McDiarmid Lumber Ltd. - v. -, 2010 SKPC 161

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2010 SKPC 161 Date: November 30, 2010 File: 480 [2009] Location: Melfort _____________________________________________________________________________ Between: McDiarmid Lumber Ltd. - and - John Wolfe & Tina Wolfe - and - Neufeld Building Movers Ltd. C. Barry For the Plaintiff (Defendant by counterclaim) J. Wolfe For the Defendants (Plaintiffs by counterclaim) C. Neufeld For the Third Party _____________________________________________________________________________ JUDGMENT M. M. BANIAK , J _____________________________________________________________________________ I. INTRODUCTION

[ 1 ] John and Tina Wolfe’s home was destroyed by fire. Needing a new home, they contacted McDiarmid Lumber Ltd., a builder of RTM (ready to move) homes, and negotiated an agreement for the purchase of an RTM. A formal Sales Agreement was executed by the parties on October 16, 2007. [1] The builder’s Saskatchewan site is located in Saskatoon, and the Wolfes live in Tisdale, Saskatchewan. [ 2 ] The purchase price was to be $142,174.16.

Paragraph 2 of the agreement reads, in part, as follows: ...the parties hereto agree and acknowledge that the purchase price includes estimated moving costs and that the purchaser shall be responsible for any additional costs that may be incurred to transport the RTM house to the purchaser’s site. (Emphasis added) [ 3 ] In addition to the Sales Agreement the builder and the purchaser signed an extra delivery cost agreement, [2] which is reproduced here in its entirety: We understand and agree that McDiarmid Homes is not responsible for any extra delivery costs that may be incurred due to extra mileage, extra time spent to unload the ready to move home on the foundation due to improper site conditions, etc. or any costs issued by the utility companies that may be incurred during the move.

We understand that the moving costs are based on actual costs from moving company and are not McDiarmid Homes’ responsibility. In signing this below we agree to the terms and conditions stated above. [ 4 ] The builder would arrange the move and find the mover (a practice, I might add, that it has since discontinued) to transport the home.

On this occasion, as on many others, McDiarmid Lumber Ltd. engaged the third party, Neufeld Building Movers Ltd. to transport the home from Saskatoon to Tisdale, which move commenced on August 1, 2008, and was completed on August 2, 2008. [ 5 ] Neufeld Building Movers Ltd. invoiced McDiarmid Lumber Ltd. [3] for the move, the total cost of which was $15,974.91. The account presented by the mover to the builder exceeded the estimated cost of the move by $6,107.83.

The builder paid the entire account as presented by the mover, without question, and then sent an invoice to the purchasers [4] requesting that they pay the additional moving costs. [ 6 ] The purchasers refused to pay and the builder commenced an action on November 19, 2009, for the sum of $6,107.83, plus interest and costs.

On February 22, 2009, the purchasers counterclaimed against the builder for $17,596.00, plus interest and costs, citing numerous deficiencies in the RTM as a result of either the construction of the home, or its transport or placement on the foundation. [ 7 ] On May 5, 2010, the builder, McDiarmid Homes Ltd., filed a third party claim against the mover, Neufeld Building Movers Ltd., claiming inter alia , for that portion of the additional moving costs that the purchaser may not be liable for, as well as any damages for deficiencies caused to the home during transport which were caused by the mover’s negligence. [ 8 ] The third party, Neufeld Building Movers Ltd., did not file a third party defence as per the provisions of The Small Claims Act . [ 9 ] Initially, all parties were represented by legal counsel.

However, at trial, only the Plaintiff (Defendant by counterclaim), McDiarmid Lumber Ltd., had legal representation, while John Wolfe represented the Defendants (Plaintiffs by counterclaim), and Corey Neufeld appeared on behalf of the third party, Neufeld Building Movers Ltd. II. THE FACTS a. Plaintiff’s (Defendant by counterclaim) Evidence [ 10 ] The Plaintiff (Defendant by counterclaim) [5] relied on the testimony of three witnesses:

i) George Mark Henderson ; is employed by the Plaintiff as its director of business development. He described his job as administering the day to day business of the company, which also includes paying accounts, responding to warranty work claims, etc. ii) Gerry Koersveldt ; attended the Wolfe property on September 9, 2010, and inspected the home. His report is Exhibit P13.

He listed his credentials as being a journeyman carpenter since 1964; as an employee of the CMHC (Canada Mortgage and Housing Corporation) for ten years doing home inspections; as a construction manager; as an inspector for the National Home Warranty Program; and, presently, as a full-time home inspector and consultant. He was qualified as an expert witness. iii) Jeremy Klassen ; is a warranty manager with McDiarmid Homes Ltd. He testified that he oversees all warranty issues from Saskatoon to Winnipeg.

i) George Mark Henderson [ 11 ] Mr. Henderson testified that all RTM’s built on site in Saskatoon are then delivered to a purchaser’s property and placed on a foundation which is constructed by the purchaser. The negotiated purchase price of the RTM home includes an estimated cost of

moving. McDiarmid Lumber Ltd. would make all arrangements with the movers. If the moving costs exceeded the estimated moving costs the additional expenses would be borne by the purchaser as per the agreement. [6] (Interestingly, as of now, McDiarmid no longer handles the transportation or moving arrangements as that is solely the purchaser’s responsibility). [ 12 ] In arriving at the estimated moving costs, Mr.

Henderson testified that McDiarmid used a price list for moving RTM homes in Saskatchewan and Alberta which was prepared by Neufeld Building Movers Ltd. [7] At the time that the agreement was being negotiated between McDiarmid and Wolfe, the list was current as it was compiled in March 2008. [ 13 ] Once the RTM house is moved onto the purchaser’s property, the mover presents McDiarmid Lumber Ltd. with the account. In the present case, the account presented to McDiarmid for payment was considerably higher than the estimated moving costs.

McDiarmid estimated that it would cost $9,769.44 to move the RTM house onto the Wolfes’ property, [8] whereas the account sent by the mover, Neufeld Building Movers Ltd., to McDiarmid was for $15,974.91, a difference of $6,205.47. [9] McDiarmid paid the total account it received from the mover, without question, and then demanded the additional amount from Mr. Wolfe. [ 14 ] Mr. Henderson further testified that he was prepared to renegotiate the amount claimed with Mr. Wolfe in the interest of settling the matter, but nothing came of these discussions. [ 15 ] Mr.

Henderson also agreed that any cracks or problems that would have occurred during the move or placement of the RTM home on the foundation (which are common and normal during a move of an RTM home) would be the responsibility of the builder and McDiarmid would repair them. [ 16 ] When asked by Mr. Wolfe, during cross-examination, as to why the deficiencies were not repaired, Mr.

Henderson replied that since the purchaser did not pay the outstanding account for the additional moving costs, McDiarmid was not obligated under the National Home Warranty Program to effect the repairs. [10] ii) Gerry Koersveldt [ 17 ] Gerry Koersveldt, McDiarmid’s second witness, attended at Mr. Wolfe’s property and conducted an inspection on September 9, 2010. He filed a report and 71 photographs of the RTM home, both inside and out. He testified that he had inspected approximately 175 RTM homes in Manitoba and Saskatchewan during the last two years. Mr.

Koersveldt expressed some concern about the home’s ventilation and airflow problems as a result of the duct work hookups, or lack thereof, and was of the opinion that this may lead to further problems down the road, as the humidity level in the home may be too high. [ 18 ] With respect to the home’s deficiencies, Mr. Koersveldt testified that there were shear cracks in the drywall which are usually caused by the move. He also stated that the angle cracks by the doors and windows are unique to the RTM industry and are usually caused when the homes are being transported.

He characterized these defects as being relatively easy to fix.

Further, he acknowledged that there were some “workmanship flaws”: some discolouration in the drywall (he speculated that maybe someone leaned on the wall when it was being painted); the casing not fitting the window frame evenly (picture #19); a slight gap between wall and door frame (pictures 11, 12 & 14); small paint defects; bathroom not properly caulked; shower stall has two damaged spots which he believes happened during construction; in one spot the carpet is shorter than it should be (picture #43); numerous nail pops; and minor damage to one piece of fascia (pictures 1 & 6). [ 19 ] When asked, in cross-examination by Mr.

Wolfe, as to what it would cost to repair all the deficiencies, Mr. Koersveldt declined to offer an opinion. iii) Jeremy Klassen [ 20 ] McDiarmid’s third and final witness was Jeremy Klassen, he is the warranty and production manager with the company. He testified that when a warranty claim comes up, the builder’s manager contacts him and he then contacts the customer. In this case he did not go to Mr. Wolfe’s house as the home was not paid for in full. [ 21 ] Mr. Klassen agreed that all the defects listed in Mr. Koersveldt’s report are usual and attributable to the move.

In his opinion the total cost of repairs, labour and materials, would be $1,700.00. He indicated that he often did estimates based on pictures. b. Defendant’s (Plaintiff by counterclaim) Evidence [ 22 ] It should be noted here that even though the house was purchased by John and Tina Wolfe, and they are both listed in the style of cause as Defendants (Plaintiffs by counterclaim), John Wolfe was the only one present, as Tina Wolfe, who is his mother, is elderly and was too ill to attend. [ 23 ] Mr.

Wolfe testified that most of his dealings and negotiations relating to the purchase of the home went through McDiarmid’s

salesman, Jason Thiessen. Everything went smoothly: they signed a Sales Agreement, paid the required installments and understood that the house had to be paid in full before it would leave McDiarmid’s site. As a small inducement, he was to earn Air Miles at the rate of one Air Mile “...for every $40.00 of purchases, excluding taxes.” [11] At the date of the trial he still had not received his Air Miles. [ 24 ] Mr. Wolfe testified that the RTM house left Saskatoon around 8:00 a.m. on August 1, 2008, and arrived on the outskirts of Tisdale around 6:30 p.m. that same day.

Nothing more was done by the movers on August 1, 2008, and they returned the next morning to unload the home. By 11:30 a.m. the house was on the foundation, and by 1:00 p.m. everything was loaded and the movers left. [ 25 ] According to Mr. Wolfe, the movers had to trim some branches from the trees on the boulevard to accommodate the move. He denied that the movers did any bracing or backfilling of the foundation. He further testified that there was no walkthrough or inspection of the home by the movers after it was set on the foundation. [ 26 ] Once Mr.

Wolfe examined the home he realized that it had a number of defects or deficiencies and he contacted McDiarmid’s salesman, Jason Thiessen, who advised him to send them a list of the deficiencies. [12] Later, Mr. Wolfe delivered a packet of pictures to McDiarmid Lumber’s yard site and left them with the yard foreman. No one from McDiarmid came out to have a look at the home. Around the same time he received an invoice from McDiarmid in the amount of $6,205.47 for additional moving costs. [13] He considered this to be a “double charge” and refused to pay. [ 27 ] Finally, Mr.

Wolfe was not able to present any tangible evidence as to what it would cost to repair the deficiencies in his house, other than to dispute the figure given by Mr. Klassen. In September 2009, Mr. Wolfe had Tisdale Flood and Fire Ltd. provide him with an estimate that it would cost more than $17,000.00 to repair all the problems in the house. However, the estimator, according to Mr. Wolfe, was unwilling to testify in Court and no further evidence was given on this point. c. Third Party’s (Neufeld Building Movers Ltd.) Evidence [ 28 ] Mr.

Neufeld, the manager and owner of Neufeld Building Movers Ltd., testified on behalf of the third party. His evidence was that prior to 2009 his company moved all homes sold by McDiarmid Lumber Ltd., and, in his estimation, his company transported approximately 300 homes throughout Saskatchewan and Alberta. He characterized this particular move as “no different than any of the others”. The only problem occurred when the movers arrived in Melfort, Saskatchewan, and discovered that their permit was not valid.

This caused some delay (approximately one hour) but he stated that no one was charged for this down time. [ 29 ] Once the movers arrived at the Wolfe property in Tisdale they apparently encountered some difficulty in unloading the home as the site was not properly prepared. It must be noted here that Mr. Neufeld was not personally present during either the transport or the unloading. His testimony was based entirely on what he was told by others, which clearly is not admissible, as it is hearsay. He did not call any of the individuals involved in the move to testify.

There is no evidence of any correspondence between Mr. Neufeld and Mr. Wolfe. He testified that the entire move took about eight hours longer than it should have. This was due to the fact that the basement was not properly backfilled or braced.

There was no evidence led to support his claim that any backfilling or bracing was done by his crew. [ 30 ] Similarly, there was no evidence to support the contention that eight additional hours were required to effect the move; no log book or time sheet to show time of arrival; time spent preparing the site for unloading; the unloading itself and the time of departure. [ 31 ] Finally, it is important to note that Neufeld Building Movers Ltd. did not file, or deliver, their third party defence to the third party claim issued against it by McDiarmid Lumber Ltd. on May 5, 2010. III.

ANALYSIS [ 32 ] It is clear that McDiarmid Lumber Ltd. had a contract with John and Tina Wolfe to build an RTM home and have it delivered to their property in Tisdale. The move, or transport, of the home was an integral part of the agreement. It is likely that this service appealed to many buyers and, thereby, made the builder’s product more attractive. It is also true that McDiarmid would be in charge of hiring and paying the mover. The purchaser, as per the Sales Agreement, would pay for any additional costs over and above the “estimated moving costs”.

The contract does not enumerate what may constitute “additional costs” but it may be surmised that it would include costs involved in a normal course of a move that are not anticipated by, and beyond the control of, the mover. These may include sudden violent natural or weather events during the transport; or it may involve a greater distance because there is a detour in the planned route due to road closure because of construction, repair or a major accident. This would add to the cost of the move and the purchaser would have to cover these additional costs.

However, delays caused by failure to obtain the requisite permits in a timely manner; or delays caused by miscalculating the time of arrival; or delays caused by the mover’s inattention to detail vis-a-vis the site where the house had to be unloaded are not the “additional costs” for which the purchaser should be responsible. [ 33 ] It would be unreasonable to assume that, while negotiating the terms of the agreement, the purchaser would agree to be responsible for any additional costs caused by the mover’s negligence or incompetence.

Further, if any additional costs are being claimed, the mover should be able to account precisely as to what these costs are comprised of, any extra time or extra work should be itemized. [ 34 ] To allow the movers to charge any additional costs they deemed appropriate to the purchaser, without the purchaser having

any recourse, and without the mover having the obligation to justify the additional costs would be absurd and clearly unenforceable. To allow the mover to achieve the same objective in a roundabout way by invoicing the builder, who pays without question, and then recovers from the purchaser, would lead to the same absurdity. [ 35 ] Clearly, the builder should have taken some steps to determine if the additional costs were justified.

The builder, upon receiving the invoice for the additional costs from the mover should have, at the very least, directly communicated with the purchaser to ascertain whether the additional costs being claimed were reasonable. And, furthermore, the builder should not have paid the account until it had received a response from the purchaser.

The purchaser was entitled to believe, and expect, that the builder would look out for his interests, these are the basic expectations in contractual relations, as is the concept of good faith and reasonableness. [ 36 ] Reasonableness would normally require the party subject to that standard (McDiarmid) to have regard to the purchaser’s interest.

Where McDiarmid, arranging and negotiating the move on behalf of Wolfe, would have an unfettered discretion so that it could act unreasonably, without having to give reasons that could be objectively assessed, the standard of good faith and reasonableness would not be met. [ 37 ] If McDiarmid took no steps to ascertain whether the additional costs were reasonable Wolfe would be forced to shoulder the entire burden, without, at the same time, having any recourse against the mover, Neufeld, since he was not a party to the contract. [ 38 ] The estimated cost of the move was $8,858.20 plus GST.

The actual bill was for $15,974.90; a difference of almost 70%. This should have raised a red flag for McDiarmid. The fact that it did not suggests that it was not looking out for the purchaser’s interest. In other words, it was not acting reasonably or in good faith. [ 39 ] The invoice, Exhibit P5, sent by the mover to the builder includes charges of $2,750.000, for time spent due to “adverse conditions” (5 hours at $550.00 per hour), and $2,500.00 for no backfill. A 5% GST on these two charges would increase the total amount of the two itemized expenses to $5,512.50.

This alone comprises the bulk of the “additional costs” that Mr. Wolfe was being charged for. The evidence simply does not support this claim. Firstly, as Mr. Wolfe testified, the movers arrived in Tisdale at approximately 6:30 p.m. on August 1, 2008, and did nothing more that day. The following morning, no start time was given, they started unloading, and by 11:30 a.m. the house was on the foundation. After loading up their equipment and tools, the moving crew was gone by 1:00 p.m. There is no evidence that the movers did any backfilling or bracing to justify the charge of $2,500.00 “for no backfill”.

Similarly, the adverse conditions, for which the mover charged $2,750.00, appear to be the trimming of some branches on the boulevard. Clearly that would not have taken five hours, as otherwise they would not have unloaded the house by 11:30 a.m. [ 40 ] Allowing for the trimming of branches, since there is no helpful evidence, is estimated at 1.5 hours (at $550.00 per hour) for a total of $825.00. The rough terrain around the basement, due to inadequate or rough backfill, may have slowed the unloading by another 1.5 hours ($825.00).

The GST on $1,650.00 ($825.00 + $825.00) would be $82.50 for a total additional cost of $1,732.50. This amount would be payable by Wolfe to McDiarmid Lumber Ltd. McDiarmid Lumber Ltd. would then be reimbursed by Neufeld Building Movers for the balance of the “additional costs” that they paid ($6,107.83 - $1,732.50 = $4,375.33). [ 41 ] Further, it is necessary to determine the scope of work and the attendant costs required to repair the defects and deficiencies in Mr. Wolfe’s home.

Based upon the testimony of the Plaintiff’s own witness, there were numerous cracks caused by moving a house, which are common and usual. Also, some building deficiencies were acknowledged, and these have been described above. More problematic, however, is the quantification of these damages. [ 42 ] It should be noted that Mr. Koersveldt, the Plaintiff’s expert witness, who presented himself as being very knowledgeable in the residential construction industry, declined to offer an opinion as to the likely cost of effecting repairs to the home he thoroughly inspected. Whereas Mr.

Klassen, who didn’t even see the house, inside or out, could be specific about the cost of repairs simply from looking at pictures, some of which, by his own admission, were not very clear. Accordingly, I do not accept Mr. Klassen’s evidence that the total cost of repairs, both labour and material, would amount to $1,700.00. [ 43 ] I find that the repairs of the deficiencies are the responsibility of the Plaintiff, and since the cost of repairs is, based on the evidence, indeterminable, I conclude that a fair and equitable sum to repair the deficiencies would be $3,500.00.

Accordingly, the Defendant (Plaintiff by counterclaim) will be awarded this amount under his head of damages. IV. CONCLUSION [ 44 ] The Defendants (Plaintiffs by counterclaim) John Wolfe and Tina Wolfe, shall have judgment against the Plaintiff (Defendant by counterclaim), McDiarmid Lumber Ltd., for the sum of $3,500.00. Set off against this is the amount I have found should be payable to McDiarmid by Wolfe, namely $1,732.50. Therefore, John Wolfe and Tina Wolfe shall have judgment against McDiarmid Lumber Ltd. in the amount of $1,767.50 ($3,500.00 - $1,732.50 = $1,767.50).

Also, the Wolfes are entitled to their Air Miles and these should be credited to them. [ 45 ] Further, McDiarmid Lumber Ltd. shall have judgment against the third party, Neufeld Building Movers Ltd., in the amount of $4,375.33 ($6,107.83 - $1,732.50 = $4,375.33). [ 46 ] In light of the mixed success of the parties, no costs are awarded with respect to the issuance of the pleadings. Similarly, since all parties were in part responsible for this matter not being resolved sooner, no pre-judgment interest is being awarded.

[ 47 ] Dated at the City of Prince Albert, in the Province of Saskatchewan this 30 th day of November, A.D. 2010. __________________________________ M. M.

Baniak, J [1] Exhibit P1. [2] Exhibit P3. [3] Exhibit P5. [4] Exhibit P4. [5] The Plaintiff did not lead any evidence to prove its corporate existence or status as a valid and subsisting company incorporated pursuant to the laws of the Province of Saskatchewan, other than the assertion in paragraph 1of the Statement of Claim wherein it states that it “...is a body corporate with an office in Saskatoon, SK, and is duly authorized to carry on business under the laws of the Province of Saskatchewan.” Neither Wolfe, nor the third party, challenged McDiarmid Lumber Ltd.’s existence, thereby, arguably admitting or conceding that it is a legal person or entity. [6] Exhibit P1. [7] Exhibit P3. [8] Exhibit P4. [9] McDiarmid’s claim was for $6,107.83. [10] Exhibit P12. [11] Exhibit D3. [12] Exhibit D2. [13] Exhibit P4.