SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Hélène Larochelle and Michael Nimchuk, Plaintiffs
AND:
Elite Environments Inc., Landscape by Evergreen Ltd., Antonio Savoia and Lucio Savoia a.k.a. Lou Savoia, Defendants
BEFORE: Pinto J.
COUNSEL: Tanya Walker and Jordan Routliff, for the Plaintiffs
Robert Brown, for the Defendants Elite Environments Inc. and Antonio Savoia
Anthony Colangelo, for the Defendants Landscape by Evergreen Ltd. and Lucio Savoia a.k.a. Lou Savoia
HEARD: November 30, December 1, 2, 3, 4, 7, 10, 11, 2020
reasons for decision
Overview
1This trial concerned a dispute between the plaintiff owners of a residential property in Toronto and the defendant contractors who renovated their backyard.
2The defendants are two corporations and their principals:
(a) Elite Environments Inc., a landscape and home renovation company;
(b) Antonio Savoia, the owner and principal of Elite;
(c) Landscape by Evergreen Ltd., a design build landscape construction company; and
(d) Lucio Savoia a.k.a. Lou Savoia, the owner and principal of Landscape and the uncle of Antonio Savoia.
I shall refer to the personal defendants as Antonio and Lou given their common last name. I shall also refer to the individual plaintiffs as Hélène and Michael.
3For the reasons that follow, I find that:
(a) The parties to the 2016 Contract were the plaintiffs and Elite. Landscape was a subcontractor.
(b) The parties to the 2017 Addendum Agreement were the plaintiffs, Elite and Landscape.
(c) There was no fundamental breach of contract by the defendants.
(d) Piercing the corporate veil of Elite and Landscape is not justified.
(e) The plaintiffs breached the 2016 Contract and Addendum Agreement by preventing Elite and Landscape from returning to the property to fix deficiencies and complete the project.
(f) Elite and Landscape are owed damages by the plaintiffs.
(g) Landscape’s counterclaim against the plaintiffs is dismissed.
(h) The defendants are awarded their costs of the main action; the plaintiffs are awarded their costs of the counterclaim.
Facts
4The plaintiffs’ property, bought in 2014, is a Victorian two and a half storey detached house with a backyard. The lot size is 26 feet wide by 161 feet deep. At the time of the renovations in 2016 and 2017, the house contained three residential units. The plaintiffs lived in one of the units and rented out the other two.
5The plaintiffs completed interior renovations in 2015. In or around early 2016, they decided to significantly renovate the back of their property. They wanted to add ground level decks, a second storey deck, new fencing, hard landscaping (stone pavers and stone planters) and soft landscaping (plants and landscape material). They also wanted to install a work shed and a carport. At the front of the property, the plaintiffs wanted a wrought iron fence and a new secure gate leading to the backyard.
Events in 2016
6In March 2016, the plaintiffs attended the National Home Show in Toronto and came across the Elite booth. They discussed their renovation plans with Mark Savoia, Antonio’s brother. Mark advised the plaintiffs that Antonio would contact them regarding next steps.
7On March 27, 2016, Antonio attended the plaintiffs’ property to get a sense of the project. By April 19, 2016, Antonio produced concept drawings for which the plaintiffs paid $800. The plaintiffs also checked Elite’s references.
8On April 22, 2016, the plaintiffs signed a renovation contract which I will refer to as the 2016 Contract. No drafts of the contract had been previously sent to the plaintiffs. The contract, a copy of which is appended as Schedule A to these Reasons, was on Elite’s letterhead. Below the letterhead, in smaller print, Elite and Landscape and their respective HST numbers were referenced. The contract was for a fixed price of $175,000. The contract was three pages in length. The first two pages contained 14 line items with pricing for each. The third page contained ten “Terms and Conditions”, one of which states, “Any necessary permits required for the landscape project, are the responsibility of the home-owner to obtain, unless otherwise stated.”
9The payment terms of the contract were:
20% on signing
15% on commencement
40% after gravel bases and all deck supports are installed
15% after all hard landscaping is completed (not including soft landscaping)
10% on completion
10There was no signature line for Elite on the contract, but there was a signature line for Landscape. Antonio signed his name on Landscape’s signature line. Hélène signed her name on the home-owner signature line. Antonio added handwritten notes to the printed contract and Hélène initialled the changes before signing the contract.
11Antonio’s handwritten notes included:
Extend front of workshop 3 columns
Permit drawings for carport/deck
Trench for plumbing
12On April 22, 2016, the plaintiffs paid $35,000 by cheque to Elite constituting the first payment of 20 percent of the total contact price.
13On May 2, 2016, the two corporate defendants entered into an Assignment Agreement, the terms of which involved Elite paying $17,000 to Landscape, and Landscape taking over full responsibility for the implementation of the 2016 Contract and receiving the remainder of the project payments.
14On May 24, 2016, Michael attended at the Permits desk at the City of Toronto and received comments about the first set of concept drawings for the plaintiffs’ deck and carport permit applications. That afternoon, Michael summarized the Permit Clerk’s feedback in an email to Antonio. Philip Beuglet, an architectural technologist hired by Antonio to provide the permit drawings, responded to the email. Late that evening, Beuglet sent revised carport drawings to the plaintiffs. The following day further emails were exchanged about the drawings. On May 28, 2016, Beuglet provided the final carport package to the plaintiffs. On May 31, 2016, Michael submitted the revised deck permit and carport permit applications to the City of Toronto.
15On June 2, 2016, the City rejected the permit application due to missing information. A tree declaration form was missing, and the carport permit drawing included a proposed second floor deck that should not have been shown on the application. The permit application was corrected and resubmitted on June 2, 2016, but rejected again by the City on July 3, 2016, this time due to problems with formatting of the application. The application was revised and submitted successfully on June 6, 2016.
16On June 3, 2016, the plaintiffs wrote a cheque for $26,500 to Landscape constituting the next contractual payment of 15 percent on commencement of the project. The cheque was originally made out to Elite, but Antonio instructed the plaintiffs to change it to Landscape.
17Work at the property commenced involving hard landscaping, planting, and construction of the new fences.
18On June 20, 2016, the plaintiffs paid $70,000 to Landscape constituting the next scheduled payment of 40 percent of the contract price.
19In a letter dated June 21, 2016, a Zoning Examiner from the City of Toronto provided a letter to the plaintiffs advising that certain zoning requirements of the Zoning By-laws and other applicable By-Laws had not been satisfied. Among a list of problems identified were lot line setbacks and the overall square footage of the carport exceeding the local zoning requirements.
20On June 22, 2016, Beuglet offered some suggestions to the plaintiffs about how to deal with the zoning issues, including going before the Committee of Adjustment to obtain a minor variance for the excessive square footage of the carport.
21The work continued until July 10, 2016, when it stopped due to the lack of construction permits.
22The application to the Committee of Adjustment was submitted on July 22, 2016.
23On July 26, 2016, Beuglet provided the plaintiffs with revised permit drawings for the deck and carport based on an understanding that approval from the Committee of Adjustment would be required.
24On August 4, 2016, the City of Toronto issued an Examiner’s Notice letter to the plaintiffs advising that a preliminary project review revealed that certain requirements of the Zoning By-law had not been satisfied. In particular, the Notice indicated that differentiation between hard and soft landscaping in the rear yard had not been indicated and that, based on the plans submitted, a variance would be required for the soft landscaping.
25On November 9, 2016, the plaintiffs met with the Committee of Adjustment and received approval for their carport and deck renovation plans. Twenty days later, on December 6, 2016, and after the appeal period for the Committee had run its course, the building permits were issued to the plaintiffs and provided to Antonio via email. Antonio forwarded the plaintiffs’ email to Lou asking him to call the plaintiffs to work out a schedule. Lou and the plaintiffs had a telephone conversation in which Lou advised the plaintiffs that he did not work in the winter, and would only be able to restart the work in Spring 2017.
26No work took place over the winter of 2016-2017.
Events in 2017
27On March 26, 2017, Lou informed the plaintiffs by email that he was getting everything ready to complete their job and that he would keep them updated over the next few weeks with timing. On April 6, 2017, Lou followed up with the plaintiffs asking whether they received his email from a couple of weeks earlier about restarting.
28The plaintiffs and Lou then had a phone call where Lou said something about maybe having to start another project.
29The plaintiffs were on vacation overseas for 11 days in April 2017.
30On April 18, 2017, Lou asked the plaintiffs by email to contact him upon returning from their vacation. He further advised that he was on a project in Oakville and would be done in a few weeks.
31On May 26, 2017, the plaintiffs sent an email to Lou expressing concern that it had been close to a full month since their return from vacation, yet they had not received a firm date for the resumption of work.
32On June 20, 2017, work recommenced at the property.
33On the morning of June 21, 2017, a dispute arose over Lou’s request that the plaintiffs pay $26,250, an amount not required by the schedule of payments in the contract. Lou had attended the property with his work crew that morning and asked for payment. In the afternoon, Michael sent Antonio and Lou an email indicating his disappointment that Landscape had left the site before the payment issue could be resolved. In the email, Michael provided a breakdown of the 14 line items in the contract, estimating what percentage of work was complete, and the monetary value of the work remaining. Michael calculated that the plaintiffs had paid $131,250 out of the $175,000 fixed cost of the contract; yet the estimated value of the work completed was only $92,860. He nevertheless proposed to pay $12,000 to get the job back on the rails if certain conditions were met.
34Michael and Lou met in person on June 25, 2017. The next day, June 26, 2017, Landscape sent a letter to the plaintiffs on Landscape letterhead setting out various terms and conditions that the parties had agreed on for work to continue at the property. The plaintiffs then added some handwritten notes to the letter resulting in an “Addendum Agreement” between the parties. A copy of the Addendum Agreement is appended as Schedule B to these Reasons. The provisions of the Addendum Agreement included that the plaintiffs would make a payment of $12,500 and that certain work would be performed before a further payment of $14,500 would be advanced.
35The last few paragraphs of the Addendum Agreement state (the handwritten additions are in italics, and the text has been reproduced verbatim without correcting grammatical errors):
Landscape by Evergreen Ltd started this project at the Beginning of June 2016 and allocated 8 weeks of the summer of 2016 to completed this project, we were there everyday up until July 10, 2016 at which time the project was delayed due to city permits.
-Final Permits have been cleared through Committee of Adjustment & must be adhered to for all notes to ensure compliance.
Landscape by Evergreen Ltd is a seasonal business, we do not operate in winter as per Helene’s request and we did not notify you on this because the project was to be completed by End of July 2016.
Landscape by Evergreen Ltd was prepared to continue work in Mid April 2017 but homeowners were away on vacation. We had no choice but to start another project first.
-Landscape by Evergreen & Elite Environments commit to restarting work on Monday June 26th 2017, and to starting no other jobs until work is complete.
36Late in the evening on June 26, 2017, Antonio replied “All good” to the plaintiffs’ email forwarding the Addendum Agreement. On June 27, 2017, the plaintiffs submitted a cheque for $12,500 payable to Landscape.
37Further work took place at the property in the month following June 26, 2017:
The upper deck structure for the second floor was added.
The wrought iron railing to the basement walkout was installed.
The helical piles (also known as helical piers) for the carport were installed. Helical piles are steel piles that get drilled into the ground to form the foundation for the installation of a carport on top.
The forms for the concrete pad for the work shed were completed.
38On July 26, 2017, another dispute arose, which led to the breakdown of the parties’ relationship and the present action. Lou had arranged for the pouring of concrete to occur on July 26, 2017, into the form set for the planned work shed. The problem began the previous morning, July 25, 2017, when, for the first time, the backyard plumbing was brought up through the floor opening of the form. Until then, the plumbing remained hidden as it ran along a trench underground from the house to the shed. The opening would determine and fix the future location of any toilet installed in the work shed. When Hélène saw the positioning of the pipe in relation to the concrete slab for the shed, she called Lou and advised that the positioning did not correspond with the plaintiffs’ expectation of toilet location in the shed. The plaintiffs spoke to Lou by telephone on July 25, 2017, and asked him to cancel the next day’s concrete pour so as to avoid setting the concrete pad with the toilet opening in the wrong location. The plaintiffs offered to pay Lou for the cancellation costs.
39At about 10:00 a.m. the following morning, July 26, 2017, the plaintiffs sent an email to Antonio expressing frustration that Lou had not arrived on site and had not responded to the plaintiffs’ emails and text messages. The email acknowledged, with respect to the toilet opening that, “we did not sit down with you to lay it out on the floorplan of the shed to see where the drain would go, and I have admitted to Lou that was a mistake.”
40In the July 26, 2017 email, the plaintiffs were also upset that they had requested but not received pricing for several items. This was holding up completion of the work. The email concluded with the plaintiffs referring to “almost two weeks of delay due to the request for inspection of the forming not being logged with the city and a week going by before it was followed up on.” Antonio responded by email around 11:00 a.m. advising that Lou would call the plaintiffs in a few hours. The plaintiffs sent another email to Antonio at around 12:45 p.m. explaining that Lou had been told that Michael would be waiting for him from 7:30 a.m. that morning and that it is “verging on insulting that he didn’t call.” Antonio’s email response at about 2:30 p.m. was “You need to tell Lou that!!!”. Ultimately, Lou did not attend at the property, or call, or text the plaintiffs on July 26, 2017.
41On July 28, 2017, Lou emailed the plaintiffs advising that he had ordered the concrete truck again and had a delivery time for August 1, 2017, at 10:30 a.m. which would allow him a few hours to move the toilet plumbing to the south east corner location of the workshop, as the plaintiffs desired. The plaintiffs did not respond to Lou’s July 28, 2017 email.
42In fact, on July 27, 2017 the plaintiffs retained counsel and a series of without prejudice communications with the defendants ensued.
43The parties and their counsel (at the time Mr. Brown was acting for all the defendants) attended at the property on August 14, 2017. The defendants acknowledged that the helical piles were installed improperly.
44Subsequently, the plaintiffs retained another contractor, Weenen General Contracting Limited, to complete the backyard renovation project to their satisfaction.
45The plaintiffs’ claim for breach of contract was commenced on November 8, 2017, seeking damages of $163,222.70. Elite and Antonio’s defence was filed on December 8, 2017. Landscape and Lou’s defence and counterclaim was filed on December 11, 2017. The counterclaim seeks damages of $100,000 on the basis that the plaintiffs breached the 2016 Contract.
Parties’ Positions
Plaintiffs’ position
46The plaintiffs claim:
Breach of contract by the defendants and piercing of the corporate veil;
Damages of $163,222.70;
Dismissal of Landscape’s counterclaim; and
Costs
47The damages of $163,222.70 are based on:
$155,981.86, the amount actually paid to the defendants ($143,750), plus the amount paid to the subsequent contractor Weenen to complete the project ($187,231.86), less the value of the 2016 Contract ($175,000); plus
$7,240.84 for offsite storage fees (due to delays).
48The plaintiffs submit that the parties to the 2016 Contract were the plaintiffs and Elite, and that Landscape was Elite’s subcontractor. The plaintiffs claim that they were not notified of the May 2, 2016 Assignment Agreement, whereby Elite purported to assign the 2016 Contract to Landscape. By contrast, the plaintiffs take the position that the parties to the 2017 Addendum Agreement were the plaintiffs, Elite, and Landscape.
Breach of the 2016 Contract
49The plaintiffs submit that Elite breached the 2016 Contract by:
(a) Making misrepresentations to the plaintiffs that induced them into entering into the 2016 Contract, namely:
(i) That Antonio, principal of Elite, would be in charge of the work with assistance from a subcontractor when, in reality, Antonio was almost never on site and left Lou and Landscape to perform the work.
(ii) That Elite had an eight-week window available in June 2016 to complete the work or, in the alternative, if the work was not completed in that period, it could be completed in 2016.
(b) Assigning the contract to Landscape without the plaintiffs’ consent.
(c) Failing to ensure that Beuglet, the architectural technologist hired to complete the permit drawings, was sufficiently experienced.
(d) Failing to supervise Beuglet to ensure that he completed the permit drawings properly.
(e) Permitting Beuglet to create the permit drawings from the concept drawings and based on a 20-year-old survey, without requiring Beuglet to attend at the property and verify the measurements himself.
(f) Failing to ensure, when assigning the contract to Landscape, that Landscape followed the permit drawings, instead of the concept drawings.
(g) Being unaware that a significant portion of the hard landscaping was completed in 2016, which resulted in the final permit drawings not reflecting the actual completed work on site.
(h) Going back and forth too many times with the City of Toronto permit approval process, thus causing delays that pushed the attendance at the Committee of Adjustment out to November 2016, resulting in the work not being completed in 2016.
50The plaintiffs also hold the defendants responsible for performing deficient work such as:
(a) Installing fence posts that were not high enough (but later remediated).
(b) Installing a soldier course of paving stones (which was later remediated to a partial extent based on the parties reaching a compromise).
(c) Constructing a structural post that was wobbly.
(d) Installing a different structural post, the bottom of which had a section removed and replaced by a different piece of lumber, resulting in the structural post being non-continuous.
(e) Installing handrails going down into the basement walkout that were not in compliance with the Building Code, O. Reg. 332/12 (i.e. too close to the wall, with certain bubbling of the black galvanized coating, with the metal substrate being exposed in parts).
51The plaintiffs were critical of Elite advising them that they could go ahead and complete the soft landscaping without permits, only to be later told by the City that the hard and soft landscaping are linked and related to zoning requirements that may need a minor variance.
52With respect to a soil report, the plaintiffs submit that the report was to be provided to the City of Toronto in advance of the work being done. Instead, the defendants sent a report only addressing the technical specifications of the posts to bear loads, which was non-responsive to the question of the interaction with the on-site soil conditions.
53The plaintiffs confirmed that their claim is based on breach of contract, not tort. Their misrepresentation allegations are based on breach of the implied terms of the 2016 Contract.
Breach of the Addendum Agreement
54The plaintiffs acknowledge that they entered into a contact with Elite and Landscape with respect to the Addendum Agreement.
55They assert that shortly after recommencing work, on June 21, 2017, Landscape demanded $26,250 that was not due under the 2016 Contract. Landscape then abandoned the project until the plaintiffs paid money so that work could resume on the site. Approximately a month later, on July 26, 2017, the defendants abandoned the project for a second time in respect of the dispute over location of the toilet in the shed and the cancelled pouring of the concrete. Lawyers became involved on or after July 27, 2017, and negotiations ensued that were ultimately unsuccessful in avoiding trial.
56Subsequent to July 26, 2017, the plaintiffs learned that the helical piles installed by the defendants were not just wrongly installed relative to their placement on the property, namely 53.5 inches closer to the house than as described on the building permit, but also relative to each other, such that the walls of the carport structure would have been misaligned had the structure been constructed by the defendants. By this point, the plaintiffs had lost all confidence in Lou’s ability to recognize his mistakes, let alone fix them.
57The plaintiffs argue that a fundamental breach of the contract had occurred by the time the defendants offered to remediate the construction flaws. Accordingly, the plaintiffs were entitled to repudiate the 2016 Contract and Addendum Agreement and treat the contracts as at an end. Furthermore, the plaintiffs were under no obligation to allow the defendants back on site to remediate the work pursuant to the one-year warranty in the 2016 Contract.
58The plaintiffs submit that when the parties and counsel met on August 14, 2017, they just wanted Antonio to fix the problems and complete the project, but Antonio indicated that he would not be able to do so until 2018. This was the final straw for the plaintiffs and the defendants were not provided with any further opportunity to work on the project.
59The plaintiffs also submit that they were entitled to look at the history of deficiencies that had plagued the project which amounted to a repeated pattern of behaviour justifying the plaintiffs’ position that a fundamental breach of contract had occurred. The breach went to the heart of the contract, depriving the plaintiffs of the whole benefit of the contract.
60The plaintiffs cautioned the court not to conflate the question of fundamental breach with the question of whether the defendants were willing to repair deficiencies. The plaintiffs submit that if the court finds that a fundamental breach of contract occurred, the innocent party is entitled to repudiate the contract and seek damages regardless of whether the defendants were willing to remediate.
61With respect to holding Antonio and Lou personally liable, the plaintiffs argue that the corporate veil of their corporations should be pierced because the personal defendants allowed irregularities by their corporations. The plaintiffs focused on the fact that by July 2017, the plaintiffs had paid the corporate defendants $143,750, whereas, by Michael’s estimate, only $92,860 worth of work had been done. The plaintiffs argue that by holding on to the overage and not returning the funds to the plaintiffs, or offering to place the excess funds into a trust account, the personal defendants engaged in the type of improper behaviour that merits piercing of the corporate veil.
Landscape and Lou’s position
62Landscape submits that there is no basis in law to find liability against Landscape or to pierce the corporate veil.
63Landscape argues that, ultimately, it does not matter who the parties to the 2016 Contract were because Elite, Landscape, and the plaintiffs acknowledge that they were parties to the Addendum Agreement. However, if it matters, then Landscape was, in fact, a party to the 2016 Contract. Landscape points to objective factors such as the signature line and HST number for Landscape on the 2016 Contract, which should have alerted the plaintiffs to Landscape being a party to that agreement. The fact that Lou signed a copy of the 2016 Contract at a different time than Antonio and Hélène is not material. In the alternative, if the court holds that Landscape was not a party to the 2016 Contract, then Landscape and Lou cannot be held responsible for any breach of that agreement.
64Landscape also submits that it did not abandon the project and was always ready, willing, and able to complete the work. However, on or after July 26, 2017, the plaintiffs decided that they were not prepared to allow Landscape to return and complete the work. Landscape acknowledges that the helical piles were wrongly installed and argues that it was fully prepared to remediate the problem, but the misplacement issue was not one that rose to the level of a fundamental breach of the contract.
65Landscape disagrees with the plaintiffs’ characterization of the work done as deficient, suggesting that it went out of its way to satisfy the plaintiffs who were difficult to please. Landscape suggests that, with the exception of the misplaced helical piles, most of the plaintiffs’ “complaints” were point-in-time disagreements that were later remediated or rendered moot by the approval of the City’s building inspector.
Elite and Antonio’s position
66Elite submits that the parties to the 2016 Contract were the plaintiffs, Elite, and Landscape. One indication of Landscape’s party status was that, after the $800 payment for concept drawings and the first contractual payment of $35,000 to Elite was made, all subsequent payments were made to Landscape. The plaintiffs also directed most of their questions to Lou.
67Elite submits that it was always intended that Lou and his crew would do the actual work, whereas Antonio’s obligation was to deal with the permit drawings and provide some supervision of the project. However, when it comes to the Addendum Agreement, the parties to that agreement were the plaintiffs, Elite, and Landscape. Elite describes the Addendum Agreement as a recalibration of the payment schedule from the 2016 Contact, adding specificity about how the work was to be done.
68Elite submits that the plaintiffs chose a size of shed that necessitated an attendance before the Committee of Adjustment to obtain a minor variance. Nothing Beuglet did with respect to the permit drawings would have changed that fact. Also, the three-and-a-half month delay between July 22, 2016, when the finalized permit application was submitted, to November 9, 2016, when the Committee of Adjustment met, was not the fault of the defendants. Nor was the further one-month statutory delay to December 6, 2016, when the plaintiffs received the permits.
69With respect to the helical piles, Elite submits that Owen Robinson, the plaintiffs’ witness from Weenen, testified that remediation would have been relatively straightforward involving some excavation, cutting the piles off below grade, and leaving the remainder in the ground. It would have had no real impact on the project and the replacement helical piles could have easily been repositioned correctly on the property.
70Elite goes further than Landscape and argues that there was not just an expectation that the defendants would be permitted to return to the site to fix deficiencies and complete the project, but also an obligation on the part of the plaintiffs to allow this, which arose from the warranty terms of the 2016 Contract.
Analysis
(a) Observations and Findings
71As there were numerous points of disagreement between the parties, I find it useful to indicate how I decided certain issues which, in turn, informed my overall finding on liability.
(i) Parties to the 2016 Contract
72I find that the parties to the 2016 Contract were the plaintiffs and Elite. I find that Landscape was a subcontractor and not a party to the original contract.
73The plaintiffs understood that they were only contracting with Elite. They first met Elite at the National Home Show in Toronto and were directed to Antonio, Elite’s principal. The plaintiffs researched Elite and checked on Elite’s references. At the point of signing the contract on April 22, 2016, only Antonio, Elite’s principal, was present. There was no previous discussion of Landscape or Lou’s involvement as a party to the contract. The contract was on Elite’s letterhead and Antonio signed the contract, albeit on the only corporate signature line made available which read “Landscape by Evergreen Limited”.
74Even though Landscape’s signature line, name, and HST number were written in small print, it was reasonable for the plaintiffs to assume that they were only contracting with Elite. The first payment of $800 for the concept drawings and the first contractual payment of $35,000 were made to Elite. Even if Lou was primarily the one on site, that is not uncommon for a subcontractor, and it did not result in Landscape becoming a party to the 2016 Contract. Finally, if Elite and Landscape were, in fact, parties to the original contract, it would make little sense for Landscape to have had to specify in the May 2, 2016 Assignment Agreement that it was taking full responsibility for the project, as this would have arisen from its contractual status.
(ii) Did Elite breach the contract by Antonio failing to be present and supervising Landscape’s work?
75The plaintiffs allege that Elite represented that Antonio would be in charge of the work and would receive assistance from a subcontractor. However, Antonio only attended the property three times in 2016 for about five to ten minutes, and not at all in 2017. The plaintiffs allege that this constitutes a breach of an implied term of the 2016 Contract.
76I find that the evidence does not support the plaintiffs’ position. First, I note that the 2016 Contract does not have any term that states or implies how much Antonio was to be present on-site to do, or supervise, the actual work. Second, while I accept the plaintiffs’ evidence of how little Antonio was physically present, gauging to what extent Antonio was supervising is difficult because the evidence also demonstrates Antonio’s involvement by telephone. Third, Antonio was clearly in charge of retaining Beuglet, the architectural technologist responsible for producing the permit drawings. Fourth, there is little evidence that the plaintiffs complained about Antonio’s absence at the material time. Antonio’s alleged lack of supervision became a more significant issue in 2017 after there had been a number of disputes between the plaintiffs and Landscape, including over delay.
77I am unable to find that Elite breached the contract by Antonio failing to be sufficiently present and supervising Landscape’s work.
(iii) Timeline of Project, Responsibility for Permits, and Delay
78I find that the issues of the timeline of the project, responsibility of the construction permits, and delay are interrelated.
79The plaintiffs maintain that Antonio advised them that he had a window available in June 2016 to start the project, and could complete the project in approximately eight weeks.
80The evidence indicates that, by the end of the 2016 National Home Show, Elite’s schedule of work for 2016 was fully booked. Then, on April 19, 2016, Antonio sent a text to the plaintiffs that stated in part, “I want to meet with u [sic] and Michael before I present Any more designs to my other clients So we don’t lose that June opening.” I find that this text represents Elite advising the plaintiffs that work could start in June, not about how long the work would take once started.
81Furthermore, whereas the plaintiffs testified that Antonio said that the work could be done in eight weeks, I find that this glosses over an important caveat. At trial, and previously in discoveries, Antonio agreed that if all permits were in-hand, the work could be completed in eight weeks. Accordingly, I do not find that Elite simply represented that the project could be completed in eight weeks, and then breached that undertaking. The eight weeks came up in the context of an assumption that the permits would be ready. I also note that the 2016 Contract does not contain any term and condition regarding duration of project. However, under the fourth term and condition, the plaintiffs were to be advised if the project was going to be delayed due to weather conditions.
82At trial, there was much back and forth about the evolution of the permit process from concept drawings, to permit drawings and submission of permit applications by Beuglet, to attendance at the Committee of Adjustment on November 9, 2016, to the plaintiffs’ receipt of the building permits on December 6, 2016.
83The seventh term and condition of the 2016 Contract states, “Any necessary permits required for the landscape project, are the responsibility of the home-owner to obtain, unless otherwise stated.” I find that this contractual provision put the onus squarely on the plaintiffs to obtain the necessary permits.
84The plaintiffs submit that had Elite retained a more qualified and experienced architectural technologist than Beuglet, and supervised Beuglet more closely, the permit application process with the City of Toronto would have gone more smoothly. Furthermore, if a minor variance was required at the Committee of Adjustment, the permits could have been obtained by around July 2016, resulting in the project being completed in the summer of 2016, or, at the latest, by the end of 2016.
85I find that the evidence does not support the plaintiffs’ many assumptions.
86First, I shall address the question of who was responsible for the work on site going ahead in the absence of permits. Not all renovation projects require building permits and not all building permits require attendance at a Committee of Adjustment to obtain a minor variance, which is a function of zoning by-laws. But some do. Here, two separate building permits were required, one for the deck above a certain grade, and one for the shed/carport. Only the shed/carport permit required a minor variance due to the size of the carport chosen by the plaintiffs.
87All parties concede that Landscape played no role in the permit process.
88The best evidence about the parties’ views about proceeding in the absence of permits comes from a text conversation between Antonio and Hélène on May 9, 2016:
Hélène: Antonio. Question…? If the drawings only get done in the next week and a half or so, what is the plan if the city delays us on providing approval? Is there work we can start without the permits?
Antonio: We can start landscaping Put the posts for the decks in finish the planters, pavers etc Once permits come in Finish the rest The carport/workshop would be done last any ways [sic].
89I find that here there was a discussion between the parties and the upshot was that the plaintiffs wanted the defendants to proceed as far as they could without the permits, hoping that the permits would be approved and obtained in a timely manner. Elite advised the plaintiffs what work could be done without permits and the plaintiffs agreed with proceeding in that fashion.
90Second, I shall address the plaintiffs’ allegation that Elite or Beuglet’s inexperience or incompetence caused undue delay resulting in the permits only being obtained in December 2016. Again, I find that the evidence does not bear this out.
91I find that Beuglet moved with reasonable dispatch. There were some missteps that required resubmission of the drawings. But the delay attributed to Beuglet was only a couple of days, for instance between May 31, 2016, and June 6, 2016, when Beuglet submitted an application with a tree declaration form missing and with a deck that should not have been shown on the application.
92Antonio testified that the permit process could take two months, six months, or one year. Beuglet’s evidence was that, once a Committee of Adjustment is involved, in his experience it could take anywhere from three months to a year to obtain the permits. Even Michael’s evidence was that the Committee of Adjustment process requires several additional months on top of the building permit process. The plaintiffs certainly wanted the permit drawing to be designed in a way to avoid the Committee of Adjustment process. But if a Committee of Adjustment was inevitable, the evidence is that the delay could be significant ranging from two months to a year from the start of the permit process. This contradicts the plaintiffs’ closing argument that, had Elite run things smoothly, the one month delay between November and December 2016, could have been transposed to June 2016, resulting in the permits being ready to go in July 2016. I note that the delay between the final submission of the permit application and the Committee of Adjustment meeting was three-and-a-half months, which is consistent with the evidence of Antonio, Beuglet, and Michael.
93The evidence is that the work on the project could not proceed much past July 10, 2016, without the permit drawings, but the defendants did as much as they reasonably could in the absence of permits as instructed by the plaintiffs.
94The bigger question then is whether Elite could have done anything differently to avoid the project requiring an attendance at the Committee of Adjustment to obtain a minor variance. I find the answer is no, because the attendance was required due to the plaintiffs’ decision in respect of the size of their shed relative to setbacks. A delay of three-and-a-half months followed, which is fairly standard waiting for an attendance at the Committee of Adjustment. Nothing Elite or Beuglet did, or failed to do, resulted in the bulk of the delay that the plaintiffs complain about.
95Moving forward then with respect to the plaintiffs’ allegations of delay, it is common ground that there was a statutory one-month waiting period between the attendance at the Committee of Adjustment on November 9, 2016, and the plaintiffs receiving their permits on December 6, 2016. The defendants cannot be held responsible for this one-month delay.
96The plaintiffs complain that they were not advised that Lou did not work in winter. While the inability to proceed with the work in winter may have been a disappointment to the plaintiffs, I do not find that there was any explicit or implied term of the contract that was breached by the defendants. Given the timing of the receipt of the building permits, this meant that the project rolled over into 2017.
97The plaintiffs went overseas on vacation for 11 days in April 2017. While they were away, Lou asked the plaintiffs to contact him on their return. When they did, Lou was on another project and indicated he would be done in a few weeks. I find that, while the plaintiffs’ frustration at the delay in recommencement of work was understandable, there were no contractual terms breached by the defendants only returning to work on June 20, 2017.
98A payment dispute between the parties arose on June 21, 2017, which culminated in the parties entering into the Addendum Agreement. The parties accept that, this time, the parties to the agreement were the plaintiffs, Landscape, and Elite. I agree with the defendants that relitigating the immediate dispute giving rise to the Addendum Agreement would be improper because this new agreement represented the parties settling their differences over recent events. Going forward, the expectation was that, in exchange for the plaintiffs advancing $12,500, the defendants would confirm their adherence to the final permit, the work would recommence on June 26, 2017, and the defendants would take on no other jobs until the work was complete.
99The defendants acknowledge that the helical piles were installed improperly during the week of July 3, 2017, which was the result of Landscape installing the piles according to the concept drawings, not the building permits. This was not discovered by the plaintiffs until around August 14, 2017.
100On July 26, 2017, a further dispute arose over the location of the toilet opening in the shed and the cancelled pouring of the concrete. Thereafter, the parties retained counsel on July 27, 2017 or later.
101My finding with respect to why the location of the toilet opening in the shed was not where the plaintiffs expected is that neither side had adequately turned their minds to the problem. At trial the plaintiffs put the blame at the feet of the defendants, but at the material time, on July 26, 2017, the plaintiffs sent an email that acknowledged, with respect to the toilet opening that, “we did not sit down with you to lay it out on the floorplan of the shed to see where the drain would go, and I have admitted to Lou that was a mistake.”
(b) Fundamental Breach of Contract
102Having made certain findings in relation to areas of dispute between the parties, I turn then to the central issue in this trial, whether there was a fundamental breach of contract by the defendants that entitled the plaintiffs to repudiate the contract and claim damages.
103A fundamental breach of contract is one that goes to the root of the contract, namely a breach that renders the contract commercially unreasonable. In a construction contract, the court is entitled to look at the history of deficiencies involved: Turano’s Home Improvement v. Zittell, 2018 ONSC 4428, at paras. 14-17.
104In Mount Royal Painting Inc. v. Lomax Management Inc., 2019 ONSC 7071 (Master Wiebe), at paras. 66-67, the court provided guidance on how to determine if there has been a fundamental breach of contract:
[66] The question of whether either side fundamentally breached the contract is central to this case. In Dirm 2010 Inc. v. Ontario (Minister of Infrastructure), 2017 ONSC 2174 (Ont. Master) at paragraph 307 Master Albert referred to the succinct summary of this doctrine in the decision of the Supreme Court of Canada in Guarantee Co. of North America v. Gordon Capital Corp., 1999 664 (SCC), [1999] 3 S.C.R. 423 (S.C.C.) at paragraph 40:
[R]epudiation occurs by words or conduct evincing an intention not to be bound by the contract . . . [S]uch an intention may be evinced by a refusal to perform, even though the party refusing mistakenly thinks that he is exercising a contractual right . . . The effect of a repudiation depends on the election made by the non-repudiating party. If that party treats the contract as still being in full force and effect, the contract remains in being for the future on both sides. Each (party) has a right to sue for damages for past or future breaches . . . if, however, the non-repudiating party accepts the repudiation, the contract is terminated, and the parties are discharged from future obligation.
[67] How does the court determine whether there has been a repudiation? In Dirm Master Albert referred to the decisions of the Court of Appeal in 968703 Ontario Ltd. v. Vernon (2002), 2002 35158 (ON CA), 58 O.R. (3d) 215 (CA) at paragraph 16 and Spirent Communications of Ottawa Limited v. Quake Technologies (Canada) Inc. (2008), 58 O.R. (ed) 721 (CA) at paragraph 36. These two decisions outline five factors to be considered in determining whether conduct has deprived the innocent party of substantially the whole benefit of the contract, which is the core ingredient of contractual fundamental breach: (1) the ratio of the party’s obligations not performed to that party’s obligations as a whole; (2) the seriousness of the breach to the innocent party; (3) the likelihood of repetition of the such breach; (4) the seriousness of the consequences of the breach; and (5) the relationship of the part of the obligation performed to the whole obligation.
105Accepting that there is some degree of overlap, I will summarize the plaintiffs’ position with respect to the five Mount Royal factors:
(i) the ratio of the party’s obligations not performed to that party’s obligations as a whole
106The plaintiffs submit that an implied term of the 2016 Contract was that Antonio would be reasonably present on-site, and supervise the work, but that he utterly failed to do so. Further, with respect to the work not yet performed, the plaintiffs submit that 47 percent of the work was yet to be completed based on a calculation by Michael as of October 5, 2017. In fact, because the plaintiffs failed to consider HST in their calculations, the number should really be higher.
(ii) the seriousness of the breach to the innocent party
107The plaintiffs urge me to look at the entire history of deficiencies from their perspective, which led them to claim fundamental breach. When pushed to identify the most serious concerns, they point to the misplacement of the helical piles and Antonio’s declaration of unavailability until 2018. The helical piles were not just misplaced by a few inches, but by about four-and-a-half feet. The placement was internally misaligned as well, which would have resulted in a crooked structure being built. The plaintiffs also insist that, in the Addendum Agreement, they had contracted for Antonio to complete the project without starting other projects, and his inability to commit to the project was extremely serious.
(iii) the likelihood of repetition of the such breach
108The plaintiffs suggest that the number of deficiencies (e.g. incorrectly placed paving stones, missing tops of fence posts, unstable fence posts, unsatisfactory finish on the wrought iron handrails) culminating in the misplaced helical piles, suggested that there would be a high likelihood of repetition of breach if the defendants were permitted to continue with the project. The plaintiffs point to Landscape’s inability or inattention to be guided by the permit drawings as an example.
(iv) the seriousness of the consequences of the breach
109The plaintiffs suggest that the defendants were indifferent about complying with the law. The plaintiffs did not expand on this point; however, I take it that the plaintiffs believe that the defendants’ failure to follow the permit drawings amounted to a breach of a legal obligation under municipal law.
(v) the relationship of the part of the obligation performed to the whole obligation
110The plaintiffs submit that the faulty and therefore incomplete part of the project was a big portion of the contract, encompassing the shed/carport, 400 square feet of pavers for the parking pad, and the wrought iron railings.
111In response to the plaintiffs’ arguments, the defendants submit that the plaintiffs have exaggerated their difficulties through the course of the two contracts, and that when placed in its proper factual and legal context, the misplacement of the helical piles and Antonio’s position on completing the contract did not result in a fundamental breach by the defendants.
112I find no fundamental breach of contract by the defendants.
113First, I find that the plaintiffs have resuscitated deficiencies that were willingly corrected by the defendants in an attempt to highlight the alleged incompetence of the defendants. For instance, much time was spent on stairs that were allegedly installed improperly only for me to learn that they were corrected by the defendants. Similarly, a soldier course of paving stones was redone, albeit not exactly to the plaintiffs’ specifications, since the plaintiffs were prepared to accept some deviation from their preferred plan in one area of the garden. A few fence posts that did not reach the proper height were fixed, yet one fence remained unsatisfactory but hidden behind a trellis. There were a number of other issues that the plaintiffs complained about but Lou’s evidence which I accept as fair, was that the plaintiffs reversed course on a number of items.
114Not taken into account by the plaintiffs was the fact that the defendants cleared out and substantially renovated the entire backyard, built deck structures and new fences, installed new planters, stonework, plant and landscape material, and new wrought iron handrails leading to the basement walkway. In my view, the plaintiffs were entitled to point to missteps or certain deficiencies in the defendants’ work, but to suggest that the defendants had been careless and deficient builders was an unfair characterization. I agree that in assessing fundamental breach of contract I must look at the history of any previous deficiencies, however, when viewed on an objective basis, until we get to the misplacement of the helical piles, I see a large backyard renovation project that had proceeded reasonably well and where the defendants had completed the work competently and according to the contracts.
115Second, when asked about when the fundamental breach occurred, the plaintiffs stated that it occurred on August 14, 2017. This was surprising to me as I anticipated that the plaintiffs would suggest July 26, 2017, the date when the defendants allegedly abandoned the job over the cancelled concrete pour. The plaintiffs’ position suggests that, even by their own standards, the contract was still in play and salvageable after July 26, 2017. Indeed, I note that, on July 28, 2017, Lou emailed the plaintiffs advising of a rescheduled time for the concrete pour, and expressing his willingness to deal with the misplaced toilet location in the shed. By this time, the parties had retained counsel and the defendants never worked on the property again.
116Third, I find that the plaintiffs have not accurately portrayed Antonio's position regarding his ability and timing to complete the project in 2017. In closing argument, the plaintiffs submitted that the major problem was the combination of the misplaced helical piles and Antonio advising that he was not available until the following year.
Court: Can you tell me what in particular deficiencies you would say went to the heart of the contract, even if no one of them, in and of itself necessarily, but your point is, which I take it, is that, you know, it’s sort of a cumulative effect, one, and what would a reasonable person sort of do, which I also accept. But can you – you’ve sort of made it a little bit more of a general statement, you expect your contractor to comply with the law, which I agree with. But out of the many deficiencies that we’ve looked at, and I’m pretty familiar with them by now, what would you say are the ones that I should focus on?
Ms. Walker: The one that I think is huge is the breach where there was a mismeasurement, the helical piles were misplaced, and then the person that you put all the work into to get that person to work on the job tells you he’s not available ‘til next year. That’s a huge problem. A reasonable person would not go through the effort of interviewing someone, checking out their references, you know, communicating with them thoroughly even when their uncle was working on the job, to expect that they would just not pay attention to what’s going on, and then when that mishap happened, they say, “you know what, I can’t show up, I can’t finish ‘til next year.”
117The problem, however, is that Antonio’s position was not that he could only complete the project the following year; it was that, if the plaintiffs insisted that Lou not be involved in the project, then Antonio could only complete the project the next year. The distinction is important because Hélène and Michael testified that the defendants could only return to the project on the condition that Lou no longer work on the site, as they could no longer trust his judgment. This led Antonio to explain that if that was their bottom line, he would only be able to complete the project the next year.
118Given that the parties agree that Landscape was a party to the Addendum Agreement, the plaintiffs’ position that the project could only continue if Lou was out, was tantamount to a complete rejection of the Addendum Agreement. We are back to the question then, of whether the plaintiffs were justified in taking the position that the defendants had fundamentally breached the contract in the first place, but one major strand of the plaintiffs’ fundamental breach argument – that Antonio said he was not available until the following year – has been shown to be spurious.
119Fourth, I reach a different conclusion than the plaintiffs on the Mount Royal factors. I find that there is a degree of overlap, so I will not set out my analysis on a factor by factor basis. In attempting to demonstrate that a significant amount of the project was left incomplete, the plaintiffs have backed out the entire value of the 10’ x 20’ shed/carport line item on the 2016 Contract (worth $42,000) from the total value of the contract. But is it really fair to say that the helical pile problem was a $42,000 mistake? I find that it is not. Not when the uncontradicted evidence was that the cost to fix the misplacement problem was a $5,000 to $8,000 fix which, in any event, the defendants were willing to absorb.
120The solution proposed by Antonio, and by Owen Robinson from Weenen, was to cut the misplaced helical piles, which are essentially steel rods, slightly below grade; leave them in the ground; and install new helical piles at the right location on the property. The plaintiffs’ evidence was that they did not want to have these nine piles in the ground at the back of their property because they would have to disclose this in the event of a sale. I have some sympathy for their position but legally, I do not find that the plaintiffs can refuse a relatively easy fix to the problem, negative the entire value of the shed/carport, and still say that the defendants were responsible for a fundamental breach of contract.
121I find the likelihood of a repetition of breach in the remainder of the project to be low. Importantly, lawyers were involved by August 14, 2017. The project was to be completed that summer. True, the shed/carport would have to be worked on but it is difficult to imagine that the defendants would be careless again with repositioning the helical piles and installing the shed/carport.
122Ultimately, contrary to the plaintiffs’ claim, I do not find the misplacement of the helical piles to be serious enough to warrant a fundamental breach. The plaintiffs cautioned the court not to focus on the defendants’ willingness to remediate the problem as a reason not to find a fundamental breach. Put another way, if I find a fundamental breach, it remains a fundamental breach even if the defendants were prepared to go to great lengths to fix the problem. But I see the issue of willingness to repair as different from ease of repair. Surely a problem that is easy to repair is one that is not as serious. Here, the plaintiffs ask the court to ignore the fix which then leaves the problem in place. Then the plaintiffs state that the remaining problem relates to a major aspect of the project, which gives rise to the fundamental breach of contract. I disagree with the plaintiffs’ approach and find that the remediation here was straightforward. The plaintiffs had a right to refuse the recommended fix, but they cannot use their refusal to bootstrap a fundamental breach argument.
Decision
123I find that there was no fundamental breach by the defendants, which leads to the conclusion that the plaintiffs’ claim must be dismissed.
124The parties do not dispute that on or after August 14, 2017, the defendants offered to return to fix and complete the project, but the plaintiffs denied them the opportunity to do so. Having found no fundamental breach of contract by the defendants, I then find breach of contract by the plaintiffs for disallowing Elite and Landscape the opportunity to complete the project that they had contracted for.
125I also find that the 2016 Contract contained an explicit one-year warranty clause. Had I found a fundamental breach, I agree with the plaintiffs that the warranty provision would not reverse the breach and the plaintiffs would have the right to repudiate the entire contract, including the warranty provision. But in this case, I find that it was entirely open to the plaintiffs to have the defendants return to the property, remediate any issues including the helical piles problem, and complete the project. A one-year warranty over workmanship would have then run after the completion of the project.
Piercing the Corporate Veil
126As I do not find Elite and Landscape liable, there is no basis for liability against the personal defendants. In any event, had I found the corporate defendants liable, I would not have found their principals Antonio and Lou personally liable.
127The primary reason advanced by the plaintiffs for piercing the corporate veil was that the personal defendants had somehow allowed their corporations to hold on to the overage between the funds advanced by the plaintiffs and the actual value of the work done. Other than that, the plaintiffs advanced the notion that personal liability flows from the corporations being closely held. The court has rejected an independent just and equitable ground for piercing the corporate veil: Yaiguaje v. Chevron Corporation, 2018 ONCA 472, at para. 67. Piercing the corporate veil is only permissible on this ground “[w]here the corporate form is being abused to the point that the corporation is not a truly separate corporation and is being used to facilitate fraudulent or improper conduct”: Yaiguaje, at para. 70. There is no evidence that the corporations were used in that fashion here. Whatever Antonio and Lou did here was done legitimately in their corporate capacity.
Landscape’s Counterclaim
128Landscape brought a counterclaim against the plaintiffs (defendants by counterclaim) seeking damages of $100,000 and a declaration that the plaintiffs (defendants by counterclaim) breached the 2016 Contract. As a consequence of my finding that Landscape was not a party to the 2016 Contract – only the plaintiffs and Elite were – I see no basis for Landscape’s counterclaim. In any event, I see no merit in Landscape’s counterclaim as the amount claimed by the end of the trial was considerably less, around $20,000, and Landscape failed to provide sufficient documentation over its losses.
Damages to be paid by the plaintiffs
129My understanding is that the plaintiffs had paid the defendants $143,750 at the point that work stopped at the property. The 2016 Contract was worth $175,000. The Addendum Agreement did not change the fixed contract price. Subject to any clarification of damages by the parties, I would assess the defendants’ damages at $31,250. The parties shall advise me within 14 days of the release of these reasons whether they can agree on which of Elite, Landscape, or both are to be paid damages, and the amount, taking into account the issue of interest.
Costs
130The defendants are awarded their costs on the main action, and the plaintiffs are awarded their costs on the counterclaim. If the parties cannot agree on costs, the defendants may make written submissions as to costs within 14 days of the release of these reasons. The plaintiffs have ten days after receipt of the defendants’ submissions to respond. Reply submissions will only be permitted with leave of the court. Such written submissions shall not exceed five double-spaced pages, exclusive of Costs Outlines, Bills of Costs, Offers to Settle, and authorities. Submissions are to be forwarded to me via my judicial assistant at her email address, Patricia.Lyon-McIndoo@ontario.ca. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs.
Pinto J.
Date: July 12, 2021
APPENDIX
SCHEDULE A
SCHEDULE B
COURT FILE NO.: CV-17-58611
DATE: 20210712
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Hélène Larochelle and Michael Nimchuk
Plaintiffs
– and –
Elite Environments Inc., Landscape by Evergreen Ltd., Antonio Savoia and Lucio Savoia a.k.a. Lou Savoia
Defendants
REASONS FOR DECISION
Pinto J.
Released: July 12, 2021