Patel v WG Housing Ltd. (City Core Developments Ltd.), 2012 ABQB 734

Court of Queen ’ s Bench of Alberta Citation: Patel v WG Housing Ltd. (City Core Developments Ltd.), 2012 ABQB 734 Date: 20121129 Docket: 0901 07720 Registry: Calgary Between: Navindra Patel Plaintiff - and - W.G. Housing Ltd. operating as City Core Developments Ltd. Defendant Editorial Notice: On behalf of the Government of Alberta personal data identifiers have been removed from this unofficial electronic version of the judgment. _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice P. R.

Jeffrey _______________________________________________________ [ 1 ] The parties disagree on the amount of money the Defendant, a house builder, should be paid for its work managing the construction of the Plaintiff's new house.

[ 2 ] The Plaintiff, Mr. Navindra Patel, paid the Defendant W.G. Housing Ltd., operating under the name City Core Developments (“ City Core ”) $696,025.26 periodically as construction of Patel’s home progressed. Though the construction of his house was not completed, this exceeded what he expected would be the total cost. He stopped paying further invoices until he understood why. City Core then ceased further work until the outstanding invoices were paid. Over the next year efforts to resolve their impasse failed. Patel then hired another contractor to complete the house.

Patel claims $382,015.78 back from City Core. City Core says that Patel still owes it another $152,454.73 and counterclaims for that amount. [ 3 ] I grant part of Patel’s claim and part of City Core’s counterclaim for the following reasons. Facts [ 4 ] Mr. Patel, an engineer, and his family lived in a condominium unit. He wanted to move into a new detached home. [ 5 ] Patel approached Mr. Wayne Gambell of City Core regarding custom building a new house for Patel to a finishing standard comparable to his condo.

The interior of Patel’s condo had been custom finished to suit him, with the assistance of an interior designer. [ 6 ] Gambell and Patel discussed the matter. They visited Patel’s condo so Gambell could see the level of finish Patel sought. They visited a vacant house City Core had recently built to see the level of finish City Core delivered (“ #718 ”). [ 7 ] The parties identified a potential location for the new house. Gambell prepared a rough handwritten estimate of the construction cost so that Patel could have a sense of the cost of the project.

The rough estimate was based on a 2200 square foot home at a per square foot construction cost of $210. This per square foot construction cost reflected City Core’s most recent construction experience, including its experience building #718, and Gambell’s forecast of future costs based upon past trends. Added to that were amounts for a developed (fully finished) basement, City Core’s fee and the land cost. Gambell estimated the total, excluding the land cost, to be $623,300. [ 8 ] Patel continued investigating the prospect of committing to a project with City Core. City Core referred him to an architect.

Patel worked with the architect to design a suitable house. Gambell, Patel and the architect attended another property so Patel could show them the exterior finishing look he was after. The architect then completed house plans to Patel’s satisfaction. [ 9 ] City Core presented to Patel a written agreement entitled the “Project Management Agreement” (the “ PMA ”). The PMA was assembled using clauses from contracts prepared by a lawyer for other City Core purposes, then amended to try to suit the Patel project.

The PMA stated $478,000 as the “Estimated Contract Price” (the “ Estimate ”) and targeted completion by April 30, 2008. The PMA contained two attached documents: (

i) architectural design drawings (the “ Plans ”) and (ii) materials and details specifications (the “ Specs ”). [ 10 ] The Plans were construction ready drawings for three fully developed floors plus a detached garage. The two above grade floors totalled 2089 square feet. These Plans resulted from the architect City Core recommended, based on Patel’s wishes for the interior and exterior of the house. [ 11 ] City Core assembled the Specs. The Specs described in significant detail the various construction materials by quantity and quality, from stud size and spacing to the number of electrical outlets in each room.

The Specs described the kinds of materials for all aspects of the construction. The Specs left some components to be selected by Patel, for example, the type of appliances, plumbing fixtures, light fixtures, exterior stone, tile, flooring and counter tops he wanted. The Specs included a guideline amount as a spending allowance for these components. [ 12 ] On April 26, 2007, Gambell presented the PMA to Patel for review and signature. Patel did not read it over. There was no

negotiation about any of the terms. Patel glanced at the price it contained and the Plans attached. He initialled each page of the Specs without reading them, initialled a change to the year on the completion date, and signed the contract. Gambell signed for City Core. At trial Gambell said that Patel “just signed it”. Gambell knew his Estimate in the PMA was an important consideration for Patel in deciding to sign the PMA and thereby choosing to contract with City Core.

The first time Patel reviewed the PMA was November 2008, months after he stopped paying and City Core stopped working. [ 13 ] The PMA defines City Core as “Project Manager” and Patel as “Client”. It included the following clauses relevant to their dispute (the mis-spellings, improper capitalizations, inconsistencies in format and typeface, paragraph mis-numbering and erroneous references are all repeated just as they appear in the original): WHEREAS: The Client is the owner of the following land: MUNICIPAL ADDRESS: 1725 [...] N.W. east lot. NW Calgary, Alberta (IN THIS Agreement called the “Lands”) 1.

PROJECT and CONSTRUCTION The Project Manager agrees to manage the construction of a new home building project as the case may be for the Client on the Lands subject to the terms and conditions of this Agreement (the “Project”). The Project Manager shall arrange, on behalf of the Client, for the supply of all materials and labour necessary for the construction of the Project in accordance with the plans and specification annexed hereto as

Schedule “A” and forming a part hereof. The plans and specifications shall be initialled by the parties for identification and shall be held at the office of the Project Manager and copies retained by the Client. ... 3. PRICE The Client shall pay to the Project Manager or to such person, firm or corporation as the Project Manager may from time to time direct for the construction of the Project, the total of the following amounts (the “Estimated Contract Price”): (

a) the actual cost to the Project Manager of all labour, materials, permits, administration, expenses for administration/staff and other proper charges or expenses incurred to construct the Project (the “costs of construction”); (

b) the Project Manager’s project management fee (the “management fee”), which fee shall be equal to fifteen Percent (15%) of the actual costs of construction of the Project; and (this fee will be collected bi-monthly) (

c) Any Goods and Services Tax (“GST”) applicable to payments made under this agreement. The estimated contract price, as at the date of this Agreement is 1 house @ 2089 sq. ft. at a cost of Four Hundred and Seventy Eight thousand dollars ($478,000.00). The Client specifically understands, acknowledges and agrees that it is an estimate only. Any changes in the design of the Project or materials and labour will affect such estimates. The Project Manager shall keep accurate records of the actual costs of construction.

Such records may be reviewed by the Client - at the offices of the Project Manager during normal business hours. The Project Manager shall provide the Client with a statement of actual costs of construction incurred as each payment required becomes due.

3. TERMS OF PAYMENT The Client agrees to pay to the Project Manager an initial deposit of 12,500.00 DOLLARS ($12,500) upon signing of this agreement. The Client agrees to pay to the Project Manager or to such person, firm or corporation as the Project Manager may from time to time direct, the total cost of constructing the Project, the Project Manager’s project management fee and any Goods and Services Taxes applicable. Payments shall be made on the 1st and 15th of every month only for amounts billed by the Project Manager.

Payments shall only be for amounts incurred and billed for by the Project manager for material and trade labour and administration and City Core Developments staff and expenses to build the project. Depending on the actual cost of the project management fee and GST, the deposit and deposit repayment shall be equalized on the completion date. In no case shall the deposit repayment exceed the deposit. Unknown costs at the time of substantial completion shall be identified and estimated by the Project Manager to the extent possible.

Any amount not paid by the Client when due, shall bear interest at the Province of Alberta Treasury Branch prime lending rate +3% or the interest rates charged by suppliers of materials and labour on their overdue accounts, whichever is greater, until fully releasable to the Project Manager for disbursement to such suppliers or the Project Manager, as the case may be. The Client covenants and agrees that the Client will not holdback all or any portion of the payments to be made except for the deposit repayment.

The Client further understands and agrees that if he fails to make all payments required pursuant to this Clause 5, the Project Manager shall be entitled to file a Builder’s Lien against the title to the Lands. The Project Manager shall be entitled to receive payment of the amount of his Builder’s Lien, if any, from the Builder’s Lien holdback and the Client authorizes the Project Manager’s Solicitor to make such payment subject to the rights of any other lien holder. 4.(

a) FINAL CONSTRUCTION COST-DEPOSIT At the time of inspection of the project for purposes of possession as hereinafter provided for, the client shall pay to the project manager’s solicitor in trust, a deposit in the sum of TWENTY FIVE THOUSAND DOLLARS ($25,000) as a deposit for all outstanding estimated extras purchased during the term of the contract, but not paid for when the final payment becomes due to the project manager pursuant to Clause 4 of this agreement.

The said deposit may be released by the Project Manager’s solicitor to the Project Manger and applied by the Project Manager to pay any final construction costs, management fee and GST not known to the parties at completion date. The balance of the deposit shall be refunded to the client provided further that if the deposit is not sufficient to pay such final costs of construction, management fee and GST the client shall promptly pay any deficiency to the Project Manager when requested to do so. ... 4.

PRE-OCCUPANCY INSPECTION AND POSSESSION The Project Manager shall provide a notice in writing to the Client advising that on a date to be specified in the notice, the Project will be ready for possession and/or occupancy and that an inspection shall take place on the date specified.

The Client shall make an inspection of the Project on the date specified together with a representative of the Project Manager at which time any omissions of possession and/or occupancy will be deemed to be conclusive proof that the project is complete and in full compliance with this Agreement except to matters noted at the time of inspection. The Client acknowledges that if the Project Manager issues a Certificate of Substantial Performance under the Builder’s Lien Act of

Alberta, the Project Manager is required to post the certificate on the lands in a conspicuous place. The Client agrees that on or after the Client takes possession, he will not disturb this Certificate and will ensure that it remains in place until the expiration of the time set out in the Certificate. 5. CLIENT PAYABLES The Client acknowledges and agrees that he is responsible for and will directly pay the cost of all utility connections and utilities arising out of the construction of the Project, if the same are applicable. 7.

COMPLETION DATE The Project Manager agrees to use his best efforts to cause the Project to be constructed in accordance with Clause 1 of this Agreement and completed on or about the 30th day of April, 2008. (The “Completion Date”). The Project Manager does not guarantee the completion or possession of the Project on this date and the Client acknowledges that delays can and may occur for which the Project Manager shall not be responsible.

These include, delays caused by changes in the construction of the Project as contemplated in Clause 1 and requested by the Client; delays by the Client in making decisions regarding construction or choice of materials; unfavourable weather; strikes; fires; shortages of material; acts of God; or any other causes beyond the control of the Project Manager. 8. EXTRAS OR DELETIONS The parties acknowledge that additions, deletions, corrections, variations or changes to the costs of construction may occur by verbal or written agreement.

To the extent possible they shall be affected by a Change Order in writing signed by the Project Manager and Client. 8. ACCESS TO LANDS AND SITE INSPECTION The Client agrees to give free uninterrupted possession of the Lands to the Project Manager, including the right to conduct soil tests, from the date of this Agreement until the Project Manager has completed construction of the Project and the Client has paid all monies payable pursuant to Clause 5 in full.

The Client understands and agrees that the construction site is a potentially hazardous site and also the Project Manager shall not be liable or responsible in any way with respect to any loss, injury or damage suffered by the Client, any member of the Client’s family or any invitee or licensee of the Client whatsoever suffered by them by an access to the land or Project resulting from any cause whatsoever during such visit or inspection of the Project prior to delivery of possession by the Project Manager. The Client also agrees to comply with all occupational health and safety rules. 9.

DEFAULT BY CLIENT In the event that payment of any of the amounts herein agreed to be paid to the Project Manager or such other person, firm, or corporation as the Project Manager may from time to time direct, is not made at the times and in the manner provided in this Agreement or in the event that the Client should default in any of the covenants or agreements herein or should the Project Manager be unable to proceed with construction by reason of the conduct of the Client, the Project Manager may at its option cease work and treat this contract as repudiated forthwith on the occurrence of such default, and the Project Manager may recover payment for the work already proportionately to the total Contract Price, plus damages, including loss of profit together with interest thereon at the rate of the Province of Alberta Treasury Branch prime lending rate plus Three percent (3%). ... 11.

POSSESSION OF PREMISES

It is strictly agreed between the Project Manager and the Client that the Project constructed pursuant to this agreement may not be possessed and/or occupied by the client until all monies payable pursuant clause 4 have been received by the Project Manager of the Project Manager’s Solicitor or such other person, firm or Corporation as the Project Manager may have directed the Client to pay from time to time.

The payment of such money by the Client shall be unconditional excepting for conditions regarding holdbacks under the Builder’s Lien Act as set out in clause 4 hereof, or otherwise only upon written approval of the Project Manager of his Solicitor. Such written approval shall require a specific trust agreement as to the trust under which such holdbacks shall be held and upon what terms and conditions such holdbacks may be released to the Project Manager by his solicitor. 12.

The Project Manager agrees to cause the Project to be constructed in a good and workmanlike manner in accordance with the usual practice and standards of the trade and in accordance with all Municipal, Provincial and Federal building codes. The Client authorizes the Project Manager to make all decisions relating to construction means, methods, techniques, sequences and procedures and for the co-ordination of all aspects of the construction of the Project. In so doing the Project Manager shall employ only new material in the construction and such materials are to be of premium grade or quality. 13.

PROJECT MANAGER RESPONSIBILITIES The Project Manager shall be responsible for maintaining accurate statements of all accounts regarding the Project, and to present the same to the Client on a monthly basis. ... 16.

EARLY OR WRONGFUL POSSESSION BY CLIENT In the event the Client shall occupy the Project prior to completion thereof, or after completion without having completed the inspection referred to herein, or without full payment of all monies due to the Project Manager or otherwise payable pursuant to Clause 4, the Client shall be deemed to have accepted the Project in the state in which it exists and shall be deemed to have waived all rights to object to or complain about any defect in workmanship, materials or construction of any kind and all warranties of any kind obtained by or through the Project Manager. ... 18.

ENTIRE AGREEMENT This Agreement shall constitute the entire Agreement between the Project Manager and the Client and no representations, warranties and previous statements made by any person or agent other than those in writing in this Agreement signed by the Project Manager shall be binding on it so as to vary the terms of this Agreement. [ 14 ] As previously stated, the PMA also incorporated by reference the Plans and the Specs. The Specs included some additional relevant provisions under the heading “Terms & Conditions” (at pages 23 and 24).

The following, including bold and italics, are as they appear in the original: Plans & Specifications In the event of a conflict between the Blueprints and these Specifications, these Specifications shall govern. The home is to be built as per these Specifications unless otherwise specified by way of a Change Order signed by the Purchaser(

s) and accepted by Citycore Developments. The Purchaser(

s) agrees that the Blueprints are copyright protected and the sole property of Citycore Developments.

Extras or Deletions Changes are allowed and can sometimes be done without any expense to either party. But, please realize that any changes that are extra money will be charged to the Purchaser(

s) and will only be completed if the proper documentation has been generated and the Change Orders have been signed by the Purchaser(

s) and accepted by Citycore Developments. Substitutions Due to continuous product research and development, blueprints and specifications are subject to change without notice. Items will be substituted subject to availability with equal or superior products. (When possible and necessary, the purchaser(

s) will be notified). ... Agreement and Specifications This agreement and Specifications shall constitute the entire agreement made between Citycore Developments and the Purchaser(

s) and no representations, warranties or statements made by any employee or agent of Citycore Developments shall be binding so as to vary the terms hereof. [ 15 ] Patel purchased the property that the parties had in mind when they considered entering into an agreement. The Plans were developed with that property in mind. The older house on it would be demolished and the lot subdivided into two parcels. City Core coordinated the property acquisition and subdivision, with Patel as the legal owner.

Patel retained ownership of one of the resulting lots for construction of the new house (“ 1725 ”); the other lot was conveyed to City Core for its own use. There is no dispute between the parties in respect of the acquisition, demolition, subdivision or subsequent conveyance. [ 16 ] City Core started the work shortly after the PMA was signed.

Demolition of the old home and excavation for 1725 commenced in April 2007, followed by the start of construction of the new home sometime early that summer. [ 17 ] City Core prepared and provided to Patel a binder that included, among other things, a copy of the PMA and a detailed breakdown, step by step, of what he could expect for the sequence of the construction and approximate duration of each step, of the decisions that Patel needed to make prior to commencement of construction and of the decisions that he needed to make prior to various stages of the construction.

For example, prior to week two of the framing, this breakdown suggested that Patel needed to decide the fireplace(

s) he wanted and their heights off the floor, the stairs and railing he wanted, and the custom front door he wanted. It suggested that prior to week three of the framing Patel needed to decide all plumbing fixtures and locations, in order for City Core to rough-in for tubs, sinks, faucets and so on. It suggested that prior to the end of framing Patel was to decide speaker system locations and exterior finishes (i.e. deck finish, stucco, paint, soffit and fascia choices). In each case, pre-selected suppliers were noted, along with contact people, phone numbers, and addresses.

While the PMA does not require this detailed sequencing of decisions of Patel, in the PMA the parties agreed to a target completion date and that Patel would be responsible for “delays by the Client in making decisions regarding construction or choice of materials.” [Clause 7, PMA] [ 18 ] Patel contracted separately with an interior designer to assist him with those sorts of matters and, particularly, to ensure he achieved the finished look he was after. He wanted the interior designer that he worked with when finishing his condo, a Mr. Ed Tsang, but Mr. Tsang had no time available and declined the request.

City Core recommended Patel consider one of the interior designers it had recently started using, a Ms. Nancy Stals. Patel retained her services. [ 19 ] City Core employed Mr. Travis Hanna as the site manager for the majority of the time City Core managed the project, from commencement until at least mid-March 2008. When Hanna started the project he was given a set of the Plans and a list of suppliers to contact. [ 20 ] It was not Hanna’s role to communicate with Patel about the total cost of the project or to ensure the various trades and subcontractors stayed on or under budget.

Hanna was not given a form of budget for the project or for any of its component parts. There was no such budget.

[ 21 ] No original amount was determined for what each aspect of the construction should cost to align with the Estimate in the PMA, nevertheless “the incremental cost of any change to the scope or extra to be added to the scope would be determined”. [ 22 ] Hanna said he determined whether something was an extra as follows: ... if it was not on the [Plans] and there was not a notation in the scope of work, it would be an addition to the project. If so, then Hanna would execute a change order. He said that his goal was to have a change order for everything fitting into that category.

I find that he diligently endeavoured to properly document Patel’s authorizations for all changes. However, he ceased papering the extras later in the course of the work, as I describe later. [ 23 ] Until that time, if Hanna thought the scope of work was changing, he would discuss the matter with Patel or Patel’s interior designer.

Hanna would “get a quote from the contractor for whatever work needed to be done and any other costs involved and that would be documented and sent to him or over to one of his designers”. [ 24 ] As construction progressed, the parties executed a number of written change orders authorizing extra charges to the contract. Seven change orders were executed between June and late October 2007, totalling $20,797.00, exclusive of City Core’s 15% Project Management Fee (the “ PMF ”) and GST on both.

Each change order states, among other things: We hereby order the following change in the contract or, order the following extra work beyond the scope of any existing contract. [ 25 ] The construction of 1725 was progressing on or ahead of

schedule leading into late November 2007. Up to that point City Core never advised Patel as to how his total cost to date compared to the commensurate portion of the Estimate. It never told him he was on track or off track. It never provided him any accounting statements, other than reporting in each of its management fee invoices the total amount it said had been paid to everyone else involved in the project to date. [ 26 ] On Tuesday November 20, 2007, with construction in full swing, Patel announced that he would change interior designers for the “final portion” of the project.

He brought in Tsang and attempted a smooth transition for the transfer of matters from Stals to Tsang. He expressly referred to numerous items that were then in process with Stals and gave his direction in respect of each to Hanna by email as follows: • Outside Pergola and Privacy Fence Design and this can be handled by Ed.

And I have forwarded the design Nancy sent me yesterday with regards to the Fence. • Outside Fire Place and BBQ and I believe Ed has some design change as to the location of the Fire Place and Hope this does not effect the current construction taking place. • Kitchen will be handled By Ed and I believe most of the Units have been ordered and Nancy can forward that to him and not sure if there are any Drawings of the Kitchen Layouts that needs to be done or City Core provides Sketches for approval. • hand rails are an issue and Ed will coordinate it with the Vendors as they were installed incorrectly and he is proposing another idea? (Not sure but he has my approval on recommendations.) • Flooring and Tiling Ed to review and get back to me? (Again this will not impact any installation down time and if it does I need Travis to tell us?) • Internal Colouring Ed to coordinate. • Staining also Ed to coordinate final review selection. • Main Floor Fire Place Ed will review and Propose designs?? (He mentioned something and I’ve forgotten.) • Interior Finish to be carried out by Ed.

• Lighting to be carried out by Ed He added that he hoped the transition would be completed by the end of that week and that: ... Ed did mention some changes that will require Travis’s input and cost associated with it and I’m prepared to pay as long as it’s feasible and not TOO expensive and Ed will let me know this week. [ 27 ] Stals provided a list to Tsang of what was outstanding.

It included the kitchen, washroom built-ins, closets, fireplace surrounds, tile selections for washrooms, all appliances and some light fixtures. [ 28 ] At the time of transitioning between interior designers there was an imminent need for design drawings in order for the construction to remain on track. However, Tsang was attending to the project only on evenings and weekends. He had added the project onto his existing full load.

Hanna described Tsang as “very good” but that he “had too much else on his plate at the time.” [ 29 ] On December 3 Tsang emailed Hanna with three “site instructions” (for adding bulk heads and changing the stairwell base board to a stair cap) and reported that he would “issue proper dimensional working drawings and sketches mid-late this week”. [ 30 ] On December 4 Patel, Hanna and Gambell spoke by phone. The next day Patel sent an email to Tsang, and also to Hanna and Gambell, approving Tsang to proceed with various modifications and changes.

It concluded as follows: Finally: I do realize that this is going to add additional cost for the changes and I’m prepared to live with that and [Hanna] can keep us informed on that additional cost? Neither Gambell nor Hanna objected to this. [ 31 ] Also on December 4, at 4:41 p.m., Hanna emailed Tsang explaining that it was important that he get working drawings for “everything Matt Russell is doing”. He listed specifics. Hanna then estimated the cost impacts of four electrical changes they had discussed and emphasized that they were rough estimates and may vary.

He said that those estimates included drywall repair. Hanna relayed that Russell told him Tsang would have working drawings to Matt on December 5 and requested confirmation. He then requested a forecast of when he would receive “the remaining (ext. deck layout, paint colours, etc.)” designs. Tsang’s response came later that evening at 10:41 p.m. He said the drawings would not be available on the 5th, but most likely the 7th. [ 32 ] Tsang’s drawings for Russell were not delivered on the 7th, but the 11th.

Tsang explained: “I am deeply sorry for the delay, but I’ve been super swamped and don’t mean to hold you all up.” [ 33 ] The remaining drawings Hanna needed were not included with those sent on the 11th. On December 13th Hanna emailed Tsang saying: I was expecting to see the remaining drawings today (ex. Deck layout). When is a realistic date to obtain these. I need to

schedule trades to finish these items. For example, I may lose the ext. finishers that will frame the rear deck built-ins if I cannot give them a firm date in the near future. [ 34 ] On December 17th Tsang replied :

... here is the bulkhead requirements for the kitchen. Sorry for not providing you with more info, but I’ve been fully booked with drawings for other projects. I can provide you with ext. fireplace drawings by next Tues. Some “preliminary” exterior deck drawings then came the next day, December 18. [ 35 ] On December 19th, Tsang emailed Hanna regarding four further changes (remove two installed doors, remove installed drywall in the basement and replace with glass by the toilet, relocate electrical, and remove stair hand rail) and forecasted that he would: revise and provide ... by Friday: Finishes

schedule Hardwood floor selection Tile selections Paint colour selections Also referred to were seven outstanding drawings, at least two of which represented more changes (relocation of a vent and revision of the exterior deck). [ 36 ] This became the pattern for the project thereafter: delays to the project waiting on Tsang’s design input and further changes requested by Tsang. By way of example, on January 28, 2008, Tsang sent a revised “Finishes Schedule,” revised “Fireplace drawings,” revised “exterior drawings” and revised “Kitchen drawings.” On February 6, he sent a further revised Finishes Schedule.

It was revised again March 3 and again April 30 and then again on May 5. The April 30 iteration did not change anything but added items that were previously missed (bath, sink and door hardware choices). [ 37 ] As a further example, Tsang sent drawings for the laundry room and basement bar on March 3; those areas had already been framed and drywalled in accordance with an earlier design.

By March 25 Tsang changed his laundry room design one more time, from accommodating side by side appliances to stackable, because his March 3 design, he said, “wouldn’t allow you to have a sink or provide enough clearance to open the washer door.” [ 38 ] As another example, on April 25 after Tsang expressed surprise that “Raven hasn’t sent the links and images of the sinks”, City Core’s procurer responded by, among other things, reminding him: ... you wanted a quote from Frontier, they did not have all the model numbers, I emailed you a few times to get this to me and I still don’t have it, what do you want to do? ...

I can tell you that these sinks will take awhile so please get me ... [ 39 ] At trial Tsang believed that if he was on the project from the outset then he would have had the work done a lot sooner. He acknowledged that the change of interior designers extended the project. [ 40 ] I find that both the delays occasioned by Tsang’s arrival to the project and his late deliverables each materially interfered with City Core’s ability to progress the project methodically and as contemplated in the Specs. The project had been on

schedule prior to Tsang’s arrival but, after his arrival, then derailed.

[ 41 ] Consistent with this finding, I note from the selection of Hanna ‘time summaries’ included in the evidence (that Hanna submitted to City Core for allocation of his costs among his various projects) that prior to Tsang’s arrival Hanna’s entries for his work on 1725 and for his work on the neighbouring 1727 suggested he was doing roughly similar, if not identical, work at each site each 2 week period. But after Tsang’s arrival those summaries show a gradual departure in terms of the content of the entries and therefore the nature of Hanna’s time spent on each project.

For example, between January 28 and February 8 of 2008 Hanna spent time on 1727 dealing with “Light/Door hardware counts”. Tsang only provided this information for 1725 in the April 30 iteration of the Finishes Schedule. Also by early March 2008, 1727 is no longer mentioned in any of the Hanna time summaries, but Hanna continued to spend considerable time supervising activities at 1725, as did the site manager who came after him. [ 42 ] I also find that Tsang’s changes to the project contributed to the protracted construction

schedule and increased its cost. These changes necessitated additional costs for removing what had already been done, for the re-attendance of the trade(

s) involved to construct the replacement and for the continuation of associated construction support costs (such as for heating, powering and securing the workplace). [ 43 ] The sheer volume of changes brought Hanna to the site daily, adding also to the site supervision costs. Tsang added shelving to the basement bar. He made ceiling changes such as adding bulk heads. He added pot lights and relocated others. He changed the upstairs fireplace detail. He changed the fireplace facing on the main floor fireplace.

He changed the stairway from carpet to hardwood, changed the MDF facing on the stairway risers and changed the stairway railing design. He changed the design of the window casings and the baseboards. He changed the shape of the granite top kitchen island, moved the range on to it from an outside wall and removed from it the prep sink. He redesigned the ceiling range hood to match the shape of the new island. Some site work had already been completed to achieve the original designs, and Tsang’s changes required revision be made.

Some preliminary framing and rough-in work had been done, requiring certain trades return to the property to remove earlier work and then re-do it to Tsang’s specifications. Some of Tsang’s changes required site visits with various trades to confirm new colours or direction, and then re-ordering the correct input materials. The stairway change from carpet to hardwood necessitated cutting off the ‘nose’ on each step. The baseboard change required removal of installed baseboards, ‘dado-ing’ an accent groove into them and then their reinstallation.

The addition of that groove necessitated the painters to return and redo their earlier work. The change to the bathroom sinks necessitated a change to the height of the cabinet above. [ 44 ] Upon review of all the evidence, I agree with Hanna’s observation that Tsang completely changed the direction of the interior design. He did not just pick up where Stals left off. Tsang acknowledged at trial that he wanted a different look.

In his private email exchange on December 7 with Patel, he referred to what he was doing as “the new design.” He revised, replaced and revamped many of the major elements of the project that had already been completed on site. Other changes that he made had not yet been installed but were already the subject of effort by City Core in ordering, arranging and otherwise coordinating. [ 45 ] I find that Patel was generally aware that these events were adding to the total cost of the project.

Among other things he was copied on various emails between Tsang and City Core which referred to, sometimes directly and sometimes indirectly, the cost implications of various changes. [ 46 ] At no time did Patel request a status report on whether ongoing changes were adversely impacting his total project cost materially beyond the original estimates (until, that is, he was invoiced for very substantial cost overruns while the project remained incomplete). [ 47 ] Unlike earlier in the project, once Tsang assumed his role, the written change order process was no longer followed.

Hanna noted that there were few change orders executed after Tsang came on the scene because, he said, Tsang had ‘carte blanche’ to make changes. [ 48 ] This was a reasonable conclusion for Hanna to reach. Patel informed City Core, by email on November 20, 2007, as quoted above: ...Ed did mention some changes that will require Travis’s input and cost associated with it and I’m prepared to pay as long as it’s feasible and not TOO expensive and Ed will let me know this week. Also, by email on December 5 Patel informed Tsang and Hanna (again, repeating parts of one of the quotes above):

... Travis will provide cost and as long as it’s not too expensive we can proceed with that ... Modification ... as per sketch ... and again he will provide the cost ... Ed has my full authorization to sign off on the Kitchen design He then indicated that he would be off to England, but available by cell for pressing concerns and by email intermittently. He concluded with the expectation that Hanna would “keep us informed” on additional costs. [ 49 ] After December 7, Patel had no direct dealings with City Core personnel about approving various changes or revisions.

City Core’s design centre, that looked after procurement orders, only communicated with Tsang, and sought only Tsang’s approval for the various items to be ordered, not Patel’s. Tsang copied Patel on his replies and approvals, which City Core could see. Patel never objected to this process, reinforcing City Core’s impression that Tsang had Patel’s authority to make decisions about the project. Patel never objected to anything Tsang approved.

He never considered it necessary to confirm with City Core anything that Tsang had authorized. [ 50 ] Tsang’s emails were consistent with his role as the one liaising directly with Patel and then speaking on Patel’s behalf. For example, in a March 5 email directed to both City Core and Patel, Tsang wrote: “Ed to confirm order with [Patel] and finalize order.” [ 51 ] As between Patel and Tsang, therefore, Tsang would look after getting cost information and involve Patel as appropriate. On December 7 Tsang and Patel exchanged emails just between themselves.

Tsang assured Patel that he would look after things while Patel was away. Patel expressed how pleased he was with all that Tsang had done so quickly and that he was glad Tsang was looking after things.

Tsang replied that he would get pricing information for Patel after his meeting with Hanna the next day. [ 52 ] As between City Core and Patel, City Core personnel also understood this to be the new operating practice; all of them dealt solely with Tsang through the period of Tsang’s involvement. [ 53 ] According to City Core, its preferred approach was to advise customers if their choices would increase their total cost and then to actually document any such requested change by way of written change order. [ 54 ] Gambell considered the guideline dollar allowance information in the Specs to be City Core’s notice to Patel.

City Core believed that by referring to these amounts Patel would know, or would be able to ascertain on his own, when any specific decision he made might escalate the total cost of the project. However, Gambell acknowledged in cross-examination that it was City Core’s responsibility to determine whether a customer’s request would cost more money. He added: “but it’s also a shared responsibility of the customer too.” [ 55 ] I find that the budget allowance of $5,000 for appliances was inadequate for the quality of finishing of a City Core home of Patel’s size in 2007.

I accept the evidence of Stals in that regard, given her observations of City Core calibre houses and her efforts to work with that amount on Patel’s house. City Core says her frame of reference for City Core houses was a single two-million-dollar home in Calgary. That was the only City Core home she worked on before Patel’s, but she had observed other City Core calibre houses. Stals also had firsthand knowledge of the calibre of product appliance vendors usually supplied for City Core infills.

By ascribing an unduly low allowance amount in the Specs for such input materials, City Core ensured Patel would trigger an identifiable extra when overspending on appliance choices, boosting the PMF, rather than determining a more accurate estimate. Ultimately over $20,000 was spent on appliances.

More was ultimately selected than originally contemplated, but even factoring for that I find that City Core gave an estimate for goods of a certain calibre that could not be provided for that price. [ 56 ] Gambell was also of the view that City Core did not need to track the costs and tell Patel what would be extra to the Plans and Specs when, as in this case, “the client says, I will deal with Mr. Tsang and Mr. Tsang is reporting to me. ... I’m not quoting”. Later

Gambell put it this way: If it wasn’t for Mr. Tsang joining in the vision, and Mr. Patel saying, This is my guy, do what he wants, then we would have had to track [the costs], and that was not the direction City Core received. [ 57 ] Hanna provided a quote and other cost information whenever he was asked, but City Core did not provide to Patel, during any time that it was active on site at 1725, any status report on the accumulating costs as the work progressed. It did not provide to Patel accurate monthly statements of all accounts.

City Core did not provide any such statement until long after questions were asked and work stopped. As subsequent events revealed, City Core had not maintained such records. It did not begin to do so and then stop when Tsang came onto the project, despite what Gambell implies. [ 58 ] No one on the job site worked from, or was given, a budget for the project on a component by component basis, such that changes to various parts of the work could be discovered in advance of committing to them as increasing the total cost.

That is because City Core did not generate its Estimate of the total cost by adding up its estimate of all the component inputs. Rather, it estimated the total cost based upon average costs of its other recent house builds, divided by the square footage of the new house, with particular guidance gleaned from #718. [ 59 ] Gambell admitted in cross-examination that there was no way for City Core to know at any point in time whether it was on target with the budget or not, but he believed City Core would know generally because of its experience and its established pricing with specific suppliers.

Even if true this would not help Patel, since City Core never shared any such knowledge with Patel. [ 60 ] Patel understood that some of Tsang’s changes on his behalf would be increasing the total cost for which he was responsible and he nevertheless authorized those added costs. His various email communications, some of which I have already referred to, leave no doubt about that. However, Patel did not understand the magnitude of the cost impacts of Tsang’s changes. Patel had not been provided with any ongoing cost tracking information from which to appreciate their cumulative effect.

He was made aware of the total project spending to date with each progress billing he received, but he was never informed of how that running total compared to the original estimate for that portion of project completion. Therefore he did not have information from which he could have acted to temper the magnitude of or number of Tsang’s changes or perhaps to offset their effects by other changes. [ 61 ] In addition, Patel did not understand the cost consequences of the delays resulting from his change in interior designers.

I find that City Core cautioned him about this during the December 4 telephone conversation, but did nothing further or more specific. [ 62 ] Patel was busy with his own work over the period of the construction. He engaged interior designers not just for their design expertise, but also to ensure the work progressed and was performed acceptably, without having to be there in person to monitor. The evidentiary record shows that whenever a question was put to Patel, or his attention was needed for a decision about the project, he was quickly responsive.

Therefore, Patel had in no way abdicated any concern for its cost or progress; he entrusted the active monitoring to the designers. [ 63 ] City Core could not have known the full cost consequence at the time of Patel’s change from Stals to Tsang. It did not know then that Tsang had only limited availability which would cause delays to its receiving various design inputs.

It could not have known the volume of changes that Tsang would make to the project or the time frame over which he would make them. [ 64 ] However, at some point after the impact of Tsang’s changes began to be experienced, had City Core been actively managing and reporting the costs of the work, and not just the conduct of the work, City Core and Patel would have readily recognized that the intended progression of the project had been derailed by protracted delays waiting on Tsang’s designs, and also set back by Tsang’s design changes.

They would have readily recognized that these events were adding, at some point materially, to the aggregate cost overruns. At trial, Gambell spoke emphatically of Tsang still modifying the design four months into his time on the project. Therefore within that four months, had City Core been actively managing the costs of the work and not just the conduct of the work, City Core could recognize what was happening and said something to Patel about the new cost trend line. Nothing in the evidence shows that it did anything to draw this to Patel’s attention, directly or through Tsang.

City Core only expressed concern when Patel stopped paying its invoices. [ 65 ] Upon receiving one of City Core’s invoices during the first quarter of 2008, Patel was alarmed when he learned that the total

cost to date significantly exceeded the $478,000 Estimate in the PMA, with the project still far from complete. Patel did not pay this latest invoice from City Core. He asked for a breakdown and explanation of how his money had been spent, compared to what was expected to be spent for those various parts of the project. [ 66 ] City Core was unable to immediately respond to Patel’s questions. It had not kept the cost information in the form Patel wanted because it did not estimate project costs in that way.

Despite the apparent item by item cost specificity in its Specs, City Core did not develop the budget that way or account for project costs in that fashion. Nor did City Core’s personnel regularly or even periodically compare the cost of actual choices made to its ‘City Core average’ cost experience, or to its experience at #718. [ 67 ] City Core repeated its demand that payment of the outstanding amounts be made. Patel refused to pay until City Core explained the costs to date.

In approximately May, 2008, City Core ceased work on the project. [ 68 ] To respond to Patel’s information requests, in the absence of any detailed budget for the project, City Core tried to assess where the costs may have exceeded what was done at its typical recent house constructions, such as #718. [ 69 ] In September of 2008, City Core gave Patel an “Account Detail” document, three pages in length, in which it tried to identify where the spend on Patel’s project exceeded the basis for the Estimate.

It had these headings: Category Budget Actual Spend Variance Projection yet to +/- be Invoiced The amounts in the “Budget” column were based upon the average costs experienced in other recent City Core house constructions, at roughly $210 per square foot. The “Variance” column was the difference between Patel’s actual cost and that “reverse engineered” (as Gambell put it) budget average. City Core did not have anything like this document prior to generating it in response to Patel’s inquiries.

City Core said, at the time, that the company “was evolving.” [ 70 ] Patel asked many questions about City Core’s Account Detail. Answers were slow in coming. Patel asked to see the supporting documentation for various charges. Meetings were held. City Core revised its Account Detail table four times over the course of these meetings. The latest revision was on April 6, 2010. Between the revisions the “actual spend” totals fluctuated between approximately $668,000 and $683,000. City Core showed the budget total fluctuating between approximately $517,000 and $545,000.

The projected cost to complete the project ranged between $86,000 and $89,000. [ 71 ] City Core’s early project costs were substantially higher than the amounts they should have been, based upon City Core’s reverse engineered estimates. For example, excavation costs came in 50% higher than the reverse engineered budget dictated. The roofing cost was also 50% higher. The framing cost was 77% higher. The furnace cost was 34% higher. The concrete cost was 17% more than the reverse engineered budget. The cost to prepare the Plans was 305% higher.

This latter cost would have been known, or at least was ascertainable, before the PMA was signed. The actual cost could have been, and should have been, built into a more accurate initial Estimate in the PMA. [ 72 ] At trial City Core attributed these substantially higher costs to the extraordinary inflationary pressures on building costs at the time. The “explosion” of pricing “came when we started to build” with Patel, said Gambell. He then admitted that at the time he knew that prices were on the rise and that he may have estimated too low.

He maintained, however, that the real problem was that “the project got out of hand”. [ 73 ] City Core also provided Patel with a 32-page computer print-out of each individual expense paid by City Core and charged against the 1725 project. [ 74 ] Of those, the following expenses were later reversed, reducing the amount City Core claimed remained due from Patel. City

Core readily admitted the following costs should never have been charged to Patel: (

a) Two receipts for gas purchased in Palm Desert, California, totalling US$82.00. On each receipt was added in handwriting the full address for 1725. In further handwriting and circled was the Canadian currency equivalent, totalling CDN $92.44. Gambell said this was an “accounting error.” I find that very implausible. Not once but twice Patel’s 1725 address was handwritten on the applicable receipt. Twice someone manually calculated the conversion to Canadian funds, suggesting knowledge of each vehicle fuel expense originating in the United States yet being charged to construction of the Calgary property.

I find that they did not occur by momentary lapse of attention, misunderstanding or in “oops” fashion. I find they were not “accounting errors.” These appear to have been intentional acts. Each act necessarily required conscious thought by someone at City Core to treat receipts for vehicle fuel purchased in Palm Desert as if they were costs of constructing 1725 in Calgary. If nothing else, they demonstrate a failure of or the absence of the most rudimentary cost controls by City Core. (

b) Two car washes, in the amount of $18.48; (

c) Brake repairs on a vehicle, in the amount of $84.79; (

d) A “premium shrouded padlock” in the amount of $29.09 (plus GST), for use at Gambell’s personal residence. Another hardware store purchase was made at the same time for 1725. Each line on that vendor’s purchase statement was separately marked in handwriting for allocation purposes, one indicating the 1725 address and the other Gambell’s home address. It had the further handwritten notation elsewhere on the page: “all to 1725.” When asked, Gambell denied that it was his handwriting. He was not asked if he directed someone else at City Core to write that or to allocate the cost in that fashion. (

e) A receipt from a wine merchant in the amount of $104.26 and a restaurant meal in downtown Calgary in the amount of $110.48. These were “advertising costs” that City Core later acknowledged were part of its own overhead and not costs attributable to Patel’s construction. [ 75 ] At trial there was no expression of alarm, concern or even embarrassment by City Core at this apparent pattern of impropriety, to put it mildly, nor any comment about any steps taken to root out and correct it. There was no acknowledgment of a failure of fiscal controls, checks and balances.

With the exception of one of the car wash receipts, all receipts that were included in the evidence for these reversed items indicated the items were purchased with the same American Express credit card. This means that the same credit card was used to purchase gas twice in Palm Desert, for brake repairs in Calgary and for one of the car washes in Calgary. On one of those occasions the purchaser presented a Calgary Co-op member number.

It may not be the presenter’s own number, but from following up on this collective information the identity of this individual was readily ascertainable. [ 76 ] Instead, City Core dispassionately chalked the incidents up to “accounting error.” If the behaviour only occurred with the car washes, then the accounting error explanation might be plausible, since they were line items in receipts for gas purchases and City Core routinely reimbursed site personnel for their gas costs travelling to and from the various work sites and, the theory would go, the total receipt was reimbursed in error not just the gas portion of the receipt.

But the number and diversity of incidents strongly suggest more than mere error. It suggests intent. It may be that in the absence of customers like Patel asking questions, and without any cost controls or cost tracking at City Core, someone at City Core felt at liberty to help themselves at customers’ expense. [ 77 ] City Core also initially passed on to Patel its July 2009 rent cost for its showroom, in the amount of $7,735.35. Gambell did not consider this to be an accounting error. Rather, City Core includes this cost in pricing its spec homes.

Gambell similarly directed one month’s showroom rent be allocated to 1725. Patel resisted, saying he never even went there once. Patel did use the services of City Core’s procurement staff, which operated out of the design centre showroom, but Patel was separately invoiced for their time. Those time charges did not include City Core’s cost of the showroom, but Gambell agreed to remove the rent cost of its showroom. It does not form part of City Core’s counterclaim.

[ 78 ] Patel disputed City Core charging him periodically for monthly cell phone bills and vehicle gas bills. City Core maintained that its approach was cheaper than the alternative for Patel. Under the alternative approach, each of City Core’s on site personnel would track their vehicle use kilometre by kilometre for each of the various projects they worked on and travelled between, would allocate a precise amount per kilometre to each project, and similarly would track their cell phone usage call by call.

Under City Core’s approach, for cell phone costs it charged a worker’s entire month’s cell phone bill to 1725 and then many months thereafter charged no cell phone costs for that worker to 1725. In those other months the whole bill would be allocated to one of the other active projects attended by that worker. Similarly with their vehicle gas costs – no per kilometre charge was allocated to each project, but an entire gas receipt would be charged to a single project and then the next few gas receipts would be charged to different projects.

City Core acknowledged that this approach was somewhat less precise but said that, given the relatively nominal amounts involved, and the labour intensive alternative, this process actually saved City Core customers money, because customers paid much less for the City Core accounting process. Under a more exacting process City Core would have to parse through, tally, and allocate each person’s vehicle use for the month by project and allocate allowable expenses accordingly, all at the customer’s expense.

The time taken by City Core workers submitting receipts for reimbursement would also increase if they had to track each kilometre and cell phone call. [ 79 ] Patel also objected to being charged separately for the site work of Hanna and others overseeing the project for City Core. Patel considered them to be part of the project management for which, under the PMA, he believed he was paying City Core the additional 15% PMF.

City Core maintained that these were all proper amounts to charge to the project and then tack on its 15% PMF. [ 80 ] When questioned under oath before trial, Gambell said that “project management ...was to arrange the trades and get them in to build the house in a cost-effective and timely manner” and said that there was no difference between “site management” and “project management”. At trial, however, he drew a distinction between the two and maintained that both the site work and some of the project facilitation done off site were actual costs of construction, regardless of what they were called.

In Gambell’s view they were the proper subject of separate invoicing to Patel. He considered the PMF to cover such things as City Core’s overhead, office reception, and access to its list of preferred trades and suppliers. [ 81 ] Most of the individuals that worked on the project invoiced their time by the hour and charged their invoice to the project. Hanna, however, submitted a single invoice to City Core every pay period and allocated his time among the different projects to which he was assigned. City Core then charged that allocable share to the separate projects.

Except rather than charging just its actual cost of Hanna’s work on 1725, City Core charged a higher amount that included a further mark-up on top of what it appeared to pay Hanna. Hanna’s rate worked out to $31.25 per hour and City Core billed Patel $45 per hour for Hanna’s time. From January to April of 2008, Hanna billed 82 hours and thus City Core appears to have overcharged by $1353, including PMF and GST.

Gambell acknowledged that he charged a higher amount to Patel and offered in defence that City Core paid Hanna more than just what was on his invoices, since it also paid him a bonus of a fixed percentage of the final costs of all the projects he worked on, including 1725. Gambell explained that in addition to the hours he billed, Hanna received a bonus of 3% of the project management fee, which in this case resulted in City Core paying to Hanna a bonus greater than $1353.

City Core has therefore not overcharged with respect to Hanna’s invoice. [ 82 ] The parties also disagreed on what aspects of the work City Core managed were extras that Patel authorized and which should be treated as included within the scope of the work covered by the Estimate. [ 83 ] In November 2008 Patel retained the services of Cornerstone Developments to assess the status of the construction project.

Cornerstone reported to him that portions of the work done by City Core were substandard and estimated the cost to fix and complete the work to be $155,000.00 plus GST plus a 17% management fee. [ 84 ] City Core stated that it could have completed the contract for just under $90,000.

That included deficiency work, since it would have required that any deficient work be remedied by the applicable tradesman, supplier or sub-contractor, at no cost to Patel. [ 85 ] The parties state that it was early 2009 when, following their communications in February and April 2009, they both realized they would not be able to resolve their differences and, therefore, both knew that the party opposite would no longer perform the PMA. Each blames the other for the contract termination. [ 86 ] Patel contracted Cornerstone to complete the project. It did so at a total cost to Patel of $225,430.67.

Claims of the Parties

[87] Patel admits responsibility to pay City Core for the extras he says he authorized. He says these totalled $61,440.15, which isinclusive of both City Core’s 15% PMF and GST. He admits to these based on both the written change orders that he signed and on oralapprovals given on site, based on the testimony of Stals and Tsang at trial. He objects to all the remaining claims for extras.

Therefore hesays the total contract value for which he is responsible is $539,440.15 (the original $478,000 plus that $61,440.15). [88] Patel has paid City Core $696,025.26 and has paid (or is in the process of paying) to Cornerstone an additional $225,430.67.He says his damages are equal to the amount he spent in excess of the Estimate plus reasonable adjustments for inflation and anychanges he authorized.

He says therefore that it cost him $921,455.93 for the house that City Core agreed to build, and was required to build, for $539,440.15.He claims back from City Core the difference, namely $382,015.78. [89] City Core denies any such liability to Patel and by counterclaim seeks a further $152,454.73 inclusive of interest of$23,255.81 from Patel. This is the difference between the $696,025.26 it received from Patel and the $825,224.18 it incurred on theproject, inclusive of PMF and GST.

Positions of the Parties [90] Patel says that City Core should be held to the Estimate both because it was incorporated into the PMA as a contractual termand because it was so wildly inadequate: Kidd v Mississauga Hydro-Electric Commission et al. (1979), (ON SC), 23OR (2d) 385 (HC). He says the Estimate played a role in his agreeing to contract with City Core, was clearly wrong and should receive adegree of enforcement: Bornhorst Welding Ltd. v Zwingli, 2007 SKQB 154; Husky Oil Operations Ltd. v Ledcor Industries Ltd., 2003ABQB 751, rev’d on other grounds 2006 ABCA 122.

Even if City Core was allowed a reasonable variance from the Estimate, Patelargues that this would be in the range of 10%: Boehm v Chergar Enterprises Ltd., 2010 ABQB 826, 511 AR 86; or describing it as a“leeway factor,” in the range of 15%: Topsiders Construction Ltd. v Nielsen, [1997] OJ No 3807 (Ct J (Gen Div)). [91] Regarding City Core’s claims with respect to extras, Patel acknowledges that he authorized some of the extras by the writtenmethod set out in the PMA and acknowledges an obligation to pay for others by virtue of the evidence at trial.

He concedes that CityCore is entitled to receive these amounts above the Estimate. Patel submits however that the remaining amounts City Core claimedresulted from the inaccurate estimating (that is, from items within the original scope that City Core knew were to be part of the project itconstructed for the Estimate) and from items that City Core proceeded to construct without informing Patel that they would triggeradditional cost.

Patel submits that at no time did he waive his right under the PMA to know that any of his project decisions mightincrease the overall cost of the project: Banister Pipeline Construction Co. v TransCanada Pipelines Ltd., 2003 ABQB 599.

Patel alsoobjects to certain of City Core’s claims for extras for item-specific reasons, discussed later in this judgment. [92] Finally, Patel says that City Core committed an unfair trade practice, as described in the Fair Trading Act, RSA 2000, c F-2(the “FTA”), by charging a price for goods and services that is more than 10% higher than the estimate without Patel’s express consentto the higher price or the price of additional or different goods and services. [93] City Core argues that the PMA is a cost-plus contract, not a fixed price contract, and that the Estimate was based upon a verydifferent house than the one Patel ultimately instructed be built.

City Core says that all its charges to the project fit within the definitionin the PMA of “Costs of Construction”, that Patel approved all of the work that was done and that nothing was done that Patel did notwant. Patel has exactly the house he wanted and should pay fairly for it. [94] City Core submits that absent full payment by Patel for the house he wanted and now has, would result in his gaining asubstantial gratuitous benefit - an unjust enrichment- at City Core’s expense.

That is, even if the contract does not result in full paymentof the amounts City Core claims, it is entitled to that amount in quantum meruit. It says Patel has suffered no loss, receiving exactly whathe requested. [95] City Core says that, other than the amounts it agreed up front would be dropped from its claim (see paragraphs 74 and 77above) no evidence was submitted to show that the balance of City Core’s charges for the project were unreasonable or inappropriate.City Core points out that during trial Patel did not identify any of that balance of charges that were not either what he wanted or what hegot.

[ 96 ] Even though the process for approving extras and changes to the scope in the PMA was not followed after a time, the oral understanding was clear that Patel had authorized Tsang to commit to changes on his behalf. City Core says it did as Patel wanted and should be compensated fairly for it. City Core submits that the best evidence of fair compensation here is the evidence of its actual costs from various suppliers, sub-contractors and tradesmen.

It observes that these amounts were not contested by Patel. [ 97 ] It is correct that Patel did not contest the quantum of these claims, but he did contest liability for them, maintaining they were covered by the Estimate. [ 98 ] Regarding deficiencies, City Core argues that the cost of remedying them should be borne by Patel.

It says it was not given a reasonable opportunity to remedy them and that, in any event, the effect under the PMA of Patel taking occupancy of the house before City Core was done was to release City Core from further responsibility for the project, including for the cost of remedying deficiencies. [ 99 ] As for the claim under the FTA, City Core denies any unfair trade practice and says that, in any event, the FTA is not intended to deprive a provider of goods and services of reasonable compensation for those goods and services.

City Core further adds that the FTA requires the Court to assess whether Patel as the consumer made a reasonable effort to minimize any damage resulting from the unfair practice, which it says Patel failed to do. Contract Issues [ 100 ] The parties entered into the PMA to govern their relationship. In respect of determining its effect, the Alberta Court of Appeal stated in Humphries v Lufkin Industries Canada Ltd. , 2011 ABCA 366 at paras 13 , 15-16: What the Supreme Court of Canada calls the “cardinal” principle of

interpretation ... is that a contract must be read and interpreted as a whole, fitting all its parts together, and trying hard to bring them into harmony. ... A second general principle of

interpretation operates here. A contract must be interpreted in a positive and purposive manner, trying to make it work. ... In particular, the court must read a contract with an eye to finding and understanding the scheme or arrangement which the contract uses.

If there is real doubt as to the meaning of a phrase or clause in that contract, the court must prefer the meaning which advances that overall scheme. [citations omitted] [ 101 ] Despite the fact that the PMA is suffering from inconsistencies, unintelligible phrases and extensive typographical, format and content errors, reading it as a whole leads me to a number of conclusions. a. PMA was the Entire Agreement [ 102 ] The parties agreed that the PMA would be the entire agreement between them, prevailing over any of their pre-contract discussions. Clause 18 states: 18.

ENTIRE AGREEMENT This Agreement shall constitute the entire Agreement between the Project Manager and the Client and no representations, warranties and

previous statements made by any person or agent other than those in writing in this Agreement signed by the Project Manager shall be binding on it so as to vary the terms of this Agreement. They also agreed, in similar fashion, that the PMA would prevail over any oral statements by City Core differing from the PMA. The Specs includes the following: Agreement and Specifications This agreement and Specifications shall constitute the entire agreement made between Citycore Developments and the Purchaser(

s) and no representations, warranties or statements made by any employee or agent of Citycore Developments shall be binding so as to vary the terms hereof. [ 103 ] The Alberta Court of Appeal recently stated in Ko v Hillview Homes Ltd. , 2012 ABCA 245 at paras 26 and 27 : Given the whole-contract clause quoted above, the respondent buyer cannot rely upon evidence of negotiations, his intentions, the intentions of both parties, or his thoughts. Nor upon suggestions which he voiced, but which the appellant builder never agreed to. The test for

interpretation ... is objective; one party’s subjective views about the agreement, or how it would later work, not agreed to by the other side, are irrelevant. [citations omitted] [ 104 ] These ‘entire agreement’ clauses in the PMA mean, therefore, that City Core’s argument that the Estimate was for an unfinished basement, fails.

City Core’s argument was that Patel knew a finished basement would cost an additional $80,000, because that was the price Gambell listed on his handwritten rough estimate that Gambell generated and presented to Patel long before the PMA containing the $478,000 Estimate and containing the Plans. This pre-contractual communication does not override the express provisions of the PMA, which constitute the entire agreement between the parties. By Clause 1 of the PMA City Core is mandated to arrange for the construction “of the Project in accordance with the plans, and specifications annexed hereto as

Schedule “A” and forming a part hereof”. These are the architect drawn Plans showing a fully developed basement. The Estimate in the PMA is for completion of all that is on the architect’s drawings, which includes a fully developed basement. The Specs also formed part of the PMA and, at page 13 of 24, the Specs include development details for the basement for lighting, as follows: Developed basement areas 12 pot lights, 2 cable outlets 2 phone outlets, 4 light fixtures. 1/3 way switch, 4 switches The Specs at page 7 of 24 also refer to a fireplace in the basement.

In addition, the lighting fixtures allowance on page 14 of 24 in the Specs (of $1.00 per square foot) used a finished square footage of 2800 not 2089, thereby including the basement as finished space. Clause 3 of the PMA does refer to the square footage in the context of the Estimate as 2089, but this is anomalous within the contract and I take it to merely be a reference to the above grade floor space as is customary when referring to house size.

Finally, in the pre-trial questionings City Core agreed that the full finished basement as designed in the architectural drawings was included in the plans incorporated into the contract (except for the steam shower). Therefore construction of all three fully developed floors constitutes the “Project” and are included in the scope of what the Estimate covers. [ 105 ] These ‘entire agreement’ clauses also mean that City Core’s similarly based argument, that the $478,000 Estimate does not include the PMF and GST, fails. The following express wording in the PMA is operative: 3. PRICE

The Client shall pay to the Project Manager ... the total of the following amounts (the “Estimated Contract Price ” ): (

a) the actual cost to the Project Manager of all labour, materials, permits, administration, expenses for administration/staff and other proper charges or expenses incurred to construct the Project (the “costs of construction”); (

b) the Project Manager's project management fee (the “management fee”), which fee shall be equal to fifteen Percent (15%) of the actual costs of construction of the Project; and (this fee will be collected bi-monthly) (

c) Any Goods and Services Tax (“GST”) applicable to payments made under this agreement. The estimated contract price, as at the date of this Agreement is 1 house @ 2089 sq. ft. at a cost of Four Hundred and Seventy Eight thousand dollars ($478,000.00). [...] [emphasis added] [ 106 ] These ‘entire agreement’ clauses also mean that Patel’s references to City Core’s various promotional platitudes in its signage and other public communications are of no consequence in this action.

In any event they were seen by Patel after the PMA was signed and therefore did not form part of the binding PMA. [ 107 ] These ‘entire agreement’ clauses also mean that Patel’s beliefs about what should or should not be covered by City Core in its overhead, in consideration of only the PMF, is also of no consequence.

Whether Patel must separately pay for Hanna and other site personnel, City Core’s accountant and others, and their cell phone charges and vehicle fuel, is determined by the wording of the PMA. [ 108 ] The wording of the PMA results in these charges fitting within the defined phrase “costs of construction” that, subject to the rest of this decision, Patel is required to pay, plus the PMF and GST on them. City Core’s inclusion of charges for its people, such as its site managers, showroom procurement staff and accounting staff, are all valid charges based upon the following excerpts from the PMA.

First, from the first Clause 3: The Client shall pay to the Project Manager ... for the construction of the Project, the total of the following amounts ... : (

a) the actual cost to the Project Manager of all labour , materials, permits, administration, expenses for administration/staff ... incurred to construct the Project (the “costs of construction”); [emphasis added] And then from the second Clause 3: Payments shall only be for amounts incurred and billed for by the Project manager for material and trade labour and administration and City Core Developments staff and expenses to build the project . [emphasis added] The charges Patel thought would be provided by City Core as part of its own overhead, and for which he thought were covered by his payment of the 15% PMF, are costs incurred to build the house.

Apart from the construction of Patel’s house, these costs would not have been incurred by City Core. The PMA does not describe what the PMF is to cover, other than that it is City Core’s right to receive 15% on top of the costs of construction as defined in the PMA. The term “costs of construction” includes even administration costs.

Therefore, subject to the rest of this decision, these charges that Patel challenges, including the charges for accounting, gas, parking, propane, consumable tools, office support, site lock-ups, site management, telephone and project management, fall within the breadth of the matters described in the PMA for which Patel agreed to pay City Core, plus an additional 15% PMF on top of all such charges.

b. PMA a ‘Cost Plus ’ Contract, not a ‘Fixed Price ’ Contract [ 109 ] The Estimate did not serve as a fixed price within the contract. While the macro design (the Plans) was set prior to the formation of the contract, the micro plan (the interior design choices, finishes and detailing) remained to be determined. [ 110 ] The parties in signing the PMA expressly recognized and agreed that Patel’s choices on the micro plan had the potential to cause the final actual cost to differ from the Estimate: The Client specifically understands, acknowledges and agrees that it is an estimate only.

Any changes in the design of the Project or materials and labour will affect such estimates. [from the first Clause 3] The PMA contained other phrases consistent only with a cost-plus arrangement, not a fixed price contract: Depending on the actual cost of the project management fee and GST ...[from the second Clause 3] Unknown costs at the time of substantial completion shall be identified and estimated by the Project Manager to the extent possible. [from the second Clause 3] The said deposit may be released ... and applied ... to pay any final construction costs, management fee and GST not know to the parties at completion date. [from Clause 4.(a)] ... any changes that are extra money will be charged to the Purchaser(

s) and ... [from Specs, page 23 of 24] Also, the definition of total cost being a formula, as opposed to a fixed number, the very utilization of the PMF mechanism and progress payments based upon actual costs incurred by City Core rather than on percentages of a fixed price, and the obligation on City Core to track costs and report them to Patel regularly, all further demonstrate that this was not a fixed price arrangement but a cost-plus arrangement. [ 111 ] However, one phrase in the PMA is more consistent with a fixed price arrangement than with a cost-plus arrangement.

Clause 9, in the context of setting out the consequences of any default by Patel, states: ... the Project Manager may at its option cease work and treat this contract as repudiated forthwith on the occurrence of such default, and the Project Manager may recover payment for the work already proportionately to the total Contract Price , plus damages, including loss of profit together with interest thereon ... [emphasis added] The phrase “proportionately to the total Contract Price” suggests the parties had agreed on a fixed total price for the project.

The words being capitalized further suggests it is a defined term, yet nowhere in the PMA is the term “Contract Price” defined.

Its existence in the PMA is an isolated aberration; everything else in the PMA implies a cost-plus arrangement around a target price. [ 112 ] I reach the same conclusion in respect of the nature of the contract after applying and weighing the factors listed by the British Columbia Supreme Court in Strait Construction Ltd. v Odar, 2006 BCSC 690 , aff'd 2007 BCCA 437 which states at paras 17 and 18: Much of the case law in this area addresses the situation where the final costs of construction are higher than the builder’s estimate and the owner claims that the contract was a fixed price contract, while the contractor claims the contract was a cost plus contract.

I have reviewed the cases on this issue and have extracted the following factors which have been considered by the courts

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