scope of the project was not fully reflected in the two-page main section of the unsigned CHC, which referred to the addition and the cabana but not the existing house or the Q-decking. As well, the design documents forming part of the agreement do not indicate any proposed construction activity in the original structure or any interior passages between the addition and the original structure. However, included in the attached Schedule “A” (under “Included in the contract”) is “Q-decking … for the elevated terrace”. Also included in Schedule “A” is roofing and wiring for the “existing house” (under “Allowances included in price”), as previously noted. In these circumstances, I am satisfied that the scope of the oral contract included construction of the addition, a separate pool cabana and the Q-decking, as well as renovations to the existing house.

[88] It is also worth noting that the areas of work listed in Schedule “A” includes “Electrical to include 70 spotlights installed in new construction or exposed areas only” (under “Included in the contract”) and “Heating and Air Conditioning” (under “Allowances included in the price). Their inclusion in Schedule “A” is consistent with both parties’ position that those aspects of the construction (which were later the subject of dispute between the parties) were intended to be included within the scope of the oral building contract.

(iv) Standard of Construction

[89] Consistent with the language in the draft CHC, HoD submits that the agreement between the parties required HoD to carry out the construction in “a good and workmanlike manner” and conforming to applicable regulatory requirements and standards, including municipal bylaws and the Building Code. Similar wording also appeared in the 1995 Malton Drive building contract.

[90] The Adilis say that the agreement between the parties held HoD to a higher standard of construction. They say that standard goes beyond the requirement in the implied term of a construction contract that the builder perform its work in a good and workmanlike manner and meet the mandatory requirements in the Building Code: see E.J. Robson Consulting, a Division of Canadian Sadler Corp. v. Mahony, [1997] O.J. No. 3828 (Gen. Div.), at para. 13; Riar v. Bowgray Investments Ltd. (1977), 1 R.P.R. 46 (Ont. C.A.), at para. 4.[^4] The Adilis say that the parties agreed HoD would complete the construction work on an "upscale" standard usual for a custom home project, with materials and workmanship equivalent to those of Mr. Venier’s residence. The Adilis say that they received assurances of that nature early in 2008 in the discussions leading up to the building permit application (which included meetings at Mr. Venier’s residence) as well as in late 2008 when they were discussing the Adilis’ concerns as to the adequacy of the allowances that Mr. Venier proposed in Schedule “A” to the draft CHC.

[91] In his testimony, Mr. Venier did not dispute that he showed the Adilis certain aspects of his residence to provide comfort as to the adequacy of the allowances. What he does dispute is that HoD agreed to a significantly enhanced construction standard beyond that set out in the unsigned CHC.

[92] In support of the Adilis’ position that the building contract held HoD to a higher standard, their counsel relied on Abstract Developments Inc. v. Margolis, 2015 BCSC 2239, 56 C.L.R. (4th) 273, aff’d 2017 BCCA 44, 95 B.C.L.R. (5th) 177, and Ivan's Renovations Ltd. v. Arabsky, 2014 ABQB 700, 40 C.L.R. (4th) 65. In the trial decision in Abstract Developments, at para. 27, the court states as follows:

The contract sets out the scope of work, but is largely silent on performance standards governing the plaintiff's services managing the construction. In light of the representations by the plaintiff that it was experienced and successful in building high quality custom homes, I think it appropriate to hold the plaintiff to a fairly high standard as would reasonably be expected of a competent construction company engaged in this business: see Ivan's Renovations Ltd. v. Arabsky, 2014 ABQB 700, at paras. 62-65.

[93] In Ivan’s Renovations, the customer entered into a new-home building contract with a builder after being shown a “show home … finished to a high standard.” The contract did not provide “an express description of the standard of work or the quality of materials required.” In these circumstances, the court found there was an “implied term in the construction contract that the house would be built to a superior standard being that of the show home”, requiring “a higher quality of finishing”.

[94] In the present case, I have no difficulty with the suggestion that the parties contemplated a standard of construction that would be usual for a custom home. However, in my view, the evidence does not support the conclusion that that the parties agreed to an identifiable enhanced standard of construction that went beyond the implied contractual term that requires the builder to perform its work in a good and workmanlike manner and meet the mandatory requirements in the Building Code.

[95] I have particular difficulty with the notion of using Mr. Venier’s residence as a contractual yardstick for measuring the construction standard, given the paucity of evidence relating to Mr. Venier’s residence. From the trial evidence, I gather that he lives comfortably in an upscale residence, but I know little of use beyond that. The Adilis apparently recognize this evidentiary gap, since their counsel’s written closing submissions “respectfully suggested and requested” that the court and counsel attend at Mr. Venier’s residence for a “walk through”, as we did at the Adilis’ residence prior to the start of the trial (pursuant to r. 52.05). This request was made in the context of counsel’s submissions relating to the adequacy of the allowances in Schedule “A” for “the scale and standard of construction agreed to and as expected by the Adilis.”

[96] Had there been any merit to this request, I would have expected it to be given more prominence, instead of it being buried in paragraph 132 of the Adilis’ 51-page initial closing submissions. Coming when it did, some 18 months after the trial commenced and after evidence closed for all parties, the Adilis cannot reasonably expect the court to seriously entertain this further request. But even if the request had come earlier, I have difficulty seeing any merit in it.

[97] When we “took a view” of the Adili’s residence in September 2018 (with neutral commentary from the Adilis’ then-counsel), I found it very useful in orienting myself with respect to the areas of the Property that would be the subject of evidence during the trial. However, my observations that day were no substitute for the evidence that followed in the courtroom. I see no merit to the suggestion that it would be appropriate to use r. 52.05 to fill a party’s perceived evidentiary gap at this stage of the proceedings.

[98] Accordingly, I find that the building contract required a standard of construction consistent with the implied term that HoD carry out the construction in a good and workmanlike manner and comply with the Building Code and other mandatory requirements.

(v) Subcontracts/extras

[99] There was no dispute that consistent with the unsigned CHC, HoD was entitled to retain subcontractors to perform portions of the work (as would be standard for a construction contract) while retaining responsibility for the quality of the work or materials supplied. There is also no dispute that the Adilis would be required to pay HoD for “extras” that HoD performed at the Adilis’ request at an agreed price beyond the initial contract price.

(vi) Inclusions/Allowances

[100] As previously noted, Schedule “A” of the unsigned CHC sets out in more detail what would have been included (and not included) in the contact, as well as the amounts of “Allowances included in [contract] price” for specified components of the construction.

[101] A significant point of contention between the parties related to the allowances, which was the subject of back and forth between Mr. Venier and Mr. Adili in the latter part of 2008 (and into at least early 2009). The Adilis say they received several iterations of Schedule “A” from Mr. Venier. The versions placed in evidence included Mr. Venier’s handwritten attempts to break down for the Adilis the stated amounts for the allowances between “Addition”, “Reno” and “Cabana/Q-deck”, without changing the total amount for the allowances. HoD says that even though the Adilis never signed the CHC incorporating the allowances in Schedule “A”, the Adilis should nonetheless be taken as having agreed to the amount of the allowances, since they were the subject of no further discussion between the parties for the better part of a year until the final round of discussions preceding HoD’s leaving the project in the spring of 2010.

[102] I disagree. The legal basis for HoD’s position that the parties were contractually bound by all the terms of the CHC (including the specific level of the allowances in Schedule “A”) was the parties’ substantial of part performance of the contract. I have already found that the principle of part performance does not apply in this case. The dialogue between the parties extending into at least the early part of 2009 provides documentary support for the Adilis’ position that they were not satisfied with and ultimately did not agree to the allowances that Mr. Venier proposed.

[103] In these circumstances, I have concluded that there was no meeting of the minds with respect to the specific level of the allowances for the construction components set out in Schedule “A” to the unsigned CHC. However, given the parties previous experience relating to allowances in the 1995 Malton Drive building contract, I am satisfied that the parties’ agreement contemplated some reasonable limit on the extent to which expenditures on various construction components were included in the contract price. Expenditures on a construction component beyond such amount would not be included in the contract price and would be the Adilis’ responsibility as an “extra”, consistent with the operation of the 1995 building contract. That conclusion is consistent with the characterization of an extra as an additional amount for work that the parties did not intend to include in the stated contract price. As indicated further below, to the extent that HoD subsequently provided credits to the Adilis against the contract price that were consistent with the allowance levels set out in the unsigned CHC, I have generally accepted those credits as being reasonable in the circumstances, consistent with the construction standard that HoD was required to meet under the building contract.

(vii) Entire agreement

[104] As previously noted, the unsigned CHC included an “entire agreement” clause. The wording of such a provision in a written agreement may take various forms, but in general terms it seeks to limit the obligations between the parties to those set out in writing in the agreement. A written agreement was never finalized and signed in this case. Therefore, further consideration of this clause would serve no useful purpose.

V. Disputed contract changes

[105] Did HoD breach the building contract by failing to carry out components of the construction included in the contract’s intended scope?

[106] As previously noted, certain components of the construction project that fell within the intended scope of the parties’ oral building contract became the subject of contention between the parties. Those components included HVAC (heating, ventilation and air conditioning), electrical and roofing.

[107] The Adilis say that once construction was underway, HoD advised that it did not have subcontractors to perform the HVAC and electrical work that was within the scope of the building contract. As a result, the Adilis directly retained and paid Hamilton Heating and Cooling Ltd. (also known as Hamco) to perform the HVAC work and Fidani Electric for the electrical work. The Adilis say that HoD breached the building contract by arbitrarily shedding responsibility for those (and other) components of the project without providing a corresponding credit or contract price reduction. They say that doing so was not consistent with the building contract, which permitted HoD to subcontract work but required it to retain responsibility for the quality of the work (consistent with the terms of the draft CHC). The Adilis say that as a result of that breach, they are entitled to credit against the contract price payable, including credits totaling over $90,000 for the amounts they paid to HVAC and electrical contractors.

[108] In a similar vein, the Adilis characterize the “allowances” included in the CHC as being designed to download costs from HoD by allowing HoD to claim as “extras” work or materials that were intended to be included in the contract price.

[109] HoD’s position is that by mutual agreement, the Adilis assumed certain components of the construction project that were initially included in the parties’ oral contract by hiring their own contractors to complete those aspects of the project. Those components included HVAC and electrical. HoD agrees that the Adilis are entitled to credit against the contract price to the extent that those aspects of the project were intended to be included in the contract. However, HoD says that the amounts the Adilis claim as credits are excessive, covering work beyond that intended to be included in the building contract. HoD also says that it was not responsible for the quality of the work performed by the contractors that the Adilis retained and supervised directly.

[110] As indicated further below, I have concluded that the evidence as a whole supports HoD’s position that as the project progressed, those aspects of the construction (including HVAC and electrical) were removed from the scope of the contract by mutual agreement, and that doing so did not constitute a breach of contract by HoD. I am also satisfied that based on Mr. Venier’s testimony (supported by the spreadsheet he prepared for the Adilis in March 2010 prior to leaving the project), HoD was prepared to provide the Adilis with appropriate credits against the contract price for assuming those aspects of the project through contractors they retained directly. To the extent that the amounts the Adilis paid to their contractors for those aspects of the project exceeded the credits HoD was prepared to provide, I agree with HoD that those excess amounts are the Adilis’ responsibility, since they related to work performed that went beyond what was reasonably expected to be included in the contract price. In that regard, I am relying on Mr. Venier’s testimony in preference to that of the Adilis, where they conflict.

[111] I am also satisfied that HoD was not responsible for the quality of the work of the contractors the Adilis directly retained. In making that finding, I accept the evidence of Mr. Venier (supported by HoD’s site manager, Alex Toth) that HoD’s role in dealing with those contractors related to scheduling and coordinating of their work with that of HoD’s workers and contractors but not directing or supervising the work the Adilis’ directly-retained contractors were performing.

[112] In weighing the trial evidence, I am cognisant of the difficulty the witnesses faced in testifying with respect to matters that often occurred a decade or more in the past, although the extensive documentary evidence at times assisted in filling in the gaps. Taking those considerations into account, I generally found Mr. Venier’s testimony to be open, straight forward, reliable and consistent with the documentary evidence. In contrast, I found that the Adilis generally took a narrow view when responding to questions. In general terms, they tended to have a clear recollection of matters they thought supported their narrative (even if their recollection was not supported by the documentary evidence) but were less than forthcoming (and often evasive) about matters that were not favourable to them.

[113] The most significant of the construction components removed from the contract from a financial standpoint was HVAC work. The Adilis paid Hamco a total of $82,134.15 for HVAC work. The credit to the Adilis that HoD was prepared to provide was $11,000, consistent with the HVAC allowance set out in the draft CHC. While there had been prior discussions with the Adilis about use of hydronic heating in the addition (the system already used in the existing house), the contract price of $993,689 reflected Mr. Venier’s understanding that (as he recommended) the heating system for the addition would be forced air. The allowance of $11,000 for HVAC set out in the draft CHC (provided to the Adilis in October 2008) was consistent with that understanding. However, the Adilis ultimately decided that that they wanted a hydronic system in the addition instead, to be tied into the existing system in the original house. The work required to do so would be more complicated and expensive than installing a forced air system in the addition. The new integrated hydronic system would also require the replacement of hot water pipes in the original house, which were encased in what was suspected to be asbestos, which HoD did not want its workers or subcontractors to be exposed to. I accept Mr. Venier’s evidence that the Adilis agreed that they would take over that aspect of the contract with a contractor they would retain directly. In Mr. Venier’s proposed reconciliation of charges in his March 2010 spreadsheet, he provided an $11,000 credit in the Adilis’ favour to reflect the agreed removal of HVAC work from the scope of the contract. In all the circumstances, I agree that a credit of that amount was reasonable, with the result that the Adilis would bear the balance of the cost for the more expensive system that their contractor ultimately installed.

[114] In dollar terms, the next most significant construction component removed from the contract related to roofing. As set out in HoD’s closing submissions, HoD’s position is as follows. The original contract contemplated a new faux slate roof for both the existing house and the addition. For that purpose, an allowance of $83,000 for roofing was including in the draft CHC. The Adilis decided to proceed instead with a less expensive traditional asphalt shingle roof on the addition and to remove the roof for the original house from the contract. HoD agreed that the Adilis would receive a credit equal to the difference between the roof allowance and the cost of installing the asphalt roof on the addition. After HoD completed roofing for the addition, the Adilis retained their own contractor to re-roof the original house with matching shingles. In Mr. Venier’s March 2010 spreadsheet, he provided a roofing credit to the Adilis of $59,247.61. In Mr. Adilis’ reply testimony, he provided a summary of credits the Adilis were claiming, which included $59,247.61 for roofing. Therefore, there appears to be no dispute about this item from a financial standpoint.

[115] I have also concluded that as a general matter, the evidence does not support the Adilis’ submission that HoD’s proposed allowances were designed to download costs to the Adilis that were intended to be included within the contract price. While the specific levels of allowances HoD proposed were not ultimately accepted, it is evident from the parties’ ongoing discussions that the amount of the contract price attributable to those aspects of the construction was not open-ended. I saw no credible evidence of a colourable attempt to download costs to the Adilis, in breach of HoD’s contractual obligations, as the Adilis allege.

[116] In reaching that conclusion, I took into account the Adilis’ closing submissions relating to “Extras”, in which their counsel referred to the total amount that Mr. Venier proposed as allowances for selected areas of construction (set out in the draft CHC) and compared that amount to the estimated total value of the work performed for those areas, as set out in the expert reports provide by the quantity surveyors retained by the Adilis (Willem Huinink) and HoD (Joseph Pendlebury). The allowances in the draft CHC totaled $194,200. The value of the work performed for those areas of construction (as estimated by each of the quantity surveyors) totaled approximately $333,000. The Adilis’ counsel noted that HoD’s allowances were disproportionate to the professional’s quantifications (at 58.3 per cent), constituting evidence that the allowances in the CHC were “significantly inadequate for the scale and standard of construction agreed to and as expected by the Adilis.” To support that conclusion, the Adilis’ counsel also noted that the total allowances set out in the CHC (being $352,400) constitutes 35.46 per cent of the total contract price (being $993,689).

[117] I did not find that argument persuasive, for several reasons, including the following:

a. The Adilis’ submission assumes a construction standard that significantly exceeds that imposed by the implied term that would require construction work to be performed in a good and workmanlike manner and comply with the Building Code and other mandatory requirements. I have already found that the applicable construction standard for the contract did not exceed the standard that would otherwise apply as an implied term.

b. As I understand it from the evidence, the purpose of allowances in a construction contract is to place some reasonable limit on the extent to which expenditures on certain areas of construction are included in the contract price, consistent with applicable construction standard and the other contract terms. The Adilis were familiar with the concept of allowances from there experience with Mr. Venier in the 1995 Malton Drive building contract. I see no reasonable basis for concluding that the comparative numbers that the Adilis’ counsel cites supports their characterization of Mr. Venier’s motivation in proposing the allowances he did (being essentially an allegation of bad faith).

c. There is no explanation for the methodology in the Adilis’ analysis of choosing some areas of construction for comparative purposes and not others.

VI. HoD's departure from the construction project

[118] Did HoD breach the building contract by leaving the project prior to its completion?

[119] As previously noted, the Adilis say that HoD breached the building contract in the spring of 2010 by refusing to continue work on the construction project unless HoD received payment in full of the amount they said was owing for the work performed. Taken as a whole, the evidence does not support that submission.

[120] The last requested payment that the Adilis made to HoD was $200,000 in September 2009. The total amount that the Adilis had paid to HoD at that point was $620,000 (not including $90,482.72 for the two 2008 invoices for the amour stones and landscaping). After the September 2009 payment, the Adilis declined to pay any further amounts, requesting a detailed breakdown of amounts claimed as owing under the contract and as “extras”. Mr. Venier provided Mr. Adili with a series of spreadsheets, the third of which (provided in March 2010) indicated a balance owing of $558,095.52 (which included $173,532.30 for extras net of credits for construction components removed from the contract). The Adilis continued to dispute the amount owing and declined to make any further payments.

[121] Mr. Venier testified that by early 2010, since he had received no payments from the Adilis for several months, he was seeking a further substantial payment to allow HoD to pay suppliers and otherwise meet HoD’s obligations relating to the project, which by that time was substantially complete. Mr. Venier denied demanding payment in full of the amount he said was owing at the time. I accept his testimony on this point, in preference to the evidence of the Adilis. When no further payment was made, Mr. Venier withdrew HoD workers from the construction project and subsequently registered a construction lien against the Property in order to preserve HoD’s lien rights. I also accept Mr. Venier’s testimony that if he had received a further substantial payment, HoD would have completed unfinished work and would have rectified deficiencies at no additional charge.

[122] In all the circumstances, I agree with HoD that it was reasonable for HoD to take the steps it did. In doing so, I find that HoD did not breach the building contract. I also find that HoD is not financially responsible for rectifying or completing construction work once its workers left the project except to the extent indicated later in these Reasons.

[123] As well, I find that the Adilis breached the building contract by failing to pay the amount due to HoD. As indicated further later in these Reasons, the amount due consists of the unpaid balance of the contract price, adjusted to reflect the following:

a. Additional amounts due to HoD for work performed as “extras”; and

b. Credits due to the Adilis for (i) areas of construction the parties agreed to exclude from the contract; and (ii) the cost of completing unfinished work and rectifying deficiencies for which HoD is responsible.

VII. Deficient or incomplete work

A. Introduction

[124] To what extent is HoD liable to the Adilis for deficient or incomplete work performed at the Property?

[125] The Adilis say that HoD is liable to them for deficient or incomplete work arising from HoD’s activities during the Ancaster construction project. HoD denies liability, arguing that (i) construction was substantially complete and not deficient when HoD left the project, and (ii) HoD’s workers would have performed any further required completion and rectification work, had the relationship between the parties not broken down.

[126] In his closing submissions, the Adilis’ counsel raises a number of “construction issues” arising from HoD’s work that the Adilis say has required (or will require) the expenditure of funds to rectify or complete. Counsel further subdivided those issues into the following categories: (a) structural construction issues; (b) non-structural construction issues; (c) HVAC, roofing and insulation; (d) retaining wall; (e) quality of construction and finishes; and (f) extras. Each of those categories is addressed in turn below. As indicated further below, I have generally accepted HoD’s submissions with respect to the matters in issue.

[127] With respect to engineering matters, the Adilis relied to a significant extent on the expert evidence of Giancarlo Lancia, whom they retained as an expert witness relating to engineering matters. He was also a fact witness, having been consulted by the Adilis starting in 2010 on as “as-needed” basis following the end of HoD’s involvement with the construction project. Among other things, Mr. Lancia also designed the concrete retaining wall that replaced the armour stone wall on the east side of the house that was in place when HoD left the construction site (as referred to further below). Mr. Lancia is eminently qualified in his field of endeavour but had no previous experience as an expert witness in court proceedings. On consent of all parties, I accepted him as an expert witness with respect to the structure and engineering of residential construction and the Building Code. As well, over HoD’s objection, I also accepted him as qualified to opine on the quality, workmanship and attention to detail of construction work performed.[^5]

[128] With respect to engineering and Building Code matters, Mr. Lanica provided an expert report dated October 21, 2014, entitled “Building Condition Assessment” (and subsequent supplemental reports), which together with his trial testimony constituted his expert engineering evidence. He also provided a separate expert report (also dated October 21, 2014) entitled “Quality Condition Assessment”. Over HoD’s objection, I accepted the latter report as admissible expert evidence (together with his trial testimony) relating to workmanship quality. I made both reports trial exhibits, in keeping with the case management judge’s direction that expert reports be accepted as part of the witnesses’ evidence in chief to the extent the witnesses adopted the reports’ contents.

[129] With respect to Mr. Lancia’s engineering-related evidence about building condition (including Building Code compliance), I generally found his evidence to be of limited assistance. In providing that evidence, Mr. Lancia to a significant extent assumed an advocacy role on the Adilis’ behalf, which I found inconsistent with his role as an independent expert witness. By way of contrast (as indicated further below), I found the evidence of HoD’s engineering expert (Jeffrey Price) to be in keeping with what would normally be expected of an expert witness, providing support for the reliability of his evidence in comparison to that of Mr. Lancia. In general terms, I was confident about the reliability of Mr. Price’s evidence and accept his evidence in preference to that of Mr. Lancia where their evidence conflicted.

[130] With respect to Mr. Lancia’s evidence relating to workmanship quality, I agree with HoD’s counsel that it should be afforded no weight as expert evidence. After ruling that Mr. Lancia was qualified to give expert evidence with respect to workmanship quality, I accepted his 275-page “Quality Condition Assessment” as a trial exhibit. That report consists of a single-page covering letter signed by Mr. Lancia (adopting the conclusions in the balance of the report), followed by Mr. Lancia’s resume and Acknowledgement of Expert’s Duty. The balance of the report entitled “Construction Review” (a further 272 pages) consists of a series of photographs of various aspects of the Ancaster residence, annotated with commentary relating to alleged construction deficiencies. During HoD’s cross-examination of Mr. Lancia, it became apparent that those 272 pages had been compiled and authored entirely by the Adilis, not Mr. Lancia. In these circumstances, I consider Mr. Lancia’s evidence on workmanship quality derived from his report to have no value as expert evidence.

B. Structural construction issues

(i) Footings/foundation

[131] The Adilis say that the central element of this case is tangible structural damage to the existing residence and the addition due to the construction methods and activities of HoD. In September 2008, prior to pouring footings and foundations for the addition, HoD excavated within the angle of repose of the footings of the existing house on the east (back) side without underpinning the foundation of the existing house. The Adilis say that doing so was not consistent with HoD’s obligation to work in a good and workmanlike manner and not consistent with the Building Code requirement that the foundation be designed by a professional engineer in these circumstances. As a result, the Adilis say that there is physical damage to the building structure and integrity, which carries with it the risk of catastrophic structural failure at any time for many years. In support of their position, they rely on the expert engineering evidence of Mr. Lancia, as well as that of Stephen Blaney, an engineering expert who provided an additional report relating to engineering and Building Code matters in May 2017 (after the City had been added as a defendant in the construction deficiency actions). The Adilis also expressed corresponding concerns in relation to the so-called “bowed wall” at the north end of sub-basement under the new garage, where the garage meets the original house.

[132] HoD disputes that the excavation method its workers employed was substandard or that there was any resulting damage to the building structure. With respect to the excavation on the east side of the residence, HoD says that its workers acted in accordance with the direction of Jiri Tichy (a professional engineer that HoD consulted on an as needed basis) when it became apparent that the excavation would extend below the existing footings. Mr. Tichy’s evidence was that he advised the HoD site manager (Alex Toth) to use the “cut and fill” method to install shoring walls to avoid soil relaxation below the existing footings, explaining what needed to be done that day in dry conditions so that the soil would not be washed away. Mr. Toth’s evidence was that while he did not specifically recall his conversation with Mr. Tichy that day, he had in fact used the “cut and fill” method in the excavation and did so in dry conditions. Mr. Tichy’s evidence also indicated that on a walk-through of the Property in 2017 (some nine years later) in connection with this litigation, he did not observe any evidence of structural instability. HoD also notes that in the cross-examination of Mr. Blaney (one of the engineering experts the Adilis retained), Mr. Blaney acknowledged that while use of the “cut and fill” method was risky, it had apparently worked, stating that HoD had “dodged a bullet”. HoD also argues that the structural issues the Adilis are raising are theoretical in nature, with Mr. Lancia even acknowledging in cross-examination that the risk of catastrophic structural failure is remote.

[133] In considering the major structural issues the Adilis raise, I also took into account the evidence of Jeffrey Price, the engineering expert retained by HoD. His general conclusion was that the Ancaster residence was well built to a high standard of quality, with isolated deficiencies that do not detract from the normal use or occupancy of the residence. Among other things, he also noted the absence of distress, cracking or differential settlement that would indicate structural instability.

[134] Based on the evidence before me, I am not satisfied that the Adilis have established non-compliance with the required standard of construction with respect to HoD’s work on the foundation on the south side of the residence. I have reached the same conclusion with respect to the concerns expressed about the “bowed wall” at the north end of the sub-basement under the new garage. As well, I am not satisfied that any loss attributable to structural instability has been established.

[135] In reaching those conclusions, I took into account the Adilis’ testimony (supported by some of the construction photographs) that cracking has occurred in various locations in the residence, particularly in areas where the pre-existing building and the addition meet, which the Adilis say constitutes evidence of distress and differential settlement consistent with structural instability. However, considering the evidence as a whole, I am satisfied that any such cracking is minor in nature and does not constitute evidence of structural instability.

[136] It is worth noting that the amounts that the Adilis are seeking relating to these issues constitute a significant portion of the amount that the Adilis say it would be necessary to expend to correct major structural issues. The Adilis say that those structural issues arose in 2008, creating the risk of catastrophic structural failure. Notwithstanding that perceived risk, the Adilis have continued to reside in the residence for over a decade, without taking any significant steps to ameliorate such risk. In my view, those circumstances reinforce the conclusions I have reached on this issue.

(ii) Upper balcony and flat roof (back of house)

[137] The construction project included the installation of an upper balcony and flat roof on the east (back) side of the existing house. The balcony is accessed at the south end from a door opening from the master bedroom area of the addition. At the north end, it forms a flat roof over the covered barbeque and outdoor dining area near the pool, which includes an outdoor stone fireplace.

[138] Based on the trial evidence (including that of Mr. Lancia), the Adilis say that the upper balcony is structurally unsound because it was not properly tied to the house. They say the balcony needs to be removed and replaced, together with the outdoor fireplace and the barbeque eating area. The issues they raise include (i) the method used to attach a new supporting beam to the house at the south end, (ii) the attachment of the same beam at its north end to the stone outdoor fireplace, and (iii) the structural adequacy of the stone or masonry “plinths” forming the bases of the intermediate supporting posts. The Adilis allege non-compliance with the Building Code. They also say (among other things) that the type of beam and supports used did not accord with the architectural drawings provided to the City with the building permit application.

[139] Having considered the Adilis’ position and the evidence they rely on, I agree with HoD that the evidence as a whole does not support the Adilis’ position that the upper balcony is not structurally sound. The “as-built” balcony passed City inspection and shows no sign of structural instability or distress, despite the installation by the Adilis of heavy flagstone on the portion of the balcony outside the master bedroom eight years ago. The north end of the balcony extension (being the roof over the barbeque area) shows no sign of instability in ten years since construction. The photographic evidence, together with the evidence of Mr. Toth and the City’s inspectors and the expert engineering evidence of Mr. Price, support the view that the balcony structure was properly fastened to the house and properly supported. Taking that evidence into account, they Adilis have not established that the upper balcony structure needs to be removed and replaced or otherwise remediated.

(iii) Other structural issues

[140] Among other structural issues the Adilis raise, they question whether the floor joists in the addition are adequate to support the increased loading resulting from the in-floor heating system. The in-floor heating system was consistent with the Adilis’ ultimate instructions relating to the addition’s heating system but was not reflected in the architectural drawings submitted with the building permit application in May 2008, which contemplated forced-air heating for the addition (as Mr. Venier had recommended).

[141] Relying on Mr. Lancia’s evidence, the Adilis say that HoD has not provided the required level of verification that the floor joists are adequate to bear the load placed on them by the weight of the in-floor heating system. During his cross-examination, Mr Lancia confirmed that he was unable to say, based on the information he had, whether any remediation was required to address floor-loading issues.

[142] In response to the floor loading concerns that Mr. Lancia expressed, HoD called as a witness a representative of the company that distributed the engineered floor system that HoD installed in the addition. Among other things, he testified that (i) the design drawings for the flooring system were revised three times after May 2008, and (ii) the floor joists were more than adequate to support the flooring system as installed. Taking his evidence into account, I am satisfied that the Adilis have not established that the support provided by the floor joists was inadequate or that they have suffered any resulting loss.

C. Non-structural construction issues

[143] In the Adilis’ closing submissions, their counsel notes that Mr. Lancia’s expert evidence identified significant non-structural construction deficiencies involving about 63 Building Code violations and covering over 23 areas of construction, including the following: the front entrance gable, the rear roof deck, the slope on the patio deck, roofing including inadequate venting in the attic and roof area, masonry, the garage slab, railings/stairs, and weeping tile. According to the Adilis’ counsel, the number and nature of the issues and Building Code non-compliance are indicative of a less than workmanlike and unprofessional approach to the project as a whole given its significant size and potential complexity.

[144] In response to the Adilis’ position, HoD relies on the expert engineering evidence of Jeffrey Price, together with the evidence of Mr. Venier and other HoD fact witnesses. In his initial report dated November 1, 2011, Mr. Price reviewed over 200 alleged deficiency items compiled by Willem Huinink (a professional quantity surveyor the Adilis retained), stating that he did so in order to determine conformance with the Building Code, the construction contract, the drawings and specifications, Tarion Warranty construction performance guidelines, and good construction practice. Mr. Price also issued a second report dated January 18, 2015, after reviewing Mr. Lancia’s October 2014 Building Condition Assessment Report and other additional documents.

[145] In his 2011 report, Mr. Price concluded that in general, the Adili residence is well built to a high standard of quality. He identified 39 deficiencies (out of over 200 alleged), which he described as isolated and not detracting form the normal use or occupancy of the house. Mr. Price reached the same general conclusion in his 2015 report, going on to state that the majority of the deficient items noted in Mr. Lancia’s Building Condition Assessment report could be repaired with minimal expense. Mr. Price’s 2015 report went on to state that Mr. Lancia’s report also listed a number of incomplete items, also noting that HoD was removed from the site and not able to finish the project.

[146] In their closing submissions, the Adilis challenged Mr. Price’s conclusions on several grounds, including the following:

a. The Tarion guidelines (which apply to new home construction) had no application to this project. In any case, those guidelines were biased in favour of the builder.

b. The references to the building contract in Mr. Price’s report related to Mr. Venier’s draft CHC, which the Adilis never signed or accepted as the building contract between the parties.

c. There was no independent verification or evaluation of information Mr. Price received from Mr. Venier.

d. Mr. Price diverted attention from HoD’s failure to conform with the building plans and specifications and the Building Code by commenting on the lack of obvious default in the as-built construction.

[147] Taking these and other factors into account, Mr. Price’s evidence was “calculatedly biased and not objective or impartial”, according to the Adilis’ counsel.

[148] I disagree. As indicated previously, I found the evidence of HoD’s engineering expert (Mr. Price) to be in keeping with what would normally be expected of an expert witness, providing support for the reliability of his evidence as compared to that of Mr. Lancia. In contrast to the advocacy role that Mr. Lancia assumed for the Adilis, I found Mr. Price’s evidence to be fair and balanced, making concessions when warranted. To a significant extent, his expert evidence was uncontested on cross-examination.

[149] Addressing the above specific issues that the Adilis raised:

a. I accept Mr. Price’s evidence to the effect that even though the Tarion guidelines did not apply in this case, they provide a useful reference point when considering conformance with good construction practice.

b. I see no issue with Mr. Price’s reliance on the draft CHC as constituting the building contract for the purpose of his analysis, given my finding as to the applicable construction standard in this case and my finding that the oral building contract between the parties reflects the CHC’s general structure.

c. I see nothing out of the ordinary in the extent that Mr. Price relied on information that Mr. Venier provided Mr. Price in reaching his conclusions. In the normal course, a party retaining a professional to prepare an expert report will provide documents and other information to the expert which, together with the expert’s personal observations and research, will form the basis for the expert’s opinion. If the trial evidence calls into question the accuracy of information provided to the expert, that consideration would of course affect the extent to which it would be appropriate to rely on the expert’s opinion evidence. The evidence in this case does not support the conclusion that there were material inaccuracies in the information HoD provided to Mr. Price that would affect the conclusions he reached.

d. I see no issue with Mr. Price’s comments relating to the lack of obvious default in the as-built construction, given in particular the Adilis’ claim for substantial amounts for loss arising from the risk of catastrophic structural failure, which I have found has not been established.

[150] Taking these and other factors into account, I see no credible evidence of bias or lack of impartiality on Mr. Price’s part, as the Adilis allege.

D. HVAC, roofing and insulation

[151] In their closing submissions, the Adilis raised various issues with respect to HVAC, roofing, insulation and related matters. They seek to hold HoD responsible for the cost of remediating those alleged deficiencies, noting HoD’s responsibility as general contractor for the building envelope.

[152] As Ms. Adilis reported to Mr. Venier by email in February 2010, large icicles were forming along the roofline of the addition. As well, mould developed on the south side of the new roof of the addition (discovered in April 2011). A related issue was water leakage believed to be the result of ice damming on the roof. In his evidence, Mr. Lancia provided the following explanation: (i) warm air from the house was flowing into the attic space due to vapour barrier breaches; and (ii) attic air was being recirculated into the house since the vapour barrier had been installed on the wrong side of the cold air return. Following further examination of the affected area, Mr. Lancia also expressed the opinion that there was inadequate venting in the roof attic area that did not comply with the Building Code.

[153] According to the Adilis, to remediate issues relating to mould, ice damming and leaking, it was necessary (among other things) to remove sections of the roof and dormer walls, remove the insulation, chemically treat the mould, install new spray-foam insulation, and install additional vents. The evidence of the insulation contractor (Mr. Schuts) was that in carrying out his part of the work, it was necessary to seal a significant gap between the existing house and the addition that extended from the attic to the floor below.[^6] According to Ms. Adili’s evidence, the total cost incurred to remediate those issues was $92,424.92. The Adilis also testified that since that remediation work was done, they have not had further issues relating to ice damming or mould.

[154] In support of their position, the Adilis also relied on the evidence of their HVAC contractor, Hamco’s Mr. Vasilak, whom the Adilis retained directly to perform the HVAC work. In his evidence, Mr. Vasilak disputed HoD’s suggestion that the moisture problems were attributable the HVAC work Hamco performed.

[155] Considering the evidence as a whole, I have concluded that the Adilis have not established that HoD is responsible for the moisture-related issues that the Adilis have identified.

[156] As noted in HoD’s closing submissions, HoD’s construction photos indicate that ice damming was a problem in the original house before construction started. For the moisture-related problems in the attic area, based on Mr. Venier’s testimony, HoD blamed the HVAC system installed by the Adilis’ HVAC contractor (Hamco) as the source of warm moist air in the attic area. HoD says that the moisture problems in the attic were compounded by breaches in the HoD-installed vapour barrier caused by the Adilis’ HVAC and electrical contractors, for which the Adilis were responsible and not HoD. Mr. Vasilak denied that Hamco was responsible for any breaches in the vapour barrier, but assuming Mr. Vasilak is correct, there is no dispute about breaches being present. The evidence indicated the presence of multiple contractors in the attic area after HoD left the project, any one or more of whom could have breached the vapour barrier. In his evidence, Mr. Venier conceded that due to a miscalculation on his part, the number of roof vents installed were not sufficient but stated that this deficiency would have been remedied at no charge had HoD not left the project in the spring of 2010 following the payment dispute with the Adilis.

[157] Taking the foregoing into account in the context of all the evidence, I am not satisfied that HoD was responsible for the cost of remediating any damage relating to ice damming, leaking or mould, as the Adilis have alleged.

E. Retaining wall

[158] The building plans for the addition included a basement walk-out and outdoor patio area on the east (back) side, which is below the level of the pool area to the north behind the existing house. To bridge the elevation change, HoD provided plans for installation of four terraced levels of amour stones, in a stepped configuration in order to adequately stabilize the elevation change. The design was similar to a terraced stone configuration at Mr. Venier’s residence, which the Adilis had seen and liked. There is no dispute that the Building Code would not have required the involvement of a professional engineer in the design of a terraced configuration of this nature.

[159] Mr. Venier’s evidence was that for the installation of the amour stones, he gave the Adilis the option (at some initial expense) of using non-shrink fill base for the stones to be placed on or near excavated soil, to prevent movement of the stones over time due to settlement. Mr. Venier stated that the Adilis chose not to do so, with the result that it would be necessary to incur a modest remedial cost at a later date to reposition the stones if settlement occurred.

[160] Commencing in late summer 2008, after the pre-existing garage was demolished to make way for the addition, an armour stone wall was installed at the Property that did not follow HoD’s original design. A third-party contractor was retained to supply and position the stones. By late August 2008 (as indicated in contemporaneous email from Ms. Adili), prior to the wall being installed, the Adilis advised Mr. Venier of their desire to minimize the encroachment of the lower stones of the wall into the walk-out patio area outside the basement-level doors. In order to do so, Mr. Venier’s evidence was that the Adilis instructed the installer to place the stones in a more vertical configuration, rather than in a terraced layout. The Adilis’ motivation for doing so was “so that we can minimize the encroachment on the view from below as we had discussed” (quoting the Adilis’ email to Mr. Venier dated September 7, 2008, in which Mr. Adili states that he had given those instructions to the installer).

[161] As indicated in Mr. Adili’s email to Mr. Venier on September 25, 2008, the possibility that the City would require the involvement of an engineer for a more vertical stone wall became a matter of discussion between the Adilis and Mr. Venier. According to Mr. Venier, he advised the Adilis that that the City might require an engineer’s certification but the Adilis opted to wait and see whether City inspectors raised the issue. Mr. Venier’s evidence was that the stone wall as constructed did not necessarily pose a risk of stone movement or wall failure for the portion of the wall resting on native soil, but the vertical configuration would have made it more difficult and expensive to reposition the stones after settlement.

[162] After HoD left the project in the spring of 2008, the Adilis consulted a landscape architect (Mr. Ciardullo of Oakridge Landscaping) with respect to completion of landscaping at the Property. Mr. Ciardullo expressed concern about the stability of the armour stone wall as constructed and recommended an engineer be retained to review the wall, referring the Adilis to Mr. Lancia. Mr. Lancia inspected the wall. He expressed the view that the wall was poorly constructed, consisting of irregularly-shaped boulders stacked on top of each other, with loose stones and rubble used to fit the boulders in place. As subsequently set out in his 2014 Building Condition Assessment expert report, he expressed the view that the wall was unstable since it was susceptible to movement from frost-heave or settlement. He also stated that in order to comply with the Building Code, the City would have required the wall as installed to be designed by an engineer. He therefore recommended removal and replacement of the stone wall. On cross examination, Mr. Lancia agreed that as a remedial solution, it would have been possible to use stone wedges and mortar to enhance the stones’ stability or to have the stones rearranged after chipping them into more uniform shapes.

[163] At the Adilis’ request, Mr. Lancia designed a concrete retaining wall to replace the armour stone wall that was in place when HoD left the construction site. The existing wall was subsequently removed, and Oakridge Landscaping installed a concrete wall (with stone veneer facing) in its place. The Adilis say that doing so was the most economical solution, since with the completion of the addition, there was no longer access to the east side of the house to allow the contractor to bring in the heavy machinery that would be required to build a replacement armour stone wall. The contractor tied the new retaining wall into the new foundation that HoD had installed. The invoices from Oakridge totaled over $387,000.

[164] Considering the evidence as a whole, I have concluded that the Adilis have not established that HoD should be held responsible for amounts the Adilis expended to remove and replace the stone wall that was in place when HoD left the construction site. I accept Mr. Venier’s evidence that the configuration of the stone wall as constructed accorded with the instructions that the Adilis provided directly to the third-party installer, consistent with contemporaneous email evidence. I agree with HoD that it should not be held responsible for the consequences of the Adilis’ decision to depart from the wall configuration HoD originally designed. I also accept Mr. Venier’s evidence (in preference to that of the Adilis) that the Adilis were aware that for the wall as originally designed, the stones were susceptible to settlement over time, requiring them to be repositioned at modest remedial cost to the extent settlement occurred. Based on Mr. Venier’s evidence, I find that the same was also true of the armour stone wall as constructed, except that repositioning after settlement would likely have been more expensive. In my view, the cost of doing so (if incurred) would have properly been the Adilis’ to bear as ongoing maintenance for the wall. As well, based on Mr. Venier’s evidence (in preference to Mr. Lancia’s), I also find that the stone wall as constructed did not pose a material risk of failure. In accepting Mr. Venier’s evidence in preference to that of the Adilis or Mr. Lancia, I took into account the factors considered previously with respect to the comparative reliability of the evidence of those parties.

[165] In these circumstances, I am not satisfied that it was necessary to remove and replace the stone wall that was in place when HoD left the construction site. Therefore, HoD should not be held responsible for the cost of doing so.

E. Quality of construction and finishes

[166] In the Adilis’ closing submissions, their counsel argued that HoD should be held financially responsible for construction deficiencies relating to the poor quality of HoD’s workmanship and their general lack of attention to detail. The examples cited include poor quality finishes, defects in windows and doors as installed (some cracked, out of square or plumb) and others that the Adils say were generally unsatisfactory and well below the standard of construction and finish for a custom home. To support that position, the Adilis rely on the expert evidence of Mr. Lancia, whom I accepted as qualified to provide opinion evidence with respect to the quality, workmanship and attention to detail of construction work performed. The Adilis’ counsel also referred to the photographs contained in Mr. Lancia’s report entitled “Quality Condition Assessment” as evidence of poor workmanship.

[167] As well, the Adilis’ counsel relied on the expert reports of Mr. Huinink, the quantity surveyor whom the Adilis retained to value the work HoD completed and the cost of correcting deficiencies. In Mr. Huinink’s first report (completed in 2010), he found the value of HoD’s work “assuming good quality and workmanship” to be $1,172,009. He also found that the cost of correcting deficiencies would render the work performed of little value. Taking into account deficiencies noted in his 2010 report and a subsequent 2014 report, Mr. Huinink found that the cost of correcting deficiencies would total $1,551,561, leaving the residual value of the work performed as -$379,552.

[168] As indicated further below, the evidence as a whole does not support the conclusion that HoD should be held financially accountable for the alleged deficiencies that the Adilis have identified (except to the limited extent indicated later in these Reasons). As previously noted, unknown to the court when Mr. Lancia’s quality assessment report was accepted as an exhibit, substantially all of that report (consisting of construction photographs with annotations and commentary) was entirely authored by the Adilis. In these circumstances, I have already found that Mr. Lancia’s report relating to workmanship quality has no value as expert evidence.

[169] In addition, with respect to the deficiency items identified in Mr. Huinink’s report, I have already found that HoD is not financially responsible for many of the items that would require significant sums of money to address, including major structural remediation, replacement of the retaining wall outside the basement walkout, and replacement of the back balcony. As well, when considering Mr. Huinink reports, I also took into account the evidence of Joseph Pendlebury, a quantity surveyor whom HoD retained to provide an expert report relating to the project. Mr. Pendlebury valued the work HoD performed in an amount similar to Mr. Huinink ($1,284,000 plus GST) but found the cost of addressing deficiencies to be only $31,388 (plus GST). I found Mr. Pendlebury’s evidence to be fair and balanced and accept it in preference to Mr. Huinink’s where their evidence conflicts.

[170] As an additional consideration, I have already found that HoD is not financially responsible for completion of work to the extent it was left unfinished at the time HoD left the project, except to the limited extent indicated later in these Reasons.

F. Extras

[171] As previously noted, there is no dispute that the Adilis were required to pay HoD for “extras” that HoD performed at the Adilis’ request for an additional amount not included in the contract price. In the Adilis’ schedule attached to Ms. Adili’s affidavit entitled “Breakdown of Construction Costs”, several of the listed items are described as “extras” that the Adilis agree they are responsible to pay for. Taking into account offsetting amounts for other items where the Adilis claim a credit, the net amount the Adilis say is due to HoD for extras would be $11,064.55 (for “extras agreed to on an incomplete basis”, according to the Adilis’ closing submissions). In his testimony, Mr. Adili referred to an updated version of that schedule, which indicates that the net amount due to HoD for extras (on an incomplete basis) would be $13,099.75.

[172] By way of contrast (while not necessarily strictly comparable due to apparent differences in methodology), HoD’s calculation of its claim for “extras”, with offsetting credits HoD is prepared to provide, is set out in Mr. Venier’s March 2010 spreadsheet. As indicated in that spreadsheet, HoD says that the net amount due to HoD for extras is $146,057.30. That amount was calculated based on HoD’s net claim of $237,495.30 for extras, offset by credits for work performed by the Adilis’ directly-retained contractors ($64,200) and incomplete items ($27,238).

[173] As Mr. Venier indicated in his testimony, HoD’s claim for extras includes amounts spent on the components of constructions set out in the draft CHC to the extent that the expended amounts exceeded the indicated allowance levels for those components. I have already concluded that the specific allowance levels set out in the CHC did not form part of the contract, but the parties’ agreement contemplated some reasonable limit on the extent to which expenditures on various construction components are included in the contract price. On that basis, expenditures on a construction component that exceed the allowance level stated in the draft CHC would not automatically be the Adilis’ responsibility as extras. At the same time, HoD would not automatically be required to pay the full amount expended on a construction component. The amount included in the contract would be limited to what would reasonably have been contemplated by the parties when they entered into the building contract, taking into account the required standard of construction and the other terms of the contract. The balance expended beyond such amount on a construction component would be the Adilis’ responsibility, as an “extra”.

[174] As previously noted, in the Adilis closing submissions, their counsel also characterizes the allowances in the CHC as an attempt to download costs from HoD to the Adilis that would otherwise be included in the stated contract price. As well, the Adilis refer to the disconnect between the amounts of those allowances as compared to the total value of the work performed for those construction components, as estimated by the quantity surveyors the parties retained. I have already found that the evidence does not support that characterization of the proposed allowances. I also rejected (as untimely and otherwise inappropriate) the Adilis’ request for a “walk-though” of Mr. Venier’s residence to assist in determining the allowances’ adequacy in light of the expected construction standard.

[175] In the Adilis’ closing submissions, their counsel also argues that work performed under the contract cannot be properly characterized as an extra if the work is necessary to comply with the Building Code. Given that Building Code compliance is mandatory, I do not quarrel with that statement as a general proposition, but I find counsel’s formulation unnecessarily categorical. When interpreting a contract, the key consideration is the intention of the parties when they entered into the contract. Depending on the circumstances, it may not be reasonable to expect a builder to proceed with an aspect of construction that proves unexpectedly difficult or expensive to perform due to some unforeseen circumstance (for example, the absence of a foundation or footings where they were reasonably expected to be). In those circumstances, one would expect the parties to reasonably determine whether that aspect of the construction should proceed as originally contemplated within the scope of the original contract price.

G. Conclusion

[176] To sum up, I have concluded that the Adilis have not established that HoD is liable to the Adilis for deficient or incomplete construction work, except to the limited extent indicated later in these Reasons as an offset against unpaid amounts the Adilis owe to HoD.

VIII. The City’s building permit review

[177] Is the City liable on the merits for negligence relating to the City’s building permit review, inspections and Building Code enforcement?

[178] The Adilis claim in negligence against the City for losses resulting from the City’s breach of its duty of care in its review of the building permit application, the inspections its personnel conducted, and its enforcement of the Building Code. The City denies liability on the merits, arguing that the Adilis failed to establish a breach of duty or any resulting loss.

[179] There is no dispute that the City owed a duty of care to the Adilis with respect to the construction that took place at the Adilis’ residence. That duty arose in the City’s operational (as opposed to policy) capacity with respect to the building permit and inspection process required under the City’s construction bylaw, including enforcement of the Building Code: see Kamloops v Nielsen, 1984 21 (SCC), [1984] 2 S.C.R. 2, at pp.12-13; Rothfield v. Manolakos, 1989 17 (SCC), [1989] 2 S.C.R. 1259, at p. 1266. The duty of care in these circumstances requires the municipality to show “reasonable care” in the exercise of its function, rather than some higher standard: see Rothfield, at pp. 1268-69.

[180] The standard of care applicable to City inspectors is described in further detail in Ingles v. Tutkaluk Construction Ltd., 2000 SCC 12, [2000] 1 S.C.R. 298, at para. 40, as follows:

[T]o avoid liability the city must show that its inspectors exercised the standard of care that would be expected of an ordinary, reasonable and prudent inspector in the same circumstances. The measure of what constitutes a reasonable inspection will vary depending on the facts of each case, including the likelihood of a known or foreseeable harm, the gravity of that harm, and the burden or cost which would be incurred to prevent the injury …. For example, a more thorough inspection may be required once an inspector is put on notice of the possibility that a construction project may be defective. In addition, a municipal inspector may be required to exercise greater care when the work being inspected is integral to the structure of the house and could result in serious harm if it is defective. While in some circumstances a more thorough inspection will be required to meet the standard of care, municipalities will not be held to a standard where they are required to act as insurers for the renovation work. The city was not required to discover every latent defect in the renovations at the appellant's home. It was, however, required to conduct a reasonable inspection in light of all of the circumstances …. [Citations omitted.]

[181] The Adilis argue that the City breached its duty of care to the Adilis in the processing of the building permit application, including the conduct of inspections required to ensure compliance with the Building Code. The evidence that the Adilis rely on to support their position includes the expert opinion evidence of Stephen Blaney, a consulting engineer with extensive experience relating to residential construction and Building Code compliance. In his expert report and oral evidence, Mr. Blaney expressed the opinion that the City issued the building permit based on drawings and documents that were inadequate and lacked sufficient information to confirm compliance with the Building Code and the City’s building bylaw. Mr. Blaney also expressed the view that the City building inspections were insufficient to ensure that HoD’s construction work was completed in accordance with the building permit drawings and the Building Code, including important structural work adjacent to existing building foundations, foundation walls and the rear balcony roof deck. According to Mr. Blaney, the Adilis faced the cost of repairing the deficiencies left by HoD’s work, allowed by the City’s inadequate building permit application review and its deficient building inspection.

[182] In support of the City’s position that it did not breach its duty of care, the City relies on the evidence of its Building Department personnel as well as the expert evidence of David Finbow, a former chief building official for two Ontario municipalities. Mr. Finbow expressed the opinion that the permit review process in this case was adequate and consistent with practices he observed in his long career as a chief building official, and that the building permit was issued in accordance with the Building Code and other applicable requirements. He also expressed the view that the standard of completeness and detail that Mr. Blaney suggests for building permit applications does not reflect the requirements or practices of municipal building departments and would result in an unattainable permitting system. He also opined that the City’s building inspection staff generally conducted their inspections in a reasonable manner in this case. Among other things, Mr. Finbow also refuted the suggestion that there were design deficiencies relating to structural and other issues referred to in Mr. Blaney’s report. Mr. Finbow also notes the absence of apparent stress, cracking or differential settlement that would indicate structural issues.

[183] Considering the evidence as a whole, I have concluded the Adilis have not established that the City breached its duty of care with respect to its building permit application review, its building inspection, or its enforcement of the Building Code.

[184] As indicated in Ingles and other case law, the standard of care relating to building officials’ review and inspection is reasonable care, and not a higher standard that would require them to act as insurers. Consistent with Mr. Finbow’s evidence, I am satisfied that giving effect to Mr. Blaney’s conclusions would hold the City to a standard of care that is not reasonable and therefore beyond what is required for the City to meet its legal duty.

[185] In general, I found Mr. Finbow’s evidence to be more persuasive than that of Mr. Blaney, with Mr. Finbow’s evidence providing a more realistic assessment of the requirements of a reasonable plan examiner or building inspector. I also note that in Mr. Blaney’s oral evidence, he indicated the extent of his reliance on Mr. Lancia’s evidence with respect to the existence of Building Code deficiencies and the need to remediate them. As previously noted, I found Mr. Lancia’s evidence on these issues to be of limited assistance, calling into question the reliability of Mr. Blaney’s evidence to the extent that he relied on Mr. Lancia’s conclusions.

[186] As well, consistent with my previous findings relating to alleged structural and non-structural construction deficiencies, I also find that the Adilis have not established that they suffered any resulting loss with respect to remediation of alleged deficiencies. As the City’s counsel noted in her closing submissions, there is no such thing as “negligence in the air”. In order to succeed in their claim against the City, the Adilis must prove more than a breach of duty. They must also prove damages resulting from the breach for which the City is responsible. They have not done so.

[187] Accordingly, the Adilis’ claim against the City is dismissed.

IX. Limitation period for claim against the City

[188] Is the Adilis’ claim against the City statute barred?

[189] Given my conclusions above about the merits of the Adilis’ claim against the City, it may not be considered necessary to determine whether their claim is statute barred. I will do so nonetheless in case a different view on the merits ultimately prevails.

A. Legal principles – limitation period

[190] The basic limitation period for Ontario actions is set out in ss. 4 and 5 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.

[191] Under s. 4, a proceeding shall not be commenced in respect of a claim more than two years after the claim was discovered. Under s. 5(1), a claim is discovered on the earlier of (a) the day on which the claimant first knew of an actionable claim for a loss arising from the act or omission of the person against whom the claim is made, and (b) the day a reasonable person in the claimant’s circumstances ought to have known of the matters giving rise to the claim. Under s. 5(2), a claimant shall be presumed to have known of the matters giving rise to the claim on the day that the act or omission took place unless the contrary is proved.

[192] The complete text of ss. 4 and 5 is set out below.

4 Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

5 (1) 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).

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.

[193] Subject to the presumption in s. 5(2), a claim is discovered under s. 5(1)(a) based on the claimant’s actual knowledge of the matters set out in that clause. By way of contrast, a claim is discovered under the objective test in s. 5(1)(b) based on when a reasonable person in the claimant’s position “ought to have known” of the matters giving rise to the claim, whether or not the claimant actually turned his or her mind to those matters at that time. A claim that meets the objective test in s. 5(1)(b) is often referred to as being “discoverable”.

[194] When determining whether a claim was discovered under the subjective test in s. 5(1)(a) or the objective test in s. 5(1)(b), the case law makes it clear that it is “reasonable discoverability” that triggers a limitation period, not “the mere possibility of discovery”: see Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA 16, 406 D.L.R. (4th) 252, at para. 35. However, certainty of a potential defendant’s responsibility is not a requirement. It is sufficient to have prima facie grounds to infer that the acts or omissions were caused by that party: see Kowal v. Shyiak, 2012 ONCA 512, 296 O.A.C. 352, at para. 18.

[195] While due diligence is not referred to in the Limitations Act, it is a “principle that underlies and informs limitation periods, through s. 5(1)(b)”: see Fennell v. Deol, 2016 ONCA 249, 97 M.V.R (6th) 1, at para. 23. As noted in Longo v. MacLaren Art Centre Inc., 2014 ONCA 526, 323 O.A.C. 246, at para. 42 (cited in Fennell, at para. 23):

A plaintiff is required to act with due diligence in determining if he has a claim. A limitation period will not be tolled while a plaintiff sits idle and takes no steps to investigate the matters referred to in s. 5(1)(a).

[196] When considering whether the objective test in s. 5(1)(b) is met, it is relevant to consider what steps the claimants ought to have taken by the exercise of “reasonable or due diligence” to discover the matters giving rise to the claim against the other party: see Fennell, at para. 24; Pepper v. Zellers Inc. (c.o.b. Zellers Pharmacy) (2006), 2006 42355 (ON CA), 83 O.R. (3d) 648 (C.A.), at para. 16. For this purpose, the claimants are required to show that they took reasonable steps to discover the potential claim or to explain why no steps were taken: see Pepper, at paras. 20-22.

[197] In Fennell, the Court of Appeal also considered the principle of due diligence as it relates to the presumption in s. 5(2). As the court noted (at para. 26), the presumption that arises under s. 5(2) is a presumption of actual knowledge of the matters giving rise to the claim as set out in s. 5(1)(a). There is no onus on the claimants to “show due diligence to rebut the presumption in s. 5(2)”. To overcome the presumption, the claimants must only prove that they did not actually know of the matters giving rise to the claim as set out in s. 5(1)(a). Therefore, the failure to exercise due diligence is not in itself a reason to dismiss a claim as statute barred: see Fennell, at paras. 18 and 24.

B. Position of the parties

[198] According to Ms. Adili’s evidence, the City was put on notice of the Adilis’ intention to add the City as a party in June 2015. The Adilis took formal steps to do so by notices of motion dated September 16, 2015, in which the Adilis sought leave to add the City as a defendant in the construction deficiency actions. The Adilis were granted leave by order dated February 26, 2016. Applying the two-year limitation period in s. 4 of the Limitations Act and working backwards from the date the Adilis formally sought to amend their statements of claim, their claim against the City would be statute barred if the Adilis “discovered” the claim before September 16, 2013: see Mancinelli v. Royal Bank of Canada, 2018 ONCA 544, 24 C.P.C. (8th) 1, at paras. 15-16. Measuring instead from the date that Ms. Adili says the City had notice of the Adilis’ intention to add the City as a defendant, their claim against the City would be statute barred if the they discovered the claim before June 2013.

[199] The City argues that the Adilis’ claim was statute barred. The City says that by the time the Adilis commenced the construction deficiency action against HoD and Mr. Venier in March 2011, the Adilis had actual knowledge sufficient to base an actionable claim against the City for construction deficiencies under the Building Code that required remediation. That knowledge was sufficient to determine that a court action against the City would be the appropriate means to remedy the loss. Therefore, their claim against the City was precluded under s. 5(1)(a). Among other things, the City refers to various claims against HoD and Mr. Venier set out in the Statement of Claim alleging construction deficiencies, including failure to construct several parts of the building in accordance with the minimum requirements of the Building Code.

[200] In addition, the City says that regardless of their actual knowledge, the Adilis reasonably ought to have known they had an actionable claim against the City by October 2010, when they received reports from Mr. Huinink and Sharp Carpentry Inc. (as well as advice from Mr. Lancia) raising structural and Building Code compliance issues. Therefore, their claim against the City was also precluded under the objective test in s. 5(1)(b).

[201] The City also says that in determining when the Adilis’ claim against the City was discovered under either s. 5(1)(a) or s. 5(1)(b), it is relevant to take into account the Adilis’ failure to take additional steps to apprise themselves of the material facts relating to their claim. In particular, the Adilis did not ask Mr. Lancia to perform a comprehensive structural engineering investigation until 2014, even though Mr. Lancia (as well as Mr. Huinink and Sharp Carpentry) had raised potential structural and Building Code issues in 2010.

[202] The Adilis dispute that their claim against the City was statute barred. They say that they were not aware of their claim against the City until after receiving over 2,300 construction photographs from HoD as part of litigation document disclosure in June 2014. Mr. Lancia used those photographs to prepare his report entitled Building Condition Assessment (dated October 21, 2014) with respect to the structural deficiencies and concerns. The Adilis say that the limitation period for their claim against the City did not start to run until they became aware of those deficiencies and concerns after receiving Mr. Lancia’s report. They say that prior to receiving the constructional photographs and Mr. Lancia’s report, the information they actually had (or could reasonably have discovered) raised the possibility of a claim but did not rise to the level of knowledge of material facts to support their claim against the City. In these circumstances, the Adilis say that they moved to add the City as a defendant well within the limitation period.

C. Analysis and conclusion

[203] As previously noted, the Adilis claim against the City was statute barred if the Adilis discovered their claim prior to either June or September 2013. The City’s position is that (i) the Adilis actually knew they had a claim against the City by March 2011 (when they started the construction deficiency action against HoD), and (ii) the Adilis ought reasonably to have known about the claim by October 2010 (when Mr. Lancia, Mr. Huinink and Sharp Carpentry first raised potential structural and Building Code compliance issues). If the City is correct, the Adilis’ action against the City is statute barred.

[204] Based on the trial evidence, I am satisfied that the Adilis did not discover their claim against the City before June 2014, when their counsel received the construction photographs from HoD’s counsel. Therefore, the City was added as a defendant within the limitation period.

[205] By fall 2010, the Adilis’ actual knowledge of information about potential structural and Building Code compliance issues may well have been sufficient to raise the suspicion or possibility of the City’s liability. However, I agree with the Adilis that before receiving the HoD construction photographs in June 2014, the information of which they had actual knowledge did not rise to the level of a prima facie case that the City was in breach of its duty of care.

[206] As the evidence of Mr. Lancia and Mr. Huinink indicated, the concerns they raised with the Adilis prior to receipt of the construction photographs arose in large measure from visual observation of the various areas of finished (or semi-finished) construction after HoD had left the construction site. Once Mr. Lancia reviewed and analyzed the construction photographs in 2014, he advised the Adilis that the photographs raised serious structural and Building Code compliance issues, many of which would not have been evident once construction moved forward toward completion. Significantly, the areas of concern included excavation occurring within the angle of repose of the footings of the existing house without underpinning the foundation, with potentially catastrophic consequences, according to Mr. Lancia. In these circumstances, the Adilis justifiably looked beyond HoD and Mr. Venier to consider the City as a potential additional defendant by reason of inadequate building permit review and inspection and failure enforce the Building Code. On the evidence, the Adilis moved to add the City as a defendant well within the limitation period.

[207] As previously noted, the City also argued that regardless of their actual knowledge, the Adilis reasonably ought to have known they had an actionable claim against the City by fall 2010, when they received reports from Mr. Huinink and Sharp Carpentry Inc. (as well as advice from Mr. Lancia) raising structural and Building Code compliance issues. I have already concluded that the information the Adilis had at that time did not constitute actual knowledge (as opposed to a suspicion or possibility) sufficient to support a claim against the City. Given that finding, I see no basis for concluding that they ought to have known of their claim against the City at that time, as set out in s. 5(1)(b). However, that leaves open the question of whether the Adilis ought reasonably to have known of their claim against the City at some other time prior to June (or September) 2013. If that was the case, the Adilis’ claim against the City would be statute barred under s. 5(1)(b).

[208] As indicated below, I have concluded that the evidence does not support the conclusion that the Adilis ought reasonably to have known of their claim against the City at some time prior to receipt of the HoD construction photographs in June 2014.

[209] In determining this issue, it is relevant to consider the City’s submissions relating to the Adilis’ alleged failure to exercise reasonable diligence by taking additional steps to acquire further information relating to their claim. Consistent with Fennell, at para. 24, consideration of additional steps they took (or failed to take) is relevant when considering the question of when the Adilis first ought to have known of the matters relating to their claim against the City, as set out in s. 5(1)(b). However, failure to exercise due diligence is not “a separate basis for determining whether a limitation period has expired”: see Fennell, at para. 24.

[210] The City argues that the Adilis failed to take reasonable steps to acquire additional information about their claim that would have led them to conclude that they had a viable action against the City. In particular, the City notes that the Adilis did not ask Mr. Lancia to perform a comprehensive structural engineering investigation until 2014, even though Mr. Lancia (as well as Mr. Huinink and Sharp Carpentry) had raised potential structural and Building Code issues in 2010. The City also notes that even after the Adilis retained Mr. Lancia to conduct a comprehensive report, Mr. Lancia’s mandate did not include “non-destructive testing or opening and exposing structural systems” (to quote from Mr. Lancia’s 2014 report), and that no destructive testing in fact occurred until the summer of 2018, on the eve of trial.

[211] I do not agree, however, that the evidence supports the conclusion that the Adilis failed to exercise reasonable diligence. By October 2010, they received a report from Sharp Carpentry which (although not relied on at trial) provided details of perceived construction deficiencies. In the same month, they received Mr. Huinink’s report estimating costs relating to rectification of construction deficiencies. Also in 2010, they retained Mr. Lancia, initially in relation to concerns raised by their landscape consultant about the retaining wall behind the house. Mr. Lancia provided ongoing advice on engineering issues (on an as-needed basis) in the period from 2010 to 2014, while the Adilis’ litigation with HoD was ongoing. With the benefit of hindsight, it may be tempting to say that something more should have been done. However, I do not consider it fair to say that the Adilis were in the position of “a plaintiff [who] sits idle” without taking reasonable steps to investigation their claim: see Longo, at para. 42. The evidence supports the view that the steps they took (as outlined above) were reasonable in the circumstances.

[212] For the reasons above, I have concluded that the Adilis commenced their claim against the City within the limitation period. Therefore, had I found in the Adilis’ favour on the merits, the City would not have avoided liability based on a limitation defence.

X. Amount the Adilis owes HoD for construction work

[213] What amount is due to HoD from the Adilis for HoD’s construction work?

[214] As already indicated, I have found that the Adilis breached the building contract with HoD by failing to pay amounts properly due to HoD, consisting of the unpaid balance of the contract price, adjusted to take into account the following:

a. Additional amounts due to HoD for work performed as “extras”; and

b. Credits due to the Adilis for (i) areas of construction the parties agreed to exclude from the contract; and (ii) the cost of completing unfinished work and rectifying deficiencies for which HoD is responsible.

[215] In order to calculate the amount HoD says is due from the Adilis, Mr. Venier referred to the spreadsheet he provided to the Adilis in March 2010. That spreadsheet provided the basis for Mr. Venier’s calculation of the amount of the construction lien that HoD registered on the Property’s title on April 21, 2010 in the amount of $616,379.12. The same amount was claimed as owing to HoD in the Statement of Claim in the construction lien action and the counterclaims in the construction deficiency actions. In his closing submissions, HoD’s counsel indicated that the amount of the construction lien now being claimed is $578,058.52, or alternatively, $558,095.52, as explained below.

[216] The March 2010 spreadsheet indicates that the amount HoD was then seeking from the Adilis was $558,058.52, calculated as follows:

Contract amount $ 993,689.00

Extras 237,495.30

Completed by Adilis’ contractors (64,200.00)[^7] $ 1,166,984.30

GST (5%) 58,349.22

Payments to HoD from the Adilis (620,000.00)

Incomplete items (27,238.00)

Deficiencies allowance (20,000.00)

Total amount due $ 558,058.52

[217] HoD calculated the $616,379.12 lien amount registered on title by taking the total amount set out on the March 2010 spreadsheet ($558,095.52), adding back the amounts HoD was willing to credit the Adilis for incomplete work ($27,238) and deficiencies ($20,000), and then adding an additional amount for interest from December 2009 ($11,045.60).

[218] HoD now agrees that the lien amount should not have included an amount for interest (see Construction Lien Act, s. 14(2)) or incomplete items. However, HoD submits that the deficiencies allowance should not be treated as excluded from the lien, since HoD would have corrected the deficiencies at no cost to the Adilis using its own labour (or its subcontractors) had the relationship with the Adilis not broken down. On that basis, the amount of the lien would be $578,058.52, which is the amount HoD now claims from the Adilis. In the alternative, HoD claims $558,095.52, after deducting the deficiencies allowance.

[219] As indicated further below, I have concluded that the amount due to HoD from the Adilis is $558,095.52, being the valid amount of the construction lien. In arriving at that amount, I accept as correct HoD’s calculation of the payments that HoD received from the Adilis for construction work (including extras) totaling $620,000. There is no dispute that HoD received cheques totaling that amount from the Adilis from late 2008 until September 2009.

[220] The Adilis say that for the purposes of calculating the amount due to HoD, the total amount the Adilis paid should be $727,482.72, not $620,000. The additional $107,482.72 consists of (a) $90,482.72 the Adilis paid in 2008 for two invoices relating to the amour stone retaining wall, and (b) $17,000 the Adilis paid Mr. Venier in cash for granite in late 2009.

[221] I do not agree with the Adilis’ calculation. I have already found that the invoices relating to the amour stone retaining wall were not included in the contract price. As well, I accept Mr. Venier’s evidence that he acted as conduit to the supplier for the cash purchase of granite that was beyond the scope of what was contemplated by the construction standard that applied to the construction contract. Therefore, the $17,000 cash payment would not be credited to the Adilis for the purpose of this calculation.

[222] In addition to the lien amount, HoD also claims interest at the rate of six per cent per annum from April 1, 2010 to the date of judgment. HoD says that the Adilis’ refusal to pay what they owed left HoD with no choice but to borrow money at that rate from a private lender in order to remain operational. For the reasons below, I am instead awarding prejudgment and postjudgment interest to HoD at the statutory rates prescribed under ss. 128 and 129 the Courts of Justice Act, R.S.O. 1990, c. C.43.

[223] Under ss. 128 and 129, a person to whom money is payable under a court order is entitled to claim prejudgment and postjudgment interest at prescribed rates, with certain exceptions. One of those exceptions (set out in ss. 128(4)(g) and 129(5)) is “where interest is payable by a right other than under this section.” There is no dispute that the oral building contract between the parties did not include any provision for payment of interest on unpaid amounts. However, as noted in the Adilis’ closing submissions, interest may be claimed as a component of damages for breach of contract if there is a basis for doing so. HoD made a claim for interest at the rate of six per cent per annum in its counterclaims in the construction deficiency actions. HoD would be entitled to recover that amount as part of its damages for breach of contract if it established that it incurred the interest as a consequence of the contract breach.

[224] In support of HoD’s interest claim, Mr. Venier testified that after leaving the Adilis’ construction project in 2010, he required funds for a significant investment in Toronto that was close to fruition. Without the funds expected from the Adilis, he instead arranged a $500,000 loan from the spouse of his then counsel. As set out in the document brief Mr. Venier submitted in evidence, the loan was secured against property owned by a related company. The loan required monthly interest-only payments at the rate of 7.5 per cent per annum, with the principal being repayable in one year. Mr. Venier testified that the loan remained outstanding after that time, stating that “I think I still have part of that loan on the books today.” The document brief included cancelled cheques indicating payments to the lender continuing until May 2018. He also testified that the interest rate came down over time, and he believed the rate he was being charged in January 2020 was five per cent per annum. When asked by his counsel whether a loan from a bank or other traditional lender would have been available, Mr. Venier stated that he could have received a bank loan, but he thought that the payment dispute with the Adilis was only temporary, which would allow repayment of the loan once matters with the Adilis were resolved.

[225] In response to HoD’s interest claim, Mr. Adili provided evidence with respect to the interest rates the Adilis were charged for construction lines of credit during the relevant periods, in order to support the view that an award of interest to HoD at the rate of six per cent would be excessive. Mr. Adili testified that the interest rates that they were paying on their lines of credit during that period were much lower than six per cent. HoD’s counsel challenged Mr. Adili on cross-examination, noting that the mortgage documents in place for the lines of credit indicated a rate of prime plus five per cent in one case, and prime plus ten per cent in another. Mr. Adili denied that they had ever paid those amounts for interest on bank loans and provided other banking documentation to support that view.

[226] I found the evidence as to the interest rates the Adilis were paying to be of no real assistance on the issue of what interest rate HoD should receive on unpaid amounts under the building contract. Arguably, the interest rates they paid provided some general indication of prevailing rates during the relevant period. However, the differing circumstances applicable to HoD and the Adilis (for example: business loan versus personal loan; the parties’ relative creditworthiness and borrowing history, of which there was no evidence) significantly limit the usefulness of that evidence relating to HoD’s interest claim.

[227] Based on the evidence before me, I have concluded that HoD has not established its entitlement to interest at the rate of six per cent per annum or any other amount in excess of the statutory rates for prejudgment and postjudgment interest. In that regard, I found the documentary evidence that Mr. Venier provided to be insufficient to establish that HoD incurred additional interest costs at any particular level in excess of the statutory rates. Among other things, HoD was not a party to the loan documentation Mr. Venier provided to support HoD’s interest claim, without any real explanation as to why it was relevant for that purpose. Mr. Venier testified in chief that he believed he could have obtained a bank loan, rather than borrowing from an alternative source. There was no evidence as to what kind of terms the borrower would have been able to obtain had the loan been from a bank or other conventional source. If less expensive financing was available from another source, there was no explanation of why the borrower continued to use to same lender after the original term of the loan.

[228] In all the circumstances, the evidence does not support HoD’s interest claim beyond the default levels prescribed in the Court of Justice Act. The judgment will therefore award prejudgment and postjudgment interest to HoD at the statutory rates prescribed under ss. 128 and 129 the Courts of Justice Act, with pre-judgment interest commencing April 21, 2010, the date HoD filed its construction lien against the Property.

XI. Amount HoD owes the Adilis for deficient or incomplete work

[229] What amount (if any) is due to the Adilis from HoD for deficient or incomplete work (or on other bases)?

[230] As set out in their closing submissions, the Adilis seek the following from HoD:

a. Damages totaling $1,454,304.11 for amounts spent or to be spent to complete the construction work and rectify deficiencies;

b. A credit of $258,687.71 against the contract price for amounts they paid to suppliers for material and services they say were part of the contract; and

c. Punitive, exemplary or aggravated damages of $50,000, and a further $50,000 for mental distress.

A. Incomplete or deficient work

[231] The Adilis seek $1,454,304.11 from HoD for amounts spent or to be spent to complete the construction work and rectify deficiencies.

[232] In support of their claim, the Adilis’ counsel referred to the trial decision in Wood v. Hungerford (Corporation of Township of) (2004), 3 M.P.L.R. (4th) 38 (Ont. S.C.), varied 24 M.P.L.R. (4th) 45 (Ont. C.A.). In that case, a foundation wall of a residential building collapsed as a result of inadequate footing design. The building was deemed uninhabitable by the municipality. The homeowner successfully sued her real estate agent and the municipality. The trial judge assessed damages on the basis that the homeowner should be restored to the position she would have been in but for the defendants’ breach. Applying that principle, the trial judge found that the homeowner was entitled to recover the property’s diminution in value resulting from the undisclosed or undiscovered defects, plus any foreseeable consequential damages: see Wood (S.C. reasons), at paras. 57-59. On appeal, the Court of Appeal found that the trial judge correctly approached the measure of damages based on the diminution in the property’s value but varied the damages calculation, finding that the trial judge’s erred in declining to use the property’s subsequent selling price as an indicator of its market value: see Wood (C.A. reasons), at paras. 1-3.

[233] Relying on Wood, the Adilis’ counsel argued the Adilis were entitled to claim damages based on the amounts required to put the Property in the condition they contracted for but they could also have sought to recover the Property’s diminution in value as a result of undisclosed and undiscovered defects. According to the Adilis’ counsel, there was little doubt that the Property’s recoverable market value was substantially below what it otherwise would have been, given the “stigma” arising from the construction dispute and ensuing litigation.

[234] In fact, the Adilis’ damages calculation (as set out in their closing submissions) did not include any amount for diminution in the property’s value as result of alleged construction defects. Therefore, their submissions on this subject are academic. In any case, the Adilis would have difficulty seeking to recover for diminution in value since there is no evidence before the court that would allow calculation of damages on that basis.

[235] As well, while there is no dispute about the principles relating to the determination of damages set out in Wood, that case may be considered of little assistance, given the notable differences between the factual context in Wood and the facts before me. While structural deficiencies were alleged in both cases, there was no issue in Wood on the evidence about the serious nature of the defects and their consequences (being actual structural failure). I have already found that the evidence in this case has not established serious structural deficiencies or resulting damages.

[236] The following chart sets out the Adilis’ calculation (derived from their closing submissions) of their claim for damages for amounts spent or to be spent to complete the construction work and rectify deficiencies.

Spent to correct Building Code deficiencies

Retaining wall (Oakridge Landscaping) $ 387,058.73

Other remediation 55,660.52 $ 442,719.25

Spent to remedy other deficiencies/incomplete work 278,603.80

Building Code deficiencies to be corrected 732,981.06

Total due to Adilis $ 1,454,304.11

[237] By way of explanation, the Adilis say they spent $442,719.25 to rectify Building Code deficiencies, based on the professional advice they received from their engineering experts (notably Mr. Lancia). The most significant portion of that amount was $387,058.73 paid to Oakridge Landscaping to remove the amour stone wall on the east aside of the house and replace it with a concrete retaining wall. The Adilis also claim a further $278,603.80 for amounts expended to rectify other deficiencies and to complete unfinished work. As well, the Adilis claim an additional $732,981.06 for future expenditure to rectify Building Code deficiencies, based on expert engineering advice as well as Mr. Huinink’s cost estimates.

[238] Based on the evidence the Adilis provided, I am satisfied that the Adilis paid the suppliers for their services in the amounts the Adilis indicated. However, except as indicated below, I am not satisfied that the amounts incurred or to be incurred should be credited against amounts that I have found are due to HoD from the Adilis.

[239] Of the $442,719.25 spent to correct alleged Building Code deficiencies, the Adilis claimed $387,058.73 with respect to Oakridge Landscaping’s removal of the amour stone wall behind the house and its replacement with a concrete wall with stone veneer. As indicated previously, I am not satisfied that it was necessary to remove and replace the amour stone wall. Therefore, HoD should not be responsible for the cost of doing so.

[240] The remaining balance of the Adilis’ claim for expenditures they made to correct Building Code deficiencies is $55,660.52. In their closing submissions, the Adilis did not itemize the expenditures that they say fall into that category or specifically differentiate those expenditures from amounts that fall within the $278,603.80 claimed to remedy other deficiencies or complete unfinished work. Those expenditures do not include future amounts that the Adilis say would be necessary to remedy major structural deficiencies, which would be included in the $732,981.06 that the Adilis are claiming in the category of “Building Code deficiencies to be corrected”.

[241] As previously indicated, HoD disputes that the Adilis have established HoD’s responsibility for any amounts expended or to be expended by the Adilis, other than $27,238 for incomplete items (for which HoD has provided a credit against the amount due to HoD). As set out in Mr. Venier’s March 2010 spreadsheet, HoD was also willing at that time to provide an additional credit of $20,000 as an allowance for deficiencies. However, HoD has withdrawn its offer of that $20,000 credit on the basis that HoD would have corrected deficiencies at no cost to the Adilis had the relationship not broken down.

[242] Considering the evidence as a whole, I have concluded that the Adilis have not established that they have suffered any loss for which HoD is responsible, other than the amounts that HoD offered as credits to the Adilis in March 2010 for incomplete items ($27,238) and deficiencies ($20,000). In reaching that conclusion, the considerations I took into account included the following:

a. That conclusion is consistent with Mr. Venier’s evidence (supported by Mr. Toth’s evidence), which I accept in preference to the evidence of the Adilis where they conflict, for the reasons previously indicated.

b. That conclusion is consistent with the opinion evidence of Jeffrey Price, the engineering expert HoD retained, in which he identified only a small number of deficiencies (out of over 200 that Mr. Lancia identified) that Mr. Price described as isolated and not detracting form the normal use or occupancy of the house. He also indicated that most of the deficient items could be repaired with minimal expense. The alleged deficiencies that Mr. Price addressed included major structural concerns that I have previously determined to be unfounded. As I have already indicated, I accept Mr. Price’s evidence in preference to that of Mr. Lancia where their evidence conflicts.

c. To the extent that alleged deficiencies and incomplete items related to allegations of poor workmanship (as opposed deficiencies of a more serious nature, including structural and Building Code concerns), I have already indicated that I did not find the evidence provided in support of those allegations to be persuasive.

d. HoD’s opportunity to remedy incomplete and deficient items was limited as a result of the breakdown in HoD’s relationship with the Adilis arising from their payment dispute. As of May 12, 2010, the Adilis in fact formally excluded HoD from the construction site. Those considerations support the conclusion that HoD should have no more than limited exposure for incomplete and deficient items.

e. With respect to deficient items in particular, I accept Mr. Venier’s evidence that HoD workers or contractors would have corrected remaining deficiencies at no charge to the Adilis if HoD’s relationship with the Adilis had not broken down, which again favours a finding that HoD should have no significant financial responsibility for remaining deficiencies. Contrary to HoD’s current position, at the time Mr. Venier provided his March 2010 spreadsheet to the Adilis, HoD was willing to provide $20,000 as an allowance for deficient items, which I consider to be an implicit acknowledgement of financial exposure for deficiencies to that extent. In all the circumstances, I consider it appropriate to provide a credit in that amount to the Adilis, consistent with HoD’s prior position.

[243] Accordingly, I find that the Adilis are entitled to a credit totalling $47,238 against the amount otherwise owing to HoD. That credit has already been taken into account in calculating the $558,095.52 amount I have found to be due to HoD from the Adilis.

B. Materials/services included in contract

[244] As set out in their closing submissions, the Adilis also claim a credit of $258,687.71 against the contract price for amounts they paid to suppliers for material and services they say were part of the contract. For the reasons that follow, I have concluded that the Adilis are not entitled to any credit for those amounts.

[245] The following chart provides a breakdown of the amounts that the Adilis are claiming as credits against the contract price. The individual items in first column and the “Claimed (Adilis)” figures in the second column are derived from Mr. Adili’s schedule provided during his reply testimony (Exhibit MM). The “Provided (HoD)” figures in the second column are derived from Mr. Venier’s March 2010 spreadsheet.[^8]

Claimed (Adilis) Provided (HoD)

HVAC (Hamco) $ 82,134.15 $ 11,000.00

Electrical (Fidani) 9,500.00 15,300.00

Roofing 59,247.61 59,247.61

Garage doors 9,662.74 4,400.00

Plumbing fixtures 32,691.46 13,000.00

Fireplaces 24,154.80 12,600.00

Closet shelving 17,667.30

Vanities 10,636.86

Other 4,728.71

Unspecified balance 8,594.08[^9]

Total credits claimed $258,867.71

(i) HVAC, electrical and roofing

[246] The credits of $258,867.71 that the Adilis claim include a total of $141,381.76 for materials and services relating to HVAC ($82,134.15), electrical ($9,500) and roofing ($59,247.61). Given the findings I have already made, the Adilis are not entitled to an additional credit for those amounts.

[247] I have already found that HVAC and electrical were removed from the contract by mutual consent. As set out in Mr. Venier’s March 2010 spreadsheet, HoD provided credits to the Adilis for HVAC ($11,000) and electrical ($15,300, consisting of $3,000 for the existing house and $12,300 for the addition). He also provided credits totaling $59,247.61 relating to roofing. As set out in the spreadsheet, those amounts have already been credited to the Adilis in the calculation of the $558,095.52 amount that HoD claimed in the spreadsheet as due from the Adilis.

[248] With respect to HoD’s credit of $11,000 for HVAC work, I have previously found the Adilis were entitled to a credit in that amount, not the higher amount that the Adilis claim. In the case of electrical work, the $15,300 credit HoD provides exceeds the $9,500 amount that the Adilis say they are seeking. Therefore, there can be no issue about the sufficiency of HoD’s proposed credit for electrical work. As well, there appears to be no dispute about the $59,247.61 roofing credit.

(ii) Garage doors

[249] One hotly contested area related to the garage doors. That item was relatively insignificant in monetary terms. I found the controversy surrounding it a disproportionate distraction in the context of an already difficult and protracted matter.

[250] The main vehicle doors for the garage opened on the west (front) side. Although not part of the original design, an additional vehicle door and a person door were added on the south side of the garage at the Adilis’ request. The Adilis sourced all the garage doors themselves at a cost of $9,662.74. In Mr. Venier’s March 2010 spreadsheet, he provided a credit of $4,400 for this item, corresponding to the garage door allowance set out in the draft CHC.

[251] HoD alleges that the Adilis added the additional vehicle door after construction started in order to bolster their position in unrelated litigation with their southern neighbours over a contested right-of-way. The Adilis strongly dispute that allegation but concede that the added vehicle and person doors were extras. They nonetheless claim entitlement to additional credit for this item beyond that which HoD provided, based in part on other savings they say are attributable to their requested change in design