617359 Saskatchewan Ltd., operating as End of the Roll - v. -, 2013 SKPC 27

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2013 SKPC 027 Date: March 13, 2013 File: SC#231 of 2012 Location: Saskatoon _____________________________________________________________________________ Between: 617359 Saskatchewan Ltd., operating as End of the Roll - and - Evelet Home Improvements Ltd., operating as Rock N Tile Services and Hollie Ockey and Manley Hernandez J. Patrick, Student-at-law For the Plaintiff H. Ockey and M. Hernandez For the Defendants _____________________________________________________________________________ JUDGMENT Q.D.

AGNEW , J _____________________________________________________________________________ [ 1 ] The plaintiff, 617359 Saskatchewan Ltd., operates a business known as “End of the Roll”. It sells, and arranges for the installation of, coverings such as tiles. The corporate defendant is in the business of installing tiles. The individual defendants are employees of the corporate defendant. During the course of the trial it was implied, but not proven in evidence, that they are also the principals of the corporation.

No evidence was provided as to the corporate structure of Evelet Home Improvements Ltd., including its shareholders, directors or officers.

[ 2 ] I make the above comments with respect to the corporate defendant, and the name of the corporate plaintiff, notwithstanding the style of cause in the plaintiff’s Statement of Claim. The plaintiff there listed the “Plantiff” [sic] as “617359Sk. Ltd T/A End of the Roll/Rodney S. Mellquist”. The stye of cause in the summons as issued by this Court, however, identifies the plaintiff as “617359 Saskatchewan Ltd., operating as End of the Roll”, and eliminates Mr. Mellquist. During the course of the trial, it became obvious that Mr. Mellquist indeed has no personal interest in this action.

Similarly, the Statement of Claim identifies the “Defendant” [sic] as “Holly Oakey and Manley Hernandez T/A Evelet Home Improvements Rock ‘n Tile Services.” Once again, the style of cause on the summons identifies the corporate defendant as “Evelet Home Improvements Ltd., operating as Rock N Tile Services”. No objection having been taken to the style of cause as issued by this Court, I take it to be proper.

I note that from all appearances, the original Statement of Claim was likely not drafted with legal assistance, although the plaintiff subsequently obtained the aid of counsel. [ 3 ] In late 2011, the plaintiff contracted with the corporate defendant (hereinafter referred to as “Evelet”) to install tile and certain other, related products in two homes in Saskatoon. These will be referred to hereinafter as “the Thorpe home” and “the Lieffer home”.

In each case, the services which Evelet contracted to provide were physically provided by the individual defendants. [ 4 ] The plaintiff’s complaints are as follows: 1. in the Lieffer home, several rows of small tiles were inserted between rows of large tiles. However, the edges of the small tiles were not lined up with the edges of the large tiles, with the result that the grout lines between the tiles, both large and small, did not run in an uninterrupted fashion from the top of the tiling

section to the bottom. I accept that this constituted faulty workmanship in the context of this particular installation; 2. in the Lieffer home, due to the fault of someone else one wall of a shower was not straight, but rather bulged. The defendants applied tiles over the bulge. When the tiles were applied, the bulge became much more pronounced. The tiles had to be removed and the wall straightened before tiles were again applied. I accept that installing the tiles without fixing this problem constituted faulty workmanship; 3. at the Lieffer home, a tile was dropped by either Ms. Ockey or Mr.

Hernandez, resulting in a chip in the floor of the installation. It has proven impossible from the evidence to determine which of the two of them was actually responsible for dropping the tile which caused the damage. The defendants also failed to properly lay down material to protect the surface from exactly this kind of accident; 4. in the Thorpe home, the drain in the shower was installed incorrectly, such that water did not drain fully out of the bottom. I accept that this constituted faulty workmanship; 5. in the Thorpe home, tiling was installed on a bulkhead over the entrance to the shower.

However, the height of the bulkhead was not consistent, increasing from one side of the opening to the other. When tiles were applied, this change in size became very apparent and the tiling was unsightly. I accept that this constituted faulty workmanship. [ 5 ] I recognize that in the testimony of Ms. Ockey, she alleged that certain of these problems were brought to the attention of Mr. Mellquist, of the plaintiff, prior to the tiling being done, and that Mr. Mellquist instructed Ms. Ockey and Mr. Hernandez to proceed with tiling in any event.

She further alleged that it was only after the plaintiff received complaints that it insisted that the work be corrected. However, neither Ms. Ockey nor Mr. Hernandez cross-examined Mr. Mellquist on these points when he was on the witness stand. He was not given an opportunity to confirm, deny or explain. Accordingly, I am not willing to give credence to these allegations.

Had I found that these problems were brought to the plaintiff’s attention and the individual defendants proceeded to carry out the plaintiff’s instructions, and that it was only after so doing that complaints were received and the changes were required, I would not have found in the plaintiff’s favour with respect to those matters. Damages [ 6 ] The plaintiff has claimed damages in the amount of $6,858.21. It asserts that this is the cost to remedy the problems caused by the defendants.

In the course of the evidence, it became clear that, while this may be the total of the invoices which the plaintiff sent to Evelet relating to the repairs, it is not the amount which it actually cost the plaintiff to correct these problems.

[ 7 ] Mr. Mellquist testified that the plaintiff marked up its costs in these invoices. The amount of that markup, and what exactly it was intended to cover, was not at all obvious. I found Mr. Mellquist to be unclear in his evidence on this point. He asserted that his markup was on the basis of “points” rather than percentages, although at times in his evidence he used percentages in discussing the amount of his markup. For example, he stated that a 10% “administration fee” is the policy of his company “to handle installers’ paperwork”. It was not clear to me what this meant.

However, the context in which he stated this was that he paid an installer one amount to fix one of the problems which is the subject of this lawsuit, and now seeks to recover that amount plus 10% from the defendants. Mr. Mellquist’s credibility was not assisted by the fact that he admitted this immediately after he said that he simply claimed from the defendants exactly what he had paid to the installer. [ 8 ] Elsewhere in his testimony, Mr.

Mellquist testified that he added 20% to 25% to the cost of product used in repair of these difficulties, when he put them in the invoices which he sent to the defendants and on which the plaintiff now sues. At another point in his testimony, he again said that his markup on “product” was usually 20% to 25%, but then said it was 20 - 25 “points”. There followed a lengthy, involved and ultimately unsuccessful attempt to explain what he meant by “points”. His explanation may have made sense to Mr. Mellquist, but it made no sense to me. Mr.

Mellquist attempted to argue that it was not possible to run a retail operation on the basis of a markup based on percentages, but that instead it had to be done on points, because otherwise one could not make any money. The fact that, from his explanations, “points” simply seems to be a different way of calculating the size of a markup, and is thus simply a different arithmetic calculation as opposed to a fundamentally different way of doing business, seemed lost on him. At the end of Mr.

Mellquist’s evidence, I was left uncertain as to whether he was deliberately obfuscating, or if he was genuinely unable to see that the difference amounts to no difference that could not be solved by using a different multiplier. By way of example, at one point Mr. Mellquist stated that a 34% markup was equivalent to 20 - 25 “points”. This simply illustrates that these are different ways of calculating markup, but nothing more. According to Mr. Mellquist, the plaintiff’s normal “spread” is 40 - 50 “points”, of which 20 - 25 “points” is overhead.

Presumably the other half of that markup is profit to the plaintiff corporation. [ 9 ] Ultimately, whether as points or percentages, it became clear that the plaintiff was attempting to recover from the defendants not only its out-of-pocket costs for these repairs, but also some amount that it could charge against its overhead, plus profit. How the claim breaks down between these three is not discoverable from the evidence. According to Mr. Mellquist, whom I found less than persuasive, the plaintiff marked up labour to fix these problems at 10%.

Elsewhere, he stated that the plaintiff marked up product that was supplied to fix some of these problems by approximately 34% (20 - 25 “points”). [ 10 ] Looking at some of the known amounts tells a different story. On one occasion it turns out that he marked up a $315.00 charge to $350.00, a markup of slightly over 11%. This is a small difference, but indicates that whatever the plaintiff’s policy may have been, it was not a fixed markup of 10%. More significant is the case of Exhibit P-6. Mr.

Mellquist testified that this invoice to the defendants includes nothing but the amount charged by the third-party repairer (Exhibit D-6) and the markup. The D-6 amount of $171.82 becomes (not including tax) $525.00, a markup of over 200%. At least one invoice, on the other hand, seem to have been passed on to the defendants with no markup at all: see Exhibit P-2. [ 11 ] From these and other difficulties, as well as the experience of observing Mr. Mellquist on the witness stand, I have concluded that I cannot rely on his testimony with respect to damages.

That is unfortunate, because it is clear that the plaintiff has suffered some damage, in that it has been put to some expense to purchase new materials and to pay another subcontractor to repair the problems encountered: but I have no reliable information as to the amount of those expenses. [ 12 ] What is certain is that the plaintiff’s figures, however flawed, include what amounts to claims not just for compensation for amounts paid out to third parties to remedy the breaches, but also for amounts to pay the plaintiff’s office expenses, and profit.

I have no hesitation in saying that damages do not include profit: the purpose of damages is compensatory, and the plaintiff is not entitled to be put in a better position than he would have been in had the breaches not occurred. With respect to overhead, in essence this amounts to a claim for costs - the normal expenses that a party is put to in pursuing rectification of a legal wrong. A claim for costs should be laid out separately in the evidence, and argued as costs, rather than being smuggled into the claim in the guise of compensatory damages.

Were I inclined to grant the plaintiff some amount in costs beyond the Court’s filing fee, this surreptitious approach would be enough to make me exercise my discretion against awarding such costs. [ 13 ] Mr. Hernandez agrees that some errors were made, and concludes that the total which the plaintiff should receive in judgment is $1,900.00. He came to this amount by deciding that the damages at the Thorpe home were $1,100.00 and the damages at the Lieffer home were $1,400.00, and then deducting $600.00 which the plaintiff had previously held back. It was not clear to me how those numbers were arrived at. Ms.

Ockey also agrees that errors were made for which the plaintiff should receive compensation. She

suggests that the amount should be the total of Exhibits D-15 and D-16, or $364.40. Her explanation of the difference between her position and that of Mr. Hernandez’ is that she is more upset than he is. [ 14 ] As indicated above, the plaintiff claims $6,858.21. I am not prepared to grant judgment in that amount, given the problems I have set out above. On the other hand I do not think it fair, or appropriate, to award the plaintiff nothing on the basis that it has not proven its damages: it has in fact proven some damages, albeit that quantification is difficult. As stated in Maisonneuve v.

Burley [1] , citing the Supreme Court of Canada in Wood v. Grand Valley Railway Co. [2] , “the fact that damages cannot be assessed with certainty does not relieve the defendant from his obligation to compensate the plaintiffs”. [ 15 ] The evidence is that the expenses which the plaintiff incurred to repair the defendants’ breaches were marked up between 0% and 200%. I note that a 100% markup would constitute a doubling of the initial amount - that is, that $1.00 marked up by 100% would be $2.00.

The best estimate I can make of the actual damages suffered by the plaintiff for which it is legally entitled to compensation amounts to one-half of the total of its invoices, or $3,429.11. Judgment against whom? [ 16 ] The plaintiff urges me to find liability on the part of the individual defendants on two bases. The first is that they are the principals behind Evelet, and that I should pierce the corporate veil. The second is that the individual defendants were negligent in their actions, and should accordingly be liable to the plaintiff on that basis. I will deal with each of these issues in turn. i.

Piercing the Corporate Veil [ 17 ] The plaintiff argues that I should “pierce the corporate veil” to find liability against the individual defendants. I am not prepared to do so, for two reasons. [ 18 ] The first reason is that I do not consider this to be, at law, a proper case for so doing. The law is clear that, as a general rule, a corporation is a distinct legal entity from its shareholders. [3] Finding liability against individuals involved in the corporation is called “piercing the corporate veil”.

It has been stated by the Supreme Court of Canada that the law as to when the corporate veil may be pierced “follows no consistent principle”. [4] The Saskatchewan Court of Appeal in 1994 referred to when the courts have been willing to do so. [5] Speaking of a subsidiary corporation, but with comments applicable to shareholders who are individuals, the Court of Appeal said: the courts have found it possible to pierce the corporate veil when one company is in fact the agent of the other, or where one of the companies is being used to cloak the actions of the other or where it is necessary to permit enforcement of tax laws.

The courts have also pierced the corporate veil when one company is so dominated by another that even though they are separate in law, one is so controlled by the other that both corporations constitute one common unit. [6] [ 19 ] The decision as to whether or not to pierce the corporate veil is very fact-specific. The significant facts in the case before me are: (1) the plaintiff, itself a corporation, made a conscious decision to enter into a contract with Evelet, not with the individual defendants. Mr.

Mellquist, who testified on behalf of the plaintiff, I find to be an experienced and knowledgeable business person; there is no suggestion that he did not know what he was doing when he caused the plaintiff to enter into a contract with the corporate defendant;

(2) Mr. Mellquist, when questioned, specified that the contract was between the two corporations, not with the individuals. Although the “New Installer Form”, Exhibit D-19, refers to the individual defendants by name, Mr. Mellquist was quite specific that the contract was between his corporation and Evelet.

The documents on which the plaintiff sues are made out to “Evelet Home Improvements”, and I find that there was no intention on the part of either the plaintiff or the defendants that the contract for installing tiles would be with the individual defendants; (3) none of the four factors identified by the Court of Appeal are present in this case; (4) the only argument in favour of piercing the veil is that the individual defendants are purportedly the only shareholders and directors (and thus the “guiding mind and will”) of the corporation. However, this is very often the case in small, closely-held corporations.

Were I to conclude that this in and of itself is sufficient to justify piercing the corporate veil, I would in effect be holding that shareholders in small, closely-held corporations are not entitled to the benefits of limited liability, a proposition for which no authority has been cited and which I am disinclined to assert. [ 20 ] To my mind, the above reasons are sufficient to dispose of the suggestion that I pierce the corporate veil. As indicated above, however, there is a second reason as well. That reason is that there is no evidence before me as to the corporate structure of Evelet.

Who its shareholders are, who its directors are, who its officers are and what positions they hold: these remain unknown to me. Even were I so inclined, I would be unable to pierce the corporate veil. However, as indicated above, the issue is moot since even if I had that information, and even if it was the most helpful possible to the plaintiff, I would not find in its favour on this point. ii.

Negligence [ 21 ] The plaintiff also urges me to find the individual defendants liable on the basis of their alleged negligence. [ 22 ] It is clear that in Canadian law there can be liability in both contract and tort arising out of the same facts, even with respect to the same defendant. [7] The distinction between the two causes of action can sometimes be important, as in situations where the calculation of damages would be significantly different, or where different limitation periods would apply.

The latter situation is less likely to occur now, given the changes made to the limitations regime in this province in 2005. In any event, there is no limitations issue in the case before me, nor has any argument been made that damages would be different as against Evelet whether liability were to be found in contract or tort. [ 23 ] The situation is different with respect to the individual defendants, however.

As I have found that there was no contract with them, the only liability which the plaintiff can argue as against them is in negligence. [ 24 ] It is trite to say that negligence involves a duty to a person who it is reasonably foreseeable would be harmed by breaching that duty, such a breach, and damages causally connected to that breach. There are of course a great number of exceptions, expansions, clarifications and deviations, but the essence is duty, as defined by reasonable foreseeability, and a breach causing damage.

In the present case, it is not clear to me that such a duty was owed to the plaintiff by the individual defendants. There could perhaps be the basis for a negligence claim by the homeowners - a court might conclude that the harm they would claim to have suffered from improper installation of tiles, for example, was reasonably foreseeable. Certainly, the dropping of the tile and resulting damage to the shower floor might be the basis of a negligence claim by the homeowner. It is not clear that the individual defendants owe to the plaintiff the same duty they would owe to the homeowner, however.

Was it reasonably foreseeable by the individual defendants that the plaintiff would be harmed by their actions? Furthermore, does it need to be reasonably foreseeable that there would be any harm over and above the breach of contract between the corporate parties? Both the evidence and the arguments submitted are of very limited use to me in considering these issues. [ 25 ] It is clear that employees can be liable in negligence to their employer’s customers; whether or not there is such liability depends on ordinary principles of tort law. This was enunciated by the Supreme Court of Canada in London Drugs Ltd. v.

Kuehne & Nagel International Ltd. : There is no general rule in Canada to the effect that an employee acting in the course of his or her employment and performing the "very essence" of his or her employer's contractual obligations with a customer does not owe a duty of care, whether one labels it "independent" or otherwise, to the employer's customer . . .

There may well be cases where, having regard to the particular circumstances involved, an employee will not owe a duty of care to his or her employer's customer . . . the question of whether a duty of care arises between an employee and his or her employer's customer depends on the circumstances of each particular case.

The mere fact that the employee is performing the "very essence" of a contract between the plaintiff and his or her employer does not, in itself, necessarily preclude a conclusion that a duty of care was present. [8] [ 26 ] Did the individual defendants breach a duty of care to the plaintiff in the present case? The plaintiff argues, in its brief, that “there was a sufficient relationship between [the plaintiff and the individual defendants] to expect that the defendants’ action, if careless, would cause loss to the plaintiff.” The plaintiff, in support of that proposition, cited Canoak Flooring Ltd. v.

Link [9] , a decision of this Court, which in turn cited the House of Lords in Anns v. Merton London Borough Council [10] . The plaintiff does not, however, explain how it is that the relationship is such that it meets this test, other than by saying that by not installing the tiling in a good and

workmanlike manner, the defendants breached their duty of care. I agree that the contracts, in the manners I have described, were not carried out in a good and workmanlike manner; I do not agree that this automatically constitutes a breach of duty for the purposes of negligence.

The tests are conceptually different, and while there may be cases in which they are effectively the same, it is not clear that this is one of them. [ 27 ] I find that the damage to the shower floor in the Lieffer home was a breach of duty in the tortious sense, and constituted negligence vis a vis the plaintiff; I do not find the same with respect to any of the other breaches of contract. [ 28 ] As a result, I have to assess damages with respect to the shower floor. The same comments I made above regarding damages, and the frailties of the evidence regarding the same, apply.

There is an additional difficulty, in that I have been unable to locate in the evidence any monetary information specific to the shower base which had to be replaced. The figures seem to combine various repairs at the Lieffer home, and I have found it impossible to determine what amounts would properly be related to this specific problem. In the circumstances, I have decided that it would be appropriate to use the figure which Mr. Hernandez proposed for damages at the Lieffer home, namely $800.00 (being $1,400.00 less a holdback of $600.00 retained by the plaintiff).

As indicated above, I am unable to determine which of them was actually responsible for dropping the tile; I find that they were both responsible for the failure to adequately protect the shower floor. As a result, I find them jointly and severally responsible for this amount. Prior settlement [ 29 ] After all of the above matters between the parties boiled over, the plaintiff refused to pay Evelet the balance of the contract prices. The evidence is not clear exactly what Evelet did, or intended to do: Ms.

Ockey, for instance, referred to placing a “thrasher’s lien” in place, which I note as a matter of law would not have been an available option. It appears that a builder’s lien, pursuant to The Builder ’s Lien Act [11] , was either threatened or put in place. In any event, as a result of whatever actions were taken, the plaintiff paid to Evelet the entire balance of the contract prices.

The plaintiff subsequently commenced this lawsuit to recover what it considered were its losses arising out of these transactions. [ 30 ] From the evidence, there were no settlement documents of any kind signed when that payment was made. There does not appear to have been any consideration given by either side as to whether or not the payment was to finalize all matters between the sides, or if the payment was without prejudice to the plaintiff’s right to bring an action such as the present one.

There was no release, no settlement agreement, no documentation of any kind executed by the parties. [ 31 ] I conclude that the plaintiff did not make any admission of liability, and that it retained the ability to pursue compensation through an action such as this. I speculate that the defendants might have been well-served to have obtained legal advice at that point: had settlement documentation been signed by all parties at that time, it is likely that this lawsuit would not have occurred.

However, while it is always easy to see in retrospect what a better course of action might have been, it is often difficult to justify the cost of such decisions at the time they have to be made. [ 32 ] Accordingly, I find that the plaintiff’s payment to Evelet is not a bar to this action. Judgment [ 33 ] I note that the court filing fee to commence this matter was $69.00, but the plaintiff only claimed $50.00 of that amount in its Statement of Claim.

As the plaintiff was successful against all three defendants, it is entitled to the costs it claimed, namely $50.00, as against all three defendants. [ 34 ] The plaintiff has claimed pre-judgment interest in accordance with The Pre-Judgement Interest Act [12] . The plaintiff’s claim arises from monies it paid out over a period of time, to repair the defendants’ errors. When those amounts were paid is not clear from the evidence, as most of the plaintiff’s evidence in this regard consists of its own invoices to Evelet. Mr.

Mellquist implied that these were amounts that had been paid by the time the invoices were sent, which would mean that the plaintiff had incurred those expenses by the dates of those invoices; but then, I have already found Mr. Mellquist’s statements regarding those invoices to be unreliable. I note that the plaintiff first sent a demand letter to the defendants regarding this matter on May 5, 2012. I believe it reasonable to conclude that it had incurred all of its expenses by that date, and accordingly I award pre-judgement interest in accordance with the Act from that date.

[35] There will accordingly be judgment against the three defendants, jointly and severally, for $800.00, plus costs of $50.00, andagainst Evelet in the further amount of $2,629.11, together with pre-judgement interest on those respective amounts (not including costs)from May 4, 2012. ____________________________ Q.D. Agnew, J [1][2001] S.J. No. 520, 2001 SKQB 407, [2002] 1 W.W.R. 111, 211 Sask. R. 100, 13 C.L.R. (3d) 186, 108 A.C.W.S. (3d) 280, at para.44. [2](1915), (SCC), 51 S.C.R. 283, [1915] S.C.J. No. 17, 25 C.R.C. 117, 22 D.L.R. 614. [3]Salomon v. Salomon & Co., [1897] A.C. 22 (H.L.). [4]Kosmopoulos v.

Constitution Insurance Co., (SCC), [1987] 1 S.C.R. 2, 63 O.R. (2d) 731, 34 D.L.R. (4th) 208, 36 BLR233, 21 OAC 4 at paragraph 12. [5]Tridont Leasing (Canada) Ltd. v. Saskatoon Market Mall Ltd., (SK CA), [1995] S.J. 297, [1995] 6 W.W.R. 641,131 Sask. R. 169, 24 B.L.R. (2d) 105, 46 R.P.R. (2d) 169, 55 A.C.W.S. (3d) 1047. [6]Paragraph 16. See also paragraphs 98 through 103 of the dissent. [7]See Central & Eastern Trust Co. v.

Rafuse, (SCC), [1986] 2 S.C.R. 147, 31 D.L.R. (4th) 481, 34 B.L.R. 187, 37C.C.L.T. 117, 42 R.P.R. 161, 75 N.S.R. (2d) 109, 186 A.P.R. 109, 69 N.R. 321, [1986] R.R.A. 527. [8] (SCC), [1992] S.C.J. No. 84, [1992] 3 S.C.R. 299, 97 D.L.R. (4th) 261, 143 N.R. 1, [1993] 1 W.W.R. 1, 18 B.C.A.C.1, 73 B.C.L.R. (2d) 1, 43 C.C.E.L. 1, 13 C.C.L.T. (2d) 1, 36 A.C.W.S. (3d) 669 at paragraphs 185 and 186. [9][2008] S.J. No. 840, 2008 SKPC 173, 329 Sask. R. 52 at paragraph 26. [10] [1977] 2 All ER 118, [1978] AC 728, [1977] UKHL 4. [11]S.S. 1984-85-86, c. B-7.1 as amended. [12]S.S. 1984-85-86, c. P-22.2, as amended