COURT FILE NO.: CV-15-149
DATE: 2022-08-24
ONTARIO
SUPERIOR COURT OF JUSTICE
In the Matter of the Construction Lien Act, R.S.O. 1990 c.C.30
B E T W E E N:
LAURIE L. ZEHR DEMOLITION INC.
- and –
MARY-ANNE VARGA, ROB VARGA and MERIDIAN CREDIT UNION LIMITED
Filipe Mendes, for the Plaintiff/Defendant by Counterclaim
Gerry Schaffer, Counsel for the Varga Defendants/Plaintiffs by Counterclaim
Meridian Credit Union Limited is no longer a Defendant in this action
HEARD: January 31, February 2-4, 7-10, 22 and 24, 2022
The Honourable Justice Catrina D. Braid
JUDGMENT
I. OVERVIEW
[1] Laurie L. Zehr Demolition Inc. (“Zehr Demolition”) is a corporation that is controlled by Laurie Zehr and carries on business as a demolition and excavation contractor. In 2013, Rob and Mary-Anne Varga decided to start a dog kennel business. Rob Varga hired Zehr Demolition to supply and install a septic system for a dog kennel on the Varga property.
[2] Mr. Varga also hired Zehr Demolition to backfill the kennel building, and a dispute arose regarding the scope of the work under that agreement. Zehr Demolition vacated the property before the septic system was finished.
[3] Zehr Demolition registered a lien on the Varga property for approximately $25,000 and sued Rob and Mary-Anne Varga (“the Vargas”) for unpaid work. The Vargas counterclaimed for deficiencies and other damages. The Vargas paid money into court and the lien was discharged.
[4] The following issues arose at trial:
A. What was the scope of the contracts?
B. Should the Court grant the claims made by Zehr Demolition?
C. Are the Vargas entitled to a set-off and/or judgment on counterclaim?
[5] For the reasons set out below, I find that each party is liable to pay some of the claims advanced by the other party. After these amounts are set off, the Vargas shall pay $5,578.50, and the claim and counterclaim are otherwise dismissed.
II. ANALYSIS
A. What Was the Scope of the Contracts?
[6] This trial should have been straightforward with many of the facts agreed on by the parties. Unfortunately, Mr. Zehr and Mr. Varga were both angry after their working relationship broke down, and both made claims for additional funds that they likely would not have made, but for the dispute.
[7] Mr. Zehr was earnest in his evidence, even though some of his claims were far-reaching. On the other hand, I have concerns about Mr. Varga’s credibility. Mr. Varga was clearly bitter about what happened. Without independent evidence, he blamed Mr. Zehr for the broken pipes and broken hoses. He refused to accept that there were other possible causes of this damage, including a mini excavator and other heavy machinery that had been driven in the area. He failed to produce important documents to Mr. Zehr and to the court. Where Mr. Zehr and Mr. Varga’s trial evidence differs, I generally prefer Mr. Zehr’s evidence.
i. Contract for Septic Tank Installation
[8] In the fall of 2013, Mr. Zehr retained engineer John Broad to design the Vargas’ septic system. Mr. Zehr dug two test pits near the back of the Varga property to permit Mr. Broad to examine soil samples. Mr. Broad determined that the water table was only 3 feet below the surface. It was his opinion that the septic tanks needed to be installed above the high-water table to prevent them from floating when empty.
[9] Mr. Broad was asked to prepare the most economic design possible for the septic system. Mr. Zehr knew that Mr. Varga wanted a septic system that was installed below ground level. Unfortunately, there was a lack of communication regarding this issue between Mr. Varga, Mr. Zehr, and Mr. Broad. Mr. Zehr and Mr. Varga did not realize that the plans, prepared by Mr. Broad, showed the tanks installed above the high-water table and above the existing grade. The plans described the capacity of the tanks, but the height of the tanks was not known when the plans were prepared. The drawings were not to scale, and it was not clear how far the tanks would extend above ground level.
[10] Mr. Varga was the general contractor for the work on his property and is fairly knowledgeable when it comes to construction projects. He assumed that the tanks would be installed below the surface because that was what he had requested. Even though the not-to-scale drawings showed the tanks extending slightly above grade, Mr. Varga did not question Mr. Broad about the elevation of the tanks.
[11] In March of 2014, Mr. Zehr prepared an estimate containing a detailed list of the work required to install the septic system in accordance with Mr. Broad’s plans. Although the parties did not sign a formal contract, it was Mr. Zehr’s intention to follow the estimate as best he could.
[12] In November of 2014, Mr. Zehr began digging a hole for the septic tanks. As water quickly gathered in the hole, he realized that the water table was high. Mr. Broad was asked to discuss the potential for lowering the tanks into the water table. Mr. Broad suggested that concrete slabs could be used to anchor the tanks if Mr. Varga wished to have the tanks installed into the water table and below ground level.
[13] Mr. Zehr told Mr. Varga that the tanks were taller than he previously thought and gave him two options: 1) strap the tanks to a concrete slab to anchor the tanks and lower them into the water table, which would stop them from floating when empty, or 2) raise the tanks so that their bases were above the groundwater table.
[14] Mr. Zehr told Mr. Varga that he estimated an extra cost of $15,000 for the concrete pad option. Mr. Zehr knew that the second option would cost more than the estimate but less than the concrete pad option. I find that Mr. Zehr did not tell Mr. Varga that there would be any additional cost to install the tanks above the water table.
[15] Mr. Varga was surprised and stated that he did not have $15,000 for the concrete pad option. Mr. Varga assumed that Mr. Zehr would not negotiate receiving the entire $15,000 up front, although he did not ask for a payment agreement or time to pay some of the cost. He instructed Mr. Zehr to install the tanks above the water table. He knew that this meant that the tanks would not be installed below ground level. He believed that there would be no charge for that option.
[16] Near the end of November, Mr. Varga saw Mr. Zehr installing the 10-foot-high tanks and realized that the tanks would extend out of the ground by approximately 7 feet. He could have asked Zehr Demolition to stop the installation to discuss the concrete pad option and canvass refinancing options. Instead, he assumed that this would be problematic and permitted the installation to continue.
[17] There was no written contract entered into by the parties for the septic tank installation. I find that the original work estimate, combined with the parties’ verbal agreement to proceed with the work, is the contract. When Mr. Varga was given the two options in November, he essentially agreed to continue with Mr. Broad’s original plans with the understanding that the tanks would not be installed below ground. Even if he made that decision because of a lack of available funds, it was still a binding contract.
ii. Contract for Kennel Foundation Backfill
[18] While Zehr Demolition was installing the septic system, another contractor was working on the kennel building. Mr. Varga had hired the other contractor to backfill the kennel, but that contractor left before completing the task. Once the septic tanks were installed, Mr. Varga asked Mr. Zehr to assume the backfill contract. Mr. Zehr believed that he was only required to backfill inside the building envelope, and that backfilling the outside of the foundation would be an extra charge. In contrast, Mr. Varga believed that the agreement required Mr. Zehr to backfill both the inside and the outside of the building. Mr. Varga did not give Mr. Zehr a copy of the original written contract and did not produce it at trial.
[19] Mr. Zehr backfilled the inside of the kennel. Mr. Varga paid half of the agreed-upon amount for the backfilling work and agreed to pay the other half in January. A dispute arose between Mr. Zehr and Mr. Varga regarding whether the contract included backfilling the outside of the kennel. Mr. Zehr removed his equipment from the property, and Mr. Varga never paid the other half as he had promised.
[20] Mr. Varga’s failure to produce the original contract to Mr. Zehr and to the court causes me concern regarding his credibility. I do not accept Mr. Varga’s claim that Mr. Zehr acknowledged that he was supposed to backfill the outside of the foundation.
[21] Counsel for the Vargas submits that the photographs at Tab 14 of the plaintiff’s productions show Zehr Demolition working on both sides of the foundation walls. It is his position that Mr. Zehr knew he was supposed to backfill the outside of the wall but did a terrible job of it. However, Mr. Zehr testified that one photo shows his machine outside the wall bringing gravel into the building envelope; and another photo shows his machine working on the swale that is located between the septic system and the building. He denies backfilling the outside of the foundation. I accept this evidence and find that Zehr Demolition did not backfill the outside of the kennel foundation.
[22] Mr. Zehr has satisfied me, on a balance of probabilities, that the agreement was only to complete the work on the inside of the kennel. I find that the backfill around the outside of the kennel was not part of the scope of the work that was agreed on by the parties, and that Mr. Zehr completed the work that was required by the contract.
B. Should the Court Grant the Claims Made by Zehr Demolition?
[23] On December 3, 2014, after the falling out between the parties, Zehr Demolition issued three invoices:
An invoice entitled “PROJECT: SEPTIC SYSTEM COMPLETION” for a total cost of $72,346.56 (the estimate amount plus HST). The invoice stated, “THIS AMOUNT HAS BEEN PAID IN FULL”.
A second invoice for “Additional Work Outside Contract” for $1,282.55, which was paid. Although Mr. Varga complains about having been charged for this work, the Vargas do not seek reimbursement for this amount.
A third invoice for “Backfill and truck gravel to site grade out and grade slope for drains”, in the amount of $19,574.99. Only half of this invoice was paid. In a letter dated December 23, 2014, Mr. Varga stated that he would be paying the other half of the invoice by the end of January, as promised. However, it was never paid. As noted above, Zehr Demolition completed the work that was required by the backfill contract. Mr. Varga therefore owes $9,787.50, which is the unpaid portion of the backfill invoice.
[24] Zehr Demolition claims for several extras. A contractor may charge for an extra where the owner expressly or impliedly instructed the contractor to do the extra work or to supply the extra materials outside the scope of the contract. If no price is fixed for the performance of the extra work, the court will imply a promise to pay a reasonable amount on a quantum meruit basis. Conversely, when the contractor does work or supplies materials not called for by the contract without instructions, express or implied or without the consent of the other contracting party, the contractor is not entitled to charge for the additional work or materials: D & M Steel Ltd. v. 51 Construction Ltd., 2018 ONSC 2171, O.J No. 1770.
[25] On December 16, 2014, Zehr Demolition prepared a document entitled “Balance Owing and Additional Work Outstanding”. In addition to the unpaid portion of the backfill invoice, Mr. Zehr claimed the following extras:
i. Snow clearing on two days $791: Mr. Zehr seeks reimbursement for snow removal on two days. Mr. Zehr testified that Mr. Varga asked him to clean snow off the driveway. Mr. Varga denied asking Mr. Zehr to clear the snow but accepted that the snow clearing was probably done. The snow needed to be cleared to permit the trucks to deliver stone for the septic system. The evidence overall demonstrates that Mr. Varga was present and very much involved in the construction of the septic system and the kennel. His evidence that he had no knowledge of the snow removal is not believable. I find that Mr. Varga requested the snow removal, and the Vargas are liable for the snow clearing in the amount of $791.
ii. Rental of a water pump and hoses and cost of replacing damaged hoses $819.25. Mr. Zehr testified that Mr. Varga asked to rent a water pump and hoses, and that they were damaged while onsite. However, Mr. Zehr did not provide receipts for the cost of replacing the hoses. I am unable to determine what caused the damage or even who used the hoses. This amount is disallowed.
iii. Excavating for kennel building foundation and the laying of pipe $5,424. The original estimate included “hookup from outside kennel to septic tank”. I find this claim was part of the original contract and was not properly claimed as an extra. This amount is disallowed.
iv. Mr. Zehr claims that the change in the installation of the tanks resulted in an additional cost of $8,814 for moving topsoil, filling around the septic tanks, and shaping the topsoil covering the tanks. However, if Mr. Zehr had to do extra work to raise the tanks, it was reasonably foreseeable since that was the engineer’s plan from the start. The high-water table was known to Mr. Broad and should have been known to Mr. Zehr. Any extra work required to raise the tanks is solely Mr. Zehr’s responsibility. Notably, the first invoice, from December 3, states that it is for “septic system completion” and that it has been “paid in full”. The clear inference to be drawn from this invoice is that the Vargas have paid for a complete and functioning septic system, and that there will be no further charges for the septic system contract. I find that this claim was part of the work required under the original contract, and this amount is disallowed.
[26] Therefore, Zehr Demolition is entitled to payment from the Vargas for the backfill contract and the snow removal, for a total amount of $10,578.50.
C. Are the Vargas Entitled to a Set-Off and/or Judgment on Counterclaim?
[27] The Vargas state that Zehr Demolition breached the contract by deviating from the planned elevation and tank layout of the septic system. They state that they paid for the septic system in full on November 12, 2014, even though the septic system was not completed. They claim a set-off with respect to any monies owing, and counterclaim for damages totaling $50,000.
[28] At trial, Mr. Zehr agreed that the septic system was incomplete when he left the property. Mr. Varga expected a complete and functional septic system, but it was missing wiring, pumps, and a control panel.
[29] In the summer of 2015, Mr. Varga paid Mr. Keith Karl to complete the system to final inspection. Mr. Varga testified that it cost a little less than $6,000 but did not provide the invoice. Mr. Karl stated that the invoice was for $5,700 inclusive of HST. Mr. Karl’s fee included the repair of a broken pipe on the outside of the septic system. Other broken pipes were discovered in 2016 and 2017. As I noted previously, Mr. Varga has not provided any definitive evidence of what caused the damage to the pipes.
[30] The fee also included the replacement pumps. Mr. Zehr stated that he left the pumps on site at the tree line and was not seriously challenged on this point. However, Mr. Varga denies that they were there. I find that the pumps were left on site and that Mr. Zehr should not be responsible for that cost. No one led evidence regarding the cost of replacing the pumps.
[31] The counterclaim should be allowed in part to remedy the deficiencies of the septic system. However, it is difficult to assess the cost to complete the septic system without the invoice, which Mr. Varga should have produced. I find that Mr. Zehr is not liable for the repair of the broken pipe or the pumps. I find that a reasonable cost to get the system functional is $5,000 inclusive.
[32] I disallow the remaining claims made by the Vargas for the following reasons:
i. Labour and equipment rentals to excavate and grade the outside of the kennel building: As stated previously, the kennel backfill contract was for the inside of the building only. This claim is disallowed.
ii. Equipment rental to grade inside the kennel: I find that the parties did not discuss reimbursement for these costs or to deduct these costs. This claim is disallowed.
iii. Cost to put septic system as per the original plans by Mr. Broad: No term of the contract required the septic tanks to be installed below ground. Even if Mr. Varga initially expected them to be installed below ground, he was given two clear options and chose the one that meant the tanks would extend aboveground. Notably, Mr. Varga’s letter of complaint to Mr. Zehr’s counsel, dated December 23, 2014, addressed perceived deficiencies with the backfill project but made no complaint regarding the septic system. Zehr Demolition is not liable to pay the costs of the Vargas obtaining a new permit and installing a new septic system with insulation and concrete pads in 2018.
[33] Therefore, the Vargas are entitled to payment from Zehr Demolition of $5,000.
III. COSTS
[34] In the event that the parties cannot agree as to costs, they are directed to provide written submissions. The submissions shall be no longer than two typed pages, double-spaced, in addition to any relevant Bill of Costs and written Offers to Settle. Mr. Zehr shall provide costs submissions by September 9, 2022; and the Vargas shall provide any response by September 23, 2022.
[35] In the event that submissions are not received from either party by September 23, 2022, costs shall be deemed settled. Costs submissions shall be filed in the usual manner and also sent by email to Kitchener.SCJJA@ontario.ca, marked for the attention of Justice Braid.
IV. CONCLUSION
[36] For all these reasons, the court makes the following findings and orders:
- The claim of Laurie L. Zehr Demolition Inc. is allowed only insofar as the following amounts:
i. $9,787.50 for the remainder owed on the backfill invoice, and
ii. $791 for snow removal.
The Varga’s counterclaim is allowed in the amount of $5,000 to complete the septic system.
After the amounts are set off, the Vargas owe $5,578.50 to Laurie L. Zehr Demolition Inc., which shall be paid out of the funds held by the court in trust.
The remainder of the $30,794.69 plus interest held by the Accountant of the Superior Court of Justice that was paid into court by Mary-Ann Varga and Rob Varga, shall be held by the court until the issue of costs is resolved.
____________________
Braid, J.
Released: August 24, 2022
COURT FILE NO.: CV-15-149
DATE: 2022-08-24
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E N:
LAURIE L. ZEHR DEMOLITION INC.
- and –
MARY-ANNE VARGA, ROB VARGA and
MERIDIAN CREDIT UNION LIMITED
pondent
JUDGMENT
CDB
Released: August 24, 2022