COURT FILE NO.: CV-19-614333
DATE: 2022 11 23
SUPERIOR COURT OF JUSTICE - ONTARIO
IN THE MATTER OF the Construction Act, RSO 1990, c C.30, as amended
RE: THE FIFTH WALL CORP., Plaintiff
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RICHARD TONELLI and MARIA TONELLI, Defendants
AND RE: RICHARD TONELLI, Plaintiff by counterclaim
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THE FIFTH WALL CORP., Defendant by counterclaim
BEFORE: Associate Justice Todd Robinson
COUNSEL: T. Brook, A. McCoomb, and T. Morrison, for the defendants / plaintiff by counterclaim (moving parties)
M. Shafir and M. Swartz, for the plaintiff / defendant by counterclaim
HEARD: July 6, 2022 (by videoconference)
REASONS FOR DECISION (Partial Summary Judgment)
[1] The Fifth Wall Corp. (“Fifth Wall”) was contracted to build a new residential house for the defendants, who are spouses. Although Fifth Wall asserts that its contract was with both defendants, the written costs-plus contract was signed between Fifth Wall and Richard Tonelli. The contract was prepared by Fifth Wall. It included various schedules, notably one at Schedule B described in the contract as “Scope of Work & Quotation”. That document had previously been prepared by Fifth Wall and provided to the defendants before the contract was signed.
[2] Schedule B contains three pages of cost-coded line items, each having a task description and a specific dollar amount listed in a column titled “Budget”. Many of the budget column entries are only a dash. The aggregate of the budget column is shown as totalling $1,002,373.91, to which a 10% management fee is added, plus HST, for total of $1,245,950.77.
[3] Work proceeded between June 2016 and December 2018. During that time, it is undisputed that some changes and extras were agreed and performed. Several are argued by the defendants to have been outside the original scope of work defined in Schedule A and Schedule B of the contract. Nevertheless, actual project costs for a number of items in Schedule B exceeded many of the listed amounts.
[4] Based on cross-examination evidence, it appears that Fifth Wall was aware that the project would be over-budget well before it advised the defendants of that fact. Approaching two years into the project, Fifth Wall provided the defendants with a cost to date summary that added further information on amounts to be billed. That chart indicated that the project would cost a total of $1,812,183.89. The defendants assert that they had no prior notice or knowledge that the final cost would so greatly exceed the agreed budget.
[5] Fifth Wall continued to provide the defendants with further updated cost to date charts after that time. Later charts added information on total change orders. By October 2018, Fifth Wall was asserting change orders totalling $409,254.40 before Fifth Wall’s management fee and HST. By the time the parties’ relationship had broken down in December 2018, Fifth Wall had invoiced at total of $1,892,729.07 for its work.
[6] One of the many disputed issues in this action is the extent to which the defendants were aware of and approved changes, extras, or cost increases that exceeded the budget amounts in Schedule B to the contract and the extent to which Fifth Wall was required to obtain approval to exceed those listed amounts.
[7] The defendants bring this motion for partial summary judgment essentially seeking a determination on whether the Consumer Protection Act, 2002, SO 2002, c 30, Sched A (the “CPA”) applies to their residential construction contract. If it does apply, then they also seek an order requiring Fifth Wall to pay damages to Mr. Tonelli under the CPA equal to the amounts paid in excess of the listed amounts for 49 items in Schedule B to the contract.
[8] I am granting the defendants’ motion, but only in part. I am satisfied that there is no genuine issue requiring a trial that the CPA applies to the parties’ construction contract and that the contract is a “consumer agreement” as defined in the CPA. Declaratory relief on those issues is properly granted at this juncture.
[9] However, I find genuine issues requiring a trial on whether the individual line items in Schedule B are “estimates” and, if so, the extent of any breach of the CPA by Fifth Wall, namely whether there was any express or implied agreement to amend any of disputed item amounts in Schedule B and the extent to which those amounts have actually been exceeded. This is not a case where it is in the interests of justice to decide those issues on the record before me using the enhanced powers available to me. Also, determining those issues is necessary to deciding the other disputed issue of whether or not to exercise my discretion under s. 100(2) of the CPA to deny repayment of any overcharge. That too is accordingly a genuine issues requiring trial.
Analysis
[10] I previously granted leave for the defendants to bring this motion: The Fifth Wall Corp. v. Tonelli, 2022 ONSC 599. The issues for determination are essentially the same as set out in my reasons for granting leave, namely:
(a) whether there is a genuine issue requiring a trial that the CPA applies to the parties’ residential construction contract;
(b) if the CPA does apply, whether there is any genuine issue requiring a trial on the extent to which it applies, namely:
(i) whether the construction contract is a “consumer agreement” within the meaning of the CPA;
(ii) whether the amounts for items included in Schedule B to the contract are price estimates within the meaning of s. 10(1) of the CPA; and
(iii) if so, whether the parties agreed to amend the price estimates under s. 10(3) of the CPA;
(c) if the CPA does apply and the Schedule B items are estimates, whether Fifth Wall breached s. 10(1) of the CPA by exceeding its price estimates by more than 10%; and
(d) if the CPA does apply and was breached, whether the defendants should be awarded damages for repayment of the amount of any overcharge.
Legal framework for summary judgment
[11] The defendants’ partial summary judgment motion is brought within a reference before me under s. 58 of the Construction Act, RSO 1990, c C.30 as it read on June 29, 2018 (i.e., the former Construction Lien Act) (the “CLA”). I thereby have the same authority as a judge to decide it: R&V Construction Management Inc. v. Baradaran, 2020 ONSC 3111(Div Ct) at para. 23.
[12] Subrule 20.02(2) of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) directs that I should grant summary judgment if I am satisfied that there is no genuine issue requiring a trial. As set out by the Supreme Court of Canada, there will be no genuine issue requiring a trial if I am able to reach a fair and just determination on the merits. That will be the case where this process allows me to make the necessary findings of fact, allows me to apply the law to the facts, and is a proportionate, more expeditious, and less expensive means to achieve a just result: Hryniak v. Mauldin, 2014 SCC 7 at para. 49.
[13] The two-stage assessment for deciding a summary judgment motion is set out by the Supreme Court of Canada in Hryniak at para. 66.
[14] At the first stage, I am required to determine if there is a genuine issue requiring trial based only on the evidence in the record before me. I make that determination without using the fact-finding powers provided in subrules 20.04(2.1) and (2.2), which allow evidence to be weighed, credibility to be assessed, inferences to be drawn, and further oral evidence. If I find that the evidence required to fairly and justly adjudicate the dispute is available on the record and summary judgment is a timely, affordable and proportionate procedure, then I may grant summary judgment.
[15] The second stage is triggered if I find that there appears to be a genuine issue requiring a trial. I must then assess if the need for a trial can be avoided by using the discretionary powers under subrules 20.04(2.1) and (2.2). Those powers are only to be used if doing so is not against the interest of justice, meaning that using them will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.
Issue 1: Does the CPA apply to the parties’ construction contract?
[16] Although there is prior case law discussing the CPA in the context of residential construction, both sides agree that there is no case law that directly addresses whether and in what circumstances the CPA applies to a residential construction contract.
[17] The defendants argue that the CPA applies to residential renovation contracts, pointing specifically to an online government publication by Consumer Protection Ontario dealing with rights when starting home renovations or repairs. That publication states, in part, as follows:
Under the Consumer Protection Act (CPA) if an estimate is included as part of a home renovation contract, the final price for all goods and services cannot be more than 10% over the original estimate unless you have agreed to new work or a new price.
[18] The publication is not dispositive of anything on this motion. In assessing whether there is a genuine issue requiring a trial on application of the CPA to the construction transaction at issue, I need not decide whether the CPA applies generally to all residential renovation and construction agreements. I am concerned only with the particular circumstances of the dealings between the parties to this action. Whether or not the CPA applies to the parties’ transaction is a matter of statutory interpretation based on the facts of this particular case.
[19] Fifth Wall argues that the scheme of the CPA is at odds with the flexible nature of a cost-plus construction contract, which provides security to contractors against being left out-of-pocket for their actual costs spent on labour, materials, and subtrade accounts. Fifth Wall submits that the presence or absence of a fixed price is a key consideration in determining whether the CPA applies at all. Essentially, as I confirmed with Fifth Wall’s counsel during oral submissions, Fifth Wall argues that the CPA is properly interpreted to exclude from its ambit the supply of goods and services under a costs-plus residential construction contract. I do not agree.
[20] Section 3 of the CPA sets out that, in determining whether the CPA applies to an entity or transaction, I must consider the real substance of the entity or transaction and, in so doing, I may disregard the outward form. I do not accept that the nature of a costs-plus construction contract is itself at odds with the CPA.
[21] Consumer protection laws have been held to be subject to special principles of interpretation. In Bernstein v. Peoples Trust Company, 2019 ONSC 2867, at paras. 134-136, Perell J. outlined those principles to include that consumer protection laws be (i) interpreted broadly in a manner that furthers their objectives, which in the case of the CPA is mainly to establish more ethical trade practices designed to afford greater protection to the consuming public, (ii) approached from the perspective of an average and unsophisticated consumer, and (iii) be interpreted generously in favour of consumers, recognizing that ordinary consumers often face information or power imbalances when dealing with sophisticated corporate counterparties.
[22] Although Bernstein was not a construction case, I see no reason why the interpretive principles outlined by Perell J. should not equally apply in the context of a residential renovation or construction transaction.
[23] Nothing in CPA expressly excludes it from applying to construction contracts or other transactions to which the CLA applies. Similarly, nothing in the CLA expressly excludes the CPA from applying to the supply of services and materials that give rise to lien and other rights under the CLA. I find no proper basis to hold, as a general proposition, that the CPA cannot and does not apply to costs-plus contracts concerning residential construction and renovation of premises. Although the fact of a costs-plus contract was relevant to various cases cited by Fifth Wall in which relief from the CPA was provided by the court, each of those cases turned on its own facts, as will this case.
[24] Section 2 of the CPA governs application of the act. It provides that the CPA applies to all consumer transactions if the consumer or the person engaging in the transaction with the consumer is located in Ontario when the transaction takes place. There are specific exemptions outlined in s. 2(2), but they were not argued to be applicable and, in my view, do not apply to the parties’ contract.
[25] “Consumer” is defined in s. 1 of the CPA to mean “an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes.” As set out in the definition, whether or not an individual is a “consumer” turns on the purpose for which the individual is acting. If acting for a personal, family, or household purpose, then the individual is a “consumer”. If acting for a business purposes, then the individual is a “consumer”.
[26] I am satisfied that the defendants are “consumers”. Although there is a dispute over the actual parties to the contract, it is not necessary on this motion to determine if the contract was between Fifth Wall and Mr. Tonelli alone or between Fifth Wall and both defendants. It is undisputed that the construction was for personal purposes, not business purposes, namely to build a “dream home” for the defendants to live in. Both defendants are thereby “consumers” in the context of the transaction.
[27] I am also satisfied that the residential construction at issue is a “consumer transaction.” That term is broadly defined in s. 1 of the CPA to mean “any act or instance of conducting business or other dealings with a consumer, including a consumer agreement.” Fifth Wall was clearly conducting business with the defendants.
[28] It follows from the foregoing that the requirements for application of the CPA outlined in s. 2 are met. There is accordingly no genuine issue requiring a trial that the CPA applies to the residential construction transaction between Fifth Wall and the defendants.
Issue 2: To what extent does the CPA apply?
[29] The defendants rely on s. 10 of the CPA in arguing that Fifth Wall was precluded from exceeding the estimate amounts in Schedule B to the contract by more than 10%. They argue that Fifth Wall nevertheless exceeded those amounts for 49 items.
[30] Section 10 of the CPA provides as follows:
Estimates
10 (1) If a consumer agreement includes an estimate, the supplier shall not charge the consumer an amount that exceeds the estimate by more than 10 per cent.
Performance of consumer agreement
(2) If a supplier charges an amount that exceeds the estimate by more than 10 per cent, the consumer may require that the supplier provide the goods or services at the estimated price.
Subsequent agreement
(3) Nothing in this section prevents a consumer and a supplier from agreeing to amend the estimate or price in a consumer agreement, if the consumer requires additional or different goods or services.
[31] There are three layers to the defendants’ position. First, the construction contract must be a “consumer agreement”. Second, the budget amounts in Schedule B must be an “estimate”. Third, the parties must not have agreed to amend the estimate or price.
(a) Is the construction contract is a “consumer agreement”?
[32] “Consumer agreement” is defined in s. 1 of the CPA. The relevant portion of that definition is an agreement between a supplier and a consumer in which “the supplier agrees to supply goods or services for payment.”
[33] The definition of “supplier” in s. 1 of the CPA is broad. It is defined to mean, in part, “a person who is in the business of selling, leasing or trading in goods or services or is otherwise in the business of supplying goods or services”. “Goods” and “services” are also broadly defined. “Goods” is defined as “any type of property” and “services” is defined as “anything other than goods, including any service, right, entitlement or benefit”.
[34] Fifth Wall argues that I should interpret the language “goods or services” (emphasis added) in the definition of “consumer agreement” as disjunctive, such that a supplier contracting to supply both goods and services would fall outside the definition and, accordingly, the supply would not be captured as a consumer transaction. I give no effect to that argument.
[35] It is statutorily prescribed that all legislation is to be interpreted as being remedial and is to be given such fair, large and liberal interpretation as best ensures the attainment of its objects: Legislation Act, 2006, SO 2006, c21, Sched F, s. 64(1).
[36] In R. v. Bondfield Construction Company Limited, 2022 ONCA 302, at paras. 56-58, the Court of Appeal discussed relevant principles of statutory interpretation. The starting point is to examine the words of the provision to be interpreted in their grammatical and ordinary sense. Those words must be read harmoniously with both the scheme and object of the legislation, as well as the intention of the legislature.
[37] The Court of Appeal expressly noted that the purpose of the legislation is central to the interpretive exercise. Although Bondfield dealt with the Occupational Health and Safety Act, RSO 1990, c O.1, the Court of Appeal’s comments at para. 58 on how interpretation of that legislation has been treated are, in my view, equally applicable to the CPA. The provisions of the CPA and its regulations must similarly be interpreted generously, with narrow or technical interpretations that would interfere with or frustrate attaining the legislature’s consumer protection objectives to be avoided.
[38] In Consumer’s Choice v. Her Majesty the Queen, 2013 ONSC 5600 at paras. 17-18, Lemon J. specially considered the use of “or” in s. 88 of O Reg 17/05 under the CPA, which deals with prescribed information for persons charged under the CPA. Lemon J. agreed with a decision of the Alberta Court of Queen’s Bench that, although “or” is a disjunctive word, when it is used in legislation it is presumed to be inclusive unless clear from the context of its use that listed alternatives are meant to be mutually exclusive. Such an approach to “or” in the definition of “consumer agreement” is appropriate here.
[39] In my view, interpreting the use of “or” in the phrase “goods or services” disjunctively to mean that a “consumer agreement” may only deal with either the supply of goods or the supply of services, but not both, would be contrary to the intent and scheme of the CPA. I do not agree that the legislature intended such a result. I also do not agree that CPA must say “goods or services or both” or “goods and/or services” in order to capture an agreement to supply both goods and services as a “consumer agreement.” In context, use of “or” is not meant to treat “goods” and “services” as mutually exclusive. To interpret the language in that manner would permit suppliers to escape the definition of “consumer agreement” simply by providing a service with the supply of goods or vice versa.
[40] I am satisfied on the evidence that there is no genuine issue for trial that the construction contract is a “consumer agreement”. Fifth Wall’s evidence on this motion is from William Campbell, a project coordinator (now operations manager) with Fifth Wall. In his affidavit, he describes Fifth Wall as “a full-service custom home builder and general contractor.” Mr. Campbell explains that the defendants had never built a home before and wanted Fifth Wall to be involved throughout. As he puts it, “The Tonellis wanted their first home to be perfect, and Fifth Wall wanted to make this dream come true for them.”
[41] There is no dispute that Fifth Wall was constructing a custom residential house for use by the defendants’ family, and not for any commercial or industrial purpose. Apart from Mr. Tonelli’s own evidence on the construction being intended to build a “dream home”, Mr. Campbell confirmed on cross-examination that the construction was for the defendants’ personal use. Mr. Campbell further confirmed that building custom homes involves providing a wide range of goods and services to a homeowner and, on this specific project, to the defendants.
[42] In my view, Mr. Campbell’s own description of Fifth Wall’s operations and supply of services fits squarely within the definition of “supplier” in the CPA. The construction contract is thereby an agreement between Fifth Wall (a supplier) with one or both of the defendants (both consumers) in which Fifth Wall agreed to supply services and materials (goods and services) for the construction work at the premises for payment. The parties’ contract is accordingly a “consumer agreement” within the meaning of the CPA.
(b) Are the budget items price estimates within the meaning of the CPA?
[43] Since the construction contract is a “consumer agreement”, s. 4 of the CPA requires that it comply with the provisions of the CPA. Accordingly, if the budget amounts in Schedule B to the contract are “estimates”, then Fifth Wall was not entitled to charge the defendants an amount exceeding those amounts by more than 10% unless the parties agreed to amend the estimate: CPA, s. 10(1) and (3).
[44] “Estimate” is not defined in any part of the CPA other than Part VI, which deals with repair work that is not relevant on this motion. However, in my view, it is not a term that requires special definition. In interpreting legislation, sources for the meaning of particular terms may include both dictionary and judicially construed definitions: R. v. Bondfield Construction Company Limited, supra at para. 57. Common understanding of the term “estimate” is consistent with dictionary definitions. The Oxford Learner’s Dictionary defines “estimate” in terms of forming an idea of the cost, size, or value something, but without calculating it exactly. The Cambridge Dictionary similarly defines “estimate” in terms of guessing or calculating the cost, size, or value of something.
[45] Fifth Wall submits that Schedule B was included in the contract to detail the work that Fifth Wall would be performing with budgeted costs for each item of work, or blanks for items of work where the cost was unknown or where work was to be performed by the defendants themselves. It submits that the word “estimate” does not appear in the parties’ contract and that Schedule B specifically notes the term “budget” as the title for the amounts column. Fifth Wall characterizes the line items as budget allowances, disputing that they were “estimates” as alleged by the defendants. It points to the terms of the costs-plus contract, which state that the contract price is equal to the sum of Fifth Wall’s cost of the work plus its 10% fee. As set out in Schedule A to the contract, that fee is calculated on the “actual construction costs (time & material)”.
[46] The term “estimate” is, in fact, used in several task descriptions in Schedule B, including one item at issue on this motion: stone material. Regardless, Fifth Wall has tendered no case law distinguishing a “budget” from an “estimate”. I am unconvinced by its arguments that there is any material distinction between the two terms for the purposes of the CPA. Whether Fifth Wall’s budget items are legally “estimates” under the CPA turns on their substance, not any term used in the contract to describe them.
[47] The defendants point to Mr. Campbell’s cross-examination, during which he confirmed that the budget items were “price estimates and allowances” and several times accepted propositions that they were estimates. However, Mr. Campbell’s factual evidence is not conclusive of the legal characterization of the budget items. Notably, the term “price estimates” is how counsel consistently described project budgeting and the items in Schedule B throughout the examination. Mr. Campbell was not afforded an opportunity to explain his reference to “allowances” until re-examination.
[48] I am satisfied that there is a genuine issue requiring a trial on whether any of the challenged item amounts in Schedule B constitute an “estimate”. They fall broadly into three categories, which is how I have considered them: (i) those with a budget figure and the word “allowance” included in the task description (32 items); (ii) those with no amount and only a dash under the budget column (16 items); and (iii) those with an amount and no caveat language noted in the task description (1 item).
i. Items with a budget figure noted as “allowance”
[49] In my view, there is a genuine issue requiring a trial on whether the 32 items in the budget schedule specifically noted as an “allowance” constitute “estimates” within the meaning of s. 10 of the CPA.
[50] The defendants submit that there is no meaningful distinction between “allowance” and other terms used in Schedule B and in the contract such as “budget”, “quotation”, and “estimate”. They argue that, in context of a costs-plus contract where the price was not fixed, a budget or allowance must mean the same thing: an estimate of the total price.
[51] Mr. Tonelli’s cross-examination evidence is that he only skimmed through the contract quickly, that he did not understand what the “allowance” references meant, that he did not seek to clarify with Fifth Wall, that he did not discuss what was included in allowance items, and that he assumed them to be appropriate estimates for the work.
[52] What was intended by “allowance” is not addressed in Mr. Campbell’s affidavit evidence either. During cross-examination, Mr. Campbell agreed that he would want project cost estimates to be as close as reasonably possible to the actual cost and that the budget items were prepared as accurately as possible based on available information, including project drawings. Mr. Campbell further confirmed that he could have spoken and did speak to the project architect about questions on the drawings.
[53] As already noted, it was put to Mr. Campbell that the budget items were “price estimates”. He confirmed that they were “price estimates and allowances.” During his re-examination, though, Mr. Campbell explained that “allowances” were provisional or placeholder amounts based on either assumed scope prior to it being confirmed or based on information provided for a particular element.
[54] Most of the allowance items have specific qualifications in their task descriptions. For example, some are noted to be “as needed” costs, some are tied to specific durations, and some refer to external requirements, such as the Ministry of Labour. Neither the defendants’ evidence nor argument has addressed the budget items individually, other than calculating the percentage by which the actual billings exceed the amount for each of the disputed line items.
[55] The different qualifications were put to Mr. Tonelli during his cross-examination in some detail, but his evidence on them was narrow. It was not, in my view, sufficient to demonstrate that there is no genuine issue for trial on whether describing these items as “allowances” has any impact on whether they are properly viewed as “estimates”.
[56] I agree with the defendants that any failure to understand what the contract meant or failing to carefully read the contract is not dispositive. Indeed, the defendants correctly point out that s. 11 of the CPA expressly mandates that ambiguities allowing for more than one reasonable interpretation of a consumer agreement be interpreted to the benefit of the consumer. Nevertheless, on this motion, I am concerned with whether there is a genuine issue requiring a trial.
[57] The defendants’ position is that I should view each line item in Schedule B as a separate “estimate” such that it does not matter whether, on a more global view of the items in Schedule B, the aggregate budget amount may not have been exceeded by more than 10%. Since it is the defendants’ motion, their position is my focus. I have thereby considered whether there is a genuine issue requiring a trial that each item constitutes a separate “estimate”.
[58] There is limited evidence dealing specifically with each of the challenged “allowance” items. Both parties primarily rely on general evidence about Schedule B and their understanding of it as a whole. In my view, given the number of varying qualifications provided on the “allowance” items, further and clearer evidence on each item of work is needed to reach a fair and just determination on whether those individual items each constitute an “estimate”.
[59] Fifth Wall is in the best position to tender evidence on the specific work performed for each of the challenged items. It has not done so. I agree with the defendants that only Fifth Wall is able to explain how and why its actual charges exceeded the amounts set out in Schedule B to the contract, such as the “allowance” item amounts for the masonry fireplace, tool and equipment rentals, brick materials, brick labour, framing labour, foundation materials, and welding. Nevertheless, the defendants’ position on these items overlooks their own burden on this motion.
[60] At trial, Fifth Wall has the burden of proof for its claim. On this motion, though, the defendants bear the burden of demonstrating that there is no genuine issue requiring a trial.
[61] The defendants submit that if increased costs resulted from design decisions or scope revisions made by the defendants, as Mr. Campbell indicates in his evidence, then Fifth Wall should have access to all of the information to substantiate that position, including receipts, quotes, and emails or other correspondence with the defendants, yet has not tendered it. That submission is accurate, but Fifth Wall’s onus on this motion is as a responding party. It need only tender its best evidence in response to the evidence tendered by the defendants, which is also required to meet the defendants’ own “best foot forward” evidentiary onus.
[62] The defendants have tendered evidence that the amount in the budget schedule was exceeded for 49 items (32 of which are marked with the “allowance” note). The fact that the amounts of items in Schedule B were exceeded does not, in and of itself, satisfy the defendants’ onus. While true that Fifth Wall did not tender specific evidence on the work performed, neither did the defendants. They elected not to tender evidence or advance specific arguments on what they understood was included for the challenged work items, what discussions and other communications (if any) occurred with Fifth Wall about them during the project, what they observed was being done, and what they understand to have been provided. That kind of factual evidence bears directly on how “allowance” was understood by the parties and how that term should be interpreted in the overall contract. It also bears on whether the items noted as “allowance” are properly viewed as “estimates” under the CPA.
[63] There is genuine issue requiring a trial on the impact of items noted as “allowance” on both interpreting the contract and whether Schedule B as a whole, or any part of it, is an “estimate” under the CPA. Fairly resolving that issue requires specific evidence on the particular “allowance” items, including their differing qualification language, the intended scope of work, the work actually performed, and discussions between the parties.
ii. Items with a dash under the budget column
[64] I agree with Fifth Wall that there is a genuine issue for trial on whether the 16 challenged items in Schedule B having no amount and only a dash beside the item are “estimates”. There is unclear and, in some cases, conflicting evidence on the parties’ understanding for these items.
[65] I agree with Fifth Wall that having no cost associated with an item is not necessarily the same as having a budget or estimate of $0 for the item. All but one of the challenged items with a dash in the budget column are noted as either “N/A” or “By client”. Mr. Campbell’s evidence on cross-examination supports that these items were excluded from Fifth Wall’s scope of work, at least at the time of budgeting. Mr. Tonelli did not give any specific evidence on his own understanding of what “N/A” and “By client” meant beyond specific examples put to him during his cross-examination. Several of those items were either confirmed to be outside Fifth Wall’s scope of work or else Mr. Tonelli’s evidence on whether they were included or excluded was uncertain or ambiguous.
[66] With specific respect to demolition, there is no dispute that Fifth Wall performed that work. However, the evidence of Mr. Campbell and Mr. Tonelli is far from clear on whether it was understood to be included or excluded from Fifth Wall’s original scope of work, including whether a revised cost of excavation was agreed and did or did not include demolition costs.
[67] The only other disputed item with a dash in the budget column is flashing and capping. The task description for that item does not include the “N/A” or “By client” language found in the others. The description is “Flashing and capping is with roofing price.” Fifth Wall invoiced the defendants a total of $1,920.44 for the item. Mr. Tonelli acknowledges in his affidavit that one of the agreed changes was to the flat roof. During cross-examination, he agreed that the flashing and capping item related to that original flat roof line item.
[68] There is limited evidence on the roofing change. Mr. Tonelli has given evidence on the agreement to increase the roofing cost, which arose from a change proposed by the defendants’ architect. However, he does not say that he understood the options discussed with Fifth Wall to include all flashing and capping. A cost comparison document tendered by Mr. Tonelli, which was prepared by Fifth Wall, does refer to a “prepainted 24ga metal cap parapet wall flashing”, but there is no evidence from either party on whether that was the only required flashing or capping to complete the new roof. Mr. Campbell was not cross-examined on the point.
[69] I am satisfied that flashing and capping was included in the original flat roof budget. In my view, it cannot be decoupled for the purposes of this motion. Since there was an agreed change to the flat roof, what Fifth Wall is entitled to charge for the flat roof and whether that ought properly to include associated flashings and capping should be decided together.
[70] For these reasons, there is a genuine issue requiring a trial on whether the challenged items in Schedule B listed with no amount and a dash in the budget column were included in Fifth Wall’s scope of work and, if they were, whether the dash entry constitutes an estimate of $0.
iii. Items with no caveat
[71] There is only one disputed item listed with a budget amount and no caveat language, namely special finishes. The task description for the item is “Supply & install T&G Spanish cedar ceiling to match soffits, as per plan”, for which a budget amount of $11,350.50 is listed (excluding 10% markup and HST). Mr. Tonelli was cross-examined on the item, but could not recall if he had selected the specific tongue and groove (T&G) ceiling at the time of Fifth Wall preparing and providing the budget/quotation that became Schedule B.
[72] I was directed to no specific evidence on the process of ceiling selection or installation. While I am inclined to view this particular item as an “estimate”, this is not a matter on which I think either party has genuine put their “best foot forward.” There is insufficient evidence to find that there is no genuine issue requiring a trial that the ceiling finish budget item is, in fact, an “estimate”.
[73] Having found genuine issues for trial on characterizing the amounts for the 49 challenged items in Schedule B as “estimates”, I have considered if using the enhanced powers provided by subrule 20.04(2.1) of the Rules would permit a fair and just resolution of the dispute without the need for a trial. In my view, this is not an instance where it is in the interests of justice to use the enhanced powers to decide these issues on the record before me. Evidence from both parties is, in my view, too general to do so.
(c) If price estimates, did the parties agree to amend them?
[74] Given my finding that there are triable issues on whether the challenged budget items are estimates, it is not strictly necessary for me to address if there is a genuine issue for trial on whether the parties agreed to amend the estimates. However, since this motion is in the context of an ongoing reference, and I would have found a genuine issue requiring a trial on whether there were agreed changes that may trigger the exception in s. 10(3) of the CPA, my reasons for reaching that determination may assist the parties.
[75] As outlined above, where a supplier has provided an estimate, the CPA does not permit the supplier to charge an amount exceeding the estimate by more than 10%. However, as set out in s. 10(3) of the CPA, the consumer and supplier are not precluded from agreeing to amend the estimate or price.
[76] Fifth Wall takes the position that the defendants agreed to numerous changes that increased the price of the work. The defendants dispute agreeing to any changes, other than a discrete few, and argue that there is no cogent evidence of any agreement to changes.
[77] The parties contract deals with changes in the work. The primary provision governing changes states as follows:
CHANGES IN THE WORK
Changes in the Work; means addition, deletions, or other revisions to the Work within the general scope of the Contract. Changes in the work may consist of but are not limited to:
a) Items specified in our proposal as 'By Owner' and performed by the Contractor.
b) Any additional costs incurred by the Contractor due to soil conditions and area topography, hidden structural defects, compromised or defective mechanical systems and compromised or defective electrical systems.
c) Items performed which are not included in the attached specifications, and/or beyond the given allocations.
d) Contractor and Owner agree that any changes in the work will only be performed by the contractor or its’ subcontractors only after the Contractor obtains written approval from the Owner.
[78] As set out in subparagraph d) above, any changes in the work had to be authorized in writing. The contract also provides certain requirements for valuing the price of a change, as follows:
When a change in the Work is proposed or required the contractor shall present to the Owner for approval, his claim for a change in the Contract Price with appropriate documentation. The Owner will satisfy himself as to the correctness of such claim, and a change order shall be issued by the Contractor amending the Contract Price as appropriate. The value of the work performed in the change shall be included for payment with the regular certificate for payment.
[79] Mr. Campbell’s evidence is that all changes and extras were verbally discussed with and approved by Mr. Tonelli and, further, that Fifth Wall’s accounts were always paid without any challenges to the billings for extras. Mr. Tonelli denies agreeing to any changes or extras, other than some discrete items that are captured in budget line items not at issue on this motion or that are beyond Fifth Wall’s original scope of work. The defendants point out that Fifth Wall failed to comply with either of the above clauses.
[80] I agree with the defendants that the record before me contains no evidence of any written change orders or change directives. Mr. Campbell confirmed on cross-examination that none were prepared. Fifth Wall has not tendered any formal change requests, change orders, or emails supporting written approval of any new or extra work. Nevertheless, I do not agree with the defendants that there is no genuine issue requiring a trial on whether the parties agreed to changes or extras and whether those changes or extras are recoverable by Fifth Wall.
[81] On a strict reading of the parties’ contract, Fifth Wall is not entitled to recover payment for any changes in its work on the project unless those changes were approved in writing by Mr. Tonelli. However, there is evidence in the record before me supporting a genuine issue on whether the parties conduct was such that changes in Fifth Wall’s work did not need to be authorized in writing.
[82] As I have previously addressed in my own trial decisions, terms of a contract requiring that changes and extras be authorized in writing may be varied by the conduct of the parties and, by doing so, an owner cannot then rely upon the construction contract’s strict provisions to escape liability to pay for additional costs that were authorized and incurred. The cost of changes or extra work is then only recoverable if three requirements are met: (a) that the base contract scope of work changed sufficiently such that the contract price no longer applies to the services and materials actually supplied, (b) that there was an express or implied agreement for supply of services and materials claimed as extras, and (c) in the absence of agreement on a price for the extras, that the value of extras has been proven on a quantum meruit basis: Reid v. Xiao, 2021 ONSC 7468 at paras. 31 and 42.
[83] The defendants argue that Fifth Wall has put forward no evidence supporting agreement to the disputed changes alleged in Mr. Campbell’s affidavit. They invite me to draw an adverse inference. However, this is the defendants’ motion. Although both parties have a “best foot forward” evidentiary onus, the defendants have the primary evidentiary onus of demonstrating that there is no genuine issue requiring a trial that the estimates were not amended. Evidence reasonably available to the defendants was not tendered.
[84] Fifth Wall’s budget/quotation, which was ultimately appended to the signed contract as Schedule B, was initially provided to the defendants in early May 2016. The budget was prepared shortly before the defendants’ architect completed the permit drawings, which was nearly one week after the budget had been prepared and provided. There is no evidence from the defendants on whether there were any differences between the permit drawings and the design drawings.
[85] Evidence also supports that there were several changes during the course of the project. The defendants initially admitted to only two changes: one for windows and another for the flat roof. Mr. Tonelli’s first affidavit stated unequivocally that, other than those two changes, he “did not agree, request or approve any other changes to the Price Estimates.” “Price Estimates” is defined in his affidavit to refer to Fifth Wall’s “price estimates for each item of the Project” in Schedule B.
[86] Despite the unequivocal evidence in Mr. Tonelli’s first affidavit, after Mr. Campbell’s responding affidavit was served, Mr. Tonelli swore a reply affidavit confirming that he had recalled three other changes: (i) approved extra plumbing work that Mr. Tonelli had requested, (ii) added tasks that were not included in the original budget, namely an HVAC snow melt feature, exterior gas heater, automatized lighting, and blinds/shades; and (iii) approval of a proposed tile quote that was higher than the budget item.
[87] Conflicts in the evidence of Mr. Tonelli and Mr. Campbell, and the additional changes acknowledged by Mr. Tonelli after receiving Fifth Wall’s responding materials, raise an issue of reliability, if not credibility, with respect to their respective evidence about the defendants’ awareness of changes and what changes were actually discussed and agreed.
[88] Moreover, in my view, neither side has adequately addressed a number of factual disputes that bear directly on a fair determination of whether amounts in Schedule B were varied and, if not, whether the original amounts should be enforced. The gaps are matters on which evidence could have been tendered by both sides, but was not. These include the following:
(a) evidence on the extent of information and documents available to Fifth Wall when it prepared the budget/quotation, other than design drawings, and whether the finalized permit drawings materially changed any of that information;
(b) evidence on the particulars of discussions that took place between the parties during the course of the project about changes, since Mr. Tonelli acknowledges that changes were discussed (albeit stating in his affidavit that he was “rarely” told that changes would increase the cost), but neither Mr. Tonelli nor Mr. Campbell provide particulars of specific discussions that are said to have occurred;
(c) evidence on the timing of Mr. Tonelli (or both defendants) selecting certain materials and appliances that, based on the record before, had not been selected or agreed at the time of the initial budget, such as the type of brick, masonry, flooring, tiles, appliances, panelling, stairs, and railings, all of which would seem reasonably to impact the price of supplying and/or installing those items;
(d) evidence on any discussions between the parties around costs of materials selected by the defendants, beyond the limited evidence tendered on a tiling quote; and
(e) as discussed above, evidence on what discussions occurred and what the parties understood about specific items in the budget noted with “allowance” or referred to as “N/A” or “By owner”, including what work associated with those items was understood to be included or excluded from Fifth Wall’s scope of work;
[89] The defendants have not satisfied me that there is no genuine issue for trial on changes to the contract. I am also not satisfied that using the enhanced powers in subrule 20.04(2.1) of the Rules to weigh the evidence, evaluate credibility, or draw inferences will lead to a fair and just result in the absence of clearer evidence from both parties on the above matters.
Issue 3: Did Fifth Wall’s billings exceed its price estimates by more than 10%?
[90] I have found triable issues on whether the items in Schedule B to the contract are “estimates” and, if so, whether changes to the scope of work were agreed, expressly or impliedly. I cannot assess if Fifth Wall contravened s. 10(1) of the CPA without first determining those issues.
Issue 4: Are the defendants entitled to damages for repayment of any overcharges?
[91] Fifth Wall argued that, if Fifth Wall is found to have breached the CPA, then relief under s. 100(2) of the CPA should be granted in the circumstances of this case to deny the defendants any judgment for repayment. That subsection provides that, where a consumer is successful in an action, the court shall order that the consumer recover full payment to which the consumer is entitled under the CPA unless it would be inequitable to do so.
[92] I need not deal with the parties’ arguments on whether my discretion under s. 100(2) of the CPA to deny any recovery by the defendants should be exercised. It is premature to do so. Even if I ultimately find that Fifth Wall breached the CPA, my factual findings on communications and dealings between the parties will likely bear on whether or not it is equitable in the circumstances to order any repayment to the defendants.
Disposition
[93] For the above reasons, I find and declare that the CPA applies to the parties’ construction contract dated May 30, 2016 and that the contract is a “consumer agreement” within the meaning of the CPA. The balance of the defendants’ motion for summary judgment is dismissed.
[94] Since I am not granting the motion in its entirety, and many of the issues on this motion will now proceed to trial, subrule 20.05(2) of the Rules empowers me to give such directions or impose such terms as are just, including various sorders itemized at subrules 20.05(2)(a)-(p). Lien actions are to be as far as possible of a summary character, having regard to the amount and nature of the lien in question: CLA, s. 67(1). I am accordingly inclined to exercise my authority under subrule 20.05(2) to make orders on, at a minimum, use of the affidavits, cross-examinations, and other evidence filed on this motion in lieu of examinations for discovery, in whole or in part.
[95] Given the amount of time and effort expended by the parties in preparing for and arguing this motion, it seems to me that only limited further interlocutory steps should be required to ready this action for an ultimate trial on the remaining issues. I intend to expedite this action to trial as quickly as possible. I encourage the parties to discuss an appropriate timetable and terms that will assist in expediting trial readiness, which may be spoken to at the next hearing for trial directions.
Costs
[96] The parties previously exchanged and filed costs outlines. There has been a measure of divided success on the motion. Considering the result and the fact that affidavit and cross-examination evidence will almost certainly serve as discovery evidence in some form, together with this motion being heard in an ongoing reference where I will be the ultimate trier of fact, I am inclined to defer costs of this motion to be decided at the conclusion of litigation. Costs of the motion need not be in the cause, though, and could be deferred without prejudice to arguments of entitlement irrespective of the ultimate result.
[97] The parties should discuss how costs of the motion are to be addressed. If they cannot agree, then submissions on how and when to decide costs of this motion may be made at the next hearing for trial directions.
ASSOCIATE JUSTICE TODD ROBINSON
DATE: November 23, 2022