Hendriks Construction Ltd v Jackie, 2015 ABQB 782

Court of Queen ’ s Bench of Alberta Citation: Hendriks Construction Ltd v Jackie, 2015 ABQB 782 Date: 20151209 Docket: 1003 03810 Registry: Edmonton Between: Hendriks Construction Ltd. Plaintiff - and - John W. Jackie Q.C., David K. Handerek, Jeffrey M. Forester, a Partnership Operating Under the Firm Name and Style Jackie, Handerek & Forester Defendants J H & F Holdings Ltd. Plaintiff by Counterclaim - and – Hendriks Construction Ltd. Defendant by Counterclaim _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Eric F. Macklin

_______________________________________________________ Table of Contents A. Introduction......................................................................................................................... [1] B. The Parties............................................................................................................................ [7] C. The Original Proposal......................................................................................................... [11] D.

The Contract...................................................................................................................... [19] E. Change Order 3.................................................................................................................. [31] F. Progress of Construction.................................................................................................... [35] G. Progress Claims.................................................................................................................. [44] H.

Undisputed Change Orders............................................................................................... [53] 1. Change Order 1....................................................................................................... [54] 2. Change Order 2....................................................................................................... [56] 3. Change Order 3....................................................................................................... [60] 4.

Change Order 4....................................................................................................... [64] 5. Change Order 7....................................................................................................... [65] 6. Change Order 8....................................................................................................... [66] 7. Change Order 9....................................................................................................... [67] I.

The Claim............................................................................................................................ [68] 1. Contract.................................................................................................................. [68] 2. Change Order 5....................................................................................................... [82] 3. Change Order 6....................................................................................................... [96] 4.

Change Orders 10 through 16............................................................................... [107] 5. Change Order 10................................................................................................... [110] 6. Change Order 11................................................................................................... [117] 7. Change Order 12................................................................................................... [124] 8. Change Order 13................................................................................................... [129] 9.

Change Orders 15 and 16..................................................................................... [133] 10. Memorandum of February 8, 2010..................................................................... [136] 11. Other Claims....................................................................................................... [143] 12. Inability to Obtain Bond..................................................................................... [146] 13.

Summary of Claim.............................................................................................. [150] J. The Counterclaim.............................................................................................................. [151] 1. Delay..................................................................................................................... [152] 2. Lost Revenue (Loss of Rent)................................................................................ [163]

3. Canopies................................................................................................................ [191] 4. Deficiencies........................................................................................................... [196] K. Bad Faith......................................................................................................................... [199] L. Assignment by JHF to HoldCo........................................................................................ [216] M.

Conclusion....................................................................................................................... [221] N. Costs and Interest............................................................................................................ [225] A. Introduction [ 1 ] John Jackie, David Handerek and Jeffrey Forester are lawyers practicing in a partnership under the name of Jackie, Handerek and Forester (“JHF”). They own a limited holding company known as JHF Holdings Ltd (“HoldCo”). [ 2 ] Hendriks Construction Ltd. (“HCL”) is a general contracting company.

It acted as the general contractor for the construction of a new office building for JHF. [ 3 ] HCL claims that JHF still owes it over $1,100,000. [ 4 ] JHF denies that it owes any remaining amount to HCL and counterclaims for over $550,000 both on its own behalf and on behalf of HoldCo for damages arising from HCL failing to complete the project on time and for deficiencies in the work performed. [ 5 ] HCL denies that HoldCo is a proper party to the JHF Counterclaim and that any of the work was completed improperly or was not completed on a timely basis. [ 6 ] In HCL’s counterclaim against HoldCo, it repeats its claim against JHF in the event that HoldCo is a proper party to the contract and the within action.

B. The Parties [ 7 ] HCL is a family owned business which was started by Alois (“Al”) Hendriks. His son, Perry Hendriks (“Mr. Hendriks”), is the general manager for HCL. [ 8 ] John Jackie, David Handerek and Jeffrey Forester are lawyers practicing in the JHF partnership. Penni MacKenzie was the officer administrator for JHF authorized to deal with accounting and bank issues relating to the building. [ 9 ] Glen Cameron owns the architectural design company GC Can Ltd. GC Can did the preliminary design for the JHF project and coordinated the mechanical, electrical, structural and architectural work.

It also acted as HCL’s consultant and the “Payment Certifier” under the Contract. [ 10 ] JHF retained Pat Jansen of AD Williams Engineering as its consultant. Specifically, Mr. Jansen was retained for his expertise in construction and was expected to review the contract between HCL and JHF in detail, and to provide advice on costing and budget. He was also asked by JHF to review Progress Claims and invoices from HCL, and to advise as to whether payment was recommended. Mr. Jansen was replaced near the end of the project by Perry Cysouw of AD Williams. C. The Original Proposal [ 11 ] In late 2005, Mr.

Hendriks heard that JHF intended to renovate the building it owned and occupied in Leduc, Alberta. He sent a letter dated November 30, 2005 introducing his firm as a design builder and including resumes and brochure information for JHF to review and consider. [ 12 ] In January 2006, the scope of work involved moving the existing building (“the old building”) onto new foundations in the place of an old rental property, and the construction of a new building on the east side of the property previously occupied by the old building.

The old building was then to be moved back and incorporated on to the west side of the new building. [ 13 ] HCL provided a proposal dated January 25, 2006 (“the Proposal”) outlining the proposed scope of work and a total anticipated cost of $2,091,225.48 plus GST. The Proposal included plans that had been drawn up by GC Can. [ 14 ] Prior to submitting the Proposal of January 25, 2006, Mr. Hendriks had not received any quotes from any sub-trades or subcontractors.

He relied on his many years of experience in the industry to provide an educated guess as to some of the anticipated costs associated with various sub-trades or subcontractors. This was done, he said, for budgetary purposes only. [ 15 ] As stated above, Pat Jansen and the engineering firm of AD Williams were hired by JHF as a consultant to provide advice to JHF. Essentially, Mr. Jansen was to provide a “second pair of eyes” to look at the entire project. He was retained by JHF before a contract with HCL was signed. He sent a letter dated April 3, 2006 to HCL described as a “construction value assessment” for the

“proposed office” [ 16 ] HCL responded to Mr. Jansen’s letter of April 3, 2006 on April 10, 2006. Mr. Jansen then advised HCL by letter dated April 28, 2006 that the owners (JHF) had agreed to proceed with the building. [ 17 ] In handwritten notes dated April 21, 2006, Mr. Jackie acknowledged that any changes to the project would affect the costs. He also noted that there would be unknown off-site levies to tie into city utilities. Further, he noted advice from Mr. Jansen that the interior decorations were not included. [ 18 ] During initial discussions, Mr.

Hendriks advised JHF that the entire project would take approximately 9 months to complete. By April 2006, however, there were discussions about changes to the project and their effect on the future costs of the building. There do not appear, however, to have been any discussions prior to the signing of the contract as to the effect proposed changes would have on the start date of the project or the anticipated length of time it would take to complete. D.

The Contract [ 19 ] On June 23, 2006, the parties entered into a standard construction agreement called a Design-Build Stipulated Price Contract (“the Contract”). The Contract named JHF as the owner and HCL as the design-builder. Next to the name of the owner were handwritten words by Mr. Jackie: “or nominee”. While the lawyers say it was their intention to appoint Holdco as a nominee, there was nothing in writing purportedly doing so, nor did HCL ever accept such an assignment. [ 20 ] Mr. Jackie said that he always made it clear to Perry Hendriks that the owners would not enter into a cost-plus contract.

The agreement had to be a stipulated price contract, though it was the concept of such and not that precise term that was understood by Mr. Jackie. [ 21 ] Mr. Hendriks also understood that the Contract with JHF was a stipulated price contract and not a cost-plus contract. The charges to JHF for work performed were to be those contained in the Contract unless additional costs were agreed upon between the parties and supported by Change Orders. [ 22 ] Various provisions of the Contract will be referred to throughout this judgment, but the following are some of the relevant provisions:

ARTICLE A-1 THE WORK The Design – Builder shall: Perform the work required by the Contract Documents for Jackie, Handerek & Forester New Facility . . . and for which G.C. Can Limited is acting as . . . the “C onsultant ” . . . commence the work by the 4 th day of July in the year 2006 . . . attain Substantial Performance of the Work . . . within 40 weeks after receipt of all approvals from authorities having jurisdiction. . . .

ARTICLE A-2 AGREEMENTS AND AMENDMENTS 2.2 The Contract may be amended only as provided in the Contract Documents . . .

ARTICLE A-3 CONTRACT DOCUMENTS 3.1 The following are the Contract Documents: • Agreement between Owner and Design Builder •

Definitions of the Design Build Stipulated Price Contract • General Conditions of the Design Build Stipulated Price Contract • Owners Statement of Requirements • Construction Documents, after they have been accepted by the Owner • Proposal dated January 25, 2006 from Hendriks Construction Ltd. to Jackie, Handerek & Forester GENERAL CONDITIONS GC 1.1 Contract Documents 1.5.1 Neither party to the Contract shall assign all or any part of the Contract without the written consent of the other . . . GC 2.1 Consultant

2.1.1 The Design-Builder shall engage the consultant under a Contract whose responsibilities include: 2.1.1.11 The Preparation of Change Orders ... 2.1.1.13 The issuance of certificates for payment... 2.1.1.20 Reviewing any defects or deficiencies in the Work... GC 2.2 Owners Representative 2.2.1 The Owner shall designate a representative authorized to act on the Owner’s behalf. 2.2.2 . . . The Design-Builder may rely upon any written instructions or directions provided by the Owner’s representative. GC 3.1 Control of the Work 3.1.1 The Design-Builder shall have total control of the Work . . .

GC 3.8 Labour and Products 3.8.1 The Design-Builder shall provide and pay for . . . heat, light, power . . . necessary for the performance of the Work . . .

GC 4.1 Cash Allowances 4.1.1 The Contract Price includes cash allowances stated in the Contract Documents, which allowances shall be expended as the Owner directs. 4.1.2 Cash allowances cover the net cost to the Design-Builder of . . . expenses incurred in performing the Work stipulated under the cash allowance . . . 4.1.4 Where costs under a cash allowance exceed the amount of the allowance, the Design-Builder shall be compensated for any excess incurred and substantiated plus an amount for overhead and profit. 4.1.5 The Contract Price shall be adjusted by Change Order to provide for any difference between the actual cost and each cash allowance. 4.1.6 The value of the Work performed under a cash allowance is eligible to be included in progress payments.

GC 5.3 Progress Payment 5.3.2 The Owner shall make payment to the Design-Builder on account . . . no later than 15 days after the receipt of a certificate for payment issued by the Payment Certifier . . . GC 6.1 Changes 6.1.1 The owner . . . may make changes in the work consisting of additions, deletions or other revisions . . . by Change Order . . . 6.1.2. The Design-Builder shall not perform a change in the Work without a Change Order or a Change Directive . . . 6.1.3 If change in the Work results in a net increase in the Contract Price, an allowance for overhead and profit shall be included.

GC 6.2 Change Order 6.2.2 When the Owner and Design-Builder agree to the amendment to the Owner’s Statement of Requirements . . . such agreement shall be effective immediately and shall be recorded in a Change Order and signed by the Owner and Design-Builder. The value of the Work performed as the result of a Change Order shall be included in applications for progress payment.

GC 6.5 Delays 6.5.4 No extension shall be made for delay unless notice in writing of claim is given promptly to the Owner and in no event later than 10 Working Days after the commencement of delay . . . [ 23 ] As previously noted, GC Can acted as the consultant and the payment certifier under the Contract. [ 24 ] Mr. Jackie was the owners’ representative as stipulated in Clause 2.2.1 of the contract. He took on the major responsibilities for the owners and dealt with the bank that was financing the construction. Mr.

Forester took the lead on the cost aspects of the Contract. [ 25 ] JHF never provided a statement of requirements. Mr. Jackie said that he was never asked to do so. No assignment of the owner’s obligations under the contract was ever submitted to HCL, nor was HCL’s consent ever sought for an assignment by JHF. [ 26 ] The information contained in the Proposal of January 25, 2006 was used to arrive at the anticipated contract price. The contract price is stipulated in

Article A-4 as $2,216,698.50 including GST. [ 27 ] Clause 10.2.2 of the Contract provided that the Design-Builder (HCL) would obtain the necessary permits. However, Mr. Hendriks testified that throughout his dealings with Mr. Jackie, whom he knew to be a lawyer and the former mayor of the City of

Leduc, he was told that Mr. Jackie would obtain those permits. [ 28 ] According to Mr. Jackie, Perry Hendriks said that he would take care of the applications for permits. He believed that Mr. Hendriks prepared the requisite documents and had the owners sign them for submission to the City. Mr.

Jackie also said that HCL was to confirm any land zoning issues and coordinate a consolidation process for the four lots on which the property was located. [ 29 ] Al Hendriks explained the term “PC Sum” as a Prime Cost Sum which allowed an amount to be included in the contract when the exact cost was not known at the time of the execution of the contract. Essentially, it is another term for a “cash allowance”. This phrase is not found in the Contract. The only “PC Sum” specified in the Proposal as an allowance related to landscaping in the sum of $15,000. [ 30 ] Mr. Jackie signed the contract on Mr.

Jansen’s recommendation and on behalf of, and with the authority of, his law partners, Dave Handerek and Jeff Forester. E. Change Order 3 [ 31 ] The original design changed markedly from the old building to be incorporated onto a new building to the east (“Phase I”), to a completely new facility with a new west wing (“Phase II”) attached to Phase I. A letter dated November 28, 2006 provided by HCL to JHF outlined the work to be done.

While the individual costs were not specified in that letter, the total additional cost for Phase II, over and above the original cost for incorporating the old building, was anticipated at $458,160. [ 32 ] Negotiations between HCL and JHF resulted in an agreed additional net cost of $404,632.30 which took into account the actual cost of Phase II, less the original budgeted amount of around $283,000. The change is reflected in Change Order 3 dated March 2, 2007 signed by both parties.

The Change Order reads, in part: DESCRIPTON OF CHANGE: Existing structure deletion Original quote of January 26, 2006 – credit (282,789.70) Revised quote of December 14, 2006 – add 687,422.00 NET CHANGE 404,632.30 [ 33 ] A letter dated December 14, 2006 (“the PC Sum letter”) from HCL to JHF is the revised quote referred to in the Change Order. It provided a breakdown of the costs for the changes and referred to various items as “PC Sums”. The lawyers testified that they never knew what the term “PC Sum” meant, but took no steps to determine what it meant by asking either Mr.

Hendriks or their own consultant, Pat Jansen. Nevertheless, and supposedly without that knowledge, Mr. Jackie executed the Change Order on behalf of the JHF lawyers. [ 34 ] The term “PC Sum” had clearly been used on April 10, 2006 (the construction value assessment by A.D. Williams), December 14, 2006 (the “PC Sum letter”), and March 17, 2008 (HCL letter to JHF). However, Mr. Jackie, Mr. Handerek and Mr. Forester all testified that they had never heard the term before a meeting with Mr. Hendriks on September 4, 2008. F.

Progress of Construction [ 35 ] In August 2006, an old rental house located on the west side of the site was demolished. In its place, a new temporary foundation was installed. On October 13, 2006, the old building was moved to the new foundation. It was then occupied by the lawyers pending completion of Phase I when the lawyers were to move into the new building. [ 36 ] Construction could not begin on the new building, however, until a development permit and a building permit were obtained. The application for the development permit was signed by Mr. Jackie and was submitted on July 7, 2006.

The permit was issued by the City of Leduc on July 25, 2006. One condition of the development permit was for a building permit to be issued prior to the start of construction. Nevertheless, construction did begin and no building permit was actually issued until March 5, 2008. [ 37 ] JHF argued that construction began with excavation and backfill work during the period ending October 31, 2006. Mr. Hendriks testified, however, that this was work done simply as part of the move of the old building and was not actual excavation or construction work for the new building. [ 38 ] Mr.

Jackie testified that at a meeting on November 2, 2006, Mr. Hendriks advised them that construction would start in about two weeks’ time and would then take 40 weeks to complete. Mr. Hendriks provided the completed drawings together with a critical path document (that is, a proposed construction schedule) on November 15, 2006. Mr. Jackie was not concerned about the proposed time frame. Mr. Hendriks testified that the actual construction

schedule could only be triggered once the building permit was provided. On November 17, 2006, HCL provided the first cash flow schedule. [ 39 ] Mr. Hendriks testified that the actual construction began in February 2007. This is supported by an entry for February 23, 2007 in Mr. Handerek’s diary that “construction on the new office commenced (drilled and poured pilings)”. [ 40 ] Concern was expressed by JHF at a meeting on April 26, 2007 as to whether or not the project would be completed on time.

In a meeting on June 14, 2007, Mr. Hendriks provided an update on timing and indicated that the delivery of the steel for the project would be a problem. While it was guaranteed to be delivered no later than July 16, 2007, it was not delivered until August 13, 2007. Very little work occurred on the site during the month of July pending delivery of the steel. [ 41 ] The decision to add a new west wing (Phase II) instead of incorporating the old building necessitated revised drawings by Mr. Cameron. These were completed in September 2007 and stamped by the architect.

The old building was sold to the Town of Beaumont for $110,000 and was moved to the Town around January 15, 2008. [ 42 ] Phase I was sufficiently complete in November 2007 such that JHF was able to vacate the old building, and it moved into the second floor on November 23 or 24, 2007. [ 43 ] The building permit was issued by the City of Leduc on March 5, 2008. All necessary permits or approvals had then been obtained. Phase II and the exterior of the entire project were substantially completed by October 31, 2008.

A Certificate of Substantial Performance of Prime Contract (“Certificate of Substantial Completion”) dated October 31, 2008, was issued by HCL to JHF. G. Progress Claims [ 44 ]

Part 5 of the Contract outlines the procedure for submitting progress payments. Pursuant to Clause 5.2.2, HCL was required to submit to JHF a

schedule of values for the different phases of the work to be completed, with the aggregate amount being the total value of the Contract. [ 45 ] Clause 5.2.3 provides that evidence of the values of the work must be supported by such evidence as is accepted by JHF. Clause 5.2.4 provides that the applications for payment shall be dated the last day of the agreed monthly payment period. They were to be issued to the owner and to a “ Payment Certifier ”. The amount claimed was to be for the value, proportionate to the amount of the contract, of the work performed and products delivered to that date.

The Payment Certifier under the Contract was Glen Cameron of GC Can. Pat Jansen (and later, Perry Cysouw) of AD Williams acted in a similar capacity for JHF, though he was not named in the Contract. [ 46 ] In March 2007, Mr. Hendriks prepared a Progress Claim Set-up form, which included the costs for various items contained in the initial proposal as well as various costs relating to anticipated changes in design and Change Orders that had been signed.

By then, the plans had changed such that the existing facility (the old building) would no longer be incorporated into the new facility. [ 47 ] On receipt of a Progress Claim, Mr. Cameron, as “payment certifier”, was to review statutory declarations to ensure that everybody was paid, review Change Orders, determine the percentage of work done on the site and - if everything was in order - issue a Certificate of Payment. In considering the percentage of work, he was to determine whether it reflected the scope of work to that point in time. [ 48 ] Mr. Cameron did not follow this procedure. When Mr.

Cameron received the progress claims referring to Change Orders, he did not necessarily receive or request copies of Change Orders. He simply assumed that an agreement was in place to add the Change Order amounts to the Contract as they are referred to in the Progress Claims themselves. Mr. Cameron also never required Statutory Declarations from HCL confirming payments made to sub-trades. He simply accepted the statements prepared by HCL and assumed the requisite payments had been made. [ 49 ] Mr. Cameron confirmed that the amount claimed on each Progress Claim for “general conditions” was in the sum of $33,082.

He simply accepted that number without question. This amount reflected payments to HCL for its role as general contractor. [ 50 ] Copies of Certificates of Payment were provided to Mr. Jackie throughout the course of the project. He understood that by the time he received them, both Mr. Cameron and Mr. Jansen had seen and approved them, and payment would be requested. Mr. Jansen never communicated to Mr. Jackie any issue with any of the Progress Claims or Certificates of Payment signed by Mr. Cameron. When Mr. Jansen left AD Williams, Mr. Cysouw took over Mr. Jansen’s function. Mr. Cysouw also never advised Mr.

Jackie at any time that he took issue with any of the Progress Claims or Certificates of Payment received from Mr. Cameron. [ 51 ] When JHF received Certificates of Payment from Mr. Cameron, Penni MacKenzie referred them on behalf of JHF to its bank for advance payments. However, and before actual payment, Ms. MacKenzie sent the information to either Mr. Jansen or Mr.

Cysouw at AD Williams for advice on payment of the Progress Claims. [ 52 ] Each of the letters from AD Williams reviewing the various Progress Claims stated that their recommendations for payment by JHF were based on observations made during periodic site visits and the breakdown received from HCL. Prior to October 2008, JHF did not raise any issues with HCL regarding any invoice. Each was received, reviewed and ultimately paid in full. No written notice was ever provided to HCL, under the terms of the Contract, regarding any dispute. H.

Undisputed Change Orders [ 53 ] The following Change Orders, prepared in relation to various charges, are not in dispute. 1. Change Order 1 [ 54 ] Change Order 1, dated November 1, 2006, related to the provision of an Exterior Insulation and Finishing System at an additional cost of $149,540. It is an insulated water resistant finishing designed to provide a drainage system to help prevent potential flooding.

[ 55 ] Change Order 1 was signed by Mr. Jackie and the amount was paid. It is not in dispute. 2. Change Order 2 [ 56 ] Change Order 2 dated November 1, 2006 related to a basement addition of approximately 1,700 square feet, not including interior finishes, at a cost of $150,000. [ 57 ] Initially, the intention had been to simply create a crawl space and not a basement. The decision to construct a full basement was made to address potential water intrusion/flooding concerns. [ 58 ] Mr.

Hendriks testified that as a result of the change to the basement, the matrix and the structure of the entire building had to be changed. The foundation was changed from a spread footing to a pile footing. [ 59 ] Change Order 2 was signed by Mr. Jackie and the amount was paid. It is not in dispute. 3.

Change Order 3 [ 60 ] Change Order 3 dated March 2, 2007, discussed above, related to the deletion of the old building from the new facility and the building of a new west wing (Phase II) at an additional cost of $404,632.30. [ 61 ] This plan called for JHF to move into the second floor of Phase I once it was complete. The old building was then to be moved (ultimately it was sold and moved to the Town of Beaumont) and Phase II would be built.

The decision to do this was made so as to replace the existing combustible wood frame structure of the old building with a new non-combustible structure. [ 62 ] By letter dated December 14, 2006 to Mr. Handerek (the PC Sum letter), HCL provided all of the costs relating to Phase II. It included a number of items referred to as “PC Sums”, or cash allowances, as discussed above. [ 63 ] Change Order 3 was signed by Mr. Jackie and the amount paid. However, there remains a dispute as to whether HCL is entitled to claim amounts in excess of the PC Sums set out in the PC Sum letter. 4.

Change Order 4 [ 64 ] Change Order 4, dated August 30, 2007, related to extra charges for mechanical work at an additional cost of $3,201. It related specifically to air conditioning problems identified by Mr. Jackie. This Change Order was not signed by Mr. Jackie but the amount was paid. It is not in dispute. 5. Change Order 7 [ 65 ] Change Order 7 dated October 15, 2008 called for payment of an additional $62,500 relating to a change to the third floor common area of the building. Change Order 7 was not signed by Mr. Jackie or anyone at JHF.

With the exception of the holdback sum (including GST) of $5,250, the amount was paid. 6. Change Order 8 [ 66 ] Change Order 8, dated October 28, 2008, related to two hand dryers at an additional cost of $2,070.60. Change Order 8 was signed by Mr. Jackie and the amount paid. It is not in dispute. 7. Change Order 9 [ 67 ] Change Order 9 dated November 7, 2008 provides a credit to JHF for an allowance of $15,000 for landscaping which was in the original contract. Change Order 9 was signed by Mr. Jackie. I. The Claim 1.

Contract [ 68 ] The JHF lawyers now argue that they should not be bound by the wording in the quote (the PC Sum letter), even though it was incorporated by reference into the Change Order they agreed upon. [ 69 ] JHF asks this Court to accept the lawyers’ evidence that they expected the major change in plans, agreed upon by them and reflected by Change Order 3, to be on the same terms as the original Stipulated Price Contract. However, it acknowledges that the anticipated work involved, and the negotiated price for doing it, is reflected in the PC Sum letter which is specifically referenced in Change Order 3.

It argues that it should not be bound by the term “PC Sum” because the lawyers did not know what it meant even though it was incorporated by reference into Change Order 3. [ 70 ] In Sattva Capital Corp v Creston Moly Corp , 2014 SCC 53 , [2014] 2 SCR 633, the Supreme Court of Canada held that a question of contract

interpretation is a question of mixed fact and law. Regardless of whether or not there is an ambiguity, courts are to

apply the principles of contractual

interpretation to the words of the written contract, considered in light of the factual matrix of the contract. The Court explained that the parol evidence rule does not preclude consideration of the factual matrix. It precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing. Therefore, it precludes, among other things, evidence of the subjective intentions of the parties. [ 71 ] In Bhasin v Hrynew , 2014 SCC 71 , [2014] 3 SCR 494, the Supreme Court confirmed that considerations of good faith inform the process of contractual

interpretation. [ 72 ] It bears noting again that the term “PC Sum” had clearly been used on April 10, 2006 (the construction value assessment by AD Williams), December 14, 2006 (the “PC Sum letter”), and March 17, 2008 (HCL letter to JHF) though Mr. Jackie, Mr. Handerek and Mr. Forester all testified that they had never heard that term before a meeting with Mr. Hendriks on September 4, 2008. [ 73 ] The original Contract was a Stipulated Price Contract. All of the work contemplated by the Contract and the costs associated with that work, subject to change orders relating to that work, are fixed.

However, the costs referred to as PC Sums in the PC Sum letter are not subject to fixed prices. These costs which now form part of the Contract by the incorporation of the PC Sum letter in Change Order 3 are subject to a cost plus agreement. They are subject to the cash allowances provision in General Condition 4.1 of the Contract. JHF agreed to this when it signed Change Order 3 incorporating the PC Sum letter and the lawyers cannot now be heard to say that they did not know or understand what they had agreed upon. [ 74 ] As a result, the contract between HCL and JHF was amended as at March 2, 2007 when Mr.

Jackie signed Change Order 3 on behalf of JHF. All of the work contemplated by the original Contract remained subject to stipulated costs, as varied by Change Orders.

The work contemplated by Change Order 3 and specified in the PC Sum letter as a PC Sum, was subject to a cost plus arrangement between HCL and JHF. [ 75 ] Further, if any of the work or materials requested by JHF relating to Phase II (to which Change Order 3 relates) necessitated an otherwise unanticipated change to work or materials in Phase I so as to ensure consistency between Phases, thereby increasing the costs of that portion of Phase I, then any increase to those costs in Phase I is also a “PC Sum”. [ 76 ] The net effect of Changes Orders 1 to 4, 7, 8, and 9 was an increase in the contract price of $756,943.90, bringing the total contract price to $2,848,168.90.

Change Orders 5, 6, the holdback sum on 7 and Change Orders 10 to 16 remain in dispute. JHF says that Change Orders 5 and 6 did not comply with the change order procedure set out in the contract and were issued two weeks prior to substantial completion of Phase II on October 31, 2008 (about 11 months after completion of Phase I). [ 77 ] As discussed below, Change Orders 5 and 6 relate to extra charges for masonry and floor coverings. The lawyers at JHF were advised that there would be additional charges for these items at a meeting on September 4, 2008. This meeting is described by Mr.

Jackie in his notes as a “rough meeting”. This term was meant by Mr. Jackie to suggest some conflict occurred at the meeting between the JHF lawyers and Mr. Hendriks. Mr. Jackie and the other lawyers testified that when they heard from Mr. Hendriks that there would be additional charges for these items, they were both surprised and angry. According to the JHF lawyers, Mr. Hendriks was advised at the meeting that there had better be no additional charges as their agreement was a fixed price contract. Curiously, particularly given that Mr.

Jackie took comprehensive notes at each meeting, his notes of the meeting contain no reference to any dispute at that time nor any indication that any of the JHF lawyers verbalized a concern about additional charges to Mr. Hendriks. [ 78 ] Mr. Jackie signed off on Change Orders 1, 2, 3 and 9. JHF paid for Change Order 4 though Mr. Jackie never did sign off on it. Change Order 4 was sent to him after the work described in the order was completed.

Change Order 7 was never signed either though JHF paid the full amount less the holdback. [ 79 ] None of Change Orders 1, 2, 3, 4, 7 and 8 was issued by GC Can, the HCL representative. Some were issued after the work was done and two were paid without ever being signed by the owners. Not one of these was issued in accordance with the strict terms of the Contract, yet each was paid by JHF. JHF takes the position, however, that Change Orders 5, 6 and 10 to 16 do not have to be paid because they were not issued in accordance with the Contract. I do not accept JHF’s position.

If they wished for the terms of the Contract to be strictly adhered to, then both parties were obliged to comply and each could then hold the other one to strict compliance. Neither did so. The JHF lawyers cannot pick and choose which terms it will require HCL and themselves to comply with strictly and which need not be complied with strictly, or at all. [ 80 ] By way of example, the Contract provides in Clause 5.3.2 that payment on Progress Claims was to be made within 15 days of receipt by JHF of the Certificate of Payment from the payment certifier (Mr. Cameron).

In fact, there were only two occasions when JHF paid a Progress Claim within the requisite 15 day period. On 21 separate occasions, they did not pay the progress claim in accordance within that 15 day requirement. In some cases, JHF indicated that it waited for additional certification from its own consultant, Mr. Jansen or Mr. Cysouw, though neither is named in the Contract, nor is AD Williams.

At no time did JHF ever advise HCL that delays in payment were because they were waiting for additional certification, nor did it offer to pay a penalty for late payment. [ 81 ] In addition to the balance owing by JHF on Change Order 7, HCL claims that the following amounts are owing to it. 2. Change Order 5 [ 82 ] Change Order 5, dated October 15, 2008, relates to the supply and installation of stone masonry “in excess of the allowance in the base contract”. It called for the additional payment of $33,907.50. According to Mr. Hendriks, this was a PC Sum. [ 83 ] Change Order 5 was never endorsed or signed by Mr.

Jackie. He testified that JHF was first advised that there would be an upcharge for this item at the meeting of September 4, 2008. [ 84 ] The original plans called for a brick veneer at a quoted price of $148,592.50. In October 2007, JHF decided to use a manufactured stone known as cultured stone which everyone understood would result in an additional cost to the original quoted figure.

There was some delay in confirming the type of stone and color to be used but JFH had chosen a blended cultured stone by July 4, 2008. There were two types of stone selected which were to be combined into a pattern known as an “Ashler pattern”, and which required a much greater amount of work. [ 85 ] On August 14, 2008, a sample of the Ashler pattern design was prepared for JHF to review and approve. No price could be obtained until final approval by JHF.

It was then necessary to obtain a quote from the installers, Browne & Sons Plastering (“Browne”), who, in turn, required a quote from the supplier. [ 86 ] The first quote was provided on September 3, 2008. JHF received it on September 4, 2008. JHF was told at the meeting on September 4 that there would be an upcharge of $34,000. The quote from Browne was $182,500. JHF was unhappy with the quote as it was greater than the amount they were originally told the masonry would cost. [ 87 ] JHF gave instructions for HCL to proceed. The cultured stone was installed. In his notes of the meeting of September 4, 2008, Mr.

Jackie confirms being advised of the upcharge of $34,000 for the “upgrade to stonework from masonry”. There is nothing in his notes suggesting that JHF opposed the charge. The installation continued into October 2008. [ 88 ] At no time did JHF advise Hendriks that it did not wish to proceed with the authorized changes or to stop doing any of the work until the issue over cost was resolved. Indeed, by email dated September 10, 2008, Mr. Forester of JHF advised Hendriks that “the exterior is looking great”. The installation continued and was 99% complete by October 2008.

The stone is now a distinct feature of the building and is profiled on the JHF website. [ 89 ] Mr. Jackie and JHF now dispute the claim by HCL for payment. [ 90 ] Even after being told there would be an upcharge for the masonry work, JHF took no steps to halt its installation or to notify HCL of any concern over the price. The original Contract provided only for the installation of a veneer in relation to Phase I. The masonry was selected by JHF, it was unique and it was clearly a cost not included in the original budget or Contract. [ 91 ] The cost reflected in Change Order 5 is part of Progress Claim 23.

A Certificate of Payment for this claim was issued by GC Can. Payment was also recommended by Mr. Cysouw of AD Williams who stated in his approval letter of December 11, 2008 to JHF: . . . We are not aware of any discrepancies between the Contractor’s claim and our

interpretation of the work to date, and therefore find it fair and indicative of progress and materials on site . . . The above is based on observations made during my site visit and the breakdown received from the contractor, and not a detailed and exhaustive examination of quantities of shipment and materials installed and labour expended during the work. We have reviewed the above documents, find them to be in order, and recommend that payment of the invoice should be made directly to the Contractor.

We trust you will find this to be acceptable; however, please contact our office at your earliest convenience if you have any questions or comments in this regard. [ 92 ] JHF argues that no reliance can be placed on any Certificate of Payment because the consultant, Mr. Cameron, failed to comply with his obligations in obtaining Statutory Declarations confirming the completed work, and did not request evidence from HCL with respect to the Progress Claims themselves. That is, JHF says that Mr.

Cameron simply rubber stamped the Certificates of Payment as prepared and presented by HCL. [ 93 ] However, clearly, and without regard to whether Mr. Cameron performed the tasks expected of him by JHF, its own consultant did perform the tasks JHF expected. Ultimately, Mr. Cysouw recommended to JHF that it pay the Progress Claim, which included the amounts claimed under Change Orders 5 and 6. Further, there was no evidence tendered by JHF indicating that it went back to its own consultant, Mr.

Cysouw, with any questions or comments, as he suggested it could do if they found his recommendation unacceptable. [ 94 ] Accordingly, JHF showed both an intention to rely, and actual reliance, on its own consultant regardless of what they expected Mr. Cameron to do. There is no suggestion that its consultant’s advice was predicated on Mr. Cameron’s certification. Indeed, this procedure was followed from the very beginning of the Contract and was followed throughout. Mr. Cameron performed the same function in the same way, and the consultant for JHF (whether Mr. Jansen or Mr. Cysouw) did the same.

JHF knew from the start that Mr. Cameron was not performing his functions as anticipated in the Contract, yet did not care. It relied solely on its own consultant. [ 95 ] This claim is allowed in the sum of $33,907.50. 3. Change Order 6 [ 96 ] Change Order 6 dated October 15, 2008 relates to an additional claim of $36,496.50 for the supply and installation of floor coverings “in excess of the original allowance”. [ 97 ] According to Mr. Hendriks, this was a PC Sum. Change Order 6 was never endorsed or signed by Mr. Jackie. Mr. Hendriks advised JHF on September 4 that there would be an upcharge for this amount.

JHF dispute this upcharge. The amount reflects the total charge from Builders Flooring Center (“BFC”) of $69,719.00 less the original contract amount of $33,222.50 which includes a cost of $10,946.50 for Phase II. [ 98 ] When Change Order 3 was signed on March 2, 2007 deleting the old building, the owners had not yet attended BFC to choose

flooring. The term “PC Sum” was used for floor covering in the PC Sum letter. [ 99 ] HCL had provided a quote for flooring to which Mr. Jansen had agreed. Once it was decided to replace the old building with new construction on the west side, additional flooring would be needed and the flooring cost on the initial quote would have to change.

JHF spent considerable time determining what type of flooring to install in the different areas of its offices and, ultimately, the changes and selections by JHF resulted in a net increased cost of $36,496.50. [ 100 ] On September 24, 2007, the partners of JHF attended at the BFC premises with Perry Hendriks to choose flooring. Ultimately, they chose the type of carpet and tile they wished installed and Mr.

Bizon of BFC recalls saying something to the effect that the choices made by JHF would put the project “way over budget”. [ 101 ] The JHF choices of tile and carpet were formally communicated to HCL on October 4, 2007. According to JHF, Perry Hendriks never advised of any upcharges at that time but merely confirmed that some of the choices were at the upper end and that he “would make it work”, which meant to JHF that it would be done within the budget earlier provided. Mr.

Hendriks recalled no discussions with the owners about the increase in cost for the flooring and does not recall ever telling them that he “would make it work”. While JHF made its choices, the partners say they did not formally accept the products at that time as a final price had yet to be provided. [ 102 ] The flooring chosen by JHF also necessitated a change in the expected cost for the flooring in Phase I.

While JHF could have insisted that the quality of flooring and the cost be maintained at the level reflected by the original quote for Phase I, JHF instead insisted on a higher grade and quality of flooring for both Phases. [ 103 ] I am satisfied from the evidence that JHF knew that its selections of higher quality floor coverings, particularly the tile, would increase the price. Mr. Bizon told the partners so and, in his evidence, Mr. Forester acknowledged receiving that indication. If Mr. Hendriks did use the phrase “make it work” it is unclear precisely what he meant and to what it may have applied.

If JHF had a concern, it should have specifically asked for the precise cost and insisted on written quotes before finalizing their selection. It should not have simply allowed the chosen flooring to be installed and, once done, complained about the cost. [ 104 ] This cost is set out in Progress Claim 21R dated October 15, 2008, for which a Certificate of Payment was issued by GC Can. Further, the same letter by Mr. Cysouw referred to above (see para 91) also refers to Progress Claim 21 which includes this claim relating to Change Order 6. That is, it recommends this amount for payment as well.

I would also note that Change Order 6 is referred to in Progress Claim 23 as having previously been claimed and, in my view, the comments of Mr. Cysouw in his letter of December 11, 2008 apply equally to Charge Order 6 as well as Charge Order 5. [ 105 ] As outlined above in paragraphs 92 to 94, JHF says that no reliance can be placed on the Certificates of Payment because Mr. Cameron failed to perform the tasks expected of him. However, and for the same reasons, I find the JHF is not entitled to rely on any apparent failure by Mr.

Cameron given that JHF always intended to, and did, rely upon advice from its own consultant in determining whether payment should be made. [ 106 ] This claim is allowed in the sum of $36,496.50. 4. Change Orders 10 through 16 [ 107 ] On March 11, 2009, Mr. Hendriks delivered to JHF Change Orders 10 through 16. He testified that he delivered them after substantial completion of the project (October 31, 2008) in accordance with his agreement to do so, which he confirmed to JHF in a letter dated March 17, 2008. Importantly, in his notes of a meeting on September 4, 2008, Mr. Jackie wrote that Mr.

Hendriks “will put together budget for extras, final #s to be provided at end of job”. [ 108 ] None of Change Orders 10 to 16 was signed by Mr. Jackie or anyone else representing JHF, nor had anyone at JHF seen them prior to March 11, 2009. [ 109 ] Change Order 10 relates to utilities and is not referred to as a PC Sum. Change Orders 11 through 14, according to Mr. Hendriks, all relate to PC Sums. 5. Change Order 10 [ 110 ] Change Order 10 relates to utilities costs of $89,101.02 . The Contract provides in

Article 3.8.1 that the Designer-Builder (HCL) would provide and pay for “heat, light, power, transportation, and other facilities and services” necessary for the performance of the work. [ 111 ] Mr. Hendriks referred to a fax sent by him to Mr. Handerek dated April 10, 2006 which included a “construction value assessment” and included Al Hendriks’ comment that “off-site costs, utility connection costs, utility charges, and utility construction costs [would all be paid] by owner.”.

This, however, did not find its way into the Contract itself. [ 112 ] Change Order 10 is a claim for temporary utilities required during the construction. Mr. Jackie testified that JHF had paid the utilities for the old building while on the temporary foundation and also paid utilities once JHF moved into the second floor. When they moved in, floors one and three were still under construction.

The heat was provided by an external unit (Genset) obtained by HCL which heated the building temporarily. [ 113 ] The claim for the utility costs begins as at November 22, 2007, the day before the JHF law firm moved in. [ 114 ] I am satisfied on the evidence that HCL did provide and pay for the utility costs between November 22, 2007 and February 2008. I am also satisfied that, in accordance with the Contract, HCL was obliged to do so where the utilities were necessary for the

performance of the work. Construction began on Phase II in February 2008. It is clear from the Progress Claims that work was continuing on Phase I to that point in time, though the second floor had been turned over to, and occupied by, JHF on November 23, 2007. [ 115 ] I do not accept the evidence of JHF that it paid the utilities on the second floor after it moved in. No documentation was ever produced by JHF to substantiate its claim that JHF paid them. HCL was not obliged to pay the utilities for the second floor of Phase I after JHF began operating its law firm out of those premises.

I find that HCL paid all of the utility costs for Phase I during that period of time though they were only obliged to pay the utility costs for the continuing work on the first and third floors. Without any other method of calculating the precise costs incurred by HCL in paying for the utilities on the second floor and recognizing that this was an obligation of JHF and not HCL, I will simply consider those costs to be one third of the total costs for all three floors. [ 116 ] HCL claimed a 10% overhead and a 10% fee on the utility costs claim.

However, this is not a claim arising out of any change to the Contract. The total utility costs were in the sum of $73,637.21 and HCL is entitled to one third of that amount, being $24,545.74. 6. Change Order 11 [ 117 ] Change Order 11 relates to “Drywall/T-Bar”. It adds the sum of $103,927.30 to the Contract. [ 118 ] The first three Progress Claims set out the expected cost of drywall/T-bar at $135,948.50. These three Progress Claims were all dated prior to the date of the PC Sum letter (December 14, 2006) and set out the expected costs of the drywall for Phase I.

The PC Sum letter set out a cost for drywall for Phase II at $73,912.80 and specified it as a PC Sum. [ 119 ] The total cost of drywalling for Phase I, as set out in the Progress Claims before work began on Phase II, was $201,871.30.

Accordingly, and assuming the initial drywalling costs set out in Progress Claims 1 to 3 reflected the anticipated cost for Phase I only and were part of the Stipulated Price Contract, then the actual cost of drywall for Phase I was $65,922.80 over budget (the actual cost of $201,871.30 less the original budget of $135,948.50). [ 120 ] The total cost incurred by HCL for drywall and T-bar for both Phases was in the sum of $287,761.63. The actual cost for the drywall and T-bar in Phase I was $201,871.30 so the cost incurred for drywall and T-bar in Phase II was in the sum of $85,890.33.

The amount set out as a PC Sum for drywall in the PC Sum letter is $73,912.80. As this was a PC Sum, HCL is entitled to claim the difference of $11,977.53. [ 121 ] However, the Progress Claims indicate the total sum of $213,356.95 has been paid for drywall though JHF was only obliged to pay the sum of $209,861.30 (the amount budgeted for Phase 1 at $135,948.50 plus the amount budgeted for Phase II in the sum of $73,912.80). As a result, the sum of $3,495.65 has already been paid towards the additional costs of drywall in Phase II.

The balance owing for the drywall in Phase II is, therefore, the sum of $8,481.88. [ 122 ] I am also satisfied that the change in ceiling tiles requested by JHF necessitated a change in the T-bar and resulted in a change of price. Mr. Jackie acknowledged the upgrade in his letter to HCL of December 24, 2008. The PC Sum letter refers to an anticipated cost of T-bar at $9,600. I am satisfied that changing the ceiling tile sizes from a 4 x 2 to a 2 x 2 increased the cost for the ceiling tiles and I allow a claim of $4,800 in that respect, as the actual cost is not broken out in the Change Order.

Again, the cost of T-bar is referred to as a PC Sum in the PC Sum letter. [ 123 ] The additional amount reflects only a change in cost from the Contract and not a change in work or material entitling HCL to claim an overhead cost and a fee. Accordingly, the total claim allowed for drywall and T-bar is in the sum of $13,281.88. 7. Change Order 12 [ 124 ] Change Order 12 relates to millwork. It specifies a subtotal of actual costs of $76,639.83 and, deducting the budget allowance of $37,703.90, leaves a claim of $38,935.93 plus overhead and fee.

The initial proposal was $37,703.90 and included the anticipated Phase I costs of $20,600 and Phase II costs of $17,103.90. The latter figure is set out in the PC Sum letter and is referred to as a PC Sum. [ 125 ] I am satisfied that JHF knew that the millwork costs for Phase II were set out in the PC Sum letter at $17,103.90.

However, I am not satisfied that HCL is entitled to claim the entire amount as it appears from the various Progress Claims, particularly Progress Claim 13, that the amount spent for Phase I was in excess of the amount initially anticipated and that amount was not an allowance but, rather, a fixed cost. [ 126 ] While JHF argues that the millwork on the second floor Phase II was modest, I accept the evidence of HCL that it was more substantial and included finishing carpentry work and veneers in the JHF offices on the second floor. Mr.

Hendriks testified that the final cost for the millwork could not be determined until the second floor space in Phase II had been completed. I am satisfied from the evidence that the cost of millwork for Phase II exceeded the amount set out in the PC Sum letter, and HCL is entitled to claim a portion of the additional costs. [ 127 ] It appears that the costs for millwork in Phase I actually totalled $31,500 out of the $37,703.90 initially budgeted, leaving only $6,203.90 available to complete the millwork in Phase II.

JHF is entitled to credit for the full amount budgeted for Phase II in the sum of $17,103.90 leaving a claim of $21,832.03. [ 128 ] The change here reflects a true change to the Contract and budget. Accordingly, HCL is entitled to claim overhead costs and fees which bring the total allowed for millwork to $26,198.43. 8. Change Order 13

[ 129 ] Change Order 13 for painting relates to costs exceeding the original proposal by about $4,100 plus overhead and fee. [ 130 ] Painting is listed as a PC Sum in the PC Sum letter at an anticipated cost of $6,567.90. [ 131 ] The original budget allowance for painting was in the sum of $20,563.90 and the total costs were in the sum of $24,660. [ 132 ] The difficulty with this claim is that the evidence is not clear as to how much of the total painting costs relate to Phase II and the amounts set out in the PC Sum letter.

As indicated, that amount is set out as $6,567.90 and while it is shown to be a “PC Sum”, the evidence is insufficient to conclude that the additional amount now being claimed actually relates to Phase II rather than simply being an additional cost to Phase I, which cost was not set out as a “PC Sum”. This claim, therefore, is denied. 9.

Change Orders 15 and 16 [ 133 ] Change Order 15 relates to the installation of a frost box at a cost of $7,332.60 (including overhead and fee) and Change Order 16 refers to actual work that Hendriks performed with respect to the installation of the frost box at a cost of $3,500. [ 134 ] Both claims relate to the tie in of a storm sewer from the parking lot to an existing catch basin. The work was necessary and conducted off of the project lands at the request of JHF. Mr.

Jackie approved these additional services by email dated October 8, 2008, and the work was completed prior to the substantial completion date of October 31, 2008. [ 135 ] While Change Orders 15 and 16 indicate that these sums would be deducted from the overall amount, this was an accounting error. Clearly, this work was done and costs incurred by HCL. They were added and properly so. These are proper claims in the total sum of $10,832.60. 10. Memorandum of February 8, 2010 [ 136 ] In a memorandum dated February 8, 2010 (the Statement of Claim was issued on March 8, 2010) by Mr.

Hendriks to his lawyer, he listed additional charges he wished to claim against JHF in the sum of $364,806,47. The memo was provided to JHF, by way of an answer to an undertaking, on November 8, 2011. These alleged additional costs are listed on three pages and total over 29 individual items. No change order was ever prepared with respect to any of these items, nor was any invoice ever sent to JHF. None of them was included in the original proposal, nor were any of them listed either with a specified cost or as a PC Sum in the PC Sum letter of December 14, 2006.

HCL asks this Court to consider awarding some or all of these costs on the basis that JHF has been unjustly enriched by the work and materials outlined in the additional charges. [ 137 ] It bears repeating that the original contract was a Stipulated Price Contract and that the only PC Sums or allowances considered as part of the Contract are those listed in the PC Sum letter which related to the change in plans specified or necessitated by Change Order 3. [ 138 ] The work and materials set out in the Memorandum relate to both Phase I and Phase II.

All of the work and materials set out should have been considered by HCL at the time it entered into the Contract or alternatively, and no later than, when the PC Sum letter was provided and Change Order 3 was signed. All of the additional charges relate directly to work that must have been considered initially or necessitated by Change Order 3. [ 139 ] HCL submits that it is entitled to recover for these charges on an unjust enrichment basis.

It says that JHF has been enriched by the supply of this work and materials, JHF has suffered a corresponding deprivation and there is an absence of any juristic reason for the enrichment. In my view, JHF has not been enriched as they have only received that which they had contracted to receive. There has been no deprivation to HCL as it was obliged to provide that which it contracted to provide.

Relationships between contractors and owners would be thrown into a complete state of disarray and chaos if contractors could simply go ahead and provide work and materials in addition to that which they are contractually obliged to provide and then argue that they are entitled to payment on the basis that the owner was unjustly enriched in relation to work that must have been contemplated at the time of entering into a contract. [ 140 ] In the alternative, HCL argues that it is entitled to payment on a quantum meruit basis.

HCL argues that where work is done at the request, and for the benefit, of an owner but there is no contract or provision with regard to payment for that work, the Court should award an amount to the unpaid party on the basis of a reasonable amount for the goods or services. HCL refers to the cases of Vanir Construction Services Ltd (Receiver of) v Field Aviation Co , [1992] AJ No 36, 1992 CarswellAlta 444 (CA) and Noranda Builders Ltd v Alberta , 1988 ABQB 374, [1998] AJ No 493 . [ 141 ] In this case, there was a contract.

It was a Stipulated Price Contract though a portion of it was on a Cost Plus basis as a result of the PC Sum letter of December 14, 2006 and Change Order 3. The work done was pursuant to the Contract and the costs were agreed upon. There is no basis for a claim by HCL for payment on a quantum meruit basis. [ 142 ] The work or materials claimed in the Memorandum all relate to work or materials that were either performed or supplied during periods of time when Progress Claims and Invoices were still being sent by HCL to JHF. None of the items was claimed.

All of the work and materials outlined were contemplated in the Contract or Change Order 3 and the PC Sum letter. These claims are denied. 11. Other Claims [ 143 ] JHF acknowledges owing the sum of $49.23 on one of the early invoices. HCL is entitled to payment. [ 144 ] JHF paid a portion of Progress Claim 23 but as indicated above, it did not pay the additional cost for the stone masonry and held back an amount for seasonal deficiencies. The holdback was improperly withheld and after other minor adjustments, the outstanding amount owing on Progress Claim 23 is $61,121.81.

I have already taken into account the amount owing on Change Order 5 ($33,907.50)

and accordingly, the additional sum of $27,214.31 remains outstanding and is payable by JHF. [ 145 ] In addition, and while the bulk of the holdback amounts set out in Progress Claim 24HB have been paid, there is a balance owing of $14,752.05 (including GST). This sum does not include the $5,250 (including GST) still owing on Change Order 7. 12. Inability to Obtain Bond [ 146 ] Al Hendriks testified that the fact that HCL was owed a considerable amount of money by JHF resulted in HCL’s inability to pay sub-trades and subcontractors.

HCL does have a good relationship with its subcontractors and continues to use them. It says that the subcontractors are still owed the money, however. [ 147 ] Al Hendriks says HCL has had problems trying to obtain a Bond. HCL submitted a financial statement showing that it has receivables of just over $1,000,000. However, only a portion of that amount relates to JHF. Mr. Hendriks says that it has not been possible for HCL to obtain a Bond with a receivable that high and, therefore, it has not been possible for it to bid on some large projects.

He said that he ultimately mortgaged his house for about $400,000 and put that money back into the company. In the meantime, he suggested that the only projects HCL is doing now are smaller ones where a Bond is not required. [ 148 ] The evidence established that the last time HCL did a project requiring a Bond was in 1998. Further, there is no evidence of any projects that would have gone to HCL even if it had been able to get a Bond. [ 149 ] HCL asks for $400,000, being the amount of the mortgage Al Hendriks took out. There is no evidence to establish any claim for loss of profits or revenue.

There is no evidence of any loss suffered by HCL as a result of any failure to pay by JHF. This claim is denied. 13.

Summary of Claim [ 150 ] The following is a

summary of the amounts JHF is obliged to pay HCL. i) $49.23 on invoice 08-415-09 ii) $5,250 on Change Order 7 iii) $33,907.50 on Change Order 5 iv) $36,496.50 on Change Order 6 v) $24,545.74 on Change Order 10 vi) $13,281.88 on Change Order 11 vii) $26,198.43 for Change Order 12 viii) $10,832.60 on Change Orders 15 and 16 ix) $27,214.31 on Progress Claim 23 x) $14,752.05 on Progress Claim 24HB Total $192,528.24 J.

The Counterclaim [ 151 ] JHF has advanced a counterclaim against HCL for alleged damages caused by a delay in the performance of the work by HCL, including lost revenue, as well as for the cost of canopies JHF alleges were not provided (though included in the original contract price) and for deficiencies. 1. Delay [ 152 ]

Article A-1 of the Contract provides that the Design-Builder shall . . . 1.3 commence the work by the fourth day of July, in the year 2006 and, subject to adjustment in contract time as provided for in the Contract Documents, attain Substantial Performance of the Work; within 40 weeks after receipt of all approvals from authorities having jurisdiction. [ 153 ] The work is defined in the Contract as meaning “the Design Services and Construction required by the Contract”. [ 154 ] No adjustment was ever made to the contract time either by way of change order or amendment to the Contract. [ 155 ] JHF argues that the development permit was issued by the City of Leduc on July 25, 2006 and that was the date upon which the 40 week term began.

It says that the construction work itself began in August 2006. Excavation and backfill work then began in October

2006 and by October 31, 2006, more than 50% of the excavation and backfill work had been completed. [ 156 ] JHF argues that Change Order 3 signed by Mr.

Jackie on March 2, 2007 acknowledged as “a material change in the scope of work”, made no reference to any change in the contract time and accordingly, HCL was still bound by the 40 week time frame set out in the contract. [ 157 ] Accordingly, says JHF, HCL was obliged to perform the work contemplated by Change Order 3 (delete exiting structure and construct new west wing) by early May 2007, or about two months after it was signed. [ 158 ] JHF says that, regardless of whether the 40 weeks began in July 2006 or August 2006 or November 2006 (when a construction

schedule was provided by HCL), the construction was clearly not completed within 40 weeks. Substantial completion was not achieved until the Certificate of Substantial Completion was issued on October 31, 2008, which was approximately 117 weeks after the issuance of the development permit in July 2006. [ 159 ]

Article A-1.2 of the Contract provides that substantial performance of the work shall be attained “within 40 weeks after receipt of all approvals from authorities having jurisdiction”. JHF says that it was HCL’s responsibility to obtain the building permit and accordingly, the fact that it was not issued by the City of Leduc until March 5, 2008 has no bearing on the determination of the receipt of “all approvals”. That is, JHF argues that it was rendered inapplicable by HCL’s failure to obtain the building permit earlier.

While the Contract does provide in General Conditions 10.2.2 that HCL would obtain and pay for the building permit and other permits and certificates, Mr. Hendriks testified that Mr. Jackie indicated that he would do so as a lawyer and the former Mayor of Leduc. Indeed, Mr. Jackie signed the application for the development permit submitted to the City of Leduc on July 7, 2006. This supports Mr. Hendriks’ evidence in this respect. [ 160 ] It is worth noting that despite JHF’s claim now that the 40 week period commenced on July 25, 2006, the JHF lawyers inquired of Mr.

Hendriks on April 26, 2007 whether the project would be completed on time. Surely they were not asking if the entire project would be complete within a couple of weeks from that time, when it was clear that Phase I was still months away from completion and Phase II construction had not yet begun. [ 161 ] There is no doubt that various delays in construction occurred during the course of construction, whether caused by late delivery of structural steel and joists or change in design or a need to obtain new materials in place of defective ones. Those things happen.

In the meantime, however, none of those delays impact on the fact that the wording of the Contract is clear and unequivocal. HCL was obliged to attain substantial performance of the work within 40 weeks of all approvals being granted. The last approval granted was the building permit by the City of Leduc on March 5, 2008. Substantial completion was attained on October 31, 2008, approximately 35 weeks later.

Substantial performance of the work was thereby achieved well under the 40 week timeframe mandated by the Contract. [ 162 ] There is no basis for a claim by JHF that HCL failed to complete the project within the time mandated by the Contract. Had the JHF lawyers wished the 40 week period to commence at a different point in time and without reference to the receipt of all approvals, they could have attempted to negotiate a different term before signing the Contract or simply not signed it. 2.

Lost Revenue (Loss of Rent) [ 163 ] While I found that there was no delay in attaining substantial performance of the work, I will assess the lost revenue or loss of rent claim by JHF in the event that I am in error. [ 164 ] The start date for the claim for lost revenue by JHF is May 1, 2007 (40 weeks after issuance of the development permit on July 25, 2006).

JHF says that despite the fact that Change Order 3 was dated March 2, 2007 and called for a deletion of an existing structure and the construction of Phase II, HCL was still bound to complete the entire project (including Phase II) by May 1, 2007, or two months after Change Order 3 was signed. [ 165 ] JHF says that Change Order 3 did not include a change to the substantial performance date in the Contract and therefore, it is entitled to claim lost revenue from May 1, 2007 notwithstanding its agreement to the substantial change and JHF’s undoubted knowledge that construction of Phase II could not possibly be substantially complete in only two months from the signing of the Change Order.

Indeed, as mentioned above, the JHF lawyers inquired about a completion date on April 26, 2007 when they were still awaiting completion of Phase I. [ 166 ] There is no claim for any loss of income for the second floor or the basement because the law firm occupies the second floor and keeps their files in the basement. There is also no claim for the main floor of Phase 1. JHF claims a loss of rent for 2210 square feet on the third floor until October 1, 2008 when that space was leased by Primary Care Network (“PCN”). It further claims a loss to October 1, 2009 when the balance of the floor was leased to the PCN.

Its total claim for the third floor is about $157,000. [ 167 ] The leasable area on the main floor is 6,840 square feet. It is divided into three suites and suite 101 (2,266 square feet) was leased on June 1, 2012 JHF is claiming lost rents for suite 101 and 102 (2,516 square feet) to March 31, 2011. It claims lost revenue for suite 103 (1,777 square feet) to August 1, 2008, the date on which Shaw Insurance Agencies Ltd was to take possession. Its total claim for lost rent for the main floor is $355,616.28. Accordingly, its total claims for lost rent for floors one and three is the sum of about $513,000.

Notably, this figure does not take into account any contingencies such as tenant improvement allowances, rent free periods and other factors which may have come into play in attempting to lease the premises. [ 168 ] Delano Sveinsson is a licensed realtor who has worked in the areas of commercial and residential real estate for over 35 years in the Leduc area. He was contacted by JHF in November 2005 to discuss various leasing options and rates with JHF. At that time, he understood that JHF was contemplating either an addition to its existing building or a free standing building. [ 169 ] When Mr.

Sveinsson was advised that the building would be a two storey building and that JHF would occupy the second floor, he thought this to be a wise move as it would leave the main floor available for leasing opportunities, which he hoped would attract other

professional tenants. [ 170 ] Mr. Sveinsson attended a meeting on January 24, 2006 at which time he was shown copies of the artists’ renderings of the proposed building. He was advised that the building would be three storeys in height. He thought it would be a “remarkably nice” building and Mr. Jackie noted that Mr. Sveinsson believed that a professional office building was appropriate for Leduc, especially as it would have an elevator (which he believed to be the key). Mr. Jackie’s notes reflect that someone thought this was a “leap of faith” though it is unclear who thought so. [ 171 ] Mr.

Sveinsson obtained the listing on the property for the first and third floors. A Listing Agreement was signed with an effective date of October 1, 2007 and an expiry date of April 1, 2008. The base rent to be charged to tenants would be $14.00 per square foot. [ 172 ] A Retail-for-Lease document was executed with respect to the main floor and an Office for Lease document with respect to the top floor. Both documents called for a lease rate of $16.00 per square foot (adding $2.00 per square foot to the original listing). [ 173 ] Mr. Sveinsson took numerous steps to market the property.

It was listed with MLS on the real estate board website, an ad was placed in Real Estate Weekly, brochures were provided to other real estate professionals, there was local advertising and a large sign was placed at the site. [ 174 ] While Mr. Sveinsson testified that there had been a boom in real estate earlier in 2006 and 2007, the market began to shift and fall in late 2007 and 2008. Values decreased and, in his words, there was a “mini recession” in 2008. [ 175 ] While the project was under various stages of construction during the time that Mr.

Sveinsson had the listing, he did have the artists’ rendering of the building to include in all marketing. [ 176 ] In early 2008, an offer was received from the PCN and on June 25, 2008, a lease agreement was signed between HoldCo and PCN for a portion of the third floor at a lease rate of $14.00 per square foot. On September 15, 2009, PCN leased the remaining portion of the third floor, though Mr. Sveinsson was not involved at that time. [ 177 ] On April 16, 2008, an offer was received from Shaw Insurance Agencies.

However, the husband of the owner was diagnosed with, and died of, cancer and the owner of Shaw elected not to pursue the lease. While JHF (or HoldCo) threatened to take action to compel performance, it ultimately allowed Shaw to back out of the agreement. JHF retained the deposit, however. Notably, pursuant to the offer to lease with Shaw, the landlord was responsible to complete the fixturing of the premises by May 1, 2008. JHF did not do so by that date, though it was firmly advised to do so by Mr. Sveinsson by email dated April 2, 2008. [ 178 ] Mr.

Sveinsson indicated that he received no other offers to lease any portions of the building and the listing agreement was not extended when it expired on September 30, 2008. Mr. Sveinsson felt he could do nothing more and that JHF or HoldCo should retain another realtor. He recommended Mike Parker at Cushman Wakefield. [ 179 ] In short, Mr. Sveinsson had the listing from October 1, 2007 to September 30, 2008 and was only able to attract two potential tenants, one of whom entered into a formal lease agreement. The lawyers had moved into the second floor of the project in November 2007.

The leasing of the vacant portions of the building was affected by a mini recession. After entering into the lease agreement with PCN at a rate of $14.00 per square foot, an amending agreement was executed with respect to the main floor and the third floor which extended the listing agreement to September 30, 2008. The amending agreement increased the proposed lease rate from $14.00 to $16.00 per square foot even though no lease agreement had yet been signed with anybody (the PCN lease agreement was not signed until June, 2008). [ 180 ] Michael Parker also testified on behalf of HoldCo.

He is also a licensed realtor. He met with Mr. Jackie on October 21, 2008 and ultimately, a listing agreement was entered into between HoldCo and Cushman & Wakefield, the broker for whom Mr. Parker worked. The listing agreement was signed on November 12, 2008 and the expiry date was April 1, 2009. [ 181 ] Mr. Parker also felt that the building was very nicely done and with the lawyers occupying the second floor and PCN occupying a good portion of the third floor, he felt that the main floor was marketable at a rate of $18.00 per square foot with operating costs of $6.00 per square foot.

While he said that in a “perfect world” it would have been nice to have both the landscaping and the parking completed at the time the listing agreement was entered into, the building was still in a marketable state. [ 182 ] Mr. Parker also testified that in the fall of 2008, the market was “melting down”. Mr. Parker marketed the property by preparing a brochure and forwarding it to all of the other brokers in the area. He placed signage on the site and an ad in the Leduc newspaper. He also sent out direct mailing to potentially interested parties.

The listing was not placed on MLS however, as his company was not a member. [ 183 ] The listing agreement was extended to July 31, 2009. The extension did not include the third floor as, by that time, there was an indication that PCN was going to take the additional third floor space. Mr. Parker stated that the market in Leduc from November 2008 to July 2009 was “very, very soft” after it had crashed in October 2008. He saw little or no activity for a year and the soft market lasted 15 to 18 months. [ 184 ] During the term of the listing with Mr.

Parker, no written offers to lease were received though some inquiries were made by a fitness company. In a report dated March 9, 2009, Mr. Parker described market conditions as follows: Leasing markets remain sluggish across all sectors given the present economic climate and future uncertainty. [ 185 ] Mr. Parker cited the positive factors about the building as being that it was new, the bulk of the lease space was on the main floor, it was nicely done and in a corner location. He called it a first class building for Leduc.

[186] Mr. Parker also indicated that it was not unusual to have a building under construction while attempts were being made to leasespace in the building. This building was ready for lease when the listing agreement was signed with the only matters not completedbeing the landscaping and parking. [187] In the ten months of the listing with Mr. Parker, he did not bring forward any tenants. He identified the primary issue at thattime as the market conditions. [188] JHF, or HoldCo, argue that the difficulty in quantifying the loss in this case is not a basis for refusing to make an award to JHFor HoldCo.

It argues that JHF lost the opportunity to receive rent for the first and third floors until construction of the building wascomplete. JHF says that it is clear that the breach of Contract by HCL for delay did cause a loss to JHF and while it is difficult toquantify the loss, that is not a basis for refusal to make an award (Eastwalsh Homes Ltd v Anatal Development Ltd (1993), (ON CA), 12 OR (3d) 675 (CA) at 687, leave denied [1993] SCCA No 225, referred to in Indutech Canada Ltd v Gibbs PipeDistributors Ltd, 2011 ABQB 38, 508 AR 1). [189] I conclude from the evidence of

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