Kalogon Spar Ltd. v. Papageorge et al., 2020 ONSC 710
NEWMARKET COURT FILE NO.: CV-12-109855
DATE: 20200131
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
KALOGON SPAR LTD. Plaintiff
– and –
STANLEY PAPAGEORGE, ALEXANDRA PAPAGEORGE and BANK OF MONTREAL Defendants
J. Frustaglio and A. Pilieci, for the Plaintiff
N. Wilson, for the Defendants
AND BETWEEN:
NEWMARKET COURT FILE NO. CV-13-116054
STANLEY PAPAGEORGE, 982539 ONTARIO LTD. and SABL. CORP. Plaintiffs
-and-
DINO COLIVIRAS, ALSO KNOWN AS DINO KOLIVIRAS AND GUS COLIVRIAS, MOURGO INVESTMENTS INC. and KALOGON SPAR LTD. Defendants
N. Wilson, for the Plaintiffs
J. Frustaglio and A. Pilieci, for the Defendants
HEARD: November 20-23, 26, 27, 29 and 30, December 3-6, 2018, May 13-17, 2019
REASONS FOR JUDGMENT
HEALEY J.:
Overview
[1] The primary subject of this litigation is a property located at 3 Oakbank Road in Thornhill, Ontario. The main litigants are Dino Coliviras (“Dino”) and Stanley Papageorge (“Stan”). Stan and Dino met in 2010 and soon became “like brothers”.
[2] Each has sued the other for money allegedly owed by the other arising from the renovation of 3 Oakbank. Not including interest, neither of their claims exceed $436,000.
[3] Dino owns and operates Kalogon Spar Ltd. (“Kalogon”) and Mourgo Investments Inc. (the “Coliviras parties”). Kalogon’s primary business is building luxury homes and commercial developments. The Coliviras parties are also involved in commercial leasing.
[4] Stan is the owner of several Tim Hortons franchises and Cold Stone Creamery stores. Alexandra Papageorge is Stan’s spouse. Stan is also the principal of 982539 Ontario Ltd. and Sabl. Corp. (collectively the “Papageorge parties”).
[5] Stan and Alexandra Papageorge became the registered owners of 3 Oakbank when they purchased it on July 15, 2011. It is undisputed that Kalogon performed work at the 3 Oakbank property after its purchase. The nature of the parties’ agreement about 3 Oakbank is in dispute.
[6] It is also undisputed that the Coliviras parties were the recipients of three loans from the Papageorge parties. What is in dispute is whether the loans were satisfied by Kalogon’s work at 3 Oakbank.
[7] The Coliviras parties claim that they are owed $436,036.80 by the Papageorge parties as a result of breach of contract, or alternatively, on a quantum meruit basis. The claim arises from goods and services which the Coliviras parties say were provided to Stan and Alexandra Papageorge in the course of extensive renovations that included building a second storey at 3 Oakbank. The Coliviras parties also allege that the property was purchased by Stan and Alexandra with the intention of it being the Papageorge’s family home.
[8] The Papageorge parties dispute that. They claim that the purchase of 3 Oakbank was a joint venture between Dino and Stan. The mutual intention was that 3 Oakbank was an investment property, with Stan contributing the capital, Dino contributing the management of the construction at cost, and the profits to be shared between the two friends (as they then were).
[9] The Papageorge parties claim that they are owed $401,845 by the Coliviras parties. This sum is partially comprised of the three loans totalling $150,000, for which they also seek interest. The balance of the claim is made up of damages which they allege arise from a breach of the joint venture agreement, along with deficiencies, interest and damages for registering an excessive lien.
[10] Neither Dino nor Stan created a written contract to confirm their understanding about 3 Oakbank and the loans.
[11] This 17-day trial consisted of two actions being tried together – a construction lien action and an action for recovery of a debt. The Bank of Montreal was released from the lien action prior to trial.
The Issues
[12] This court’s primary task is to determine the terms of the parties’ understanding with respect to 3 Oakbank.
[13] The issues to be decided potentially include:
Whether an oral contract was made by parties, and if so, what were its terms.
In deciding its terms, this court will have to consider the parties’ fundamentally opposed positions, including:
(i) Whether this was a joint venture between the parties;
(ii) Whether Kalogon was hired initially to be a project manager, and how it was to be compensated in that role;
(iii) Whether Kalogon’s role transitioned to becoming a general contractor/project manager at risk, and how it was to be compensated.
Whether the contract was fundamentally breached by Kalogon, or wrongfully terminated by the Papageorge parties;
The amount of the costs incurred by Kalogon in the course of delivering goods or services;
The value of services and materials supplied to 3 Oakbank to support the claim for lien or its quantum meruit claim;
Whether there were any deficiencies in the work done by Kalogon, and the cost to rectify;
Whether the Papageorge parties failed to mitigate their damages by permitting Kalogon to complete the project;
Whether the Papageorge parties are owed $150,000 for the loans, plus interest;
Whether the Papageorge parties are owed damages for the lien registered by Kalogon pursuant to s. 35 of the Construction Act, R.S.O. 1990, c. C.30 and
Costs of these actions.
The Positions of the Parties
The Coliviras Parties
[14] Dino says that Stan took advantage of his generosity and friendship.
[15] The Coliviras parties say that when Dino met Stan, the five-member Papageorge family was splitting its time between residing in a small apartment above a carriage house on a property they owned at 29 Sumner Lane in Thornhill and a three-bedroom condominium. They were unable to live in the house on Sumner Lane because the house was uninhabitable, and the property was saddled with a stop work order.
[16] Dino felt sorry for Stan and began to help Stan search for a suitable home to purchase. Eventually Stan decided to purchase 3 Oakbank as a family home. The home required renovations to be suitable. Stan, having seen other homes built by Kalogon, insisted that Dino was the person to help with this renovation. Dino was reluctant but eventually agreed that Kalogon would provide project management services only.
[17] The terms of the agreement were that Kalogon would oversee the supply of goods and services, but Stan was to enter into all contracts with the trades and pay them directly. Kalogon was not to take on any other administrative duties. Kalogon was to manage the renovation and construction of the property in exchange for a management fee of $150,000. The payment of the management fee would retire the loans that the Coliviras parties had received from the Papageorge parties.
[18] However, almost immediately after the beginning of the project, a situation arose that required Dino’s role to change from project manager to general contractor. This meant that Kalogon became a project manager at risk and Kalogon was required to perform administrative tasks such as remittance of Harmonized Sales Tax (“HST”), and to bear the financial risks associated with the materials and trades.
[19] The Coliviras parties deny that there was ever a joint venture agreement, pointing to the fact that there is not one document to support the establishment of such an agreement. 3 Oakbank was purchased in the name of the Papageorges, and the design and cost decisions were made solely by the Papageorges. Stan dictated all of the design changes and made financial decisions that were inconsistent with flipping the property for profit.
[20] Dino had begun to develop reservations about Stan before the purchase of Oakbank. Dino has never had a partner in his contracting business and Stan was not someone that he would have taken on as a partner.
[21] After assuming the role of general contractor, Dino received quotes from trades and for the cost of building material and obtained Stan’s approval before proceeding. According to Dino, this included a 15% markup on each of the contracts that Kalogon made with the trades and subtrades, except for labour and lumber. They take the position that the price of each of the other 39 items in the Scott Schedule represents a separate oral agreement struck between Dino and Stan.
[22] The original renovation had a budget of $600,000, which included a complete gutting of the existing bungalow and building a second storey with 3 bedrooms and a bathroom on the east end of the house.
[23] The budget was disregarded early on, as Stan requested numerous changes during the construction project. The architect was required to update the drawings to accord with his changing desires several times at the outset. Even when framing was completed according to the drawings approved by Stan, Stan would show up on site and demand changes. This continued throughout the project, with Stan demanding costly changes that affected the cost and pace of construction and diminished the morale of the trades. Stan selected design elements and finishes that were inconsistent with renovating a home for the purpose of flipping it. Stan was insistent on building a dream home for his family. He expressed to Dino and other trades that these were his decisions because this was his house. The trades were frustrated with the number of changes, and the entire project became a stressful one for Dino. Nonetheless, he did not attempt to renegotiate the project management fee of $150,000.
[24] Dino says that the project was 85% complete by the end of December 2011 but trades continued to do work in 2012. Stan continued to provide funding for the building costs, even after the point that he now claims to have suspected that Dino was not applying the money to this project. In fact, the Papageorge parties provided $182,000 between December 2011 and March 2012, even though they now say that they became concerned about where the money was going as early as November 2011, and sought legal advice in April or May 2012.
[25] The Coliviras parties acknowledge receiving $808,000 from the Papageorge parties in the course of the project, and that, in addition, Stan paid $88,845 to a stone contractor directly.
[26] Stan locked Dino out of the property in April 2012 and the contract came to an end before the construction was completed. The month before, Dino and Stan had had a meeting in which Dino told Stan that he owed him approximately $300,000, and Stan said “that’s not too bad”.
[27] In the event that the court finds a quantum meruit approach is required, the Coliviras parties submit that the approach and amount set out in their expert’s report should be adopted, which concluded that the value of work and materials supplied by Kalogon was $1,291,741.
[28] The Colivirasparties do not deny that they received loans totalling $150,000 from the Papageorge parties, and that $100,000 of this amount was secured by a promissory note bearing an interest rate of 12%. The reasons why the loans were made are in dispute.
[29] In summary, the Coliviras parties request the following findings and orders:
(a) that Kalogon was hired by the Papageorges to supply services and materials as a project manager, which transitioned to an agreement for Kalogon to become a project manager at risk/general contractor;
(b) there was no joint venture;
(c) Kalogon is entitled to payment in the sum of $150,000 plus HST for project management services;
(d) there was an agreement on price for 39 of the items in the Scott Schedule except for lumber and labour and Kalogon is entitled to payment for each of those 39 items in the Scott Schedule;
(e) Kalogon is entitled to payment on a quantum meruit basis pursuant to the value provided by Kalogon’s experts for lumber and labour;
(f) in the alternative, Kalogon is entitled to payment based on the actual value of the services and materials supplied by Kalogon for all of the 39 items in the Scott Schedule;
(g) the contract was wrongfully terminated by the Papageorges;
(h) Kalogon is entitled to judgment in the sum of $436,036.80, plus prejudgment interest from May 1, 2012;
(i) Kalogon is entitled to return of the money posted into court as security for costs and all accrued interest; and
(j) that the Papageorge parties pay the costs of these actions, including costs of the Scott Schedule motion heard at the commencement of trial.
The Papageorge Parties
[30] The position of the Papageorge parties is that Dino took advantage of Stan’s trust and friendship. Soon after becoming friends, Dino started asking Stan for loans. Some of the money was repaid, but the loan of $150,000 to Dino or his companies still remains unpaid.
[31] The Papageorge parties state that 3 Oakbank was never purchased to be a family home. It was a joint venture. The agreement was that the Papageorges were to buy the property and arrange the financing. They were also to pay for the labour and material at cost. Dino was to arrange for the trades and pay them from the money provided by the Papageorge parties. Dino was to control and supervise the renovation at minimum cost to maximize the return on investment. When the project was completed 3 Oakbank would be marketed for quick resale and the profit split equally between Stan and Dino. Dino would repay the loans from his share.
[32] According to the Papageorges, Dino’s evidence that he was to receive a $150,000 management fee has been fabricated, as has his evidence that he was to receive an additional 15% on each amount charged by the trades. Throughout the pleadings and during Dino’s examination for discovery, he made admissions that Kalogon would only charge the Papageorges at cost, and there is no allegation in the pleadings that Kalogon or the Coliviras parties are owed monies over and above the cost to Kalogon.
[33] The Papageorge parties say that the relationship was terminated because by the time they had paid over $808,000 to Dino, they developed the belief that Dino had not used their money entirely for 3 Oakbank. The initial maximum budget was $450,000, which was later increased to $500,000 when it was decided that a second storey room would be built over the garage on the west side of the residence. Work on the home had essentially stalled at the end of 2011.
[34] The Papageorge parties say that all building and design choices were made by Dino. They point to the fact that there are no documents supporting the allegation that Stan constantly requested unreasonable and expensive changes, as complained about by Dino. To the contrary, Dino would make changes “on the fly” without regard to plans. He did not even apply for a building permit until October 2011.
[35] The Papageorge parties submit that the receipts and cheques provided by the Coliviras parties cannot support a finding that more than $602,000 was spent by Dino on 3 Oakbank.
[36] The Papageorge family moved into the property in November 2012 only because they were financially overburdened by this project. They lived in the house for just slightly over a year before selling the property in April 2014.
[37] If this court finds that the arrangement was not a joint venture, the position of the Papageorge parties is that the correct approach is to take the amount spent by Kalogon and to add 10% for profit and 10% for overhead. From that, they ask that the cost incurred for repairing Kalogon’s deficient work be deducted.
[38] After Dino was asked not to come back to the property, the Papageorge parties hired a contractor, Gavin Thompson, who found deficiencies in the work performed under the supervision of Kalogon. Similarly, an HVAC contractor identified numerous areas of poor workmanship that were subsequently fixed. The Papageorge parties incurred costs of $235,000 to repair the deficiencies and complete the project, but only claim the deficiency portion of $107,065.
[39] The Papageorge parties submit that the expert reports are unhelpful because the agreement was that Stan would pay only the actual costs incurred. Both experts approached their task on the basis that they were pricing the project for an end consumer, as opposed to a commercial venture, and both assumed that there were no deficiencies. The Papageorge’s expert valued the work done at Oakbank under Kalogon’s supervision at $838,000 excluding HST.
[40] The Papageorges sold the property for $1.95M. Given that they had purchased it for 1.218M and paid over $1M in construction costs and realty fees at the time of sale, they experienced a financial loss exceeding $500,000. These events took place between 2011 and 2015, when a boom was occurring in the housing market. The Papageorges are not seeking to recover the losses arising from the 3 Oakbank project, but rather the loans and the excess monies received by Dino that he did not apply to material or trades.
[41] In summary, the Papageorge parties request the following findings and orders:
(a) that the agreement between Stan and Dino was as described by Stan;
(b) that no more than $602,000 in expenditures has been substantiated by Dino;
(c) that there were deficiency costs of $107,000, leaving an amount due by Stan of $495,000;
(d) that Stan advanced $896,845 to Dino for the work done at Oakbank and the loans;
(e) that Dino therefore owes Stan $401,845;
(f) that as a result of his excessive lien Dino owes damages under the Construction Act equal to 1.2% of $350,000 commencing on February 4, 2014;
(g) that Dino owes Stan interest at the rate of 12% on the $100,000 promissory note loan and at the Courts of Justice Act rate for the additional $50,000; and
(h) that Dino pay the costs of these proceedings, including the costs of the Scott Schedule motion heard at the commencement of trial.
The History of Stan and Dino’s Relationship
[42] Stan met Dino sometime in the summer or fall of 2010. They were introduced by Carlo Santoro, a friend of Dino’s who worked as a building inspector for the City of Markham.
[43] Santoro had inspected the Papageorge’s property at 29 Sumner Lane and had issued a stop work order. Stan described Sumner Lane as a historic property in an idyllic, park-like setting. It was Stan’s dream home, but had been given a Class A Heritage designation and his intention to renovate it was being frustrated by zoning and building bylaws. The main house was uninhabitable, and the only place for the Papageorges to live at Sumner Lane was in a small apartment on top of a coach house. At that time the Papageorges had three sons living with them. Fortunately, they also owned a three-bedroom condominium located on Inverlochy Blvd. in Thornhill, and lived there part time.
[44] Santoro arranged the introduction to Dino, telling Stan that Dino would be able to help with the issues he was having with Sumner Lane.
[45] Dino viewed the house but declined to become involved because he saw the permit issues as being insurmountable. However, he and Stan quickly struck up a friendship. They each had Greek heritage, were car enthusiasts, had children around the same age and lived close to one another. At that time Stan owned six Tim Hortons franchises and was expecting to soon acquire another. Dino had been a luxury home builder and real estate investor throughout his career, also enjoying success as a commercial landlord. Both were accomplished business owners who enjoyed the wealth brought about by their hard work.
[46] By the fall and winter of 2010/11 Dino and Stan were regularly in contact. Stan would bring coffee and donuts to Dino’s house in the morning, or they would meet at the Tim Hortons store being managed by the oldest of the Papageorge’s sons, Leo. The two men orchestrated a meeting between Dino’s daughter and Leo, who thereafter began dating toward the end of 2010. The families met to socialize and have meals together. The men would also meet at a restaurant owned and operated by one of Dino’s brothers, Steve, called Strato. They saw one another four to five days a week, often to the exclusion of other people.
[47] Alexandra testified that she was uncomfortable with their friendship from the outset and thought that Dino was attempting to take advantage of what he perceived to be her husband’s wealth. The friendship caused significant disagreement between her and Stan.
[48] Much has been made in this proceeding about this fast and intense relationship, with both parties essentially alleging that each was groomed by the other to create trust and dependency or sympathy, later played to their advantage. I am not persuaded by any of these arguments. These are two adult men with plenty of business acumen and intelligence. I find that, certainly at the outset, they were each inclined to generosity with the other. They each wanted to impress the other. They had a genuine friendship that each wanted to sustain. Both were intent on amassing money, but neither was vulnerable to being taken advantage of by the other.
The Search for Property Before 3 Oakbank
[49] As 2010 waned the Papageorge’s residential situation remained unsettled. Stan vacillated on whether to sell Sumner Lane. In November 2010 the family had moved to a four-bedroom home on Yonge Street in Thornhill, rented for $4,500 per month. Leo remained in the condominium.
[50] It was at this point that Dino and Stan began to look at residential properties for the Papageorges to buy. The only two witnesses who gave evidence about this particular time frame were Dino and Stan.
[51] It is undisputed that Dino showed Stan various homes built by Kalogon. Dino said that he did this so that he could obtain a sense of what type of home appealed to the Papageorge family.
[52] The first of these was 107 John Street in Thornhill. The owner of the property, Morris Kason, had purchased the property from Dino. Stan’s evidence confirmed that he viewed this property for the purpose of potentially purchasing it as a family home. He looked at it twice, the second time bringing Alexandra, but although Mr. Kason “talked price” the Papageorges were not interested in buying the property.
[53] Dino’s evidence with respect to the negotiations for 107 John Street was very detailed. He explained that the property was located a 30 second drive from Sumner Lane, and that Stan told him that he had seen the house being built, drove by it all the time and mentioned how much he liked it. Dino offered to call Mr. Kason to see if he was ready to sell. He testified that Stan viewed the house one or two times, and then asked Dino for his assistance to negotiate a deal with Mr. Kason. Dino arranged a meeting and the three men met at Mr. Kason’s office on Woodbine Avenue. They worked out a deal, agreeing to a sale price of $1.55M with a quick closing. Dino explained that he vouched for Stan to Mr. Kason. Dino confirmed that Stan was his friend, on whose behalf he wanted Mr. Kason to give a good deal. Dino described that on the drive home he and Stan were excited that Stan’s family would be living in a house built by Dino.
[54] Dino then described how Stan called him the next day and told him that he thought that he was overpaying for the house. From Dino’s perspective Stan had made a very good deal. Dino explained to Stan that he had sold the house to Mr. Kason for $1.3M, Mr. Kason had upgraded the property since then and the market was “really moving” at that time. And most importantly, Stan and Mr. Kason had agreed on the deal. Dino asked Stan to go with him to see Mr. Kason once more. Mr. Kason offered a $50,000 discount, they agreed once again, and shook hands. Three or four days later Stan decided not to go through with the deal and broke the commitment. Dino called Mr. Kason to apologize and told him that he should put the home on the market. It sold for $1.750M. A text message is in evidence that references the sale of that property for that price, sent by Dino to Stan on June 1, 2011.
[55] Dino described showing Stan another house that he had built, this one at 122 Thornridge. He described how Stan looked at that property two times. It was vacant and on the market. They shook hands on a sale for the price of $2M and agreed to meet again to commit the deal to writing. Dino described that he gave Stan the keys and told him he could start moving in even before closing. Stan acknowledges having received the keys. But after they shook on the deal, Dino said that Stan disappeared for two weeks and would not answer his phone. So, Dino sold the property on a conditional basis. He described that Stan then called him from Florida, telling him that he could only call him between 7:00 and 7:30 in the evening. He berated Dino for selling the property and asked him to change his mind. Dino’s evidence is that he then told the purchasers that he was unable to satisfy the condition and the deal collapsed. But then Stan reneged on his promise to purchase the property, accusing Dino of saying that the property had been sold to others only to pressure him into buying it. Dino contacted the other interested buyers and salvaged the sale.
[56] In contrast, Stan denied that he ever agreed to buy 122 Thornridge. His testimony is that there were discussions about renting it or buying it and “flipping” it right away. He testified that he and Alexandra went to see the property, but it did not appeal to them.
[57] The best evidence provided with respect to the timing of the events concerning 122 Thornridge comes from text messages. There are a series of text messages from Dino to Stan in late October and early November 2010 which read “Boy let’s review plans before you leave” and “boy call me ASAP thanks”. Dino testified that he received no responses from Stan during this time, which is when he was reaching out to him to solidify their deal with respect to 122 Thornridge. On November 7, 2010 Stan wrote “everything good it’s okay about the house. Etho eime (translated by Dino to mean ‘I am here’) all is well”. Dino testified that the house being referenced was 122 Thornridge. Stan’s evidence did not contradict this timeline nor Dino’s interpretation of the message.
[58] Accordingly, on the evidence available I find that the events relating to 107 John Street and 122 Thornridge occurred before the purchase of 3 Oakbank. This is important because it helps to provide narrative and context to the dealings between the two men that followed.
[59] These two versions of events about 107 John Street and 122 Thornridge stand in stark contrast, and there is no way to reconcile them.
[60] I find that the evidence about these transactions is more persuasive as recounted by Dino. He had a detailed recollection of how the events unfolded. Nothing about his evidence on this topic is difficult to accept. Stan testified that he wanted to purchase his family’s home within the area in which these homes are located. Stan’s evidence confirms that Alexandra came to view both properties. The Papageorges had expressed interest in purchasing but were under no pressure at that time to leave the rental property on Yonge Street. Finally, Dino had a reason to recall the specifics; on both occasions he was personally affected by Stan’s indecisiveness.
[61] Another event is significant. In early 2011, Dino purchased a property located at Henderson Avenue “on spec”. This was part of Dino’s business strategy; he explained that in addition to building custom homes, he would renovate homes and re-sell them quickly for profit. His usual time frame for improving these properties before resale was four to five months. In addition to being a builder, Dino has also worked as a real estate agent and follows real estate market trends. Dino testified that when renovating a “spec home”, the design and finishes for the home are completed in a way to appeal to the greatest number of prospective buyers, with neutral colour schemes for paint, flooring and finishes. His evidence was that he would never design a spec home that was overly modern in design or select out-of-the-ordinary finishes. He would make conservative financial decisions. It was his experience that prospective homebuyers were not willing to pay for expensive features and finishes that they had not specifically selected.
[62] Stan was aware of Dino’s purchase of the Henderson Avenue property because he had loaned Dino $10,000 to put toward a down payment for that property. Dino was able to sell Henderson Avenue for a $70,000 profit even before the closing date of his own purchase. Stan was impressed. This deal was referred to in the trial as the “Henderson flip”. Dino repaid the loan when the sale transaction closed.
[63] In late March/early April 2011 Stan accompanied Dino on a trip to Greece with Dino’s five brothers, where he was introduced to extended family and friends and saw a large luxury property that Dino was building. Again, Dino and Stan’s evidence about what occurred on that trip is widely divergent. Stan says that the initial purpose of the trip was to view Dino’s property, and that it was Dino’s idea that he come along. Dino alleges that Stan inserted himself in the trip, contrary to the wishes of some of his brothers. Dino described how it became apparent to him in Greece that Stan had a substance abuse problem, and that he was repeatedly embarrassed by Stan’s behaviour, which included boasting about his wealth, suggesting that he was Dino’s financial backer, and expressing unfettered interest in purchasing many properties but not following up with the owners.
[64] While Stan entirely refutes Dino’s description of his conduct, he was forthright in admitting a dependency on medication following a skiing accident in 2005. He testified that he was dealing with chronic pain and was taking painkillers off and on starting in 2008. He would go to detox, be free of the drugs for a year, then fall back into using. Stan testified that he attended a detox facility in Florida shortly after the closing of 3 Oakbank, possibly from the end of July or beginning of August, for two weeks. He had a slip again in October 2011 and went away to Florida to relax at his condominium for a short time to “nip it in the bud”. During the detoxification process he would go through withdrawal that gave him flu-like symptoms, be depressed and withdrawn, then return to normal. I draw the inference that this was where Stan was when Dino could not locate him to finalize the purchase of 122 Thornridge, despite Stan’s evidence to the contrary.
The Loans
[65] Stan began to loan money to Dino right from the early days of their friendship. It is uncontested that Dino first borrowed money from Stan in the fall of 2010. Stan agreed to loan Dino $20,000 to be repaid within two weeks. Dino did not tell him what he did with the money, nor did he provide an explanation in his evidence. The loan was repaid in thirteen days.
[66] Stan later made further smaller loans to Dino, some of which Dino used as a down payment for the purchase of Henderson Avenue. As stated earlier, these loans were repaid at the time of the Henderson flip.
[67] Dino’s evidence was that he did not ask Stan for these loans, but rather that Stan would offer them in the course of their conversations about what was happening in one another’s lives and businesses. He thought that Stan may have received a tax advantage or some other financial benefit.
[68] Then came a larger loan. On March 7, 2011 Dino received a $100,000 cheque from Stan. Stan’s evidence was that Dino had approached him for money because he needed it to continue the construction in Greece. Dino’s evidence was that he did not ask for or need the money. According to Dino, Stan brought a cheque to him because Stan knew that he was waiting for the closing of some property sales at that time. And Dino accepted it because he wanted to “size up” Stan and see if Stan was sincere, because he had been waffling about purchasing real estate.
[69] Stan did not request any security for the loan. The uncontroverted evidence is that Dino drafted a promissory note at his office after accepting the cheque and inserted an interest rate of 12%, even though he could have obtained loans at a lower interest rate elsewhere.
[70] I find as a fact that Dino wanted to ensure that Stan’s larger loan was documented and went to some trouble to prepare a legal document on favourable terms to Stan that primarily protected Stan’s interests. This is significant because it contradicts the allegation that Dino was attempting from the outset to take advantage of Stan.
[71] Alexandra was not told about this loan. She learned about it by accident when she happened to find the promissory note.
[72] The parties became more financially entwined when Stan invested in importing Albanian stone to Canada, an investment that he intended to make with Dino’s brother, Steve. Again, Dino and Stan’s evidence about this event differs significantly and it is next to impossible to determine who provided a more accurate version of events. Dino agreed however, to absorb this debt for reasons that were never adequately explained.
[73] Ultimately, I find it unnecessary to make a finding about why the money changed hands, since both parties agree on the amount loaned. I agree with the submissions of the Papageorges that Dino’s explanation for taking it makes little sense – but whatever his reasoning was I find as a fact that it was not because he was impecunious. As will ultimately be shown, Dino has funded construction at 3 Oakbank beyond the money provided to him by the Papageorges. While little has been divulged by Dino about his financial circumstances, this fact alone convinces me that Dino did not accept money from Stan out of any kind of desperation. This finding also contradicts the allegation that Dino was attempting to take advantage of Stan financially.
[74] Dino acknowledges receiving the $100,000 loan on March 7, 2011, at the agreed upon interest rate of 12%. He acknowledges receiving a further $25,000 on April 27, 2011, representing $15,000 for the stone and $10,000 for a loan for Strato, and a further $25,000 loan on June 21, 2011. The first two cheques were paid to Mourgo Investments Inc. and the third was paid to Kalogon. What remains in dispute is whether Dino still owes the money to Stan.
Business Opportunities Preceding 3 Oakbank
[75] The Papageorges submit that discussions of business opportunities quickly became a part of Dino and Stan’s relationship and that these discussions intensified in early 2011. While the evidence does show that the two men took some steps toward commercial collaborations that may or may not have involved a Tim Hortons franchise, the evidence falls well short of convincing that there was consideration of a business enterprise involving Dino and Stan as partners. The evidence is inadequate to establish that they seriously considered becoming joint owners of a commercial property, directors or shareholders of an equally owned corporation, or joint venture associates or owners of a business enterprise.
[76] Stan’s evidence is that their discussions ultimately turned toward purchasing a residential property. He wanted to be part of a “Henderson flip”, or to buy a property that needed a renovation but “nothing crazy”. Stan was to provide the financing and Dino would provide real estate expertise to select appropriate properties and, if necessary, building expertise. They both wanted to make money; according to Stan these were mutual discussions.
[77] The searches for these homes started after returning from Greece, between mid-April through May 2011. They primarily focused on Thornhill, bordered by the 407 highway at the north, Clark Avenue to the south, and between Yonge and Bathurst streets.
[78] Stan testified that part of his impetus for this idea was to recover the loans that he had made to Dino. He was starting to feel that Dino might not be able to repay the loans. I specifically reject this evidence. Dino had only received the larger loan on March 7, and the second loan of $25,000 would not be made until late April. Other than his testimony, there is nothing to support Stan’s belief that Dino could not repay the loans. No demand had been made for repayment. As I have found, there is no evidence that Dino was financially strapped when he accepted the money.
[79] Stan named five various properties that were under consideration before 3 Oakbank was selected. One of these properties was located at 7 Thornbank. Stan testified that they met Amir Mizrahi, who he described as being Dino’s real estate agent, when they viewed 7 Thornbank. When introducing Stan, it was Stan’s evidence that Dino said “This is Stan, my friend, he’s a builder. We’re looking for a house to flip”.
[80] Dino denies that he ever had such an intention. His evidence was that Kalogon had never had a partner for a residential real estate investment. The additional homes viewed by Stan, including 7 Thornbank, were part of Stan’s search for a home to purchase for his family. One of those homes, on Elgin Street, was another example of a property on which Stan put in an offer, but later changed his mind and reneged, according to Dino.
[81] It is very difficult to ascertain what was in the minds of these two men at the time. It is doubtful that Dino would pick Stan, who had no expertise in building or residential real estate, to be the first partner that he would have for a spec home. Dino had been building and flipping homes for decades without a partner. It also seems unlikely that Dino would be inclined to partner with Stan given his experiences with 107 John Street and 122 Thornridge, and Dino’s perception of what went on in Greece. Yet Dino now had a history of borrowing money from Stan when he was investing in real estate, at the time of the Henderson flip. And Stan seemed to have cash on hand to provide capital. Still, Dino was the only one with the property interest throughout the Henderson flip, even though Stan had provided some or all of the down payment.
[82] Amir Mizrahi was not called as a witness to confirm the comment allegedly made by Dino to him at 7 Thornbank. I have considered whether this should give rise to an inference that he would not have been able to corroborate that such a statement was made.
[83] The law as set out by Sopinka, Lederman & Bryant in The Law of Evidence in Canada, 4th ed. (Markham: LexisNexis, 2014), page 386, is that an unfavourable inference can be drawn when, in the absence of an explanation, a party fails to call a witness who would have knowledge of the fact and would be assumed to be willing to assist that party.
[84] The Supreme Court of Canada has dealt with this issue in the decision of Levesque v. Comeau (1970), 1970 CanLII 4 (SCC), [1970] S.C.R. 1010 (S.C.C.). Levesque involved a personal injury claim in which the plaintiff called only one medical expert. The plaintiff did not call the treating doctors from whom she had received immediate post-accident treatment. Pigeon J. at p. 432 stated that the rule to be applied in such circumstances is that a court must presume that such evidence would adversely affect the plaintiff’s case. However, it must be observed that in Levesque the evidence of those treating doctors was exclusively under the control of the plaintiff to elicit, and she failed to do so.
[85] In that vein, the Ontario Court of Appeal stated in Vieczorek v. Piersma (1987), 1987 CanLII 4403 (ON CA), 16 C.P.C. (2d) 62 (Ont. C.A.) at 22, that:
It is perfectly appropriate for a jury to infer, although they are not obliged to do so, that the failure to call material evidence which was particularly and uniquely available to the Vieczoreks was an indication that such evidence would not have been favourable to them.
[86] It may have been helpful to hear from Amir Mizrahi, given the evidentiary burden on the Papageorge parties to prove the asserted proposition that Dino and Stan were intending to invest in property and share the profits on a flip equally, a proposition at the heart of their case. Mr. Mizrahi also acted on the purchase of 3 Oakbank, and Stan also testified that he was aware that it was being purchased as an investment property. However, the court heard evidence that Stan and Mr. Mizrahi were involved in litigation after the sale of Oakbank in 2014 due to a disagreement over the listing agreement. While this cannot lead to an assumption that Mr. Mizrahi would perjure himself by giving false testimony, nor can he be presumed to be willing to assist. Furthermore, Mr. Mizrahi is not like a treating physician, where his evidence could only be elicited by the Papageorges.
[87] In these circumstances, I believe the court must not draw an adverse inference from Mr. Mizrahi’s absence.
[88] At the same time, the statement cannot be considered. It was not put to Dino during his cross-examination. Other questions were asked of Dino that led to a denial by him that he ever had the intention to invest in residential real estate together with Stan, but the allegation that he made that specific remark was not examined on. It was not until Stan’s evidence that the remark was raised for the purpose of impeaching Dino’s credibility. Based on the rule in Browne v. Dunn, (1893) 1893 CanLII 65 (FOREP), 6 R. 67 (H.L.) it would be unfair to Dino to put any weight on that piece of evidence given that it arose after Dino had an opportunity to address it.
The Purchase of 3 Oakbank
[89] According to Stan, he and Dino first saw 3 Oakbank in April 2011. It is located within the geographical area desired by Stan. The property was introduced to Stan through Dino and Mr. Mizrahi. Dino looked at the property and said it had “good bones”.
[90] The list price for the property was 1.3M. Stan’s evidence was that Dino felt that they could get it for $100,000 less than the asking price due to his relationship with Mr. Mizrahi. Stan told Mr. Mizrahi that if he could get a good price on the purchase, Stan would list the property with him when he and Dino flipped the property.
[91] They talked numbers. Stan said that he and Dino felt there was room for profit just with a flip. They discussed that if they could sell it for $1.45M or even $1.43M, Stan would “be generous” with the profit. Stan testified that provided he received $150,000 to $200,000 of the profits, Dino could have the rest and the loans would be paid off from his share of the profits. He said that he would do this because it was Dino’s friend, Amir Mizrahi, who located the house for them. At this point Dino was indebted to Stan in the amount of $100,000, because the second and third loans had not yet been made.
[92] Under cross-examination Stan stated that if they only made $250,000, he would still be very generous with that profit. He would have “knocked down” the debt, which he said was $150,000 at that point. He agreed that the amount paid to Dino would have been in his discretion because the house was in his name.
[93] According to Stan, they also believed there was greater room for profit if the property was renovated. They felt that with an investment of renovations costing $400-$500,000, they would be able to sell the house for between $2.3 to $2.5M. The renovations would involve a 1,200 square foot addition to the existing house. With this amount invested in renovations, Stan said that they thought that a profit of between $500-$700,000 was achievable.
[94] Dino said that this could be done in four months. Stan thought that he was optimistic and believed that it would be more like six months. The timeline was important for Stan because he did not want to have this amount of money invested for more than six months because he was planning to open another store in the fall.
[95] There was no discussion about a potential loss. Stan’s evidence is that the parties never considered it because they were confident there would be no loss.
[96] An offer was placed on 3 Oakbank on April 27, 2011, the buyer listed as “Stanley Papageorge in trust”. A deposit was given in the amount of $75,000. This was the same day that Dino received the next loan amounts totalling $25,000. The offer was finalized on May 3, 2011 at a sale price of $1.218M. The deal closed on July 15, 2011. Title to the property was placed in the name of Alexandra and Stanley Papageorge.
[97] Stan explained that he initially made the offer in trust because he was considering taking ownership in a corporate name. This was because the property was to be an investment. However, when attempting to arrange financing he learned that he would be required to provide a larger down payment if the owner was going to be a corporate entity. For this reason, he decided to have the property transferred to him and his wife personally. Alexandra was not involved in any of these decisions.
[98] Three days after the closing date, Stan kept his word and gave Mr. Mizrahi the listing to see whether the house could be flipped for profit. The asking price was $1.499M. Stan testified that he thought he could “pull a Henderson” to make a profit. Had that occurred, he repeated that he would have been “really generous with Dino”. Provided Stan received $150-$200,000, Dino could keep the rest and they would consider the loans paid off.
[99] The home remained on the market for a month, but they did not receive any offers. They moved ahead with the plan to renovate and flip the property.
[100] Stan testified that the deal that they then struck was that Dino would build and renovate at cost. He would do a good job but build frugally in order to make the property saleable for a price that Dino said would be easy to obtain. They anticipated that it would sell for well over $2M. Stan testified that even if they had $1.7M invested in the property between the purchase price and the renovations, if it sold for $2.3M they would each realize a profit of $300,000. Dino would pay back the money that he was owed from his share of the profit. By that time, Dino had borrowed the additional $25,000 in June, bringing the total debt to $150,000.
[101] Alexandra Papageorge testified that she was aware at the time that the arrangement between the two men was that of an investment. It was never going to be a family home, and in fact, she and her husband continued to look for homes to purchase even after renovations had begun at 3 Oakbank. Similarly, the Papageorge’s three sons – Leo, Ben and Alexander – provided evidence that they were aware at the time that the property was purchased as a business deal only.
[102] I have considered the evidence of the other four members of the Papageorge family in detail. Except for Leo, who I accept was present for some of the conversations about investing in real estate, the information held by all the other family members comes from Stan. Each conceded that they had no direct involvement. Alexander, the youngest, was 15 or 16 years old at the time of these events and was not involved in any of the conversations about the purchase. Benjamin, the middle son, was 18 when it was purchased and on his way to university that fall. He was not involved in the discussions. Alexandra admitted that all her knowledge about the arrangements for the property came from Stan and Leo. Accordingly, the evidence of Alexandra, Benjamin and Alexander about the terms of the deal allegedly struck between Dino and Stan is one-sided only.
[103] Leo Papageorge was 22 and 23 years old when the relevant events took place. Leo works in the family business and has done so for his adult life. At the time the events in issue took place Leo managed the Wedgewood store near Yonge and Cummer where Stan and Dino would frequently spend time. Leo spent periods of time with Dino alone because he was dating Dino's daughter for a while in 2011.
[104] Leo's most important evidence was that he was present for numerous discussions where Stan and Dino talked about their plans to develop and flip a house, a specific conversation with respect to what the deal was for 3 Oakbank, and numerous subsequent discussions where it was clear what the deal was with respect to Oakbank.
[105] Leo testified that on at least 50 occasions he was part of discussions between Stan and Dino with respect to buying a house and developing it. They discussed that Stan would finance the project because Dino was tight on cash but knew how to do real estate and building. Leo testified that the discussions regarding what the deal would be – discussions for which Leo was present and witnessed first-hand – were that Stan would be financing the project, Dino would build it and they would split the profit.
[106] Leo also specifically recalled the first time he heard Stan and Dino discussing 3 Oakbank. The conversation occurred at the Wedgwood store. Leo was sitting in the back seat of Dino's car as Stan and Dino were discussing the property. As Leo described it, Dino and Stan decided to "pull the trigger" on Oakbank that day. The deal was that Stan would finance the project, Dino would build it, and that they would split the profit, which they thought would be $400-500,000, and that Dino would pay Stan back the money he had borrowed from Dino's end of the profit. I note that this figure differs from Stan’s evidence, which was that they would first attempt a “Henderson flip”, with profits expected to be potentially $300,000-$400,000. Also, given this was the first time that Leo had heard about 3 Oakbank, he had missed out on prior conversations. Based on the evidence of Dino and Stan, I infer that their conversations about the property were carried out over several days or even weeks.
[107] Leo also testified that there were subsequent conversations that confirmed for him the terms of the deal. Leo described it as a "known thing", and that "it was always talked about that this is what it was." There were no discussions whatsoever with respect to 3 Oakbank being the Papageorge’s family home. As Leo described it, "this was always a business deal. This was always about making money."
[108] Leo also recalled that Dino said words to the effect of "your dad is going to like this house so much he's going to want to move in". He said this comment was made while Leo was at Dino's house watching Formula 1 race car driving. The timing of this statement was not provided.
[109] Dino’s evidence is, once again, completely different. He said that following the trip to Greece, Stan approached him with respect to buying 3 Oakbank and asked if Dino would assist him in making it the Papageorge’s “dream home”. Stan wanted to renovate 3 Oakbank and was adamant that Dino was the right person to assist in designing and building the home. Stan asked if he was willing ‘as a brother’ to help him. According to Dino, despite his reservations about Stan’s indecisiveness and his substance abuse problem, he reluctantly agreed to help. But he wanted limited involvement. He did not want to abandon Stan completely, but he was “careful”.
[110] According to Dino, he was approached by Stan after the offer had been placed on 3 Oakbank, but before the closing. Part of their discussions were that the Papageorges would be hiring Kalogon to act as the project manager for a fee of $150,000 plus HST. Dino’s testimony was that Stan’s words were “I’m going to shoot you $150,000”. Dino acknowledges that this was lucrative for a three-month project, which is how long he believed that it would take to complete.
[111] Dino denies that 3 Oakbank was ever purchased as a spec home, and denies that there was ever a joint venture between he and Stan to renovate the home and flip it for profit. His role as project manager was to put together an action plan and a team to do the renovations. According to Dino, he told Stan that he would “never put his hand in his own pocket”. Stan was to be on site every Friday to sign the contracts and was to be on call. Dino was supposed to have nothing to do with money; Stan was to sign every contract and pay the trades directly. Dino emphasized that it was extremely important to him to reduce his financial risk.
[112] Between the date of the sale and the close of the purchase, the only text message between the two men relating to the property was a request from Stan on June 6, 2011 asking Dino to give him the website information for an interior designer named Alexander Gatserelia. Dino’s evidence was that Gatserelia was a famous interior designer who Stan wanted to interview for the purpose of designing the Oakbank house. Stan did not contest this evidence. After Dino was locked out, Stan’s evidence is that he hired Gatserelia to consult in completing the home.
After the Purchase
[113] Dino testified that his role instantly changed after the closing date because Stan could not be contacted. This was preceded by a period in which Stan appears to have been struggling with his addiction; on July 3, 2011 he sent a lengthy text message to Dino acknowledging that his behavior has been “off” and that he was going through a big change. As Stan testified, he went to a facility in Florida later that month. Dino testified that Leo came to him, told him that his father was dealing with other things and asked Dino to help.
[114] The evidence bears out that Stan left for Florida on July 30, 2011, because on that date he sent a text to Dino stating that he was in line at U.S. customs, that he was going to come home feeling a lot better and thanking Dino for his support. Another text sent the same day told Dino that “Alexandra has instructions to give u some loot”. Dino testified that “loot” meant money. Stan stated that he would be back in two weeks.
[115] From that point on, Dino was thrown into doing everything as a general contractor. He realized that there was a timeline, and nothing would get done unless he moved ahead. He provided the cheques to the tradespeople from the start. He had to make small decisions and was put in a position he never wished to be in. He now had to be responsible for returns and exchanges, waste of material, and to ensure that the trades kept to their quotes. The evidence shows that throughout 2011 Stan did not pay for anything other than waste disposal and part payment of the exterior stonework.
[116] When Stan returned from Florida, they clarified Dino’s role, according to Dino. Stan agreed that now that Dino was the general contractor or project manager at risk, he would invoice Stan for the cost of renovating the home. They agreed that the material and services would be provided at cost. In his testimony Dino described that “cost” includes both hard and soft costs, including overhead. A 15% surcharge would be added on to each contract that Dino had to negotiate to cover these soft costs and overhead. Dino would continue to receive the project management fee of $150,000.
[117] The Papageorge parties, of course, deny that there was a change to the terms of the agreement. Dino was always going to provide project management and organize the trades. There would never be any markup or surcharge because Dino’s compensation would be one half of the profits at the time of resale.
[118] After purchasing 3 Oakbank the Papageorges continued to look at real estate. Stan described looking at several properties including one designed in a Frank Lloyd Wright style, a property on Mill Street that was an old embassy building, and a house in “Hogs Hollow”. Alexandra’s evidence corroborates this ongoing search. The one that interested the Papageorges the most was located at 16 Thornbank. Stan described it as “perfect and spectacular”. The 16 Thornbank property came on the market on September 7, 2011. It contained everything that the Papageorges wanted - basketball courts, a large lot on a private street, a modern design, an area that was perfectly built for a recording studio, which was it of interest to one of the sons, a swimming pool, and had unique features such as a dog shower in the garage.
[119] In September 2011, at the time that the purchase of 16 Thornbank was under consideration, the Papageorges still owned Sumner Lane. Stan explained that Alexandra had had enough of renovations and was adamant that they would buy a home that was “ready to go”. Although Stan had held out hope that Sumner Lane could remain viable, it had become apparent that that would not happen. He became resigned to sell it. This must have occurred sometime after September 14, 2011, as a text message written by Stan on that date says that Sumner is not for sale. The desire to buy 16 Thornbank spurred on the decision to put Sumner Lane on the market. Sumner Lane was sold later in 2011 or early 2012.
[120] Stan had discussions with the owners of 16 Thornbank, the Bonders, about striking a deal to have the Bonders live at or rent 3 Oakbank until the Papageorges were able to purchase their home. Stan testified that these discussions went as far as convening a meeting at 3 Oakbank, at which Dino, the Bonders and their real estate agent, Darren Slavens, attended.
[121] Stan testified that he never wanted to get into a situation where he was renovating a home for himself. Alexandra’s evidence was that she did not want to buy a home that would require any significant renovations given the issues they had experienced with Sumner Lane; she wanted a “move-in ready” home.
[122] Stan also denied that 3 Oakbank was a property that he and Alexander would be interested in as their personal family home. It was on a busy street. It did not have a backyard, and so could not have a swimming pool or a basketball court. Stan believed that it was not suitable for a family home; it was better suited to “a divorced guy or empty-nesters”.
[123] Alexandra viewed 3 Oakbank on only one occasion before it was purchased. She identified that the property had several features that did not suit what they were looking for in a family home, including that it did not have a large kitchen and dining room. She then came to the home on approximately two occasions during the construction.
[124] It is uncontested that the Papageorge family did move into the property in November 2012 only because they were financially overburdened by this project. They lived in the house for just slightly over a year before selling the property in April 2014.
The Construction of 3 Oakbank
[125] At the time of the purchase, the home located on the property was a one-storey bungalow with full basement. According to the records contained in the file maintained by the City of Vaughn, it had an original gross floor area above grade of 2,031 square feet. The garage measured an additional 557 square feet. At that time, the zoning for 3 Oakbank did not permit a second floor and did not permit building outside of the existing footprint because it was within an environmentally protected area.
[126] Dino prepared three design plans, which were referred to as “Plan A”, “Plan B” and “Plan C”.
[127] According to Dino, Plan A consisted of renovating the existing bungalow at a budget of approximately $400,000 plus HST. Plan B consisted of renovation of the existing bungalow plus a 1,000 square-foot second storey addition at a budget of approximately 600,000. Plan C consisted of adding a complete second-floor across the entire home, in addition to renovation of the existing bungalow, at a budget of approximately $800,000. All amounts were exclusive of HST. A management fee of $150,00 would be charged despite which scope of work was decided upon.
[128] Dino testified that Stan told him that he had a maximum of $700,000 to spend, which was from a line of credit secured against Sumner. Stan also told Dino that he was opening a new Tim Hortons store in September and would need approximately $400,000 for that. Dino told him that for the balance of $300,000 he would not be able to build his dream home. He explained to Stan that he could only do a renovation on the existing bungalow on that budget. Dino also said that for $600,000 he could build a couple of bedrooms on the second floor with decent improvements, and that was Plan B. He provided a schedule of the finishes, including a “Michael’s kitchen” that would be affordable with the $600,000 budget.
[129] According to Stan, Plan A involved renovating the existing bungalow for $250,000. Plan B was to cost between $400 and $450,000, which included an 1100 square-foot second-story on the east end of the house. Plan C was to add a full second-story across the entire residence for $600,000.
[130] Stan testified that Plan A was never really considered as it did not make sense monetarily. He considered that they would need an extra $50,000-$100,000 for cost overruns during the renovations, so he was not comfortable with Plan C. It was agreed that they would proceed with Plan B, costing an anticipated $450,000. This would provide them with the $600,000 profit if it sold for $2.3M.
[131] The various sketches and drawings entered in evidence show that each of these options was being considered at one point or another before building began. There was clearly indecision about fundamental design because the evidence bears out that the plans were still under discussion as of August 22, 2011. A text message on that date from Stan reads “Plan b with some twiks (sic)” and the response from Dino three minutes later was “mark the tweaks and I’ll input tomorrow in the computer to see how it works and then I’ll fire it off to Montano for finalization”. Finally, on September 2, 2011 Mr. Montano, clearly exasperated, wrote in capital letters “no more revisions!!!!” in an email sent to Dino.
[132] Dino said that Stan opted to go with architect Frank Montano of 3 Sixty Architect. Dino saw himself as the “go-between”, with Stan paying for the architectural services. Stan described Frank Montano as being Dino’s connection and that Dino had most of the dealings with him. Stan’s contact was limited to two or three meetings which consisted of Mr. Montano asking to be paid.
[133] The initial sketches prepared by Dino show that the property was supposed to be clad with an exterior finish that was one quarter stone on the bottom and three quarters stucco.
[134] Stan said that it was totally within Dino’s purview to obtain all permits. Other than signing documents he had no input, and he did not submit them to the City. In contrast, Dino’s evidence is that obtaining permits was Stan’s job; Dino did not have authorization to contact the Town with respect to the permits and this could only be done by the Papageorges as the owners of 3 Oakbank.
[135] The zoning requirements permitted one storey single-family dwellings, and a minor variance was required to build a second storey. It cannot be determined who prepared the application; the evidence overall suggests that it was likely someone from Montano’s office. Of interest is that at the time that the application was submitted on June 7, 2011, the drawings that were submitted for the purpose of the Committee’s consideration were clearly reflecting Plan C, showing an upper floor addition across the entire existing house. The application indicates that the existing gross floor area of 2031.35 square feet (not including the existing basement or garage) was to be increased to 4541.30 square feet. In the course of preparing these sketches, on June 1, 2011 Montano asked Dino “how many bedrooms does Stan want and can we perhaps move all to the second floor?”.
[136] We know that Stan attended the Committee of Adjustment meeting on July 21, 2011, and that Dino likely did not attend. On that day Stan sent a text message to Dino as follows: “gents all went well at committee. All approved. Only item I noticed is that we may need approval from trca. No walk up will be allowed.” This text message relates to a Committee of Adjustment meeting that was required to decide the application for a minor variance made by Stan as the owner. The file from the City shows that a hearing was held by the Committee on July 21, 2011, approving the application to permit construction of a proposed second storey addition to the existing dwelling. This was subject to approval from the Toronto and Region Conservation Authority (TRCA). An application was made, and a permit was issued to Stan under TRCA’s regulation on December 2, 2011.
[137] The size of the building as framed under Kalogon’s supervision was calculated by both experts. Mr. Clifford calculated the gross floor area as 4,565 square feet. Mr. Yungblut calculated the gross floor area as 3,290 square feet, but on cross examination he conceded that that was not accurate.
[138] At the end of the day, I find that what was constructed was a house with a gross floor area of 4,565 square feet above grade, with an entirely new roof more steeply pitched than the original roof, containing a new second storey on both the east and west sides of the home. It is necessary, I find, to consider the garage in this calculation because of the exterior stone work that was applied to it. The plans that are the best representation of what were eventually built by Kalogon are found at Exhibit 6. These are closer to Plan C than Plan B. As will be explained below, this was an evolving process. The photographs reveal a modern-style home, with features like inverse tapered maple support and decorative columns on the main floor. It had unique design features installed while Kalogon was on site that cannot be described as generic or having universal appeal.
[139] Stan’s expectation was that this renovation would cost him no more than $500,000, an expectation that I find he confirmed in an email sent to Dino on October 1, 2011. There is no confirming response from Dino. But Stan’s expectation, I find, is insufficient to establish even a budget, let alone a fixed-price contract, given what was going on during the building process. This is explained below.
The Changes
[140] Stan has acknowledged that he made some framing-related requests when the layout did not make sense to him, because he was funding the project. Mr. Yungblut testified that in his communications with Stan during the preparation of his report, Stan mentioned that floor layouts did change on the upper levels on both west and east sides while Kalogon was on site.
[141] I find as a fact that the changes made throughout the building process were extensive. Some were structural and therefore particularly costly. If this house was being renovated in the most cost-effective manner for profit, there is little possibility that what happened would have been driven by choices made by Dino.
[142] The most dramatic change was to the height of the existing roof. When the second storey addition was put on, a new roof was constructed on top of the remaining roof to increase the pitch. The ceiling was demolished over the area under which the second storey was to be built on the east side, and the new, higher 10-foot ceiling constructed. This created a change in ceiling height between that east side and the adjacent area over the family room. Changes were made to the ceiling height in the existing middle section so that the 8-foot-high ceiling could also be raised. Dino testified that this was not necessarily Stan’s fault, but Stan did not accept Dino’s proposal to retain the structural integrity by just lifting the middle of the room to the increased height, leaving a foot or two around the outside. Because of Stan’s position, Dino had to completely remove the ceiling and build knee walls within the cavity to match the two ceiling heights. However, it did not stop there. The new roof that had been built on a steeper pitch over the existing roof, with the architectural dormer, had to be removed because of what happened next.
[143] Stan’s evidence is that in early September the parties discussed adding a second-storey over the garage. According to Stan, Dino and the framer told him that it would be an inexpensive addition and that it made sense visually. Stan added another $50,000 “in his head” for the extra cost. He was told that it could be done inexpensively, and the framing would only be $3,500 extra. If Stan heard a figure like that, I find that it referred to something other than the time and material that was actually incurred in building this additional second-storey over the garage.
[144] Dino’s evidence is completely different. He and Stan had had discussions many weeks before, when Stan had seen the space above the garage. Stan wanted to use the cavity and proposed an access hatch with pull-down stairs. Dino did not agree to this but told Stan that he would look at the collar ties to see whether it may be possible.
[145] Dino described that he then arrived at the property one day to find that the roof trusses and rafters being cut over the garage. The framer, Almos Deszi, told Dino that Stan had insisted on building a full room with 10-foot high ceilings over the garage. It is unlikely, I find, that Mr. Deszi would undertake that work, or any work on the house, without first obtaining Dino’s approval. Mr. Deszi stated that this was the case. Nonetheless, this inconsistency in the evidence does not alter my assessment of who demanded that the change be made.
[146] Almos Dezsi was the framing contractor the owner of Dezsi Framing. Mr. Dezsi testified that Stan demanded numerous changes to the design and layout of the home, some requested after he had already approved the layout and the work had been done. As a result, the framers were required to tear down their work and build again in accordance with Stan’s new requests. Mr. Dezsi’s evidence was that it was far more costly to tear down and rebuild things than to build them in the first place.
[147] Mr. Dezsi corroborated Dino’s testimony about Stan’s demand to raise the ceiling on the main floor from 8 to 10 feet after that area had already been framed, and trim, wainscotting and crown moulding completed. He described the heated conversation between Dino and Stan that occurred when Dino was trying to talk Stan out of entirely tearing down the 8- foot ceiling.
[148] Mr. Dezsi also confirmed the late addition of a full room over the garage, known as the media loft. He explained that this room was constructed after Dezsi Framing had already put a roof on top of the west side of the house. The trusses were delivered and placed and the roof was sheathed and prepped for shingles. As a result of Mr. Papageorge’s request to construct the room over the garage, that new roof had to be torn down in order to raise it to accommodate the new room. Once that second storey was built, the roofs of the two additions had to be joined with a higher pitched roof. He recalled that Dino told Stan that it was a bad idea and was going to cost a lot of money. Dino wanted to keep the project moving forward, as the framers were on site. In Mr. Dezsi’s words, this became a “Rosedale style” renovation. The existing ceiling and original roof had to be taken out through the kitchen. By the time this took place, the rough-in of the plumbing had been done, the electrician was on site, and the stonemason was doing the exterior.
[149] Mr. Dezsi also described a complete redesign of the second-floor layout to include a walk-in closet in one of the bedrooms on the east side. This change was requested by Stan after he had seen and approved the layout that was chalked out on the floor and the walls had been built accordingly. Completed walls were moved on the second floor on the east side three times. A fireplace had to be framed into the wall between the bedroom and master bathroom. There was also a change to the media loft to include a bathroom. There was an addition of another room in the attic space in between the east and west wing of the second floor above the kitchen. A round wall was built on the main floor at Stan’s request after the wall had already been built according to the plans. And Stan had doorways moved on the ground floor on the east side after the ductwork had been completed, when the bulkheads were ready to be framed.
[150] Mr. Dezsi testified that Stan was on site nearly every day overseeing the work and demanding changes. He spoke of multiple disagreements on site between Dino and Stan due to the ongoing changes requested by Stan. Stan would insist that because it was his house he would get what he wanted. He testified that Dino attempted to talk Stan out of costly and unnecessary changes, especially in circumstances where the work was already done.
[151] Mr. Dezsi testified that although Stan was always respectful to him while he worked on site, his overall demeanour was abrupt and brash, and he referred to Stan as “an acquired taste”. When he first met Stan, Stan referred to himself as the homeowner, and often referred to the fact that this was his house.
[152] Mr. Dezsi said that what he was paid for this job was not enough for his trouble. He described it as a fiasco. Were it not for these changes, he and two other men could have completed the required work in three weeks and made a good income from the job. But instead they were there far longer than anticipated. He felt that for the headaches that came with this job, $32 per hour per man was not enough.
[153] I find that Mr. Dezsi was not just a reliable witness with good recall of the events, but an excellent one. He did not embellish or overstate his evidence, nor did he pretend to have a perfect memory. But it was a solid memory. His evidence about what he was paid was less reliable because, in his words, he is not an accountant and his office is the back of his station wagon. He does not retain records once his taxes are filed for the year. But his evidence leaves no doubt that this was a problematic contract that remained a vivid memory for him. When it was suggested to him that it was Dino who required the changes, his unequivocal response was “that’s outrageous”.
[154] Stan’s evidence is that Dino made all construction related decisions, whether structural or design choices. Leo’s evidence was that Dino was not working with any plan and would make changes “on the fly”. While this may have been Leo’s perception of what was happening, I give his observations no weight because the evidence establishes that he had his own full-time job running a store and was not on site enough to receive the full picture of what was going on as these decisions were made. There is also no evidence that Leo has any building expertise.
[155] The evidence that it was Stan who requested all the structural and design changes is hard to refute. Whether the terms of the agreement were as described by either Dino or Stan, Dino had nothing to gain by re-doing work that was already done and frustrating the trades people. He was either getting a flat fee that did not increase with the cost of construction, either as the base contract increased or through extras, or he was getting half of the profits. In either scenario, these kinds of costly and time-consuming alterations would be completely against his best interests.
[156] And that is not all. In terms of interior finishes, Stan would often be unsatisfied. For example, the artisan who Stan interviewed and hired to place the faux cladding around the fireplace had to repeat the work three times because Stan did not like the first two versions.
[157] Stan and Dino obviously have contrasting perspectives about what occurred during this project. Overall, I do not believe or disbelieve the entirety of the evidence given by either of them. But on this significant point, I prefer the evidence of Dino and Almos Dezsi to that of Leo and Stan, and find as a fact that it was Stan who drove the scope of the construction and the finishes, and that his needs were difficult to satisfy.
The Selection and Quantum of Indiana Limestone
[158] George Gjergji is the owner of Albtrust Construction Services Inc. His company was hired by Kalogon to perform the stone masonry work to the exterior of 3 Oakbank. He has known Dino for many years and has worked with him on numerous occasions. Dino told Mr. Gjergji that he had a client who needed some stone work done. Mr. Gjergji attended at 3 Oakbank, where Dino told him that due to the budget the owner would clad one-quarter of the exterior walls in manufactured stone and the rest would be stucco. The plan was to have an area of approximately 600 to 700 square feet covered in stone.
[159] The Papageorges wanted to see Mr. Gjergji’s work. He arranged for them to meet him to look at stonework done by him on a home located in Leaside in Toronto. Dino was not present during that meeting.
[160] Mr. Gjergji’s evidence was that the Papageorges loved the stonework he did at the Leaside home, which was all Indiana limestone. Stan told Mr. Gjergji “I want this stone”. Mr. Gjergji recalled telling Stan that Dino wanted to use man-made stone, and that Stan’s response was that he was the owner and wanted to choose the Indiana limestone. Stan said that the man-made stone did not sit well with him. Stan particularly liked the polished Indiana limestone, which was more expensive than the natural stone. Mr. Gjergji cautioned Stan that Indiana limestone was expensive and advised him that the price to install it was $19 per square foot.
[161] Mr. Gjergji said that he does not usually provide a written quote. He can read some English but has difficulties writing in English.
[162] He then met with Stan and Dino on site and it was agreed that the height of the stone would extend about 3 ½ feet from the ground, with a sill. Mr. Gjergji’s evidence was that he started the work and had completed approximately 200 square feet when Stan approached him and told him to clad the entire exterior of the home in the Indiana limestone. Mr. Gjergji’s evidence was that Stan said “I like it and I’ll be living there, don’t listen to Dino”. Mr. Gjergji proceeded to perform the stonework in accordance with Stan’s request. He ended up covering a 3,600 to 4,000 square foot area.
[163] He was present for arguments between Dino and Stan about cladding the home in stone all the way to the top. Dino disagreed with covering the entire house because it was too expensive.
[164] Mr. Gjergji said that Dino would never spend that much on stone, which is why he guessed that this was not a partnership or that Dino had no ownership. Mr. Gjergji expressed concern to Dino that the stone was expensive and that Stan was “going overboard”. Dino’s response was that he was there to try to keep Stan on budget, but it was Stan’s house.
[165] While Mr. Gjergji admitted that he knew nothing about their financial arrangements, there were many times that he heard Stan say he was going to “shoot Dino $150,000” and that Dino was “on the payroll”.
[166] Mr. Gjergji began his work in late fall and finished in late spring because Stan added other things later, such as flagstone walkways.
[167] The exterior of the home following renovations was entirely clad in both rough Indiana limestone and an even greater amount of the more expensive polished Indiana limestone. It also has flagstone walkways and patios around its perimeter, and a polished concrete driveway with French curbs. The perimeter fencing contains more stone; 15 stone posts measuring 3 x 3 x 5 feet topped with precast 3’ x 3’ coping, and a 10’ wide by 5’ high curved stone wall was built at the end of the driveway.
[168] Dino alleges that the total cost just for the supply of stone was $104,525. The Papageorge parties accept that $65,290.54 was paid for the supply of stone. This did not include installation.
[169] The Coliviras parties claim that the cost of installation of the stonework at 3 Oakbank was $179,557.00 inclusive of HST. The Papageorge parties only accept that $136,845 was spent to pay Albtrust, of which $88,845 was paid by Stan directly. The first payment made by Stan directly to George Gjergji was on December 1, 2011 in the amount of $50,000. Stan’s explanation for why he made that payment was that it was at the request of Dino, who explained that George was buying a house and had just had a baby. Stan expected that the payment would be deducted from the renovation costs.
[170] Stan agreed that he had input into the stone to the extent that he thought that it would look better with some flat stone. Also, when the posts for the fence were being erected, he insisted that they be placed farther apart than Dino was suggesting, not out of a concern over cost, but because otherwise he thought it would look like a penitentiary.
[171] It was Stan’s evidence that he was on site somewhere between once and five times a week. He saw the stone being installed. According to Stan, he relied on Dino to choose the stone and choose where it was placed. There was initial discussion of stone cladding being placed only where it was visible, on the front and west ends of the house, and otherwise it would be stucco. Stan stated that it was not his idea to put stone on the back or the east side of the house where it would not be visible. I do not accept that this evidence is reliable.
[172] Even on Stan’s numbers for the stone and related labour, which total $202,136, this number represents 40.42% of Stan’s alleged $500,000 renovation budget. I find as a fact that Dino, as an experienced real estate investor, would never have made the decision to spend such sums if this was a joint venture. As he testified, the initial drawings and budgetary restraints required only the lower portion of the outside to be covered in stone. Stan cannot claim to have been aware of the expense; even after paying a large sum to Mr. Gjergji directly, Stan continued to employ Mr. Gjergji even after Dino was terminated from the project.
[173] Stan’s position again makes no sense, on either version of the arrangements advanced by each party. The Papageorges asked the court to negatively assess Mr. Gjergji’s evidence because he had a prior and ongoing friendship with Dino. There is no reason to do this; his evidence about what occurred with the stone was believable, and far more so than Stan’s. Again, the evidence of the Coliviras parties is preferred. I find that Stan made the decisions both about the choice of stone and the amount purchased and installed.
The Nature of the Contractual Relationship
[174] In addition to the foregoing evidence about design changes and exterior cladding, I have considered all the evidence that tends to make it more likely that Oakbank was purchased with the intention of being the Papageorge’s personal residence, which would negate their assertion that it was purchased as part of a joint venture, including:
a) the Papageorges had been searching for a residence to replace Sumner Lane, within the geographic area in which 3 Oakbank is located;
b) the Papageorges provided the entire down payment, while on the same day loaning more money to Dino for his own use;
c) Stan alone attended the committee of adjustment hearing for the minor variance;
d) Stan requested the name of a high-end interior designer before the property closed;
e) title was taken in the name of Stan and Alexandra;
f) the Papageorges discussed renting Oakbank with the owners of 16 Thornbank in September 2011, and there was no evidence that this was discussed and agreed upon with Dino in advance;
g) the fact that Plan C was initially under consideration after the purchase, which was not the option that even Stan believed would result in the greatest profit at resale, and that something very close to Plan C was constructed;
h) two of the tradesmen who did a great deal of work at the property testified that they understood that Stan owned the home, and that he made the final decisions about design and finishes;
i) That Dino would not have chosen a modern interior style if this was a spec home, or non-neutral finishes such as a blue countertop in the kitchen;
j) Alexandra Papageorge accompanied her husband to view stonework done by Mr. Gjergji at a home in Leaside;
k) Stan was at 3 Oakbank two to five times a week;
l) Leo visited 3 Oakbank several times each week;
m) Alexandra’s parents came to view the property immediately after its purchase;
n) Dino had never had a partner before for purchasing and renovating a spec home;
o) the length of time over which construction was taking place; and
p) that Stan placed a lock on the gate to the property to preventing Dino from entering.
[175] I have also considered all the evidence that tends to make it more likely that Oakbank was purchased as part of a joint venture, including:
a) the evidence of each of the Papageorges, who testified that it was understood by them at the time to be an investment property;
b) Alexandra only went to the home before the offer was placed;
c) the property contained features that did not appeal to Alexandra or Stan, and was missing features that they were looking for in a home;
d) that it was listed for sale on July 18, 2011, the first business day following its purchase;
e) Leo’s assertion that Dino said “your dad will like this place so much he will want to move in”;
f) that Alexandra and Stan continued to look for homes after their purchase of Oakbank, and were particularly interested in trying to buy 16 Thornbank;
g) after the purchase of 3 Oakbank Stan was still considering the possibility of keeping Sumner Lane;
h) Dino had renovated spec homes in the past and successfully sold them for profit;
i) the offer was put in Stan’s name in trust because he considered purchasing it under a corporate entity; and
j) finishes such as the kitchen were selected by the Papageorges only after Stan was locked out.
[176] I have deliberately omitted those facts that could suggest either of these options, such as Stan paying for all permits and applications, Stan paying the architect, and Stan providing the money that was used to pay the trades.
[177] There are few certainties in this file, and one is what was really going through the minds of Dino and Stan during the relevant time period.
[178] However, I am convinced that this project was never undertaken as a joint venture on the terms outlined by Stan. Having considered the evidence that is both for and against a joint venture, the more compelling conclusion is that this was not a joint venture. But the final aspect to the evidence that solidifies this finding is that the circumstances of the initial “flip” of Oakbank show that a joint venture did not exist.
The Initial “flip” of Oakbank
[179] This point focuses on Stan’s evidence related to his intentions about Dino’s debt at the time that he was wanting to list the property immediately following its closing, hoping to sell it for a quick profit. His evidence reveals that he intended to be the sole decision-maker about how Dino would profit from a resale. His evidence shows that the deal lacked the certainty necessary to conclude that the terms had been decided and agreed upon with Dino in advance.
[180] It is also clear on the numbers that the transaction described by Stan is unlikely to have worked in the way that he alleges it was structured. Even if the house sold on a flip for the asking price of $1.449M, real estate commission would have been payable. Based on the commission paid by the Papageorges at the time of the final sale of 3 Oakbank, realtors in the area were earning 3.0%. This would have resulted in a total profit of $181,000 at the highest once the realtor’s fees of $49,121 were paid, provided that legal fees were no higher than $790 on the sale. Based on Stan’s evidence that Dino would only receive the remainder if Stan got $150,000 to $200,000, a flip would not have allowed Dino to pay back any significant portion of the loan, if at all, depending on the degree of Stan’s generosity at the time. At a sale price of $1.43M, which was also contemplated by Stan, any payment to Dino would have to come out of a profit of less than $163,000.
[181] There was no evidence of a discussion about what would occur if the property sold for an amount that would have resulted in a profit of $150,000 or less, which on his evidence, was Stan’s cut-off point for sharing any money with Dino.
[182] A joint venture must have some form of contractual basis. Significant factors that should be present in a joint venture are as follows:
a) a contribution by the parties of resources, including money, property, knowledge, skill or other assets to a common undertaking;
b) a joint property interest in the subject matter of the venture;
c) a right of management or mutual control of the venture;
d) an expectation of profit and a right to participate in the profits or share in losses; and, commonly, limited to a single undertaking.
See CED (Ont) vol 1, title 3 at s. (b); Hayter v. R., 2010 TCC 255, 2010 D.T.C. 1176.
[183] In this case, at least two of these fundamental factors are absent. Mutual control over the venture is absent, including the distribution of profit, resulting in an uncertain to non-existent expectation of profit for Dino. A joint property interest is also absent; Stan made all the decisions about listing Oakbank, speaking to the Bonders about renting it and ultimately, excluding Dino from the premises.
[184] The conclusion that it was not a joint venture does not automatically confirm Dino’s version of events.
[185] On the entirety of the evidence, I find that it could have been purchased by Stan either with the intention to flip it for profit or to live in it, and that he vacillated. The evidence satisfies me that, at least during the relevant period, he was a person uneasily satisfied and impulsive. He may have initially purchased it for a Henderson flip. His backup plan was to renovate it. Along the way he considered living in it as a family home. He was not always forthright with Alexandra, as demonstrated by the fact that he loaned money to Dino without discussing it with her first. Once 16 Thornbank came on the market, he wanted that house. Mr. Slavens testimony about those events is believed. It had more desirable features than Oakbank, and his wife wanted it. That consolidated the need to portray Oakbank as a home that needed to be sold. His dissatisfaction and indecision resulted in a renovation project that went well beyond any budget that he initially had in his mind.
[186] Stan’s family’s understanding of what this project can only be as Stan conveyed it to them. Since Stan himself may not have been certain, it follows that their evidence cannot be of great help even though I find no reason to disbelieve them. Similarly, where Leo is concerned, I do believe that he heard many conversations about investments. But the conversation in the car was the first time that he had ever heard about Oakbank, and on the evidence as I have found it, I conclude that he made certain assumptions about that conversation. These assumptions were either formed at the time or after the fact, but they do not accurately reflect an agreement struck between his father and Dino. I candidly cannot reconcile Leo’s evidence about Dino’s statement regarding his father wanting to live in the house once it was renovated. Either it was a statement misunderstood, taken out of context, or one that was never uttered.
[187] I find that Dino’s involvement was not as the Papageorge parties described, as this was not a joint venture.
If not a Joint Venture, what was it?
[188] The requirements for a building contractor are set out in Goulimis Construction Ltd. v. Smith, 2014 ONSC 1239, 30 C.L.R. (4th) 195, at para. 17:
A leading case on the requirements for a building contract is the decision of Fisher J. in Rafal v. Lepaspi, 2007 BCSC 1944, [2007] B.C.J. No. 2925, 2007 CarswellBC 3278 (B.C.S.C.). One of the issues in that case was whether there was an enforceable construction contract. A written contract existed but both parties acknowledged that oral terms supplemented the written contract. They disagreed as to what those oral terms were, particularly as it pertained to the scope of work to be done. Justice Fisher summarize the law in this area and made the following observations: the parties must be ad idem on the essential terms of the contract; where there is no written contract, the court must determine the reasonable expectations and intentions of the parties in creating legal relations; part performance is a good indicator of the parties intention to contract with each other, but it is only an indicator; with building contracts, the parties must not only agree on the building of the improvement, but also on the following three key features, namely the exact scope of the work to be done, the timeline for completion and the price to be paid. He said this at paragraphs 23 and 24:
However, for building contracts, it is not sufficient for both parties to have agreed on the building of a house. For the contract to be enforceable, the parties must also agree on the exact type of house, the timeline for completion and the price… The absence of an essential term, in this case the specification to which the house was to be built, as well perhaps as the price, may result in uncertainty in the parties’ contract…
It is not for this Court to complete the parties’ contract for them, particularly where an essential term is missing, and it cannot be said that the parties agreed to it. Even if the parties believed and acted as if they had made an enforceable contract, and the court’s interpretation of the contract would be fair and calculated to do justice to both parties, the court must be careful not to create an agreement which the parties never had, nor intended…
[189] Cases from this province confirm that price is a material term of a construction contract: Denham v. Solmon, 2015 ONSC 3084, 49 C.L.R. (4th) 148, at para. 14; Androus v. Bedford Residences Inc., 2011 ONSC 2453, at para. 47, and Tecton Construction Inc. v. Yeung, 2016 ONSC 3039, 68 C.L.R. (4th) 327, at para. 83.
[190] I find that there was no contract entered into by these parties, as there was never the certainty of terms necessary to establish a binding contract. The evidence is so vague and contradictory that I am unable to find any clear, mutual understanding of the terms regarding price, exact scope of work or timeline for completion that would meet the requirements of contract formation. There is no clear evidence that budget or scope were ever agreed on, and although Stan’s evidence was that he wanted the project completed before purchasing his next store, there is no evidence that this date was ever confirmed or communicated.
[191] For the reasons already set out, I cannot accept Stan’s description of the discussions that he had with Dino regarding price and compensation.
[192] Nor, however, can I fully accept Dino’s description. The evidence does not firmly establish that Dino’s role was initially to be limited to project management. But it may well be that he was to provide project management in repayment of the loans. Again, the evidence of both men is too vague, and the evidence too contradictory, to draw a firm conclusion. It also makes little sense that the parties would have agreed to a project management fee of $150,000 from the outset of the project when they had not even determined the scope of the job, and whether it be a renovation according to Plan A, B or C.
[193] Dino’s evidence about the project management fee was that Stan said that he was going to “shoot” him $150,000, which he acknowledges was lucrative for a short-term renovation that he expected to last for three months. This type of loose discussion may have occurred, on the facts as I have found them, when Stan was still trying to achieve a quick “Henderson flip”, or sometime later. It may have stuck in Dino’s head. There is just no way to be certain given the unreliability of the evidence on these points.
[194] Whatever the subjective intention of the parties was, and it was likely different, the evidence clearly establishes that Kalogon worked on site in the capacity of a general contractor/project manager at risk, overseeing and managing the entire project, negotiating and securing contracts with trades, and ordering and supplying material, from July 2011 until April 2012. The subcontractors and/or trades submitted quotes directly to Kalogon, and not the Papageorges, and Kalogon made payments directly to them except on one or two occasions. During this time Kalogon also provided services in the place of building trades where requested by Stan. The totality of the evidence leads to no other conclusion but that Kalogon undertook the role, whether agreed upon at the outset or not, of doing all work associated with this project other than funding it.
[195] Dino argues that the parties agreed to a 15% overhead/administrative fee from the outset, in addition to the project management fee. He also argues that the evidence establishes that the price and scope of each individual item in the Scott Schedule was explicitly discussed and agreed upon throughout the construction process, so that each item was the subject of a fixed-price contract. I specifically reject Dino’s evidence on both points.
[196] The handwritten notes that Dino relied on in support of his testimony for both the pricing and overhead I find were all created after the litigation began. I find that he kept woefully poor records. Despite the fact that the cheques produced by Dino do not support the amounts that he claims to have paid out to suppliers and trades, he has refused to produce bank records showing these payments. Without those, there is no way to easily substantiate his claims for the amount that he is out of pocket, especially because he stated at his examination for discovery that the maximum amount that he paid in cash was somewhere between $30-$50,000. Other than cheques, no records of payment were produced. Further, the only invoice that Dino rendered was prepared after he was locked out of Oakbank and is dated May 1, 2012. It is the earliest document in existence to suggest that Dino was owed money.
[197] Further, Dino has provided contradictory evidence with respect to the price to be paid by Stan in addition to the $150,000 management fee. On his cross-examination on the claim for lien on October 9, 2013, Dino testified that the only gross profit he was to make on the construction was the $150,000 project management fee. The remainder of his claim was for trades, materials and HST.
[198] At his examination for discovery on November 5, 2015, Dino testified that except for a handful of items built directly by Kalogon, the trades were to be billed to Stan at cost. His evidence was:
Q: And so, other than the $150,000, you weren’t going to make any profits, other than this management fee?
A: No. For every trade that I provided and managed, he would pay face value for everything he asked me to do directly as my company. He would pay again face value. And, at the end of the day, there is a management fee to cover the whole thing. So, you want to make it more clear? So, he has offered me 150 to bring in all sorts of subtrades, and build his house. Now, I manage them, that’s my job. But occasionally there is a trade that would come in, that was awfully expensive, and he didn’t like them and he didn’t want to deal with that. So at that point, he asked me to do that specific trade work, at which point we looked at the estimates we had and we always pitted for that or less, or less… At the end of the day, every other trade was billed with whatever expenses associated with it to Papageorge, was marked down on his invoice, was cost. [Emphasis added.]
[199] A slightly different version of this was pled at Dino’s Reply and Statement of Defence to the Counterclaim in court file CV-12-109855, where at paragraph 33 he pled as follows:
- As to paragraph 38 of the Counterclaim, there was an immediate offer from Stan which was accepted by the Plaintiff for a $150,000 fee payable to the Plaintiff in return for immediate commencement of construction, designed to be included at no cost and all trades that require no supervision will be charged to Stan and Alexandra at cost.
[200] However, nowhere in any of his pleadings does Dino claim that the parties agreed to the mark-ups he is now claiming Stan agreed to, nor does he advance allegations that Stan agreed to 41 separate fixed-price contracts.
[201] At trial Dino explained that when he used the word “cost”, it included his administrative and overhead costs. Such additional costs were to be added to the amounts invoiced by suppliers and trades, because otherwise Kalogon would have to bear such costs.
[202] What Dino has said in his evidence makes some sense. He was asked whether he would make a profit other than the $150,000. His answer was “no”. What I believe that he may have been trying to convey was that any additional amounts that he would bill to cover his own overhead expenses are not considered profit. Were these additional amounts not charged, he would have to cover them as part of his $150,000 management fee, which was to strictly be his profit.
[203] Nonetheless, there is insufficient evidence to support Dino’s claim that a 15% margin was ever discussed or agreed upon with Stan, whether in advance or as the project unfolded.
[204] On all the evidence, I find that Dino agreed to provide general contracting services to renovate this house. There was no fixed price contract or contracts. There was never a clear agreement about how Dino was to be compensated.
[205] It was Stan’s house, whether to live in or to sell. Stan made decisions about what he wanted and how things were to be finished. While Stan may have initially had a budget, that budget was well exceeded. I find that both parties are partially at fault for this; primarily Stan for making demands without regard to budgetary restraints, but also Dino for failing to keep Stan advised of the cost overruns that were being created by Stan’s requirements. Dino could have done this simply by providing transparent, interim accounts supported by material and trade invoices. But Dino’s strengths as a builder certainly do no lie in his ability to keep complete records, and he fell well short of the record-keeping required to satisfy a homeowner of the time and material costs being incurred during the project.
[206] Because I have been unable to find that a contract was made by these parties, it is not necessary to answer the question of whether either party’s conduct constitutes a breach, or whether a contract was wrongfully terminated.
[207] It remains to determine what compensation Kalogon should have received for the work done, and whether it has been overcompensated.
Quantum Meruit
[208] Kalogon has claimed quantum meruit relief in its Amended Statement of Defence and Counterclaim in Court File Number CV-12-466877. Even if not pled, such relief is available if the facts pled give rise to the relief: Almas et al. v. Spenceley, 1972 CanLII 609 (ONCA).
[209] Given the lengthy history of this matter, including a summary judgment motion brought by the Papageorge parties, the examinations for discovery and cross examinations that have taken place in both actions, the Papageorge parties cannot claim to be taken by surprise by the unjust enrichment argument advanced in the closing submissions of the Coliviras parties. Further, the possibility that the court would be unable to find a valid contract between these two parties should always have been seen a distinct possibility.
[210] As I have found, no contract was formed in this case because there was never a meeting of the minds as to the contract price or the scope of the work. Accordingly, this is a case to which quantum meruit would apply: Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., 2007 ONCA 324, 282 D.L.R. (4th) 697, at para. 99; Northridge Homes Ltd. v. Sanhu, 2018 ONSC 5689, 86 C.L.R. (4th) 265, at para. 74. In Consulate Ventures, the Court outlined the two requirements for a successful quantum meruit claim:
(1) The services in question were furnished at the request, or with the encouragement or acquiescence of the opposing party; and
(2) that such services have been furnished in circumstances that render it unjust for the opposing party to retain the benefit conferred by the provisions of the services.
[211] In this case, there is no question that the first element of the test has been satisfied. Whether the second requirement has been met will depend upon this court’s evaluation of whether the Papageorges have received a benefit that exceeds that which they have paid.
[212] In Androus, Master Polika applied the traditional three-part test for restitutionary quantum meruit: (1) an enrichment; (2) a corresponding deprivation; and (3) the absence of a juristic reason for the enrichment. The court determined that carrying out the work and supplying services to an improvement constituted an enrichment: at para. 54. With respect to providing a corresponding deprivation the court stated, at para. 55:
[…] The onus is upon the plaintiff to demonstrate on a balance of probabilities that the value of the work carried out and the goods and services supplied to the improvement exceed the amount paid to the plaintiff by the defendant. If the work done and the goods and services supplied to the improvement by the plaintiff are less than the amount paid by the defendant to the plaintiff, the defendant would be entitled to repayment of the difference.
[213] The parties agree that the Papageorge parties paid the Colovarias parties the amount of $808,000, and another $88,845 directly to Mr Gjergji, for a total of $896,845. This includes the loans totalling $150,000. The court is required to determine the value of the goods and services supplied by Dino, excluding those items or services for which the Papageorges paid directly.
[214] If the work and materials supplied under Dino’s supervision is more valuable than the amounts paid by the Papageorge parties, they will have been enriched with no juristic reason to justify such enrichment.
Valuing the Goods and Services Supplied
[215] The court has been presented with three options for its approach to the valuation exercise.
[216] The Papageorge parties submit that the court should hold Dino to the $602,000 for which he has provided proof of expenditure and draw an adverse inference from the fact that the Coliviras parties originally had 21 potential witnesses on its list and ended up only calling five witnesses. Dino failed to call numerous trades despite that the amount paid to them was in dispute. The Papageorge parties ask that an adverse inference be drawn by the court that the evidence of those missing witnesses would not support Dino’s position, an approach adopted in Ruston v. Keddco Mfg. (2011) Ltd., 2018 ONSC 2919, 49 C.C.E.L. (4th) 113, at para. 48.
[217] The law on adverse inferences has been previously addressed in these Reasons. In McMaster (Litigation Guardian of) v. York (Regional Municipality), 1997 CarswellOnt 3626, 42 M.P.L.R. (2d) 90, Macdonald J. reviewed the law on adverse inference and stated at para. 28:
An adverse inference with varying weight attached to it may occur in circumstances where a party fails to call a material witness, and it is apparent from all of the other evidence in the case that the witness, who was particularly and uniquely available to that party, would have been able to help the court by giving evidence on a material issue.
[218] In this case I am not inclined to draw an adverse inference. These events took place 7 to 8 years before this trial began, and it is unlikely that business records would have been retained that long, as was seen to be the case with Almos Deszi. Furthermore, in this case there is tangible evidence the reconstruction and improvements occurred. Likely having realized that his client’s own records were inadequate, Dino’s counsel wisely sought the intervention of an expert. Both in terms of the reliability and the cogency of the evidence of both expert witnesses, and the savings in trial time, this was the preferable approach over calling numerous tradespeople and suppliers and attempting to revive their memories and records.
[219] The first approach that the Papageorge parties includes taking the costs proven by Dino to have been expended and to add 10% for profit and 10% for overhead. They submit the Dino has not proven that he incurred any more than $602,000 in costs for the project. The 20% markup overall would be consistent with the evidence of the parties’ experts, as well as the jurisprudence set out in Advanced Precast Inc. v. Brown Daniels Associates Inc., 2013 ONSC 2768, 25 C.L.R. (4th) 146 at para. 46; Cleanol Integrated Services v. Johnstone, 2015 ONSC 768, 41 C.L.R. (4th) 199, at para. 51. This would result in a total of $722,400, meaning that they have overpaid Dino by $120,400.
[220] Although the Papageorge parties urge the court to adopt this approach instead of relying on either of the experts’ reports, if the court determines that either of the experts should guide the court’s determination of value, their expert should be preferred. The second and third option is to accept one or the other of the expert’s opinions on the value of the work performed by Kalogon.
[221] Stan’s expert Mel Yungblut of Altus Group Limited came to an independent estimate for each item in the Scott Schedule and arrived at $838,000 plus HST, or $946,940. This approach does not make any allowance for increased costs due to lost productivity, because the Papageorge parties dispute that there were delays caused by numerous changes requested by Stan. It also omits the costs incurred by all the framing changes, including the changes to the roof and ceiling heights and the multiple changes to the interior layout as this court has found as a fact.
[222] Dino’s expert, Stephen Clifford of Woodcliff Construction Consultants Inc., arrived at a figure of $1,291,741. In addition to making an allowance for lost productivity, Dino’s expert claims that Mr. Yungblut failed to price many of the items that Dino alleges to have provided.
[223] Both parties recognize that each of their experts wrongly included the cost of waste removal in the amount of $10,631.66, which was paid for by Stan directly.
[224] In Goulimis Construction Master Wiebe addressed the types of “value” that entitle a contractor to payment. Citing the Supreme Court in R. v. Wallberg (1911), 1911 CanLII 48 (SCC), 44 S.C.R. 208 (SCC), Master Wiebe emphasized that the assessment of “value” for the purpose of a quantum meruit claim turns on what it would have cost the party that benefited, not on what it actually cost the contractor to provide the services of materials during a project (para. 44).
[225] Similarly, in Bruce Baird Construction Ltd. v. Guigues, 1988 CarswellOnt 778, 34 C.L.R. 192 (Ont. Dist. Ct.), the court likewise said that reasonable remuneration must be determined by the value of the work to the owner, and not the cost to the contractor (para. 52).
[226] Given these authorities, the first approach that the Papageorge parties urge upon this court appears to be unsupported on the jurisprudence and so will not be followed.
[227] There are 41 disputed items in the Scott Schedule. Both Dino and Stan provided evidence about each of them, as did their experts. The following chart sets out the values arrived at by each expert, and the value accepted by the court based on all the evidence provided for each item.
[228] There are problematic aspects to each of the expert reports. Where the Woodcliff reports are concerned, the authors never inspected the actual premises. They looked at photographs taken in 2014 to make some of their determinations of the work that was completed in 2011 and 2012. Further, they based many of their numbers on Dino’s description of the scope of work completed by Kalogon and/or strictly on the receipts provided by him.
[229] Where the Altus report is concerned, the author missed some of the gross floor area and failed to include some of the services and improvements to the property. However, Mr. Yungblut did go inside the house and observed and measured the materials and services provided, to the extent possible. The problem with this is that Mr. Yungblut made his observations in 2018. There is conflicting evidence with respect to whether the subsequent contractor who worked for Stan altered some of the materials and finishes. Further, Mr. Yungblut based his opinion on the scope of work as described by Stan.
[230] Overall, I do not prefer the opinion of one expert over the other. For each item in question, where the experts differ there are reasons why one of their values is accepted by the court in preference to the other.
[231] The explanation for each of the values accepted by the court follows the chart. All values include HST. Where Dino’s figures have attempted to charge HST in addition to that charged by suppliers, the additional tax has not been allowed in accordance with the jurisprudence: Proform Construction Ltd. v. Noblestar Properties (Central) Inc., 2001 CarswellOnt 4414, (Ont. S.C.), at para. 13; Traill industries Ltd. v. Sinclair, 2014 BCSC 1759, 34 C.L.R. (4th) 237, at para. 35.
[232] Where possible, I have had to work through the conflicting evidence to attempt to determine the most reliable facts. For some items that has not been possible due to the state of the evidence, in which case the court’s best estimate has been provided. Because of the several adverse findings reached about the reliability of Stan’s evidence, little weight has been given to his testimony regarding the scope of work completed by Kalogon.
| Scott Schedule Number | Item | Kalogon Claims | Papageorges Accept | Woodcliff Opinion | Altus Opinion | Allowed to Contractor |
|---|---|---|---|---|---|---|
| 1 | Lumber – soft and hard | $90,174 | $64,490 | $64,490 | $97,143 | $90,174 |
| 2 | Framing | $43,505 | $30,500 | $43,505 | $38,225 | $38,500 |
| 3 | Stone Supply | $104,525 | $65,291 | $104,525 | $127,719 | $104,525 |
| 4 | Roof shingles | $24,295 | $21,413 | $27,968 | $22,751 | $22,751 |
| 5 & 40 | All stone, concrete and stone pavers | $157,807 | $136,845 | $207,807 | $192,661 | $157,807 |
| 6 | Fascia and Soffits | $20,905 | $5,737 | $20,905 | $7,517 | $7,517 |
| 7 | Stucco | $12,882 | $12,882 | $12,882 | $23,829 | $12,882 |
| 8 | Portico | $18,928 | $7,627 | $17,847 | $7,231 | $17,847 |
| 9 | Caulking | $5,853 | $4,803 | $5,095 | $4,362 | $5,095 |
| 10 | Windows | $25,888 | $14,995 | $25,888 | $18,865 | $25,888 |
| 11 | Exterior Doors | $34,976 | $23,528 | $34,976 | $22,328 | $33,897 |
| 12 | Garage doors | $3571 | $3570 | $3571 | $4023 | $3571 |
| 13 | Exterior Tiles | $12,430 | $1,855 | $12,097 | $0 | $12,097 |
| 14 | Exterior Brick Mold | $2,260 | $0 | $2,260 | $0 | $0 |
| 15 | Railings | $37,855 | $17,000 | $37,855 | $14,701 | $28,500 |
| 16 | HVAC | $20,905 | $9,000 | $20,905 | $12,993 | $18,000 |
| 17 | Electrical | $20,340 | $18,000 | $20,340 | $20,348 | $18,000 |
| 18 | Plumbing | $19,097 | $10,500 | $19,097 | $12,028 | $18,707 |
| 19 | Spray foam | $1582 | $1582 | $1,582 | $0 | $1,582 |
| 20 | Drywall | $41,245 | $10,000 | $41,245 | $54,141 | $41,245 |
| 21 | Floor/wall tiles | $0 | $0 | $0 | $0 | $0 |
| 22 | Stairs | $12,995 | $8,576 | $12,995 | $10,084 | $11,540 |
| 23 | Painting | $15,820 | $7,910 | $15,820 | $9,938 | $13,910 |
| 24 | Interior doors | $9,944 | $9,940 | $9,940 | $12,718 | $9,944 |
| 25 | Interior Trim | $22,600 | $7,500 | $22,600 | $8,635 | $15,618 |
| 26 | Kitchen | $11,300 | $10,000 | $11,300 | $0 | $10,000 |
| 27 | Faux Finish | $3,955 | $2,500 | $3,955 | $0 | $3,500 |
| 28 | Fireplace Mantle | $3,672 | $0 | $7,345 | $1,898 | $2,574 |
| 29 | Kitchen wall | $1,695 | $0 | $1,695 | $0 | $1,695 |
| 30 | Master closet | $6,780 | $0 | $6,780 | $0 | $6,780 |
| 31 | Basement bar | $5,085 | $0 | $5,085 | $0 | $5,085 |
| 32 | LG Aux Heat | $3,650 | $0 | $3,650 | $0 | $3,650 |
| 33 | Central vac | $3,390 | $0 | $3,390 | $3,067 | $3,000 |
| 34 | Grills and handles | $283 | $0 | $283 | $0 | $283 |
| 35 | Labour | $215,204 | $55,000 | $187,079 | $106,826 | $128,680 |
| 36 | Boreholes | $1,605 | $920 | $1,605 | $0 | $1,605 |
| 37 | Caps | $5,085 | $4,500 | $5,085 | $3,910 | $4,500 |
| 38 | Landscape plan | $1,322 | $1,322 | $1,322 | $0 | $1,322 |
| 39 | Hydro bills | $1,130 | $413 | $1,130 | $0 | $413 |
| 40 | Stone pavers | See #5 | ||||
| 41 | Man. Fee & overhead (20%) | $169,500 | 0 | $237,300 | $86,106 | $169,500 |
| Total | $1,194,308 | $568,203 | $1,263,199 | $924,047 | $1,052,184 |
- Lumber – Mr. Yungblut viewed all the lumber products used in the renovated or newly built areas of the house, which are set out in unit measurements of square or linear feet in his report, along with the cost of the material for each area of the home. While Mr. Yungblut did not provide a total cost, Mr. Clifford has done so in his Response to the Altus Construction Cost Estimate. While counsel for Mr. Papageorge suggests that this number is a typographical error, it is not. Mr. Clifford testified as to how he went through the Altus report, which has a different format than his original one, in order to make an “apples to apples” comparison of cost. I have examined each of the line items in the Altus report that comprise the figure of $97,143 and have satisfied myself that they are all lumber costs.
On the other hand, Dino has only been able to produce receipts totalling $64,490 for lumber products, and this is how Mr. Clifford arrived at his first opinion. The sizeable difference between the two numbers confirms two things: 1) Dino was not diligent about saving receipts and documenting his expenses on this project; 2) where Mr. Clifford has just provided an opinion based on receipts produced, his opinion is flawed. Because Mr. Yungblut was able to access the home, review the construction and measure the material used to the extent possible, his figure is the more accurate one. But because it is higher than that claimed by Dino, the amount claimed is accepted.
Framing - Dino has only been able to produce proof of payment to the framer Almos Deszi totalling $30,500. The contract with Deszi Construction indicates that the total price for framing was $25,500 plus HST, which I find was a price reached before the framing of the room above the garage and before all of the changes were made during the construction. Almos Deszi’s evidence was that he was definitely paid more than $30,500. The extra work that he had to do as a result of the changes was charged on a time and material basis. Although his memory was not perfect on this point, he believed that he was paid $38,500 and thought that he either decided to forgo collection of the GST owed on top or collected it in 2012. Mr. Deszi swore an affidavit on December 5, 2016 in which he stated that he was paid $38,500 by Dino. Dino has not been able to show proof of any payment that he claimed was outstanding to Deszi Construction after Dino’s work on the project ended, but Mr. Deszi was firm that he was paid in full and would have gone looking for the money from Dino if it had not been paid. Because I found Mr. Deszi to be such a direct and compelling witness, and because of the amount of changes that I accept were made to this project, I accept his evidence that he received $38,500 in total.
Stone Supply - The most expensive item in the Altus report for the stone supply is at line 115, totalling $95,200 for 4” stone veneer. This was calculated at $28 per square foot, covering 3,400 square feet. Dino testified that the price per square foot was $22, and accordingly this adjustment will be made. Other stone items, such as pre-cast concrete window sills will be accepted at the price measured and estimated by Altus, as there is no contrary evidence.
Dino produced an invoice from King Masonry for stone supply totalling $92,650 inclusive of HST. Although defence counsel made some reasonable arguments about this invoice, this amount appears to be accurate, along with Dino’s other claims of having to obtain additional stone from another supplier when they ran out, plus the cost of scaffolding. Once the price is changed to $22/sq ft, the Altus number of $113,026 reduces to $92,626, with an adjustment to HST for a total of $104,667.
Shingles - Dino has claimed that he is out of pocket $22,953 inclusive of HST for shingles and watershield. He has no backup for the cost of the watershield, which he claims was $1,800. His evidence is that he charged Stan $21,500, and then he added HST again to reach the claimed figure of $24,295. Altus came to a total of $22,751 inclusive of HST, which included roof membrane. The comparison of the figures is striking. The amount arrived at in the Altus report is reliable, but because it is slightly more than that claimed by Dino, the lesser amount will be accepted.
All Stone Concrete and Stone Pavers - Dino claims that he has paid $157,807. The evidence does establish that Stan paid a total of $88,845 to George Gjergji, the owner of Albtrust Construction. Some of that amount - $50,000 – was paid in 2011 and the remainder in 2012. It is the position of the Papageorges that Dino paid an additional sum of only $48,000 to Albtrust with respect to the work at 3 Oakbank, making a total of $136,845. The Altus report values the flagstone and concrete work at this house, which was extensive, at $192,661. Given this differential, the argument of the Papageorge parties that Mr. Gjergji must have been paid in full by March 2012, and that he had only been paid $98,000 by then, was unlikely to be true. I accept the amount sought by Dino, which is less than the amount valued by Altus.
Fascia and Soffits – Dino has been able to provide proof substantiating payment of only $5,737 to Bobis Aluminum for this item. Again, because Mr. Yungblut did not simply work from drawings, I accept his observations and measurements.
Stucco - the parties agree on this amount.
Portico- The main difference here between the experts seems to be about whether some of the material used was precast concrete. Dino testified that it was; the two cheques that he produced for this item were payable to “Concrete Art Features”. They total $7,627.50. He also testified that a crane was required to lift the posts because they were between 2,000-3,000 pounds. This construction of the portico was one of the items that Kalogon provided directly to the Papageorges, and Dino was attempting to keep the price below $20,000. The Altus estimate did not price for precast concrete, either in labour or materials, and omits the cost of crane rental. It is unreasonable to take the position that the only costs for the construction of this portico were those paid to a supplier, especially when it is obvious that the item was erected. It is a substantial structure and I accept that it is primarily built of precast concrete. The value provided by Woodcliff is accepted.
Caulking - I am unable to accept the price arrived at by Mr. Yungblut, as 10 of the windows that were provided by Kalogon were not referenced in the Altus report. Dino has charged HST on the after-tax price of the caulking. Accordingly, I accept the amount calculated by Mr. Woodcliff.
Windows - Dino has only provided proof of payment in the amount of $14,995 to Dominion Doors and Windows. His evidence was that he supplied the property with 23 new windows, all of which were pre-ordered, for a total cost of $22,910 plus HST, which was a reduced builder’s price. The Papageorges have taken the position that the windows were defective but have not stated that they were not installed. Dino had never been told about any problems with the windows; had he, he would have contacted the window company. The price difference of $13,388 between the Woodcliff and Altus reports seems to be that Mr. Yungblut only accounts for 13 out of the 23 windows. This of course is not the only instance where Dino has been unable to substantiate payment for items that were obviously purchased and supplied. The value provided by Mr. Clifford is accepted.
Exterior Doors - Dino has only provided proof of payment to Metric Doors in the amount of $23,529.04, a series of invoices from the same supplier totalling $18,834.84, and a quote for $29,997 plus tax. This did not include the door in the loft. Although Mr. Yungblut did include all five of the exterior doors in his report, I am satisfied that he did not adequately price several pairs with sidelights and glazed swing doors that Mr. Clifford was able to observe in the photographs taken in 2014 and that Dino testified were installed by Kalogon. The amount quoted by Metric Door, which Dino testified that Stan agreed to of $29,997 plus tax, will be used.
Garage Doors - the Papageorge parties have accepted Dino’s claim.
Exterior/Interior Tiles - It is not known why Mr. Yungblut did not include any amounts for tiling. Stan’s evidence is that minimal amounts were done. Stan does not recognize the removal of existing tiles and scratch coat and installation of new tiles in the kitchen, hallway vestibule and second floor balcony. Dino has provided a cheque, cheque stub and invoice, all with respect to G&S Tile & Marble which total $14,118. He is claiming $12,430. Stan particularly disputes the included figure of $5,650, as it relates to tiles ordered on April 1, 2012. However, the invoice notes that the materials are in reference to 3 Oakbank. I accept Mr. Clifford’s pricing, which includes the installation of a drainage system in the second-floor balcony.
Exterior Brick Mold - Dino testified that this material was required to attach the window to the stone, which was then caulked. Brick mold was also used on doors and painted to match the doors. Kalogon did not specifically buy some for this job as Dino had supplies in stock. Brick mold does not appear to have been included in the Altus report at all. The Woodcliff report, in error I find, indicates that they believed that this material was used on exterior short walls at the northeast corner of the property. I believe Dino that the material was supplied to 3 Oakbank, but in the complete absence of any objective indicator of the material’s value am unable to prescribe an amount to this item.
Railings - Dino testified that custom railings were made to run between the 11 exterior perimeter posts surrounding the property. In addition, there were two car gates made for the end of the driveway, a man gate beside that, a railing on the south side leading up to the house, another double gate attached to the house that led to the mudroom, and a Juliet balcony on the north side of the house. Dino described how he and Stan were able to find Domenic Pagliaroli to do the work. They looked at his portfolio and Stan insisted that Dominic be hired to do the work. Dino’s evidence was that Mr. Pagliaroli agreed to do it for $27,000, $17,000 of which was to be paid in cash and the remainder by cheque. The initial agreement was that Stan would make the payments directly to Mr. Pagliaroli. Dino agreed to provide the supervision, and provided Mr. Pagliaroli with the technical requirements. Stan did not show up to pay the cash and instructed Dino to pay it. Dino ended up paying $10,500 on the instructions of Mr. Pagliaroli to Carlos Santoro’s wife, Maria Citrone. Dino claims to have reached an agreement with Stan that he would be paid $28,500, but because Stan was unwilling to come to the site to pay, Dino is now adding a 30% surcharge. This increased the amount sought to $33,500 plus HST.
Mr. Pagliarone testified as a witness for the Papageorge parties. He has had some type of continuing relationship with Stan, as he testified that Stan loaned him money years later, which had nothing to do with Oakbank. Mr. Pagliaroli testified that he was certain that he had only received $17,000 for this job. However, he also testified that he was giving Dino a contractor’s discount, and that that if quoting this job for a private resident the price would be about $24,000. When he was cross-examined in the lien action on February 21, 2017, he testified that this job should have been worth $25-$30,000.
Only the custom steel fence and the two steel gates to the driveway entrance can be found in the Altus report, so it appears that costs were overlooked. Mr. Clifford also makes the point that the Altus report measured 150 linear feet of steel fencing at the property lines, as opposed to 213 linear feet. Based on this evidence, as well is the evidence of Mr. Pagliaroli as to the value of this work to a homeowner, Dino’s initial quote of $28,500 appears to be reasonable and will be adopted.
HVAC - this is another example of where Dino has provided proof of payment in a lesser amount than both experts have priced the value of the work and material. Dino has only shown that he has paid $9,000, whereas both experts place a higher value on the work - Mr. Clifford $20,905 and Mr. Yungblut $12,993. Again, Mr. Yungblut appears to have omitted some labour and material, including waterproofing, insulation and drain for the furnace room in the attic. I have also found that layout changes were required by Stan even after ductwork had been installed, and therefore some amount must be priced for the work entailed in relocating ductwork. Given these findings, the amount of $18,000 will be allotted for ductwork.
Electrical - Dino has produced four cheques payable to Watts & Volts totalling $18,000. He has not produced invoices. It is anticipated that that company would have charged HST as required, and therefore it should not be duplicated.
Plumbing - again, both experts have valued the work in excess of Dino’s proof of payment in the amount of $10,500. Dino’s evidence is that the initial plumber, Dimoski, quit after becoming frustrated with the number of changes made to the master ensuite. There is proof that he was paid $3,000. Thereafter, Dino hired CCI Plumbing & Heating Ltd.. An invoice dated January 18, 2012 has been produced in the amount of $15,707 including tax, which shows charges including nine revisions and an entry that reads “although three quarters of a day was spent taking Stan to plumbing supplier to pick plumbing fixtures, plumbing fixtures were not finalized and/or confirmed”. Again, I cannot accept the amount in the Altus report because the scope of the work pertaining to the plumbing in the media loft over the garage was missing. I accept the recommendations in the Woodcliff report for the amount paid for plumbing.
Spray Foam - Dino testified that this material was used on steel beams. Dino has produced proof of payment in the amount of $1,582 inclusive of tax. No contrary evidence has been provided, and accordingly that sum will be used.
Drywall - this is another example of an item for which Dino has supplied proof of payment in a much lower amount both than claimed, and lower than the values ascribed by both experts for this work and material. Mr. Yungblut provided a value for this item that is almost $13,000 higher than that provided by Mr. Clifford. It is safe to accept the amount claimed by Kalogon. This court also ruled that the Papageorge parties would not be permitted to reduce the amount that they had previously accepted for this item on a Scott schedule dated November 2018.
Floor and Wall Tiles – in accordance with Kalogon’s submissions, this item is included in the tiles covered in item 13.
Stairs – The stairs for the home to access the upper east side storey were ordered from Platinum Stairs on October 17, 2011, showing a contract price of $8,576.70. Dino’s evidence is that the stairs to access the loft were ordered much later, at a price of $3,500. He has produced cheques showing payment of the full contract price for the main staircase, and another cheque dated February 20, 2012 in the amount of $1,243. His evidence was that this was a deposit for the oak stairs with closed risers that were installed to access the loft. Additional amounts are claimed for material needed for the installation. There is no dispute that both staircases were installed by the time that Dino was locked out. The Altus estimate is higher than the amount that the Papageorge’s accept, indicating that Dino likely paid more than $1,243 for the second staircase. Examining the evidence and the photos showing the apparent quality of the staircase to the loft, I accept that the amounts accepted by both experts is reasonable and select a median figure of $11,540.
Painting – Dino’s evidence about painting was that he obtained an estimate from B & B Painting for $22,000. He told Stan that the price for painting the house would be “around $25,000” and Stan initially agreed. Stan then checked around himself, accused Dino of trying to “gouge” him and obtained a price from someone else for $2 per square foot, which he thought translated to $9,000. Dino told him to go back and check because the square footage would be four times that amount when painting walls and ceilings; his evidence is that Stan did so and the estimate was revised to $48,000. Stan thereafter asked him to call B & B Painting, even though Dino had already cancelled his contract with them, and ask that they do the painting. B & B Painting had only applied two coats of primer by the time Dino was locked out of the premises. Dino therefore breached his contract with the company and was able to negotiate payment of only one half of the contract price. He explained that this was the second time they had been fired on this project and they lost out on other potential contracts as a result. Dino also hired a company called 2 Stars Painting, which provided sanding and staining of one set of stairs and the garage doors. Although the Altus report opines that the value of the painting was slightly less than $10,000, on cross-examination Mr. Yungblut conceded that he had underestimated the gross floor area and therefore underestimated the value of the priming. This court has no difficulty accepting that the cheques produced by Dino for priming, as well as the staining, totalling $7,910 do not fully represent the amount that these contractors were paid for the work done. I accept Dino’s evidence that he paid $11,000 to B & B Painting and $2,910 to 2 Stars Painting for a total of $13,910.
Interior Doors - the Papageorge parties have accepted Dino’s claim of $9,944.
Interior Trimming - the only proof of payment Dino has provided with respect to interior trimming is a cheque for $7,500. Stan’s evidence with respect to the state of completion of the trim at the time Dino was locked out was that it was only partially completed. Dino’s evidence was that the scope of work completed was the installation of solid MDF paint grade trim for baseboards, door jams and treads, window casings, ceiling mouldings, six 14 x 14” decorative maple solid columns, a wooden railing on the staircase, a powder room shoe rack, as well as revisions to five window trims requested by Stan and relocation of the decorative columns and walls at the main entrance. Once again, the difficulty with accepting the Altus estimate is that, in part due to reliance on Stan’s word, it omits the stair rails, six solid maple decorative posts and the powder room shoe rack, and measures the scope of the interior trim at 936 feet less than Kalogon claims to have installed. Based on the photographs and Dino’s evidence I cannot accept the scope of work set out in the Altus report, but Dino has also not satisfied the court on the value of the work and material provided by Kalogon. Again, the median price between the values supplied by the two experts will be used in the amount of $15,618.
Kitchen Cabinets - Dino has provided proof of payment to Albatross Wood Working & Design Inc. in the amount of $10,000 for a deposit on the kitchen. Albatross was hired to provide kitchen cabinetry. Dino is attempting to also charge $1,300 for HST, which is disallowed for the reasons previously set out.
Faux Finish - this item is with respect to a fireplace supplied by Kalogon in the basement. It has not been included in the Altus report; Mr. Clifford found that the amount claimed by Kalogon was reasonable. Dino has produced four cheques totalling $3,500 payable to Bill McGregor. His evidence is that all were for Oakbank. The Papageorge parties are unwilling to accept $1,000 of this amount because they submit that McGregor may have worked at 907 High Valley in 2012, and the cheques produced by Dino are cut off and inconclusive evidence. In the absence of a competing value from Altus, I accept that $3,500 is reasonable for this item.
Fireplace Mantle – Kalogon obtained an initial quote for the installation of a limestone mantel in the living room, which was $15,707 inclusive of HST. Stan asked Dino whether Kalogon could supply this item more cheaply; Dino’s evidence was that he and Stan agreed on a price of $6,500 plus HST. Dino agreed that the framing work was begun but not completed. The Altus report prices the value of the framing at $1,898; the Woodcliff report opines that that number is low because the estimate was for wood mantles. Dino’s evidence is that he reduced the contract price to $3,250 plus HST because of the incomplete work. No evidence was provided about the price of the limestone mantle itself, so it is very difficult to place a value on this item. Again, the median price between the values supplied by the two experts will be used in the amount of $2,574.
Kitchen Wall - Kalogon obtained an initial quote for the installation of a limestone-cladded wall in the kitchen from Parsiena design in the amount of $14,690. Stan asked Dino whether Kalogon could supply this item more cheaply; Dino’s evidence was that he and Stan agreed on a price of $1,500 plus HST. The wall was completed by the time Dino left and he was never advised of any problems with it. The photograph of the wall that is in evidence shows that the framing for the wall was completed, but the photograph is undated. The Papageorge parties, and their expert, place no additional value on this wall as they believe that it should be subsumed within the framing costs. The evidence has satisfied me that this wall was a separate item supplied by direct contract with Kalogon and that the value charged for it by Kalogon is reasonable, as opined by Mr. Clifford.
Master Closet – Dino’s evidence was that Kalogon obtained an initial quote for the manufacture and installation of custom cabinetry for the master bedroom in the amount of $16,700 after Stan requested to have a closet installation. Stan asked Dino whether Kalogon could supply this item more cheaply; Dino’s evidence was that he and Stan agreed on a price of $6,000 plus HST to built paint grade cabinetry and a makeup table. The closet was constructed and then had to be removed when Stan demanded that a wall be moved to increase the size of the living room. The cabinetry was then reinstalled or rebuilt and Dino had the cabinets reconfigured to be used by the family room fireplace. The Papageorge parties and their expert place no additional value on the supply of the closet cabinetry as they believe that it should be subsumed within the framing costs. The evidence has satisfied me that this item was a separate item supplied by direct contract with Kalogon and that the value charged for it by Kalogon is reasonable, as opined by Mr. Clifford.
Basement Bar – this was another item for which Stan made a direct contract with Kalogon. The photograph shows that the bar was completed except for one small piece, which Dino said was constructed but not attached. The Papageorge parties were only willing to pay $2,000 of the contract price of $4,500 plus HST because they took the position that the bar was only partially completed, but in the last iteration of the Scott Schedule they changed that position to $0. The bar is constructed of solid maple and includes custom cabinetry including wine racks. As opined by Mr. Clifford, the contract price is a reasonable estimate of value.
LG Aux Heat – this item refers to an electric furnace that Kalogon claims to have installed in the loft above the garage. The Papageorge parties dispute payment on the basis that no invoice has been provided. But Stan’s evidence acknowledges that the furnace was installed by Kalogon. Dino explained that the electric furnace had to be installed because the gas lines did not have enough capacity for the installation of a gas furnace, and in his evidence showed a picture of the access door built to the space housing the furnace. The Kalogon parties did not provide evidence of cost. On the existing evidence I accept that the furnace was provided, and that the value charged is reasonable, as opined by Mr. Clifford.
Central Vac - Dino claims to have paid AAA Construction $3,000 with respect to installation of the central vac but has not produced an estimate or invoice. There is a dispute in the evidence about the degree to which this item was complete at the time. However, for the scope of work that was described to Mr. Yungblut as having been completed by Kalogon, Mr. Yungblut estimated the value to be only $323 less than what is being claimed for this item. Because the subcontractor was paid only $3,000, I infer that this was inclusive of HST and so cannot be double charged.
Grills and Handle - This item is for the supply of vent grills and the handle for the front door. Dino has not supplied evidence of this claimed cost of $250 plus HST. His evidence is that they were contained in his stock of supplies. The Papageorge parties dispute that this is a proper charge, yet do not provide evidence that they had to purchase the grills or the front door handle. Accordingly, I accept that the items were supplied by Kalogon and have a value, which Mr. Clifford found to be reasonable.
All Labour – this item is for both unskilled and skilled labour supplied by Kalogon for: demolition of the interior of the house, which had to be done by hand; disposal of demolished material; removal of all floors and roof; removal of the second roof; removal of old concrete, complete in-fill work and provision of assistance to various trades in order to keep the cost of trade contracts down, especially due to numerous revisions. Dino also claims a 10% profit and 10% overhead on the labour charge of $158,705.
This is an item about which I specifically reject Dino’s evidence because of the amount of money that he claims to have paid his brother, Tom Koliviras. He considered Tom to be the site supervisor, to whom he claims to have paid the sum of $119,620. For several reasons, including that I am not satisfied that all the cheques that have been produced pertain to this project, Dino’s documentary evidence is once again not satisfactory to establish the labour claim. Similarly, the Papageorge’s position is again unrealistic, and falls $51,826 short of their own expert’s opinion of value.
On this item I am more inclined to accept a value closer to Mr. Yungblut’s opinion than Mr. Clifford’s. The Woodcliff value is based upon 33 weeks of labour and the Altus value is based upon 22 weeks of labour. The latter accepts that the construction period was from August 2011 to the end of 2011, while the former accepts that the construction period was from July 15, 2011 to March 2, 2012. There are no clear records of when demolition began, but I accept that it would not have been in the first week after the deal closed, when the property was relisted. But I find demolition was underway before July 30, 2011, as that was the date of the first cheque paid to Kalogon. The bulk of the work was done by the end of that year, as Dino testified, and there was no need for daily labour or an onsite construction manager thereafter, although I accept that some trades were on site in 2012 and work did continue, on a reduced scale.
The Altus amount for general labour costs, excluding waste bins, is $112,656. But for the reasons previously described, I find that there should be an additional amount, whether characterized as lost productivity caused by having to re-do work previously done, or simply additional man hours caused by those changes that were required by this project due to Stan’s requests for alterations after building had occurred. I accept Mr. Clifford’s explanation for why a 15% increase on the general labour costs should apply, in this case 15% of $94,536, or $14,180. With tax, the revised amount is $128,680, excluding the waste bin disposal that was paid for by Stan.
Boreholes - There were 11 concrete piers required to be installed for the perimeter fencing. Each one required a borehole. Although Mr. Yungblut submitted that the cost of this was included at #447 of the Altus report, it is not described as being included. The Papageorges only accept $920 for this work because Dino has only shown proof of payment for that amount. Mr. Clifford finds that the amount charged by Kalogon is reasonable. This is an item for which there can be no debate that 11 boreholes were required and installed before Kalogon’s work ended. Therefore, there is little room for Mr. Clifford’s pricing to be incorrect, and as such will be accepted.
Caps – the caps were supplied and installed to the stone pillars for the perimeter fencing. The only dispute is that Kalogon is attempting to charge HST in addition to the amount paid to Procrete Design Solutions. For the reasons already explained, additional HST will not be permitted.
Landscape Plan – the Papageorge parties have accepted Kalogon’s claim of $1,322.
Hydro – Dino’s evidence is that he paid this bill three times because Stan failed to pay it. He has produced proof of payment dated March 6, 2012 in the amount of $413. Absent further documentary proof, only that sum can be accepted.
Stone Pavers – this item was dealt with together with item #5.
Management Fee – Kalogon claims $150,000 plus HST. The Papageorge’s are unwilling to pay any amount for this item, because of their position, which I have agreed with in part, that no deal was struck to pay Dino a management fee. But that does not mean that a management fee for this project, which went on at varying degrees of intensity for up to 9 months, is not warranted. Someone co-ordinated and managed this project, and Dino was that person. The only question for the court is what value to place on his services.
The Woodcliff report recommends a management fee of $210,000 plus HST. It is premised on an original management fee of $150,000 charged by Kalogon, which was 19% of an original construction budget of $791,000. It is not clear to the court how that construction budget was derived. The Woodcliff report notes that the construction costs increased by about $310,000, or 39%. Mr. Clifford testified that it is an industry standard to mark up that extra work; in this case by $60,000 ($310,000 x 19%), which Kalogon did not claim. The Woodcliff report recommends a management fee of $210,000 plus tax. Mr. Clifford testified that a management fee will depend on the size and scope of the project, but typically in the industry 10-15% will be charged as pure profit. This does not consider any component for overhead.
Mr. Yungblut also accepts that a management fee is appropriate, and values it at $76,200 before tax. This is based upon a calculated construction budget of $692,434, which I have found to be inaccurate because of deficits in the calculation of gross floor area and the omission of some materials and services. Mr. Yungblut’s calculation of the project management fee is calculated at 11% of the construction budget. Mr. Yungblut accepts that a project management fee of 10%, or profit, along with a 10% fee for overhead, would be within industry standards.
I agree that there should be both a profit margin and overhead costs, and find the Altus formula to be reasonable. This court has calculated the construction costs at 882,684. Applying 20% for the management fee/overhead leads to the sum of $176,537. However, because this is more than what is being claimed, the amount claimed by Kalagon will be awarded.
[233] The court has found that the allowable amount owed to Kalogon is $1,052,184. There is no dispute that the Papageorges have advanced $896,845 for the work done by Kalogon, including the loans, which would leave $155,339unpaid. However, it remains to be determined whether there were any deficiencies in Kalogon’s work that Stan had to correct.
Deficiencies
[234] Kalogon was never presented with a list of deficiencies during the time that it was on site, or otherwise brought deficiencies to Dino’s attention until after the litigation began. Most importantly, Dino was never given an opportunity to even inspect the alleged deficiencies before they were addressed by another builder.
[235] However, the findings made by this court establish that Kalogon failed to provide transparent accounts to Stan during the project. I find that his failure to properly keep records of Kalogon’s costs and expenditures was what led to a fundamental loss in trust between builder and homeowner. I accept their evidence that there was at least one meeting at Dino’s office prior to Dino going to Greece in the spring of 2012 that was prompted by Stan’s frustration over the lack of records and Dino’s attempt to show him what was owed. But I do reject that they came to any sort of understanding at the conclusion of the last meeting, and place no reliance on the note that supposedly was created at that meeting. Like most of Dino and Stan’s evidence about their supposed “understandings”, the evidence about what transpired at that meeting is too vague to be reliable. But in all of the circumstances, I find that it was reasonable for the Papageorge parties to look to other professionals for assistance instead of first approaching Dino or the trades hired by him to come back to correct any defects.
[236] Almost immediately after removing Kalogon from the property, Stan hired another contractor to inspect the work done by Kalogon, Gavin Thompson. The Papageorge parties filed an affidavit and produced Mr. Thompson for cross-examination. Mr. Thompson took on the role of project management to rectify deficiencies and to finish the work left uncompleted after Kalogon was locked out. It is the position of the Papageorge parties that they are only claiming damages for the cost of repair, and not the completion costs. Mr. Thompson’s evidence is that the total cost of the deficiency work alone was $107,064.70. The Papageorge parties claim this amount in damages, to be set off against any amount found to be owed to Kalogon.
[237] Mr. Thompson’s affidavit contains a statement that, in his opinion, the value of the work done by Kalogon was worth no more than $600,000. I have given no weight to that opinion, as Mr. Thompson is not a quantity surveyor like Mr. Clifford and Mr. Yungblut. Further, I have no evidence that Mr. Thompson was made aware of the number of revisions and changes encompassed in the scope of the work done by Kalogon.
[238] As with the rest of the evidentiary record in this case, there are problems in the area of deficiencies. Mr. Thompson says that he took photographs of all the deficiencies, although this is not referenced in his report. He put the photographs on a USB stick and gave it to Stan. Stan testified that he misplaced it. Photographs may have assisted, but their absence is not determinative.
[239] After considering all the evidence, I am satisfied that the Papageorge parties have established that some deficiencies existed in the work completed by Kalogon, but not all that have been claimed. Some items claimed cannot be characterized as deficiencies.
[240] The work done to repair deficiencies was broken down by Mr. Thompson into various divisions. The amount allowed to the Papageorges is set out in the following chart, with explanations following:
| Division | Amount claimed | Amount allowed |
|---|---|---|
| 1 Photocopies | $368 | $368 |
| 2 Updated drawings | $3,955 | $3,955 |
| 3 Engineering design | $1,554 | $1,554 |
| 4 Site supervision | $28,788 | $28,788 |
| 5 Revised building permit application | $1,500 | $1,500 |
| 6 Cleanup site | $1,688 | $0 |
| 7 Disposal bins | $3,955 | $0 |
| 8 Demolition | $1,148 | $861 |
| 9 Exterior drainage | $2,486 | $0 |
| 10 Concrete patching | $1,017 | $0 |
| 11 Repair stonework | $2,260 | $0 |
| 12 Metal | $2,034 | $2,034 |
| 13 Steel beam | $376 | $376 |
| 14 Wood and framing | $8,633 | $8,633 |
| 15 Caulking | $904 | $904 |
| 16 Re-hang doors | $2,034 | $0 |
| 17 Install window | $209 | $0 |
| 18 Drywall | $16,792 | $15,952 |
| 19 Cleanup drywall and paint spills | $2,712 | $0 |
| 20 Heating and cooling | $14,125 | $9,125 |
| 21 Plumbing | $4,859 | $0 |
| 22 Electrical | $5,650 | $0 |
| Total | $107,047 | $74,050 |
Photocopies – Mr. Thompson incurred this cost to provide photocopies of new drawings for distribution to trades and to submit to the City of Vaughn. As I have also found that new drawings were required, this is a reasonable expense.
Updated drawings – it was Dino’s evidence that the final building did not match the plans that he submitted to the City on October 31, 2011 and finally approved in December. Mr. Thompson’s evidence is that that was the case. It was for this reason, as testified to by the building inspector Vince D’Avino, that the framing inspection never passed. I am satisfied that updated architectural drawings were required.
Engineering design – I am satisfied on the evidence of Mr. Thompson and Brent Derby, the HVAC technician who was brought in to help with repairs, that there was a visible load problem between the upper and lower storeys created by failing to build a load bearing wall on top of the concrete block wall in the basement below. Mr. Derby’s evidence was that part of the floor “bounced” when he stepped on it, and he did not want his crew in the home until the structural repairs were completed. While Dino advanced a theory that the wall had been moved after he was locked out, Mr. Thompson’s first site meeting occurred on April 30, 2012, making this an unlikely theory given that Dino found himself locked out earlier that same month after returning from Greece.
Site supervision – Mr. Thompson’s evidence is that he was on site to co-ordinate the rectification work for a period of four months, during which time he received $28,787.57, over $7,000 per month. While this is on the very high end of what a site supervisor would receive according to the evidence of both experts, it falls within the range.
Revised building permit application – a necessary cost to include the rooms, such as the loft over the garage, not shown on the plans originally submitted.
Cleanup site – I am not satisfied that this is a cost properly claimed as a deficiency, as it is typically work done by a contractor at the completion of the project.
Disposal bins – Stan had paid for these when Kalogon was on site for reasons never fully explained, and so I am not satisfied that the associated costs should be borne by Kalogon.
Demolition – As this is to take down part of the walls in the master bedroom and bathroom in the area of the load bearing wall, and the dining room entrance, part of it is allowed. What is unexplained is why there had to be yet another deconstruction of the master bedroom closet, as no problems have been identified in the area of the closet. A reduction by 25% is made.
Exterior drainage – this was a change that is not required to comply with the Ontario Building Code, and Mr. Thompson conceded that it was not a deficiency.
Concrete patching – same as above.
Repair stonework – This work related to preparing a stone opening for a window, which I find was not a deficiency for reasons explained below, and for repairing visible saw kerf marks and replacing the fiberboard capping around the garage door. The amounts for each item of work are not broken down. Included in the cheques attached to Mr. Thompson’s affidavit is a cheque in the amount of $13,845 payable to Albtrust Construction, the same company that originally did the stonework. Again, it is not clear from the evidence who is responsible for the need for stone repair around the garage, but it is not a cost that should be borne by Kalogon if the marks were created by Albtrust originally. Also, it seems that some or all of the cost of replacing the fiberboard capping may be repeated in the following category. This part of the deficiency claim fails for lack of evidence.
Metal – the costs incurred for this item were for a metal scupper required to direct water from the flat roof over the main front entrance to the eavestrough, and a decorative metal capping to replace the fiberboard capping. The metal scupper is an entirely new item and so not correctly characterized as a deficiency. The decorative metal cap may be an unnecessary upgrade. Again, there is no breakdown between these items. This part of the deficiency claim fails for lack of evidence.
Steel beam – this was needed to correct the structural deficiency in the loadbearing wall earlier discussed and so is properly included.
Wood and framing – This cost included the installation of new materials recommended by the engineer to correct the lack of proper load bearing discovered by Mr. Thompson, as well as framing a new space in the attic space to house a heating unit for the loft above the garage. These are proper deficiency costs.
Caulking – uncaulked exterior areas that were either not originally caulked or need to be re-done after repairs are a proper deficiency cost.
Re-hang doors – These adjustments to doors is work that Kalogon would have been required to complete at the end of the project and is not properly characterized as a deficiency.
Install window – This window was on the original plan but was not installed, as Dino testified, because Stan wanted it removed after it had been placed in the wall. It is not a deficiency.
Drywall – Other than in the master bedroom closet, I am satisfied that all additional drywall work was required as part of the correction of deficiencies. Some of this was necessitated by the lowering of the ceiling in the loft to permit ductwork that was required to be installed as part of the new heating design. No heating design had previously been approved by the Town for this room, as it was not on the submitted drawings. A 5% reduction is applied to account for the closet.
Cleanup drywall and paint spills – This is work that Kalogon would have been required to complete at the end of the project and is not properly characterized as a deficiency.
Heating and cooling – Brent Derby, who has been an HVAC contractor for 35 years, testified about the problems in this category. Mr. Derby was paid $33,996.25 to repair and complete the HVAC issues; only $14,125 of that amount is being attributed to deficiency work (approximately 40%). I accept the evidence of Brent Derby about the observations that he made and the work that he carried out. Mr. Derby was an independent and careful witness with expertise in this area.
The original stamped drawings showed a York 37,000 Btu output furnace to be installed in the attic above the second-floor addition at the east end of the home. A Goodman 70,000 Btu unit had been installed under Kalogon’s direction. Mr. Derby explained that this oversized unit would have burnt itself out due to overheating. There were problems with venting into the attic and there was also no safety drain pan, filter or heat ducts in place. The unit was completely drywalled in, with no access. This all required rectification.
The gas lines from the gas meter into the house were found to be leaking. There is no evidence that new gas lines had to be installed during the period of Kalogon’s work and so it is not clear why this would be a deficiency in their work.
There was no air conditioning unit on site; Mr. Derby installed two. This is not a deficiency. Mr. Derby agreed that it was included in the $33,996 that he charged and it appears to be part of the scope of deficiencies included by Mr. Thompson in the amount claimed. Mr. Derby said that the costs were between $4,500 and $5,500.
The kitchen exhaust was not to Code. There is no evidence that Dino had installed the exhaust unit.
The duct work in the basement was poorly installed and incomplete. There is no evidence that Dino had installed duct work in the basement.
The existing basement furnace was not functioning and appeared to be clogged with dust. Other problems with the furnace were that the exhaust piping had not been updated to modern PVC specifications. Mr. Derby’s evidence was that the furnace required replacing because it was clear that it had been run during the construction period.
The room over the garage was heated with a forced air electric furnace, which Dino testified had been installed by him. No heat loss calculations were available as the room was not on the original drawings submitted. The levels of insulation found in the walls and ceiling were not compliant with the Building Code’s requirements for an electric heating system. The ceiling had to have duct work installed. Mr. Derby’s affidavit does not address the work in the loft in any manner, and there appears to be no allotment for the work in this category.
The deficiency costs claimed in this category are for finishing missing ducts, installing the correct size exhaust fans and furnace exhaust piping, installing three new air conditioning condensers, and repairing the leaking gas lines. Attempting to strike a balance, the sum of $5,000 will be deducted for the air conditioning units, and the remainder allowed.
Plumbing – Mr. Thompson’s report indicates that the plumbing was never completed, and that drywall had to be removed to allow plumbing rough-ins to be connected to the water lines. I am not satisfied that this is a deficiency, as opposed to work that Kalogon would have been required to complete in due course.
Electrical – the same electricians, Watts & Volts, was hired by Mr. Thompson. Neither his evidence or his report explains how the same electrician could legitimately charge to redo his own deficient work. This is either not a valid charge for a deficiency or pertains to new work.
[241] In summary, I find that when Kalogon was terminated in April 2012 there was deficient work that required rectification at a cost to the Papageorge parties of $74,050. Deducting this from the amount owed to Kalogon by the Papageorge parties leaves a balance owing of $81,289.
Interest on the Loans
[242] As has been determined, taking the loans into account still results in the Papageorge parties owing money to the Coliviras parties. Accordingly, I find that satisfaction of the loans was made during the construction period, or at least by the date that Dino was locked out in 2012. No demand was made for payment of the loans before that time. No interest can be awarded.
Registration of Lien
[243] Kalogon registered a lien in the amount of $300,000. The Papageorge parties seek damages for registration of an excessive lien pursuant to s.35 of the Construction Act, R.S.O. 1990, c. C.30. The lien was vacated on February 4, 2014 when the Papageorge parties paid $350,000 into court.
[244] Section 35 of the Construction Act provides that a person who preserves a claim for lien for an amount the person “knows or ought to know…has been wilfully exaggerated” or who “knows or ought to know that he or she does not have a lien” is liable to any person who suffers damages as a result.
[245] The findings of this court confirm that Dino did have the right to a lien, at least in the amount of $155,339. There is no evidence that Dino was aware of any deficiencies claim when he registered the lien. Nor is there any clarity about whether he took the loans into account in his calculations.
[246] I agree with the submissions of counsel for the Coliviras parties that the evidence falls short of showing that Dino wilfully exaggerated the lien.
Money Paid into Court
[247] The Coliviras parties are entitled to immediate return of the money posted into court pursuant to the orders of Mulligan, J. and Vallee, J., with accrued interest.
Summary of Findings
[248] Summarizing the major findings made by this court:
The purchase of and work done at 3 Oakbank was not part of a joint venture;
There was no contract reached by the parties prior to or during construction;
Kalogon is entitled to be compensated on a quantum meruit basis;
Kalogon was hired by the Papageorge parties as a general contractor;
Kalogon is not entitled to a project management fee of $150,000 plus GST;
The value of the work done under Kalogon’s supervision or directly was $1,052,184;
There were deficiencies arising under Kalogon’s supervision at a cost of $74,050;
The Papageorge parties advanced $896,845 for the work done under Kalogon’s supervision or directly, including the loans;
The Papageorge parties owe the Coliviras parties $81,289;
No damages are owed to the Papageorge parties pursuant to the Construction Act;
That the money paid into court by the Coliviras parties should be immediately returned to them, plus interest; and
That no interest is owed to the Papageorge parties on the loans.
Order
[249] This Court orders that Kalogon Spar Ltd. shall have judgment against Stanley and Alexandra Papageorge in the amount of $81,289 plus prejudgment interest pursuant to the Courts of Justice Act from the date of the claim.
[250] This Court orders that the money paid into court pursuant to the orders of Mulligan, J. and Vallee, J. shall be forthwith paid out, with interest, to Kalogon Spar Ltd.
Costs
[251] If the parties are unable to reach an agreement on costs of the actions including the Scott Schedule motion heard at the outset of trial, they are to provide written submissions no longer than ten pages in length, plus a Bill of Costs and any offers to settle, on a reasonable timeline to be agreed on between counsel. The final submission must be received, however, by no later February 28, 2020. All material is to be submitted to the office of the judicial assistants in Barrie.
HEALEY J.
Released: January 31, 2020