Southwest Waterproofing and Coatings Inc. v. 155 Uptown Ventures Inc. and VanMar Constructors ON 1009 Inc., 2022 ONSC 3497
COURT FILE NO.: CV-19-227
DATE: 2022/06/10
SUPERIOR COURT OF JUSTICE-ONTARIO
RE: SOUTHWEST WATERPROOFING AND COATINGS INC., Plaintiff
-and-
155 UPTOWN VENTURES INC. and VANMAR CONSTRUCTORS ON 1009 INC., Defendants
BEFORE: Gibson J.
COUNSEL: Robert Haas, Counsel for the Plaintiff
Jordan Diacur, Counsel for the Defendants
HEARD: September 8, 9, 10, 13, 14 and 15, 2021
ENDORSEMENT
Overview
[1] The plaintiff Southwest Waterproofing and Coatings Inc. (“SWC”) is an Ontario corporation which at all material times conducted business as a commercial waterproofing and coatings company.
[2] The defendant VanMar Constructors ON 1009 Inc. (“VanMar”) is an Ontario corporation that was at all material times the general contractor of a 23-storey high-rise condominium project located at 155 Caroline Street, Waterloo, Ontario.
[3] The defendant 155 Uptown Ventures Inc. (“Uptown”) was at all material times the owner of the lands and premises known municipally as 155 Caroline Street, Waterloo, Ontario (“155 Caroline”).
[4] Uptown and VanMar entered into a contract dated March 1, 2017 to design, construct, and erect a condominium building at 155 Caroline.
[5] VanMar delivered a Letter of Intent to SWC on June 9, 2017 to complete the waterproofing, expansion joints, roofing and pavers for the project. On July 12, 2017, VanMar and SWC entered into a Subcontract Agreement dated July 5, 2017, which provided for a contract price of $498,457 plus HST, for a total contract value of $563,256.41 (“the Agreement”).
[6] The Agreement provided that work was to commence on November 26, 2018, and substantial performance of the work was to be completed by February 15, 2019. The bulk of the work consisted of applying Hot Rubberized Asphalt (“HRA”) to waterproof the structure.
[7] Payment of the Agreement price was governed by section 4 of the Agreement.
[8] Between June 19, 2017 and December 13, 2018, the plaintiff SWC supplied and installed roofing, waterproofing and coating on the 155 Caroline project.
[9] By the terms of the contract between the parties, amounts were due and payable to the plaintiff when invoices were issued to VanMar.
[10] In December 2018, there was a disagreement between the parties and SWC withdrew from work on the project. It states that $213,000.59 was due and owing to it. It asserts that VanMar failed or refused to pay this amount, and that VanMar was thus in breach of the contract. SWC further asserts that VanMar failed to fulfil its obligations of site preparation under the contract, and that the construction site was chaotic and disorganized.
[11] On January 17, 2019, pursuant to the provisions of the Construction Lien Act, the plaintiff caused a Claim for Lien to be registered against the project. On January 30, 2019, an Order was made in the Superior Court of Justice vacating the Claim for Lien and providing for the posting of security by way of a lien bond in the amount of $224,139.81, inclusive of security for costs.
[12] By its Statement of Claim dated February 25, 2019, the plaintiff SWC claims: payment of the sum of $202,027.11, which includes its asserted lien, for breach of contract; in the alternative, restitution in the amount of $202,027.11 for unjust enrichment, relying on the doctrine of quantum meruit pursuant to the contract between the parties; an injunction requiring VanMar to return to SWC various property which it says VanMar has appropriated, including a melter, ladders, propane cylinders, wheelbarrows, torches, and assorted other construction-related equipment.
[13] By its Statement of Defence and Counterclaim dated April 18, 2019, the defendants resist SWC’s claim. They plead that SWC failed to comply with its obligations under the Agreement. They assert that SWC had insufficient forces on site, and that deficiencies and defects in the workmanship became apparent early on in the project and that SWC was unwilling or unable to remedy the deficiencies. It says that SWC abandoned the project on or about December 18, 2018. After SWC abandoned the project, VanMar proceeded to have the work performed under the Agreement and defects caused by SWC remedied by other subcontractors, Triumph Roofing and Sheet Metal Inc.(“Triumph”).
Evidence
[14] The plaintiff called three witnesses: Scott Evans, the principal of SWC; Imran Khan, who worked for Tremco, the manufacturer of the waterproofing products used on the project, who was called not as an expert witness, but as a fact witness regarding the condition of the worksite following his inspection in December 2018: and Todd Neaves, one of the SWC workers. The defendants called only one witness: Andre Riberio, who worked for Triumph.
[15] A large number of documents were made exhibits. Evidence from the examination-for-discovery of the parties was also read in.
Issues
[16] This case turns ultimately on whether there was a repudiation of the contract by either party. It is the position of SWC that VanMar breached the contract, and repudiated it, by forcing SWC off the worksite, taking its equipment, and hiring Triumph to complete the work. VanMar’s position is that, during the notice period, SWC pulled off the worksite, abandoned the job, and failed to perform the work contracted for, thus engaging the subsection of the agreement that allowed VanMar to provide notice and proceed to have the work performed by another contractor.
[17] This may be distilled into the following issues:
- Did the plaintiff SWC default on or breach any of the terms of the contract with VanMar? Specifically, did SWC:
a. Breach the work schedule?
b. Breach the obligation to install in sequence and as required by the site superintendent?
c. Fail to perform its work properly?
d. Fail to supply proper workers, subcontractors, material or equipment?
e. Persistently or substantially breach any provision of the agreement and, if it did, did this default continue without correction five days from the date of any Notice of Default?
f. Demonstrate, in the reasonable opinion of VanMar, that it was not capable of adequately performing or providing the work?
g. Fail to properly prepare surfaces?
If SWC did breach any term of the subcontract, did this constitute grounds on which VanMar could validly terminate the contract?
Did VanMar breach the contract in:
a. Insisting that SWC apply HRA waterproofing in wet or other unsuitable site conditions?
b. Issuing a Notice of Default on December 12, 2018?
c. Seizing SWC’s materials and equipment on December 14, 2018?
d. Terminating the contract on December 18, 2018?
Did SWC act reasonably, having regard to its warranty, indemnity and other contractual obligations, in refusing to apply waterproofing in unsuitable conditions, in November and December 2018?
As of December 12, 2018, the date of the Notice of Default, had SWC failed to provide adequate manpower and production?
In issuing the Notice of Default on December 12, 2018, did VanMar anticipatorily repudiate the contract?
Did SWC abandon the worksite on December 14, 2018, repudiating the contract?
If SWC breached the contract, did this breach constitute a fundamental breach, giving rise to a right for the defendant to terminate the contract?
What are the plaintiff SWC’s damages under the contract, if any?
What compensation is SWC entitled to pursuant to paragraph 12 of the subcontract for the seizure of its equipment by VanMar?
Does the amount paid by VanMar to Triumph reduce such compensation as a set off?
Law
[18] The law of construction contracts governs this situation. Repudiation is the key concept engaged.
[19] The repudiation of a contract is conduct that demonstrates that a party has absolutely renounced its contractual obligations: Remedies and the Sale of Land, Paul Perell (Toronto and Vancouver, Butterworths 1988), page 32.
[20] Where repudiatory conduct takes place before the time when performance is due, the result is sometimes described as “anticipatory breach of contract”.
[21] If the owner without justification ceases to make required payments under the construction contract, cancels it, or through some act without cause makes it impossible for the contractor to complete its work, then the owner has breached the contract and it has no claim for damages, and the contractor is justified in abandoning the work and the contractor is entitled to enforce its claim for lien to the extent of the actual value of the work performed and materials supplied up to that time: D & M Steel Ltd. v. 51 Construction Ltd., 2018 ONSC 2171, at para.49.
[22] Mere bad or defective work or insignificant non-completion will not, in general, entitle an owner to terminate a contract, but the owner will have an obligation to pay for the work and make a claim for damages for the defective work. An owner will not be able to terminate the contract because of some minor or inconsequential failure to complete: D & M Steel Ltd v. 51 Construction Ltd., at para. 51.
[23] If a contractor abandons the contract, repudiates the contract, fundamentally breaches the contract, or performs the contract in a way that it is so defective as to amount, in substance, to a failure or refusal to carry out the contract work, the owner is entitled to terminate the contract, to claim damages for breach of contract, and to be discharged from its obligations: D & M Steel Ltd. v. 51 Construction Ltd. , at para. 53.
[24] Cessation of work and abandonment are not necessarily coexistent and in order to constitute abandonment, a cessation of work would have to be permanent in the sense that it was not intended to carry the project to completion: Wildberry Homes Inc. v. Prosperity One Credit Union Limited, 2008 CanLii 70790 (ON SC), at para. 15.
[25] Abandonment is a question of fact. It means, not leaving a work under the belief that the contract is completed, but knowing or believing that the contract was not completed and declining to go on and complete it: Wildberry Homes, at paras. 15 and 16.
[26] It is well accepted that fundamental breach is an extraordinary doctrine and is to be applied sparingly because of the exceptional remedy to which it gives rise. A fundamental breach may relieve the non-breaching party from future executory obligations under the contract. In determining whether there has been a fundamental breach, the court must consider five factors: 1. The ratio of the parties obligations not performed to the parties obligations as a whole; 2. The seriousness of the breach to the innocent party; 3. The likelihood of repetition of the breach; 4. The seriousness of the consequences of the breach; and 5. The relationship of the part of the obligation not performed to the whole obligation: RPM Investment Corp. v. Lange, 2017 ABQB 305, at paras. 49 – 50.
[27] Repudiation occurs by words or conduct evincing an intention not to be bound by the contract. Such an intention may be evinced by a refusal to perform, even though the party refusing mistakenly thinks that he is exercising a contractual rate: RPM Investment, at para. 52.
[28] 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: RPM Investment, at para. 52.
[29] A party’s words or actions may amount to repudiation even if that party believes those words or actions are within its contractual rights: RPM Investment, at para. 53.
[30] In determining whether there has been a repudiation of contract, the conduct and circumstances of the parties must be considered as a whole. The test can be to determine whether the defaulting party’s actions could lead a reasonable person to conclude he no longer intends to be bound by the provisions of the contract: RPM Investment, at para. 54.
[31] An act of repudiation puts the non-repudiating party to an option: either accepting the repudiation, which terminates any prospective obligations under the contract, or declining it, leaving contractual obligations in place: RPM Investment, at para. 55.
[32] A party may also evince an intention to cease to be bound by the contract at some future point, giving rise to an anticipatory repudiation. The other party again has the option to accept or refuse the repudiation: RPM Investment, at para. 56.
[33] Where a general contractor fundamentally breaches the contract, it is entitled to no damages: Adam Rowe v. Fred Hagemans Holdings Limited, 2021 ONSC 5291 at para. 79; D & M Steel Ltd. v. 51 Construction Ltd., at para. 49.
Analysis
[34] For the reasons which I shall explain below, I find that SWC did not breach the contract, and that VanMar breached and repudiated the contract in forcing SWC off the site, taking its equipment, and replacing it with Triumph.
[35] It is necessary to review the sequence of events, starting with the condition of the fourth-floor site, and then events leading up to December 12, 2018.
[36] In September 2018, SWC returned to the project. The pouring of the concrete structure was two to three months behind schedule. VanMar was feeling pressure to meet the occupancy date for the condominium project.
[37] On November 13, 2018, Scott Evans inspected the site. Debris, materials, dirt, water, and concrete disrepair were evident. He contacted VanMar representatives to report this.
[38] At least twice in November 2018, including just before moving to work on the 4th floor, Todd Neaves inspected the 4th floor, and communicated to Mackenzie Ebert, the VanMar assistant site supervisor, the unpreparedness of the site.
[39] On November 29, 2018, SWC mobilized to the 4th floor. The site was not ready. Little to no preparation had been done by VanMar. Few concrete repairs had been done. The 4th floor parapets had been painted, which meant they could not be waterproofed. SWC left men on the site doing flashings. Scott Evans communicated to VanMar representatives that the site was not ready for waterproofing.
[40] On November 30 and December 1, 2018, VanMar worked on preparing the site. A paint subcontractor ground off the parapet paint.
[41] On November 30, 2018, Scott Evans contacted Tremco, the manufacturer of the waterproofing products being used, requesting a review of the site conditions.
[42] On December 3, 2018, Imran Khan from Tremco attended for a site review. He prepared a report. He found the concrete saturated, the site was dirty, there was debris, some concrete was in disrepair, and there was water draining from upper-level temporary scuppers onto the 4th floor. The site was not ready for waterproofing.
[43] On December 4 – 5, 2018, SWC performed preparatory work on 4th floor.
[44] December 6, 2018 was a snow day.
[45] On December 7, 10, and 11, 2018, SWC performed waterproofing and preparation work on the 4th floor.
[46] On December 9, 2018, SWC forwarded the Tremco report to VanMar. The only response was a Notice of Default sent three days later by Andrew Landolfi, the VanMar project manager.
[47] On December 12, 2018, the 4th floor was wet. SWC worked much of the day on flashings. VanMar and SWC prepped and dried the 4th floor terraces. SWC resumed waterproofing in the afternoon. The Landolfi Notice of Default (for “lack of manpower and production”) was received. This was the first time that VanMar alleged that SWC did not have sufficient manpower.
[48] The evidence suggests that at some point between December 12 – 14, 2018, Triumph was first called out to the site to provide a quotation.
[49] On December 13, 2018, the weather was foggy. The terraces were damp. SWC spent 1-2 hours drying the site, and heated up the melter, only to find moisture again condensed on the same surfaces. There was too much moisture in the air to apply waterproofing. SWC shut off the melter. Mr. Ebert became upset. VanMar offered to torch the terraces in front of the SWC waterproofers. SWC declined, for safety reasons. Scott Evans demonstrated for Mackenzie Ebert the effects of waterproofing in these conditions by applying HRA to a small surface, which bubbled and steamed.
[50] On December 14, 2018, Scott Evans had a discussion with Dino Dobrila, the VanMar site supervisor. He explained SWC would be a man short for a couple of weeks. Mr. Evans then had a heated discussion with Mackenzie Ebert, following which SWC began to demobilize. Scott Evans believed VanMar needed to reassess its position on the condition of the site. Mr. Evans also needed to calm down. He anticipated that VanMar would contact him to negotiate SWC’s return and to recognize that the current site conditions needed to be addressed. Instead, VanMar seized SWC’s equipment and materials. Mr. Landolfi sent an email regarding the seizure of equipment and suggested that Mr. Evans might be charged with theft. Mr. Lasani, a lawyer for the defendant, sent a letter regarding seizure of equipment.
[51] On December 15 and 18, 2018, there was continued contact by Scott Evans with VanMar about the site.
[52] On December 17, 2018, Triumph sent a revised Quotation/ Contract.
[53] On December 21, 2018, Mr. Lasani sent a letter confirming termination of the contract.
[54] Regarding the work schedule, I make the following findings:
• There was no explicit start date specified for the 4th floor terrace waterproofing. It was necessary to extrapolate from the overall schedule. The pouring of the 3rd floor suspended slab (which was the base for the 4th floor terraces) was scheduled for July 30, 2018;
• No explicit end date was provided;
• By December 2018, VanMar was 2 – 3 months behind schedule for the project. The terraces were not ready;
• The schedule did not indicate a date for pouring of the 4th floor parapets (unlike the main roof);
• Consequently, it was reasonable to infer SWC would have several months to complete the waterproofing on 4th floor terraces;
• If the start date were to change, the duration allocated to a contractor to perform the work would extend the expected completion date accordingly; and
• The schedule specified July 18, 2018 to pour the 23rd floor and elevator penthouse. This was not actually completed until about October 2018.
VanMar’s Actions: Repudiation by the Defendant
[55] In its December 12, 2018 Notice of Default, VanMar put the plaintiff on notice that it was going to terminate the contract. This constituted an anticipatory breach of the contract.
[56] VanMar claimed as grounds for the Notice a “lack of production and man power” and that “due to the lack of production of waterproofing… we have been held up on numerous occasions.”
[57] These grounds were not substantiated. In fact, the plaintiff had men working on site.
[58] The actual dispute centered on where the men should be working; in particular, whether SWC should be working on the 4th floor terraces in the existing site conditions.
[59] In seizing the SWC’s materials, machinery, and equipment on December 14, 2018, VanMar breached the contract between the parties. There was no default on the part of the plaintiff that triggered paragraph 18 (or any other provision) in the subcontract. This constituted a repudiation of the agreement between the parties.
[60] The December 14, 2018 email of Mr. Landolfi threatening to have Scott Evans charged with theft signaled the complete collapse of the relationship between the parties, and VanMar’s further repudiation of the agreement.
[61] By declaring (in the Lasani letter) that it would be proceeding to have the remaining work performed by another contractor, VanMar breached the contract between the parties.
Southwest’s Actions - No Repudiation by the Plaintiff
[62] In applying the HRA waterproofing, SWC sought to abide by the contract specifications and the Tremco application requirements.
[63] These specifications dictated that:
i) The site be clean of dirt and clear of debris;
ii) The site be dry;
iii) The HRA system not be laid on dust, rainwater, dew, ice, frost, or snow;
iv) The HRA system not be laid during inclement weather;
v) The HRA system not be laid on dust, loose particles, grease, paint, frost, oil, or other material detrimental to the bond; and
vi) The concrete surface for the HRA system be level, and not contain depressions greater than one-half inch.
[64] It was reasonable that SWC would exercise prudence and caution in addressing site conditions, since SWC was contracted to provide a warranty for its work, and since SWC would conceivably be negligent and in breach of contract if the waterproofing failed.
[65] SWC devoted significant resources and manpower in performing the waterproofing work on the 4th floor of the project in late November and early December, 2018.
[66] SWC devoted significant resources and manpower in preparing the 4th floor in late November and early December, 2018.
[67] VanMar made clear that there was no way that it would be satisfied with the work of SWC, unless SWC performed its waterproofing work in clearly unsuitable conditions.
[68] In the circumstances, SWC would arguably have been justified in abandoning the work site.
[69] However, SWC did not abandon the site. I accept the evidence of Scott Evans that SWC wished only to demobilize until VanMar could reassess its position. SWC kept the lines of communication open. VanMar rebuffed this and was determined to terminate the contract.
[70] In sum, while VanMar represented that it was dissatisfied with SWC’s supply of manpower, the dispute really revolved around VanMar’s unhappiness that SWC did not proceed with waterproofing on the 4th floor, notwithstanding unsuitable conditions. VanMar was months behind schedule in December 2018, and was pushing to complete the 4th floor terrace before it was ready.
[71] Time was of the essence in the agreement. But there was no clear direction from VanMar about dates.
[72] SWC was expected by VanMar to do more than its required scope of work, repeatedly preparing the same area because of conditions on the site. It was SWC’s obligation to communicate its concerns, but VanMar’s responsibility to do the necessary concrete repairs.
[73] VanMar has adduced no evidence that SWC’s work was defective. It has adduced no evidence of persistent or substantial breaches by SWC.
Assessment of the Issues
[74] I therefore determine the issues identified earlier as follows:
• The plaintiff SWC did not default on or breach any of the terms of the contract with VanMar. Specifically, SWC: did not breach the work schedule; did not breach the obligation to install in sequence and as required by the site superintendent; did not fail to perform its work properly; did not fail to supply proper workers, subcontractors, material or equipment; did not persistently or substantially breach any provision of the agreement; did not demonstrate that it was not capable of adequately performing the work; and did not fail to properly prepare surfaces.
• There was no breach by SWC of any term of the subcontract that constituted grounds on which VanMar could validly terminate the contract.
• VanMar breached the contract in:
a. Insisting that SWC apply HRA waterproofing in wet or other unsuitable site conditions;
b. Issuing a Notice of Default on December 12, 2018;
c. Seizing SWC’s materials and equipment on December 14, 2018; and
d. Terminating the contract on December 18, 2018.
• SWC acted reasonably, having regard to its warranty, indemnity and other contractual obligations, in refusing to apply waterproofing in unsuitable conditions, in November and December 2018.
• As of December 12, 2018, the date of the Notice of Default, SWC had not failed to provide adequate manpower and production.
• In issuing the Notice of Default on December 12, 2018, VanMar anticipatorily repudiated the contract.
• SWC did not abandon the worksite on December 14, 2018, thereby repudiating the contract.
• In this case, there was a repudiation by VanMar of the contract. This was accepted by SWC in issuing a lien against the property, and by commencement of its action.
• The plaintiff SWC is entitled to damages under the contract of the remaining amount it was to be paid under the contract.
• SWC is entitled pursuant to paragraph 12 of the subcontract to compensation for the seizure of its equipment by VanMar. These include an A-380 melter, extension ladders, and sundry other equipment. However, it has not provided satisfactory evidence of the value of such items. There has been no evidence of what materials were delivered, or of their value. The rental value of $1,500 a week asserted by Scott Evans was chosen unilaterally. His indication of an internet search for comparable items does not provide a reliable indication of their value. There has been no evidence of what an appropriate depreciation rate would be. There is no basis to determine the present value of the items. The plaintiff has not satisfied the evidentiary onus upon it to substantiate its claim in this regard.
• The amount paid by VanMar to Triumph does not reduce such compensation as a set off.
Conclusion
[75] I find that SWC is entitled to damages for the outstanding money owed from contracted work, in the amount of $201,871.74.
[76] SWC should be entitled to reasonable compensation for the appropriation of its machinery and equipment. However, the plaintiff has not provided satisfactory evidence to quantify such an amount.
[77] VanMar is entitled to no damages, and its counterclaim should be dismissed.
Order
[78] The Court Orders that:
The defendants shall pay damages to the plaintiff SWC the sum of $201,871.74, plus prejudgment interest pursuant to the Courts of Justice Act; and
The defendants’ counterclaim is dismissed.
Costs
[79] The parties are encouraged to agree upon appropriate costs. If the parties are not able to agree on costs, they may make brief written submissions to me (maximum three pages double-spaced, plus a bill of costs) by email to my judicial assistant at mona.goodwin@ontario.ca and also to Kitchener.SCJJA@ontario.ca. The plaintiff may have 14 days from the release of this decision to provide its submissions, with a copy to the defendants; the defendants a further 14 days to respond; and the plaintiff a further 7 days for a reply, if any. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves. If I have not received any response or reply submissions within the specified timeframes after the plaintiff’s initial submissions, I will consider that the parties do not wish to make any further submissions, and will decide on the basis of the material that I have received.
M. Gibson, J.
Date: June 10, 2022