Kholghi v. Lammus and, 2022 BCPC 24

Citation: Kholghi v. Lammus and 1244211 British Columbia Ltd. 2022 BCPC 24 Date: 20220217 File No: C-200294 Registry: Victoria IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: NAHID KHOLGHI CLAIMANT AND: CHRIS LAMMUS and 1244211 BRITISH COLUMBIA LTD. DEFENDANTS REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE GOUGE Appearing in person: Ms. Kholghi Appearing in person: Mr. Lammus Place of Hearing: Victoria, B.C. Date of Hearing: February 14, 2022 Date of Judgment: February 17, 2022 [ 1 ] Ms.

Kholghi sues to recover $5,950 which she paid to the Defendants under the terms of a contract which was executed on August 13, 2020, and terminated on November 26, 2020. She also seeks to recover $3,136.89 on account of legal fees which she incurred

for advice relating to the termination of the contract. [2] The corporate Defendant counterclaims for damages for breach of contract, including profit which it alleges that it could haveearned from other clients had it not been bound by the contract in issue. [3] The contract is in writing. The parties named in the contract are “Base Mountain Reno” and Nahid Kholghi. Mr. Lammus saysthat “Base Mountain Reno” is a trade name used by the corporate Defendant. Ms.

Kholghi says that there was no mention of acorporation during the negotiation of the contract, and that she thought that “Base Mountain Reno” was a trade name used by Mr.Lammus. Mr. Lammus did not contradict her on this point. [4] The relevant authorities were reviewed in Clow Darling Ltd. v. 1013983 Ontario Inc., [1997] OJ No. 3655; 36 BLR (2d) 137 @paragraphs 11 - 13: [11] In Corkam v.

Lohnes (NS CA), 43 N.S.R. (2d) 477, it was stated: If a person incorporates a business he must make it clear to those with whom he is negotiating contracts that he is doing so on behalf ofhis company and not in his personal capacity. If he fails to do so, he should not thereafter, when sued, be allowed to hide behind thecorporate veil so called. [12] In Milligan Fuels Ltd. v.

Aitchison [1996] O.J. 407, it was held that the defendant was in breach of his duty to advise the plaintiffthat his limited company was a party to the agreement after he had ample opportunity to clarify that invoices, which had been made outin the defendant's name, should have shown the existence of the limited company as the contracting party. [13] In Nord Ovest Sea v. Gruppo Giorgio Ltd. [1994] O.J. 1657 it was stated that: It was not enough for George Elian to contract using the name "Boutique Cerutti 1881" and to have all the documents use that name.

Itwas his duty to make it clear to each of the plaintiffs that he was acting as agent for his numbered company, and he did not discharge thatduty. I conclude that the contracting parties in this case were Ms. Kholghi and Mr. Lammus. [5] Under the heading “Description of Work”, the contract provides: The Contractor agrees to supply all the materials, obtain all required permits, and perform all the work … as described in the contractdocuments and as set out below …”. Unfortunately, there were no other “contract documents”, and the contract contains no further particulars of the work to be done.However, Mr.

Lammus and Ms. Kholghi agree that the work was to design and install some renovations to Ms. Kholghi’s home inVictoria, and that the general nature and design of the renovations were agreed between them before the contract was signed. [6] The contract form contains a provision for the dates of commencement and completion of the work, but the spaces for thosedates are blank. In such circumstances, the law implies a covenant by the contractor to complete the work within a reasonable time: Diamond 11 Excavating and Demolition Ltd. V.

Dhunna, 2018 BCSC 2230; [2018] BCJ No. 6908; 96 CLR (4th) 147 @ paragraph 50.During the negotiations for the contract, Mr. Lammus estimated that it might take five or six months to obtain the necessary approvalfrom the City of Victoria. [7] The contract provided for a fixed price of $17,850, payable in three instalments of $5,950 each. Ms. Kholghi paid the firstinstalment on execution of the contract on August 13, 2020. The second instalment was due on completion of 2/3 of the work and thefinal instalment when the work was complete. [8] In September 2020, Mr. Lammus told Ms.

Kholghi that the City of Victoria had not yet approved the project. Although literallytrue, that statement was so incomplete as to be misleading. In fact, the City of Victoria knew nothing about the project. Mr. Lammus hadnot followed the prudent practice of the industry, which is to initiate discussions with city officials before detailed plans are prepared.The idea is that city approval is more likely to be obtained if city officials are involved in the design process from the outset.

Mr.Lammus explained that he does not follow that practice because he is based in the Fraser Valley, and the City of Surrey often losesdocuments. I think it incumbent on a contractor who chooses to do business of this kind to make himself familiar with the regulatoryclimate of the city in which he does business and to deal prudently with regulatory officials. Mr. Lammus failed to do that. [9] Mr. Lammus did not tell Ms. Kholghi that he had not communicated with the City about the project. She inferred from hisstatement that the City had been asked to approve the project, and had declined.

She wrote to the City to enquire about her application.The City responded on November 18, 2020, informing her that no application had been received. [10]

Article 7 of the contract provides: The Contractor agrees … to undertake all work diligently in a good and workmanlike manner …. By mid-November, 2020, Mr. Lammus had made essentially no progress on the work required by the contract. He attributes this fact tothe incompetence of a draughtsman to whom he had subcontracted the preparation of the necessary plans and specifications.

Mr.Lammus says that, as a result of that individual’s incompetence, he was unable to make any progress between August 13 and mid-November. [11] The governing legal principle is that, subject to any express terms of the contract, a contractor may sub-contract any part of thework, but remains responsible for the completion of the work in accordance with the contract. It is not a defence to an allegation ofbreach of contract for the contractor to blame the breach on a sub-contractor, even if the breach was caused by the fault of the sub-

contractor. [12] It follows that, by mid-November, Mr. Lammus was in breach of his obligation to “diligently” undertake the work required bythe contract. [13]

Article 13 of the contract provides: If the Contractor neglects to perform the Work in accordance with the terms of this Contract, the Owner may by a written notice to theContractor require it to cure the default, neglect, or event specified in such written notice within fifteen (15) days. If the Contractor fails to comply with the said notice, or is not then actively curing the said default …, the Owner may … finish the workin accordance with the plans and specifications … and provides for an accounting of costs and benefits on completion of the work. [14] On November 26, 2020, Ms. Kholghl sent an e-mail to Mr.

Lammus, in which she said: According to clause 13, we are cancelling the contract, and are expecting to receive a refund on the project. … we are giving you 24hours to respond to this e-mail regarding refund for the amount and the complete refund in 15 days or we will have to escalate this issueto the Small Claim Court.

Article 13 of the contract does not authorize the course of action threatened by Ms. Kholghi. Her only right under

article 13 was to takeover and complete the project and have an accounting of costs and benefits after completion. [15] There remains the question whether Ms. Kholghi was entitled to terminate the contract on the ground of a fundamental orrepudiatory breach of contract. A fundamental breach of contract is one which deprives one party of substantially the whole of thebenefit which the contract was intended to provide to her. A repudiatory breach of contract is one which evinces an intention on the partof the party in breach to no longer be bound by the contract: MacMillan v.

Insurance Corporation of British Columbia, 2021 BCPC 184;[2021] BCJ No. 1678 @ paragraphs 8 - 12. [16] I do not think that a delay of three months in a contract originally expected to take six months or so can be said to deprive theowner of substantially the whole of the benefit which she was to receive under the contract. [17] However, I do think that Mr. Lammus’ conduct in the period August – November 2020, evinced an intention on his part to fail todiligently pursue the project, as required by the terms of his contract.

By his own admission, he retained an incompetent draughtsmanwho failed to move the project forward, and took no other steps himself to do so. In particular, he failed, during that period, to engage theCity officials in the planning process. I conclude that Ms. Kholghi was entitled to terminate the contract as and when she did, althoughnot under the terms of

article 13. [18] Upon termination of the contract, Mr. Lammus’ obligation to perform the contract came to an end, and was replaced by anobligation to pay damages: Moschi v. Lep Air Services Ltd., [1973] AC 331 @ page 350. The normal measure of damages is a sum ofmoney sufficient, in so far as money can do so, to put the innocent party in the position which she would have occupied if the contracthad been performed according to its terms. In this case, there is no evidence from which I could determine that amount.

However, wherethere has been a total failure of consideration, the innocent party may elect, instead, to seek an order for the return of money previouslypaid under the contract: Lyon Developments Ltd. v. Airways Compressor Sales Ltd., [1985] AJ No. 704; (AB KB), 37Alta LR (2d) 80 @ paragraphs 29 – 30. [19] Ms. Kholghi received no benefit at all under the contract. On the contrary, she suffered a loss by reason of the delay in herproject. There has been a total failure of consideration and she is entitled to the return of $5,950 paid by her on execution of the contract. [20]

Section 19 of the Small Claims Act, RSBC 1996, c. 430 provides: The Provincial Court must not order that one party in a proceeding under this Act … pay counsel or solicitor’s fees to another party to theproceeding. For that reason, Ms. Kholghi’s claim for her solicitor’s fees must be dismissed. [21] Because Ms. Kholghi was entitled to terminate the contract as and when she did, the counterclaim must be dismissed. [22] In the result: a. Ms. Kholghi is entitled to judgment against Mr.

Lammus for: (i) $5,950; (ii) pre-judgment interest on that amount, at the Registrar’s rate, from August 13, 2020, to the date of this judgment; and (iii) filing and service fees of $176.64. b. The counterclaim is dismissed.

_____________________________ The Honourable Judge T. Gouge Provincial Court of British Columbia