2018 QCCQ 3997, 2018 QCCQ 3997

9190-0142 Québec inc. c. Marcogliese 2018 QCCQ 3997 COURT OF QUÉBEC Small Claims Division CANADA PROVINCE OF QUÉBEC DISTRICT OF MONTRÉAL TOWN OF MONTRÉAL Civil Division N° : 500-32-149323-158 DATE : June 12, 2018 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ 9190-0142 QUÉBEC INC. Plaintiff v.

JOHN MARCOGLIESE and KELLY WOODFORD Defendants and LLOYD’S UNDERWRITERS Impleaded Party ______________________________________________________________________ JUDGMENT ______________________________________________________________________ I.

Parties and Proceedings [ 1 ] The Plaintiff, 9190-0142 Québec Inc, doing business as Les Entreprises Constructions Fleur De Lys (« Fleur De Lys »), a building constructor, sues its former clients, the Defendants John Marcogliese and Kelly Woodford claiming a contractual balance consisting chiefly of the tax portion of payments made for labour provided in a renovation project at the Defendants’ home.

It claims as well certain labour costs that it asserts were not paid for at all, including the cost of work of a third party. [ 2 ] The claim consists of $ 3,389.29 for GST and PST charged on labour billed in the amount of $ 22,633.00 as well as additional labour costs of $1,510.00 and a bill of $ 48.87 for materials purchased, including tax, for a total of $ 4,948.16. Added to this are other amounts for legal and expert costs totalling $ 2,486.20 for a grand total of $ 7,434.36. [ 3 ] Mr. Marcogliese and Mrs.

Woodford contest the claim, asserting that the payments they made for labour between July 9 th and August 25 th , totalling $ 22,010.24, were in full and final payment, including any applicable taxes. [ 4 ] They also bring a cross-demand reduced to the maximum of $ 15,000.00 permitted in the Small Claims Division, alleging incomplete and defective work, as well as damage to the property. [ 5 ] They implead the insurer of Fleur de Lys, Lloyd’s Underwriters, as solidary debtor for their claim. [ 6 ] Lloyd’s denies the claim, and denies that the claim is covered under the policy. II.

Issues [ 7 ] To decide this case, the Court must make the following determinations: 1. Is Fleur de Lys entitled to claim taxes on amounts apparently already settled in full? 2. Is there any other outstanding balance, including taxes? 3. Is the work for which Fleur de Lys invoiced its clients incomplete or faulty and, if so, what amount should be deducted from the price or awarded as damages? 4. Are Fleur de Lys’ insurers liable? III. Analysis

A) The principal action Facts [ 8 ] At the outset of the relationship between the parties, Fleur de Lys, through its principal, Charbel Loubos, submitted a price for a renovation project at the home of John Marcogliese and Kelly Woodford at 590 Kindersley in Ville de Mont Royal. It was a substantial project, based on drawings and specifications prepared by the Defendants’ professional. The price submitted on May 21, 2014 was $ 281,410.00 [1] . [ 9 ] Rather than proceed on the basis of a contract for the entire project, Mr. Marcogliese asked Mr.

Loubos to perform certain tasks in a piecemeal fashion, in order to check the quality and manner of his work. Mrs. Woodford testified that they decided not to carry out the project as designed, but to carry out a different scope of renovation work. [ 10 ] Mr.

Loubos agreed on behalf of Fleur de Lys to proceed on the basis of reimbursement for payments made for materials, without markup, and direct labour costs, hoping that Fleur de Lys would be given the entire project once he proved himself to the Defendants. [ 11 ] Work commenced in early June 2014, one step at a time beginning with the installation of windows, moving on to opening walls, installing insulation and the correction of minor structural deficiencies. [ 12 ] Mr. Marcogliese was present to assign the work and to approve it progressively. Remuneration was based on time and materials. Each week Mr.

Loubos would submit, at Mr. Marcogliese’s request, on behalf of Fleur de Lys, the amounts incurred for materials purchased and claim the amount of hours he and the other employees had worked. John Marcogliese remitted payment, including cheques at the end of each week between July 17, 2014 and August 25, 2014 for the labour portion of the claim. All but one of these cheques were drawn on his account. The last cheque was drawn on Mrs. Woodford’s account but apparently signed by him. Mr.

Loubos testified that it was agreed that the taxes portion would be settled later. [ 13 ] The Defendants refute that assertion stating that they wanted to make payment in full each week. Four of the five cheques bear the inscription “paiement complet main-d’œuvre et matériaux” [2] . [ 14 ] Work came to a halt on or about the end of August 2014 in a situation of conflict. Mr. Loubos states that he spoke to the Defendants after he had worked for several weeks, asking for a written contract for the entire project.

His clients did not accede to this request. [ 15 ] No work was performed by Fleur de Lys after August 27, 2014. Mr. Loubos went to the premises to collect his tools on September 8, 2014. The local police were called in by Mr. Marcogliese. After certain deliberations, Mr. Loubos was allowed to take away his tools. [ 16 ] He returned on September 14 th , with a police escort, to return a damaged window that had been repaired at his cost. [ 17 ] The Defendants complain that Mr. Loubos failed to be present on the site, having taken a vacation without notifying them.

They were not prepared to allow his workers to proceed in his absence. [ 18 ] They treat the situation as being one where Mr. Loubos abandoned the work after September 25th, only showing up again on September 8th. [ 19 ] Fleur de Lys then submitted accounts showing the computation of GST and TVQ on the amounts invoiced [3] . With reference to accounting registers and Revenu Québec forms, he established that the amounts were included in his GST QST remittances. [ 20 ] On the issue of payment, the Defendants state simply that they remitted the payments requested each week by Mr.

Loubos, by cheque payable to Fleur de Lys. [ 21 ] They mention cash reimbursement for materials purchased by Fleur de Lys, prior to the period in issue but this is not germane to the case. [ 22 ] Mrs. Woodford testified that, from her point of view as a consumer, she simply paid what she thought was the amount owed in total. There was no understanding that there was to be a subsequent bill for GST/QST. Either taxes were included in the amount, or no taxes were remitted by Mr. Loubos, because of the small billings of his business.

Findings [ 23 ] The issue that is crucial for this part of the case is whether the stipulation of an hourly rate was inclusive of the applicable taxes or whether it was a net amount, to which GST and QST was to be added. In the absence of a bill, or an express stipulation, the ambiguity of the situation must be resolved in favour of the consumer. While Mr.

Loubos may have understood or assumed that he would be billing taxes later, this is a very irregular business practice, and, to an objective bystander, the appearance is that his claim for payment, and the payments made, were payments inclusive of tax. [ 24 ] The Court accepts the Defendants’ testimony that the amount of labour costs was inclusive of any taxes owing. They did not know or inquire as to whether or not the business entity had to remit taxes. [ 25 ] If Fleur de Lys was receiving payment, week to week, it had the role and responsibility of tax collector.

If it did not claim the applicable taxes with a bill that showed a net amount and a computation of the addition of taxes, it is presumed to have accepted the amount inclusive of taxes.

[ 26 ] In the Court’s analysis, the Plaintiff has in fact remitted too much GST and QST, because its invoices are inaccurate. The account for labour, since it was inclusive of tax, should have been expressed as a total of $ 22,633.00 with a calculation of a lesser net amount and then the addition of taxes.

Subject to verification by Fleur de Lys’ expert accountant, the Court would have expected to see invoices totalling $ 19,685.14, GST of $ 984.25 and QST of $ 1,963.59 for a total of $ 22,633.00. [ 27 ] Fleur de Lys overpaid approximately $ 441.45 ($3,389.29 - $ 2,947.84) to Revenu Québec. [ 28 ] On account with the Defendants, Fleur de Lys is owed what it should have considered its gross bill, $ 22,633.00 plus the cost of material of $ 48.87 ($ 22,681.87) less the amount received of $ 22,010.24, for a balance of $ 671.63.

B) The Cross demand Facts and expertise [ 29 ] The claims made by the Defendants concerning the work performed fall under various subject matters: - Faulty installation of windows and damage to window-frame materials; - Damage to the finish of an existing window; - Damage to the building’s alarm system; - Removal of the heating and cooling system and failure to replace it; - Damage to the floor under windows; - Faulty work in connection with the structure following the demolition of a masonry fireplace; - Failure to properly insulate the main floor. [ 30 ] Evidence was produced at the trial concerning structural issues by Michel Provencher, a professional engineer.

The design engineer Vathis did not testify and his report [4] is not produced as opinion evidence. [ 31 ] The first demand letter of September 16, 2014 [5] is nonspecific as to structural repairs required.

Though the letter gives the Defendant seven days to correct, there is no specific programme of correction referred to. [ 32 ] The Vathis report is dated October 23, 2014. [ 33 ] On November 10, 2015 the Defendants made their cross demand as a purely monetary claim; it is not a putting in default to carry out corrective work. [ 34 ] A second letter of demand, dated February 24, 2015 and served on the Plaintiff March 5, makes reference to the Vathis report sent in November.

It is also a claim for money and does not consist in a claim to do structural work. [ 35 ] The Vathis report speaks chiefly to the idea of replacing the windows. [ 36 ] The Vathis report was not relied upon as expert testimony. [ 37 ] Even if it had been, it was not particularly credible since Mr. Vathis’ expertise is structural engineering, not architecture. Windows are an architectural element, not a structural one. [ 38 ] The Vathis report provides insight as to why the Defendants did not properly put the Plaintiff in default with respect of structural issues. Mr.

Vathis speaks of a newly-appointed contractor he met on September 8, and he reiterates his clients’ assertion that Fleur de Lys had abandoned work. [ 39 ] The expert report that was relied upon at trial by the Defendants, the Provencher report of March 25, 2017, speaks of new unrelated work carried out May to July because of water damage. Corrective work was given to another contractor, DHMR. on May 16, 2016. [ 40 ] All corrections were approved by Provencher as performed on 7 July 2016. The Provencher report was not disclosed to the Plaintiff contemporaneously to the findings and the corrective work.

The Plaintiff only learned about it at the trial. This caused a postponement, because it was taken by surprise. Findings [ 41 ] The claim made at trial is, for the most part, for the structural repairs specified by Mr. Provencher. There was mention as well of mechanical problems to do with the ventilation system. Fleur de Lys was never put in default to correct work according to these specifications: the general mise en demeure and the cross demand itself do not constitute an opportunity to complete or correct the work. [ 42 ] Mr.

Vathis only intervened after Fleur de Lys’ work had been suspended: his intervention did not result in a direction to the Plaintiff to correct his work in any specific way. [ 43 ] Much of what was done later was an engineering redesign by Mr. Provencher, without an opportunity for Fleur de Lys to take cognizance of the specifications and to comment on them. The works were simply carried out by the new contractor at a cost of

$ 22,281.32 [6] . The Provencher Report mentions this amount as being appropriate to the extent of $ 19,781.00. [ 44 ] The cross demand fails because of the inadequacy of the process of putting in default. Fleur de Lys was not given a clear indication of what work required correction and was not given an opportunity to carry out such corrections. [ 45 ] What’s more, the quantification of the required corrections or improvements is not necessarily a measure of damages that would be owed by Fleur de Lys who was working pursuant to a contract by time and material, not a contract at a fixed price.

The work that was given was not defined in plans and specifications for construction purposes. The contract was an award of specific tasks given on a weekly basis, and the design engineer did not provide comprehensive specifications. [ 46 ] The true measure of prejudice would not necessarily be the cost of doing the work that Fleur de Lys did not do.

It would be necessary to demonstrate that any additional work was more expensive than if it had been done originally by Fleur de Lys on its cost and material basis and that the value of work done by Fleur de Lys could not be salvaged and was lost in demolition. [ 47 ] This evidence is not adequately established in the Defendants’ case. [ 48 ] It follows then that Fleur de Lys’ insurer, Lloyds, is not liable. It becomes unnecessary to consider the question whether the loss reported would be covered or not under the policy. [ 49 ] All parties having been successful in part, there will be no award as to costs.

BY THESE REASONS, THE COURT: GRANTS, IN PART, the Plaintiff’s claim, condemning the Defendants to pay the Plaintiff the amount of $ 671.63, with interest at the legal rate of 5% per annum together with the additional indemnity provided at

article 1619 Civil Code of Québec calculated from September 18, 2014; DISMISSES the Defendants’ cross demand; DISMISSES the third-party proceedings against the Impleaded Party. WITHOUT COSTS. __________________________________ DAVID L. CAMERON, J.C.Q. Date of hearing : March 27, 2017 and February 12, 2018