Kinghorn v. Osprey Construction Ltd., 2022 BCPC 245

Citation: Kinghorn v. Osprey Construction Ltd. 2022 BCPC 245 Date: 20221102 File No: 5742 Registry: Duncan IN THE PROVINCIAL COURT OF BRITISH COLUMBIA (Civil Division) BETWEEN: RAQUEL KINGHORN CLAIMANT AND: MICHAEL ALEXANDER and OSPREY CONSTRUCTION LTD. DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE T. GOUGE Appearing on her own behalf: R. Kinghorn Appearing for the Defendants: M. Alexander Place of Hearing: Duncan, B.C. Duncan, B.C. August 15, 16 and October 27, 2022 Date of Judgment: November 2, 2022 [ 1 ] Ms. Kinghorn claims damages for breach of a construction contract.

The Defendant, Osprey Contracting Ltd. (“the Corporate Defendant”) counterclaims for amounts which it alleges to be due under the contract. The Defendant, Mike Alexander, is the principal of

the Corporate Defendant. The Parties to the Contract [ 2 ] In the summer of 2020, Ms. Kinghorn approached Mr. Alexander, seeking an estimate for the replacement of her carport with a more sophisticated structure with a rooftop deck. On July 18, 2020, Mr. Alexander provided Ms. Kinghorn with an estimate of $45,536.76, not including applicable taxes. Ms. Kinghorn authorized him to proceed with the work. The estimate identified the contractor as “Osprey Contracting”, which was a trade name under which Mr. Alexander carried on business. [ 3 ] On July 23, 2020, Mr.

Alexander caused the Corporate Defendant to be incorporated. Sometime in November 2020, Mr. Alexander sent a second estimate to Ms. Kinghorn. The only difference between the first and second estimates is that the contractor identified in the second estimate is the Corporate Defendant. [ 4 ] Ms. Kinghorn asserts that she contracted with Mr. Alexander. He asserts that she contracted with the Corporate Defendant. On this issue, Ms. Kinghorn is obviously correct. Mr. Alexander had no right to substitute the Corporate Defendant as the contracting party, without the consent of Ms. Kinghorn, after the contract was made.

The Terms of the Contract [ 5 ] I am mindful that the construction contract in this case was partly oral and partly written. Mr. Alexander provided a written estimate and Ms. Kinghorn orally instructed him to proceed. That raises a question as to the terms of the contract. Plainly, the parties did not intend a fixed-price contract, under which Mr. Alexander promised to perform the work at the price stated in the estimate. There is no reference in the documents or in the oral evidence to a cost-plus contract. The differences between the two were discussed in Ashlar Developments Inc. v.

Barakat Industries Ltd. , [2018] AJ No. 90 ; 2018 ABQB 67 . At paragraph 14, Master Schlosser said: An open-ended contract or a costs-plus contract puts the risk of overrun (though limited) with the owner. A fixed-price contract puts the risk of overrun on the contractor. A contract with an estimate as a reference apportions the risk between both. In both cases, the final allowable amount is required to fall within the bounds of reasonableness. [ 6 ] At paragraph 16, Master Schlosser quoted the following passage from Patel v. W.G.

Housing Ltd. [2012] AJ No. 1403 ; 2012 ABQB 734 : The bounds of reasonableness will be circumstance specific. In this case, I consider a range of plus or minus 5% to be reasonable. This case involved a larger project, not of a unique nature, involving many different cost inputs, where each was reasonably ascertainable. Greater care into estimating accuracy is expected as the amounts at stake increase, militating in favour of a narrower band of variance.

The more unique the subject matter of the project, the less experience the estimator will have from which to expect accuracy, militating in favour of a wider band of variance. For a project comprising numerous input costs, the expected variability in each input offset each other to a degree. In such cases the total variability, or range of reasonableness, is therefore narrower than for a project with only a few or just one cost determiner. [ 7 ] The contract between Ms. Kinghorn and Mr. Alexander was for a routine piece of renovation work, not complicated and readily estimable.

I think that a variance of 10% from the estimated price would be reasonable. As a result, I conclude that Mr. Alexander contracted to perform the work for a price less than $51,000. The Building Permit Application [ 8 ] A building permit was required by the Cowichan Valley Regional District (“CVRD”). Mr. Alexander prepared the building permit application, which he and Ms. Kinghorn signed. [ 9 ] Mr. Alexander says that he submitted the building permit application to CVRD in November, 2020. Mr. Gary Anderson is the building inspector for CVRD.

He was called to give evidence, and said that no building permit application was ever submitted to CVRD. I accept Mr. Anderson’s evidence on the point. Ensuing Events [ 10 ] Mr. Alexander commenced work on the project in mid-August. Ms. Kinghorn was dissatisfied with some of the work and complained to Mr. Alexander. Some of the deficiencies were rectified. Mr. Alexander completed the project on November 23, 2020. [ 11 ] Ms. Kinghorn remained dissatisfied with the quality of the work. In particular, the roof leaked, with the result that there was water on the garage floor every time it rained.

In December, 2020, she telephoned to the office of the CVRD building inspector. During that call, she learned for the first time that no application for a building permit had been filed with CVRD and that no building permit had been issued. [ 12 ] Mr. Anderson inspected the work on January 8 and February 1, 2021. He concluded that the building, as constructed, conformed neither to the plans provided to him by Ms. Kinghorn nor to the British Columbia Building Code . He recommended that Ms.

Kinghorn retain a structural engineer to assess the building, and that she follow the engineer’s advice in taking remedial measures. When he gave evidence at trial, he said that: a. If a building permit application had been filed, as it ought to have been, before work was commenced, he would have inspected the work periodically during construction to determine whether it was being done in conformity with the plans and the British Columbia Building Code .

If deficiencies were identified during the course of construction, he would have issued a stop-work order and required the deficiencies to be corrected before allowing work to proceed. b. If Ms. Kinghorn had ignored his advice to: (

i) retain a structural engineer in February, 2021; and (ii) act on the engineer’s advice, he

had a number of legal remedies available to him to compel her to do so. c. Most of the deficiencies which he identified during his inspection were structural and serious. [13] Ms. Kinghorn retained Mr. Jonathan Reiter, a structural engineer, to inspect the work. In his report, he identified nine majorstructural deficiencies. They created a risk that the structure would collapse under heavy loads (having particular regard to activities onthe roof-top deck) or in the event of an earthquake. He set out the particulars of the work necessary to remedy the deficiencies.

Ms.Kinghorn retained another contractor to undertake the remedial work recommended by Mr. Reiter. Most of that work has beencompleted, at a cost of $29,956. The estimate of the cost of the remaining remedial work is $14,500. [14] Mr. Alexander tendered in response the evidence of Mr. Robert Blanchard, a structural engineer, who inspected the work at Mr.Alexander’s request in August 2022, after most of the remedial work had been performed. He acknowledges that there were deficienciesin the work performed by Mr.

Alexander, but opines that the deficiencies were relatively minor, that they could have been remedied byMr. Alexander at relatively small expense, and that Mr. Alexander ought to have been offered the opportunity to remedy them. [15] I do not accept Mr. Blanchard’s evidence. He did not have the opportunity to inspect the work as performed by Mr. Alexander.He saw it only after very substantial remediation had already been done. I do not see how he could opine as to the quality of work whichhe has never seen. His evidence flatly contradicts that of Mr.

Anderson, who is an independent witness, with appropriate qualifications,who inspected the work as performed by Mr. Alexander. [16] It is an implied term of a construction contract that the work shall be constructed in conformity with the applicable building code: G. Ford Homes Ltd v. Draft Masonry (York) Co. Ltd., (1983) (ON CA), 43 OR (2d) 401; 1 DLR (4th) 262; Mason v.Michaud, [2020] BCJ No. 2312; 2020 BCPC 283. In this case, Mr. Alexander breached that term of the contract. [17] Mr. Alexander complains that Ms.

Kinghorn ought to have afforded him the opportunity to remedy the defective work beforeretaining another contractor for that purpose. The governing principle was stated in 2016637 Ontario Inc. v.

Catan Canada Inc., [2013] OJ No. 3259; 2013 ONSC 4727; 26 CLR (4th) 84 at paragraph 47: There is authority for the proposition that if there are defects in a contractor's workmanship, but not enough to amount to a fundamentalbreach entitling the owner to rescind the contract, the contractor should be permitted to remedy the defects and failure by the owner topermit such corrections should disentitle or reduce the amount of damages the owner can claim to remedy the defects as a result of itsfailure to mitigate (see Nichol v. Horner 2012 BCPC 164 … at para. 66).

A similar proposition was stated in CED - Building ContractsXIII 3, para. 350 as follows: "a contractor has a right to be notified of defects and to be given an opportunity to correct them, but thisright arises only in contract and not under common law."… [18] The question, therefore, is whether Mr. Alexander’s breach of contract may be properly characterized as “fundamental”. Theprinciples to be applied in answering that question were set out in Spirent Communications of Ottawa Ltd. v. Quake Technologies(Canada) Inc., 2008 ONCA 92; 88 OR (3d) 721, and summarized as follows in 1157391 Ontario Ltd v.

Ortiz, [2021] OJ No 4836; 2008ONSC 5923 at paragraph 14: …Spirent establishes the following principles: (

a) Only a fundamental breach gives a party the right to terminate a contract …. (

b) A "fundamental breach is one which deprives the innocent party of substantially the whole benefit of the contract" …. (

c) There are five factors to consider in deciding whether there has been a fundamental breach: The five factors are: (1) the ratio of the party's obligations not performed to that party's obligations as a whole; (2) the seriousness of thebreach to the innocent party; (3) the likelihood of repetition of such breach; (4) the seriousness of the consequences of the breach; and(5) the relationship of the part of the obligation performed to the whole obligation … [19] In considering those five factors, I am mindful that the obligation of a builder to comply with the applicable building code is ofgreat importance, not just to the building owner but also to the general public.

The most important function of a building code is toprovide a safe structure for those who use it. Mr. Alexander’s failure to conform to the building code put public safety at risk.Addressing the five factors in turn: a. Mr. Reiter identified structural deficiencies throughout the building. b. The breach was, from Ms. Kinghorn’s point of view, very serious. It left her with an unsafe building and a direction from themunicipal building inspector to repair it. It cost her more to remedy the deficiencies than Osprey’s estimate of the cost of the entireproject. c. From Ms.

Kinghorn’s point of view, there was every reason to think that any repair performed by Mr. Alexander was likely to sufferfrom similar deficiencies. After all, Mr. Alexander had successfully evaded regulatory oversight by the simple expedient of not applyingfor a building permit. Such a contractor was not to be trusted. d. The consequences of the breach were very serious. The breach left her with an unsafe building and a direction from the buildinginspector to fix it forthwith. e. Mr. Alexander had pronounced the project to be complete. The deficiencies appeared throughout the structure. [20] I conclude that Mr.

Alexander’s breach of contract was fundamental, and that Ms. Kinghorn was entitled to treat the contract asrepudiated.

[ 21 ] Ms. Kinghorn made the following payments on account of the contract price: July 17, 2020 $109 July 24, 2020 $3,000 July 25, 2020 $3,000 July 26, 2020 $,3000 September 6, 2020 $2,500 September 9, 2020 $3,000 October 18, 2020 $18,028.15 November 23, 2020 $15,627.82 Total $48,264.97 [ 22 ] In the result, if Ms. Kinghorn completes the remedial work as recommended by Mr. Reiter (as she intends to do), her total cost for the project will be $92,270, more than $45,000 in excess of the estimate.

On any view of the measure of recoverable damages, her loss exceeds the monetary limit on the jurisdiction of this court (which is $35,000). [ 23 ] Accordingly, Ms. Kinghorn will have judgment against Mr. Alexander for $35,000, plus court order interest at the Registrar’s rate from January 8, 2021 to the date of these reasons. [ 24 ] Under Rule 20(2)(

c) of the Small Claims Rules , Ms. Kinghorn is also entitled to filing fees of $156, service fees of $20, and Mr. Reiter’s fee of $1,398.58 for preparation of his expert report and attendance to give evidence at trial. [ 25 ] The claim against Osprey Contracting Ltd. and its counterclaim against Ms. Kinghorn are both dismissed. _____________________________ The Honourable Judge T. Gouge Provincial Court of British Columbia