COURT FILE NO.: CV-18-611810 DATE: May 9, 2023

ONTARIO SUPERIOR COURT OF JUSTICE

IN THE MATTER OF the Construction Act, R.S.O. 1990, c.C.30

BETWEEN:

NOVELCARE HEATING & COOLING Plaintiff

AND:

ERICA HERBERT, ERICA HERBERT, LITIGATION ADMINISTRATOR OF THE ESTATE OF KENNY RAMSUBICK, 1750446 ONTARIO LIMITED and EQUITABLE BANK Defendants

BEFORE: Associate Justice C. Wiebe

COUNSEL: Jason R. Cherniak for the plaintiff, Tel.: 905-883-6706, Fax: 905-883-6703, Email: Jason@CherniakLaw.com,

Alfred Shorr for Erica Herbert, Erica Herbert, Litigation Administrator of the Estate of Kenny Ramsubick and 1750446 Ontario Limited; Tel.: 905-940-9252, Email: Alfred@schorrlaw.ca.

HEARD: January 18, 2023

REASONS FOR JUDGMENT

I. INTRODUCTION

[1] This reference was started by Novelcare Heating & Cooling (“Novelcare”). There are two claims for lien in this reference. This trial concerned the claim for lien of Novelcare.

[2] On November 8, 2018 Novelcare registered a claim for lien in the amount of $18,988.64 on the title to property whose registered owner is Kenny Ramsubick, now deceased. Erica Herbert is his widow and litigation administrator of his estate. Ms. Herbert is also a defendant in her personal capacity presumably as a beneficiary of the estate. The claim against 1750446 Ontario Limited is of no consequence.

[3] The property is a three story rooming house located at 1417 Dundas Street West, Toronto. The claim for lien concerned the installation of eight air conditioners and heat pumps (“air conditioning units”) in eight rental units being constructed in the basement and first floor of the building. Ms. Herbert denies the claim in its entirety. The claim against the mortgagee, Equitable Bank, has been dismissed.

II. BACKGROUND

[4] I begin with a summary of the facts of this case that are undisputed.

[5] On April 12, 2018 Ms. Herbert contracted with Novelcare to have Novelcare supply and install two outdoor compressors and eight interior, concealed air conditioning units. The eight interior units were to be installed in eight rental apartments being constructed, three in the basement and five on the first floor of the building. The contract price was $32,199.35 (HST incl.). Ms. Herbert paid a deposit of $8,050.

[6] This contract was replaced by one dated May 11, 2018. There was some change to the profile of the interior units, and there was a price reduction to $27,038.64 (HST incl.). The $8,050 deposit was applied to this contract. leaving a balance of $18,988.64, which was stated to be “due upon completion.” The contract stated that there would be a 2% surcharge if the final payment was paid by credit card. The contract also stated that “all electrical and plumbing work related to the installation” was included in the price.

[7] Based on the Herbert pleading, I understand that the planned sequence of the Novelcare work involved first the rough-in of the drain lines and other lines prior to the drywall, a return to install and test the exterior compressors, a return after drywalling to install the interior units, and finally the commissioning of the system. This sequence does not appear to be in dispute.

[8] The rough-in work started in late May, 2018, and continued on June 27, 28 and 29, 2018. Novelcare returned in late July, 2018 to complete the rough-in to facilitate the drywall.

[9] On or about August 2, 2018 Ms. Herbert requested that an air conditioning unit be moved to facilitate the construction of a bulkhead. One air conditioning unit in one of the basement apartments was not removed from its packing box.

[10] In early August, with the drywall done, 2018 Novelcare installed the compressors and the interior units, but did not connect them to the drains in the sinks. On August 10, 2018 Al Ghandchi, the principal of Novelcare who was managing the work, emailed Ms. Herbert asking for a final date to “wrap up the installation.” In this email, he stated that a certified cheque for the final installment was “required” upon completion. He followed this up with an email on August 13, 2018, which he called a “second notice.” Ms. Herbert did not respond.

[11] On September 12, 2018 Mr. Cherniak sent a letter to Ms. Herbert asserting that the work was completed, and demanding that Ms. Herbert pay the balance plus $452 in legal costs. He threatened that Novelcare would register a claim for lien if payment was not made by September 19, 2018.

[12] The parties agreed to have the final installation and commissioning done on October 2, 2018. When Ms. Herbert did not produce the certified cheque on site, the Novelcare employees called Mr. Ghandchi, who instructed them to leave without doing this work.

[13] On November 8, 2018 Novelcare registered a claim for lien in the amount of $18,988.64.

[14] On November 27, 2018 Ms. Herbert sent Mr. Cherniak an email. She confirmed that the rough-in work was done. She also advised that air conditioning units had been installed in the five apartments on the first floor, but that in four of these five the air conditioning units had not been connected to the kitchen sinks for drainage. She advised that none of the three basement air conditioning units had been completely installed. She also said that the final connection and testing had not been done. As a result, she stated that the work was not complete and that Novelcare was not entitled to be paid. She required that the claim for lien be removed.

[15] On December 18, 2018, Novelcase commenced this action purporting to perfect its lien.

[16] Mr. Herbert produced an “invoice” from a firm called DoneRight Plumbing & Heating Inc. dated January 26, 2019 for $1,219. The work described was rough-in for five air handling units. Ms. Herbert conceded that this work was actually not done. She did not pay the invoice.

[17] In February, 2019 there was a flood in the building that Ms. Herbert attributed to the fact there was no heat in the basement and the first floor. She said she was unaware that the heat pumps were not working. She made a claim on her insurance policy. A firm called Therm Tech. was retained by the insurer. On March 15, 2019 Therm Tech reported that the air conditioning system was not complete as the coolant had not been released and the power turned on.

[18] Having retained counsel, Ms. Herbert delivered an amended statement of defence and counterclaim on April 7, 2019. The counterclaim was for $300,000 in damages due to the flood.

[19] In June, 2020 Ms. Herbert retained Heating Home to connect the air conditioning system and start it. On June 2, 2020 Heating Home rendered an invoice for $1,748.11, which was paid.

[20] On September 11, 2020 Ms. Herbert retained Free Air Heating & Air Conditioning Ltd. as she said that three of the air conditioning units were not producing sufficient air conditioning. Free Air issued a report dated September 11, 2020 that says there were issues with three of the air conditioning units on the first floor. It estimated that a repair of the three would cost $9,012.68. Ms. Herbert has not had the three repaired.

[21] Novelcare obtained a judgment of reference from Justice Sossin on December 17, 2019. I issued an order for trial on November 17, 2020. I became seized of this reference by conducting the first trial management conference on February 8, 2021. I held further trial management conferences on June 28, 2021, November 8, 2021 and April 19, 2022.

[22] In early 2022, the insurers for the parties settled the Herbert counterclaim. The focus then was on the Novelcare claim for lien. At the April 19, 2022 trial management conference I scheduled a one day, summary trial in the Novelcare action to take place on July 13, 2022. At that time unnamed representatives of DoneRight, Therm Tech, Free Air and a firm named “One Air” (probably Heating Home) were on Ms. Herbert’s witness list.

[23] This schedule was subsequently changed. At Mr. Cherniak’s request, I held a trial management conference on May 26, 2022. The main affidavits for evidence in chief had been exchanged. Novelcare had been one day late in responding to Ms. Herbert’s request to admit, and Ms. Herbert prepared her affidavits based primarily on the deemed admissions in her request to admit. At Novelcare’s request, I vacated the trial date of July 13, 2022 and scheduled a Novelcare motion for that date for an order setting aside the deemed admissions. The parties subsequently resolved the motion. I spent the time on July 13, 2022 setting a new schedule for further affidavits and a new trial date of January 18, 2023.

[24] At 9:14 a.m. on January 17, 2023 I received an email from Mr. Schorr advising that there was a “high likelihood” that Ms. Herbert would not be attending at the trial hearing. Then at 12:07 p.m. Mr. Schorr emailed advising that Ms. Herbert would be joining the videoconference trial hearing from her location in Tobago.

[25] The trial hearing took place on January 18, 2023 as scheduled. The only witnesses were Mr. Ghandchi and Ms. Herbert.

III. ISSUES

[26] Based on the evidence and submissions, I find that the following are the issues to be determined:

a) Did Novelcare breach the contract? b) What are the damages?

IV. WITNESSES

[27] While both witnesses had issues, I generally found Mr. Ghandchi more credible than Ms. Herbert. Mr. Ghandchi’s credibility was enhanced by the detail and chronological nature of his initial affidavit. He admitted against interest that Novelcare did not complete the work, namely the commissioning. While his affidavits contained hearsay, the key evidence came from his personal experience on site.

[28] Yet, Mr. Ghandchi’s insistence that there was a verbal agreement with Ms. Herbert whereby she would pay immediately on closing by certified cheque when there was no written or other corroboration for such an agreement and nothing in the contract requiring such payment detracted from his credibility. There was also evidence that more than just commissioning was not done by Novelcare.

[29] Ms. Herbert had significant credibility issues. Her affidavits were not detailed and chronological. She asserted things in her affidavits as facts that she conceded in cross-examination were not true. Most importantly, she represented that the DoneRite invoice reflected actual work and later conceded that there was no such work. Ms. Herbert took positions that were not reasonable. For instance, she asserted she did not know that the heat pumps were not working, which she said led to the flood. This conflicted with her own memorandum of November 27, 2018 which contained her detailed observations at the time as to what was not completed, including the fact that the system had not been connected and tested. It was also a position that seemed unreasonable as the heat would not have been on during several winter months before the flood in February, 2019. How could Ms. Herbert not have been aware of the nonfunctioning heat pumps during this time?

[30] As a result, with the exception of the alleged agreement concerning the certified cheque, I gave more credence to the evidence of Mr. Ghandchi than that of Ms. Herbert whenever the two conflicted.

V. ANALYSIS

a) Did Novelcare breach the contract?

[31] The contract specified that the balance of the contract price, $18,988.64, was “due upon completion.” It is undisputed that the scope was not completed by Novelcare as the drains were not connected and the units not commissioned.

[32] I do not accept Mr. Ghandchi’s assertion that Ms. Herbert agreed to pay the balance by certified cheque immediately upon completion. There was no such requirement in the contract. Therefore, such an agreement would have meant an amendment to the contract. An amendment agreement required clear corroboration. The only corroboration Mr. Ghandchi provided was the email he sent to Ms. Herbert on August 10, 2018 wherein he “required” that Ms. Herbert provide a certified cheque at completion. This was not confirmation of an agreement. It was a demand.

[33] In cross-examination, Ms. Herbert made it clear that she did not want to pay by credit card as that would have meant a 2% surcharge under the contract. She said she wanted to pay by cheque and insisted she did not agree to pay by certified cheque. She did not waiver from that position. I accept her evidence on this point as it made sense. Certifying a cheque is an added expense, and Ms. Herbert was cost conscious.

[34] Therefore, when the Novelcare crew returned to the site for final installation and commissioning on October 2, 2018 and left without doing that work when Ms. Herbert did not produce the certified cheque or any proof of intention to pay, Novelcare breached the contract. It did not complete its work as required by the contract. The crew should have finished the work and demanded payment, as specified by the contract.

[35] However, I do not find that Novelcare fundamentally breached and repudiated the contract. Contract repudiation happens when a party objectively evidences an intention no longer to be bound by the terms of the contract; see Kaplun v. Mihhailenko, 2005 CarswellOnt 1945 (Ont. Master) are paragraphs 114 and 115. In my view, that did not happen here. Ms. Herbert caused Mr. Ghandchi to have good reason to be concerned about whether she would fulfil her fundamental obligation to pay upon completion. As stated by Mr. Ghandchi, Ms. Herbert interrupted and delayed the Novelcare work by calling its crew back to the site on several occasions thereby causing Novelcare more expense than it had anticipated. She interrupted the installation of units, such as the one unit in the basement that remained in a box. She called for changes, such as the removal of a unit in early August, 2018 to make way for a bulkhead. Ms. Herbert denied all this, but I prefer the evidence of Mr. Ghandchi on this point for the reasons already stated. In light of this conduct, Mr. Ghandchi became understandably concerned that Mr. Herbert would not abide by the contract and pay upon completion. He did not repudiate the contract, but in the circumstances wanted the assurance of seeing a Herbert certified cheque before completing the work.

[36] Ms. Herbert also alleged that Novelcare breached the contract by providing and installing deficient units. As proof, she produced an invoice from Free Air dated September 11, 2020. Attached to this invoice were written comments concerning a “diagnostic” Free Air said it performed on what it called “malfunctioning Mitsubishi units.” The comments identified deficiencies with three units, namely the ones in rental units 6, 7 and 8. The identified problems were a lack of cooling, freezing up and leaking water due to a defective condensate pump. Attached to these comments was a written estimate showing a cost to correct of $9,012.88. In this estimate there is the following comment: “Current installation has not been done in accordance to [sic] manufacturer specs.”

[37] Ms. Herbert has the onus of proving the deficiencies she alleges. In my view, she failed to meet that onus. The Free Air document was essentially a report about alleged deficiencies. This was not a business record. Ms. Herbert did not produce the author of the report. As a result, the report was hearsay evidence that should be discounted.

[38] In addition, there are many questions about the report that needed to be answered by its author. The following are some: What exactly was wrong with the installation? Was the alleged defective installation that of Novelcare or of Heating Home? Could the fact that the units were left uninstalled by Ms. Herbert for 20 months have anything to do the defects? All of these questions needed to be answered by the author of the report to give any weight to the report, should it otherwise have been accepted as evidence. Of course those questions were unanswered since Ms. Herbert did not produce the author of the report.

[39] I also find telling the fact that Ms. Herbert admitted that she has done nothing to repair the alleged defective units in the 27 months between the date of the Free Air report and the trial. Had there been truly malfunctional air conditioning units, as Ms. Herbert alleges, she would have done something about them over that more than two year span. She did not do anything.

[40] I, therefore, deny Ms. Herbert’s allegation of contract breach due to deficiencies.

b) What are the damages?

[41] The basic rule of breach of contract damages is that the innocent party should, as far as reasonably possible, be monetarily put into the same position he or she would have been in had the contract been performed; see Safe Step Building Treatments Inc. v. 1382680 Ontario Inc. at paragraph 58. The most commonly used measure of these damages in construction contracts is the cost of curing the defective performance of the contract. That is what I will use in this case.

[42] What Ms. Herbert lost as a result of the Novelcare contract breach was the services and materials to connect and start up the air conditioning units. It was undisputed that a reasonable measure of this loss was the cost Ms. Herbert incurred to have Heating Home connect and start up the air handling units, namely $1,748.11. Deducting $1,748.11 from the unpaid balance of the contract price, $18,988.64, produces $17,240.53.

[43] Ms. Herbert also did not get the benefit of the Novelcare warranty. It was undisputed that the contract contained a ten year parts and labour warranty. By breaching the contract and causing others to work on its product, Novelcare denied Ms. Herbert the benefit of this warranty. The difficulty lies in valuing this lost warranty. In the Scott Schedule I ordered Ms. Herbert claimed the amount of $3,500, which is the amount of $500 per air conditioning unit times the seven units that Novelcare installed. This position was not supported by evidence. Again, the onus of proving her damages rests on Ms. Herbert. Given this onus, the absence of any evidence from Ms. Herbert on this point and the need nevertheless to reach a finding of some damages because of this obvious loss, I have decided to discount Ms. Herbert’s claim by 2/3. I find that Ms. Herbert’s lost warranty damage claim is worth $1,155.

[44] Ms. Herbert also claimed damages for deficiencies correction. I have already dismissed her claim in this regard. The Scott Schedule contains not only the $9,012.88 estimate from Free Air, but also an additional $2,500 for each of the three allegedly defective units. I do not know where these figures come from, and Mr. Schorr did not enlighten me. In any event, I dismiss that claim as well as Ms. Herbert has failed to prove this claim.

[45] Therefore, in the end, I find that Ms. Herbert suffered damages totaling $1,748.11 + $1,155 = $2,903.11. Deducting $2,903.11 from the unpaid balance of the contract price of $18,988.64 produces a result of $16,085.53.

[46] I find, therefore, that Novelcare has a lien and damages for breach of contract in the amount of $16,085.53.

VI. CONCLUSION

[47] In conclusion, I find that Ms. Herbert has a set-off of $2,903.11. After deducting this set-off, Novelcare has damages for breach of contract and a lien in the amount of $16,085.53.

[48] Concerning costs, Mr. Schorr advised that Ms. Herbert is not seeking costs. She filed no costs outline. Novelcare is seeking costs and filed a costs outline showing $26,287.25 in substantial indemnity costs and $18,676.20 in partial indemnity costs.

[49] I strongly encourage the parties to resolve the issue of costs and interest. If they do not, Novelcare must serve, file and upload written submissions on costs and interest of no more than two pages on or before May 15, 2023. In that event, Ms. Herbert must serve, file and upload responding written submissions on costs and interest of no more than two pages on or before May 19, 2023. Any reply written submissions must not be longer than one page and must be served on or before May 23, 2023.

[50] I reiterate that these written submissions must address the prejudgment and post-judgment interest to be calculated and paid on the judgment amount.

Released: May 9, 2023

ASSOCIATE JUSTICE C. WIEBE

COURT FILE NO.: CV-18-611810 ONTARIO SUPERIOR COURT OF JUSTICE In the matter of the Construction Act, R.S.O. 1990, c. C.30 BETWEEN: Novelcare Heating & Cooling Plaintiff

• and - Erica Herbert, Erica Herbert, Litigation Administrator of the Estate of Kenny Ramsubick, 1750446 Ontario Limited and Equitable Bank Defendants REASONS FOR JUDGMENT Associate Justice C. Wiebe Released: May 9, 2023