2013 NBQB 386, 2013 NBQB 386

Diotte v. Consolidated-Consolidated v. Diotte: 2013 NBQB 386 Court File No.: C/C/41/09 IN THE COURT OF QUEEN'S BENCH OF NEW BRUNSWICK TRIAL DIVISION JUDICIAL DISTRICT OF MONCTON B E T W E E N: EVARISTE M. DIOTTE and E.M. DIOTTE CONSTRUCTION INC., Plaintiffs - and - CONSOLIDATED DEVELOPMENT CO. LTD., Defendant Court File No.: C/C/23/2011 IN THE COURT OF QUEEN'S BENCH OF NEW BRUNSWICK TRIAL DIVISION JUDICIAL DISTRICT OF MONCTON B E T W E E N: CONSOLIDATED DEVELOPMENT CO. LTD., Plaintiff - and - EVARISTE M. DIOTTE and E.M. DIOTTE CONSTRUCTION INC., Defendants Before: The Honourable Justice Tracey K.

DeWare Place of Hearing: Campbellton, New Brunswick Date of Hearing: October 29 – 31, 2013 and November 1, 4 and 5, 2013 Date of Decision: December 2, 2013

Appearances: Jeffrey Delaney, Esq., solicitor for the plaintiffs/defendants Evariste Diotte and E.M. Diotte Construction Inc.; Basile Chiasson, Q.C., solicitor for the defendant/plaintiff, Consolidated Development Co. Ltd. Reasons for Decision DEWARE, J: [ 1 ] The trial of these two actions proceeded together on October 28 until November 5, 2013. These actions stem from a construction project undertaken between the parties in the fall of 2007. The plaintiffs, Evariste M. Diotte and E.M.

Diotte Construction Inc. (hereinafter referred to as “Diotte”) allege that pursuant to a contract signed November 19, 2007 between the parties and subsequent to the work effected pursuant to the contract, they are owed $62,823.25 of which $58,052.31 is the subject of a Mechanics’ Lien. The defendant, Consolidated Development Co. Ltd. (hereinafter referred to as “Consolidated”) submits that there were deficiencies in the work done by Diotte and they have incurred costs and damages of $62,823.25. Consolidated requests a set off in this amount to any sums owing to Diotte.

FACTS: The contract: [ 2 ] Raymond Dubé is the sole shareholder in the defendant company, Consolidated. Mr. Dubé became aware that the Department of Fisheries and Oceans (hereinafter referred to as “DFO”) was looking for a property to rent in the Dalhousie area in early 2007. Mr. Dubé wanted his company, Consolidated, to secure the contract to provide the required space to DFO. Mr. Dubé had experience dealing with DFO, as they had previously rented premises he owned in the Dalhousie area. [ 3 ] Mr. Dubé was familiar with Jean-Paul McIntyre.

Jean-Paul McIntyre was a project manager employed by the plaintiff, Diotte. At some point in 2007, Mr. Dubé would have had discussions with Mr. McIntyre advising him of this potential project with DFO. [ 4 ] Mr. Dubé purchased a property in Charlo, N.B. with the intention of using this property for his DFO project. [ 5 ] Following initial meetings with Jean-Paul McIntyre, Mr. Dubé decided to ask Diotte to prepare plans for him for the DFO buildings. Unfortunately, Jean-Paul McIntyre has no memory of the particulars concerning any meetings he would have had with Mr.

Dubé prior to the beginning of this construction project. There is some consensus between the witnesses that Mr. McIntyre was the initial contact person between Mr. Dubé and Evariste Diotte, the owner of Diotte Construction. [ 6 ] Mr. Dubé was provided with lease documentation from Public Works Canada (hereinafter referred to as “PWC”) upon which he was to base his plans, and his bid for the DFO contract. It is unclear when Mr. Dubé would have received this documentation from PWC.

[ 7 ] Sophie Perron was and is an employee of Diotte. Ms. Perron completed her education at the Community College in Bathurst as a building engineer technologist in June 2007. She immediately began her employment with Diotte following her graduation. Ms. Perron’s first experience in drafting a contract and managing a project was this project with Consolidated. The project with Consolidated was and remains Ms. Perron’s only experience dealing with a client/owner as a landlord. [ 8 ] Commencing sometime in September 2007, the dates are unclear, Ms. Perron began preparing plans for Mr.

Dubé setting out the buildings that Diotte was to construct. Although the timing is unclear, it is agreed that there were various plans exchanged between Diotte and Consolidated during the fall of 2007. At some point, Mr. Dubé was awarded the contract to construct the buildings for DFO. There is no evidence before the Court as to when Mr. Dubé found out he had been selected by PWC to construct the buildings required by DFO. [ 9 ] As of November 2007, Mr. Dubé was aware that Consolidated had been given the contract. At that point, a set of plans had been drawn up by Sophie Perron. Ms.

Perron did not have any architectural or engineering plans to consider when she prepared her plans. Ms. Perron testified that she had an idea of what the tenant wanted in the office building from Mr. Dubé. [ 10 ] Sophie Perron prepared a written contract setting out the work to be completed by Diotte for Consolidated. Attached to this contract were the plans, which had been prepared by Ms.

Perron, in addition to three schedules setting out the work for which Diotte was responsible as well as a list of items not included in the contract. [ 11 ] Prior to the preparation of the written contract there had been negotiations between Mr. Dubé and Mr. Diotte concerning the costs of the contract and the scope of the work to be undertaken. Initially, Mr. Diotte had proposed a price of $380,000, which included the construction of two buildings, as well as the grading of the property, asphalt, landscaping, and fencing for a compound on the site. [ 12 ] Mr. Dubé felt that the contract price was too high.

Subsequent to further negotiations, Mr. Diotte reduced the contract price by $20,000 and the parties mutually agreed that Diotte would not be responsible for the grading, asphalt, fencing or landscaping work. These adjustments reduced the contract price to $318,500. [ 13 ]

Schedule “C” attached to the contract set out the work that would not be included in the contract. Not included in the contract was the following: 1) Asphalt-grading\paving lines; 2) Landscaping-blocks\trees\flowers\etc.; 3) Fence in compound area; 4) Temporary heat; 5) Signs; 6) Permits; 7) Environmental site assessment by Gemtech. 8) Demolition of building, shed or other debris on site. [ 14 ] The contract prepared by Ms. Perron with the attached plans and the schedules setting out the scope of work were given to Mr. Dubé. Mr.

Dubé added four clauses to the written contract and attached the lease specifications from PWC to the contract. Mr. Diotte picked up the revised contract from Mr. Dubé and brought it back to his office to review it with his staff prior to signing. [ 15 ] Mr. Diotte has a Grade 9 education and admits to difficulties reading in English. Mr. Diotte is more of a field man, and relies heavily on his staff for the paperwork side of his business. For this reason, Mr. Diotte never signs anything without first reviewing the document with his staff. Mr. Diotte never read the contract prepared by Ms.

Perron nor the revisions inserted by Mr. Dubé.

[ 16 ] Mr. Diotte brought the contract back to his office where it was reviewed by Sophie Perron. Ms. Perron immediately noticed the four clauses which had been added by Mr. Dubé. Mr. Dubé added to

Article 1.2 of the contract the following clauses: The contractor also agrees that it shall perform the work in accordance with the stipulations, norms and specifications contained in the attached “Trousse de documentation relative au projet de location à bail numéro 305636. The contractor acknowledges that he has received a copy of the contract relating to project 305636. The specifications and norms contained in project 305636 shall take precedent over all other specifications.

The contractor also agrees that the price quoted included all the lessee’s improvements (i.e. 4 or 5 offices, washrooms, closets, janitor’s room, etc.). The contractor shall provide the owner with a performance bond in the amount of Three Hundred and Sixty Three Thousand Ninety ($363,090.00) Dollars and the owner agrees to pay One Thousand Five Hundred ($1,500.00) Dollars towards the premium for the performance bond. [ 17 ] The lease requirements which were attached by Mr. Dubé to the contract is a lengthy document containing specifications for various items pertinent to the lease premises.

It should be noted that much of the requirements in the document, such as the installation of elevators, would not be applicable to this particular project. However, that said, there is certainly much in the document in terms of construction specifications that would be pertinent to the construction of these two buildings. The only portion of the document that is unique to this project, as opposed to PWC construction projects generally, are the square footage requirements for the buildings. [ 18 ] Mr.

Dubé maintains that he provided a copy of the lease requirements document to Jean-Paul McIntyre early on in this process. Jean-Paul McIntyre does not know when he might have seen the document for the first time and was unable to provide the Court with any insight as to his involvement with the document prior to the preparation of the contract and the plans by Ms. Perron. While Mr. Dubé is adamant that he provided a copy of this to Mr. Diotte and/or E.M.

Diotte staff prior to the signing of the contract, Sophie Perron is equally clear that she had never seen the document prior to its return to their offices attached to the revised contract. [ 19 ] Mr. Dubé and Mr. Diotte’s evidence with respect to when the lease requirements document was given to Diotte Construction is unclear. Mr. Dubé maintains that he must have given Diotte a copy of the document early on in the process, although he has no specific recollection of whom or when. Mr. Diotte is equally unclear. Mr. Diotte cannot say when he first saw the document but suspects it was only when Mr.

Dubé attached it to the revised contract. Ms. Perron, on the other hand, is certain that the first time she saw this document was when it was returned by Mr. Dubé attached to the revised contract. I accept Ms. Perron’s evidence on this point. Ms. Perron realized immediately that the additional clauses added by Mr. Dubé in addition to the lease documentation significantly changed the scope and nature of the contract from what Diotte had agreed to build. [ 20 ] Mr. Diotte and Ms. Perron went to Mr. Dubé’s office to discuss the changes that had been made to the contract prior to signing.

It is at this point that the parties’ respective understandings as to the agreement reached in the written contract start to diverge. [ 21 ] According to Ms. Perron and Mr. Diotte, they would have made it clear to Mr. Dubé that they could not be responsible for all of the additional items in the lease documentation, as these items had not been negotiated in their contract. According to them, Mr. Dubé indicated that really all that was to be added to what had been agreed upon in the contract were four or five standard offices in the office building. Subsequent to some discussion, Mr.

Diotte agreed to construct those four or five offices within the scope of the agreed-upon contract price of $318,500. Furthermore, Mr. Dubé agreed to add a qualifying provision to the terms put into the contract. In particular, Mr. Dubé altered the second clause of

Article 1.2 as follows: The contractor acknowledges that he has received a copy of the contract relating to project 305636. The specifications and norms relating to the construction contained in project 305636 shall take precedent over all other specifications.

[ 22 ] Mr. Diotte’s understanding was that this qualifier, “relating to the construction”, restricted his responsibilities under the lease documentation to the construction of the two buildings as laid out in the plans. He was responsible for nothing that went beyond the construction of the buildings he had contracted to provide. Mr. Dubé has a more nuanced appreciation for the meaning of this qualifier. According to Mr. Dubé, this simply meant that Mr.

Diotte would not be responsible for all the interior items, such as signage on the bathroom doors, toilet paper dispensers, window blinds, and things of that nature. Mr. Dubé’s understanding is that Mr. Diotte remained responsible for all lessee’s improvements. [ 23 ] Further to these discussions, the contract was signed by the parties and dated November 19, 2007. Subsequent to the parties’ agreement that Mr. Diotte would furnish four or five offices as part of the $318,500 contract, Ms.

Perron prepared a sketch setting out the proposed office space with the addition of four separate offices. [ 24 ] The parties are all in agreement that they were anxious to secure a written contract given the time of year. Mr. Dubé had agreed to have the premises available for DFO in the spring of 2008. In order to meet this deadline, it was necessary for construction to get under way immediately, or it would be too late to pour the foundation. Ms. Perron agreed that Mr.

Diotte was anxious to get the contract signed and wanted the project to get underway. [ 25 ] The initial plans prepared by Diotte provided for a storage building and an office building. The office building, as depicted on the initial Diotte plans, included two washrooms, a storage building and an electrical room. [ 26 ] On November 7, 2007, Linda Gallant, an employee with PWC, faxed to Raymond Dubé a sketch setting out the proposed layout of the office building. The November 7, 2007 sketch sent to Mr.

Dubé is very detailed and provides far more insight into the layout of the office building than the plans agreed upon by the parties on November 19, 2007. This sketch sent to Raymond Dubé on November 7, 2007 essentially mirrors the layout that was eventually agreed upon and constructed in the office building. [ 27 ] Mr. Diotte and Ms. Perron maintain that they never saw the November 7, 2007 sketch until long after the litigation process was under way. Mr. Dubé has no confirmation that he faxed, emailed or delivered a copy of the sketch to Diotte, although he assumes he must have. Mr.

Dubé points out there would be no reason for him not to provide them with a copy of the sketch, and in fact it would be in his best interest to do so. That said, the plans and the contract agreed to on November 19, 2007 bear no resemblance to the sketch of November 7, 2007, nor do the subsequent office layout plans prepared by Ms. Perron resemble those provided by Ms. Gallant. Again, on this point, I accept the evidence of Ms. Perron that she was never provided a copy of Linda Gallant’s sketch of November 7, 2007. The construction: [ 28 ] The construction project got under way in late November 2007. Mr.

Diotte spent considerable time at the property ensuring that the foundations were properly heated and properly cured. Mr. Dubé was impressed with Mr. Diotte’s work ethic during this period. Mr. Dubé frequently saw Mr. Diotte, on site, late at night and early in the morning. [ 29 ] Mr. Diotte testified that he recommended to Mr. Dubé that the elevation of the buildings be raised somewhat, as the ground of the property was level to the road. According to Mr. Diotte, Mr.

Dubé did not want to elevate the buildings any higher, as he did not want to incur any further costs that could be occasioned by gravel or additional grading. Mr. Diotte maintains that he explained to Mr. Dubé that now was the time to do it before the foundations were poured, and that the cost would be minimal. Mr. Diotte decided to raise the office building by six inches of his own accord, and assumed the cost of the gravel to do this, despite the fact that Mr. Dubé had not agreed. [ 30 ] Mr.

Dubé denies that there was any discussion between the two men concerning the elevation of the buildings, prior to the pouring of the foundations. Mr. Dubé notes that he has had water problems due to elevation on other properties he owns, and would have been willing to address the problem immediately had it been pointed out to him. [ 31 ] Construction got under way in November 2007. The first invoice from Diotte was sent to Consolidated on December 19, 2007. The invoice in the amount of $100,210 was paid in full with the exception of the 15% holdback. A second invoice

was sent from Diotte to Consolidated on February 1, 2008 in the amount of $174,180.53. This invoice was paid as well in full, other than the appropriate 15% holdback. [ 32 ] In early 2008, the buildings had been erected and the issue concerning the fit-ups inside the buildings was addressed. DFO or PWC required fit-ups according to their contract specifications, which went well beyond the scope of the original four to five standard offices discussed between Mr. Diotte and Mr.

Dubé at the time the contract was signed. [ 33 ] Raymond Losier, who was in charge of the project on behalf of PWC, requested that three quotes be provided from contractors for the work required inside the buildings. Diotte submitted a bid for the work on the interior fit-ups as did two other contractors. These bids were all submitted to Consolidated who provided them to PWC. Diotte’s bid for the interior fit-ups was accepted. [ 34 ] According to Mr.

Diotte and Sophie Perron, the negotiations for the bid for the interior fit-ups included a discussion and an agreement reached on the appropriate credit to be provided Consolidated for the four to five offices Diotte had agreed to include in the $318,500 contract price. Mr. Dubé maintains that no such discussion ever took place. Mr. Dubé suggests that the contract for the fit-ups was a contract between Diotte and DFO or PWC, not Consolidated. According to Mr. Dubé, he was simply an agent in the process. [ 35 ] Mr. Dubé’s position with respect to the contract for the fit-ups is simply untenable. Mr.

Dubé charged PWC his 10% fee for the fit-up work. Consolidated was paid by PWC for the fit-up work and Consolidated paid Diotte for their initial invoices. There is no question that at all times there was a contract between Consolidated and Diotte and a contract between Consolidated and PWC. Diotte did not at any time enter into a contract directly with PWC. Furthermore, while the fit-ups can certainly be characterized as an additional aspect of the contract between Diotte and Consolidated, they were all invoiced within the same project. [ 36 ] I accept the evidence of Ms. Perron and Mr.

Diotte that the quote accepted by Consolidated and forwarded to PWC included a credit to compensate Consolidated for the initial agreement to provide for four of five offices. Diotte’s quote of $68,438.16 for the office building fit-ups was acceptable to both Consolidated and PWC. Diotte went on to complete all of the interior fit-up work, both in the office building and in the garage. [ 37 ] As Diotte continued to do the work on the buildings and the fit-ups, invoicing continued to take place as between the parties.

Diotte invoiced Consolidated on March 25, 2008 in the amount of $47,419.50 for the work that had been completed on the fit-ups at that point. The invoice was paid in full. Diotte issued a further invoice to Consolidated on April 28, 2008. This invoice was also paid in full. Consolidated, at no time, disputed any of the work completed by Diotte or the invoices sent between November 2007 and April 2008. [ 38 ] In the spring or summer of 2008, DFO or PWC advised Consolidated that bollards were required in front of the garage. Diotte provided a quote to Mr.

Dubé in the amount of $3,500 plus tax to install the bollards as per PWC specifications. Mr. Dubé added his 10% to this invoice and forwarded it to PWC. Diotte went ahead and installed the bollards as per Consolidated’s request. PWC subsequently denied payment to Mr. Dubé for the bollards indicating that these ought to have been part of their contract. Once PWC refused to pay Consolidated, Mr. Dubé refused to pay Diotte for the installation of the bollards. Mr. Dubé maintains that Diotte is responsible for the bollards because they are likely included in the lease documentation attached to the contract. Mr.

Dubé concedes that Diotte had no responsibility for the exterior work and that the bollards are not part of the building but are an exterior component. [ 39 ] In addition to the bollards, two other issues appear to have arisen prior to Mr. Dubé’s refusal to pay E.M. Diotte’s final invoice. In January 2009, Linda Gallant of PWC raised the issue that the square footage in the storage building was less than required under the lease agreement. Mr. Dubé brought this to the attention of Mr. Diotte.

The storage building or garage was to provide 150 square meters of usable space and it has 143.5 square meters of usable space. There is an area of approximately 4 square meters whose loss is attributable to the manner in which the foundation of the building was constructed. The 10-inch foundation wall protrudes slightly into the building. Once the insulation and wall materials are added, there is approximately a two-inch loss along the walls to the interior floor space. [ 40 ] Discussions took place between Linda Gallant of PWC and Sophie Perron of Diotte once this problem was identified. Initially, Mr.

Diotte had offered to go back into the building and sand off the protruding foundation wall, thus leveling out the area, and increasing the usable space. Mr. Dubé denied Diotte access to the building to make these repairs. Linda Gallant accepted that the building remain as is, and that PWC would honor the terms of the lease agreement and the rent as negotiated with Mr. Dubé. Mr. Dubé maintains that this loss of space is the fault of Diotte, and that it could occasion problems for him in the future.

[ 41 ] The storage building that E.M. Diotte originally agreed to construct did not contain a washroom, which it now does. The storage building is actually a garage. The nature of the use of the building also changed over the course of the project. Mr. Diotte suspects that part of the loss of usable space could be attributed to the addition of the washroom, which was not included on the original contract plans. There is no question but that the garage, as proposed by Diotte in the plans and as finally constructed, is considerably different.

The refusal to pay: [ 42 ] On February 4, 2009, Diotte sent Consolidated its last invoice with respect to this project. The invoice confirmed an original contract amount of $378,377.67, and extras of $100,819.49 for a total of $479,197.16. Of this amount, Consolidated had already paid $433,903.43. As of February 2009, the outstanding amount owing to Diotte for all of its work under the contract was $51,181.91, inclusive of HST. [ 43 ] The February 2009 invoice was never paid by Consolidated. Rather than paying the invoice, Mr. Dubé sent a letter to Diotte advising that they were not owed the amounts claimed. Mr.

Dubé’s letter is significant. This is the first time that Mr. Dubé explains why Consolidated will not pay the last invoice of Diotte. The letter, in its entirety, states as follows: The Contract we signed November 19, 2007, includes the following: ‘The Contractor also agrees that the price quoted includes all the lessee’s improvements (i.e. 4 or 5 offices, washrooms, closets, janitor’s room, etc.).’ This clause is very clear, that the contractor has to pay for all the lessee’s improvements so this includes all the work done inside the building.

If we look at your ‘Revised Price for Extra Work/Material/Labour’ list dated 2008-01-28, your sub-total is $50,931.61. You stated that you allowed me $4,000 as my share, this figure is ridiculous when you quote the amount of $5,561.95 for the metal studs-wall. Even if we remove 25%, the total would still be $38,198.70. Just by calculating the first 5 items on your list, amounts to $20,283.61. By just using your numbers, I do not owe you what you are claiming. I am enclosing a copy of your Revised Price List dated 2008-01- 28. (Emphasis is mine) [ 44 ] Prior to the letter from Mr.

Dubé of February 29, 2009, there is very little evidence in the file of disagreement between the parties or concerns with respect to the work affected by Diotte. Similar to the office building, significant interior fit-ups were required for the storage building, which subsequently became a garage. [ 45 ] Subsequent to receipt of the correspondence from Consolidated indicating they would not pay Diotte’s final bill, Mr. Diotte filed a claim for lien pursuant to the Mechanics’ Lien Act , R.S.N.B. 1973, Chap.

M. on March 11, 2009 in the amount of $58,052.31. [ 46 ] Discovery was held in this matter on September 27, 2010. At that time, Mr. Dubé was asked several times to explain why he felt he did not have to pay the last invoice from Diotte of February 2009. Mr. Dubé’s explanations for his failure to pay the invoice are set out in the following questions and answers gleaned from the Discovery transcript of September 2010: Q. 770 Okay. So you paid everything on that invoice except for the 15 % holdback, right?

A. I paid everything… Like I told you before, I paid everything, as far as I’m concerned. Q. 771 Yeah. A. --- except for $48,000. What that $48,000 represents, as far as I’m concerned, is money owed to him, that he is billing me for. Q. 772 That’s what I’m trying to get to the bottom of, --- A. But it’s not… Q. 773 --- is exactly which… A. I don’t call it holdback, it’s just… You know, I paid everything except $48,000. Q. 774 And where does that number come from though? A. Hein? Q. 775 I guess what is really… A. It’s the last bill. It’s the last invoice that I’ve got. Q. 776 Yeah. A. I was looking for it.

Q. 777 Yeah. A. There’s even a written thing there saying: “Last, final bill.” Q. 778 Yeah. So why are you not paying it though, I guess, is what I’m… A. Because I think that I don’t owe him that much . Q. 791 Why would you have even paid a penny on any of this if in fact E.M. Diotte had agreed to do this work as part of its $318,500? A. I’m going to repeat myself. The way I looked at it, ---

Q. 792 Yeah. A. ---when the final invoice came in, I didn’t pay it because I figured I didn’t have to pay him that, okay? Because he was supposed to do the lessee’s improvements, okay? And I wanted to negotiate a price on that. That’s it. Q. 793 Negotiate a price on what? A. On the value of that… You know, the… Q. 794 The lessee improvements? A. Yeah. He did… I don’t know, it’s over $100,000 of improvements in there. Q. 795 That’s right. A. Okay? But some of that stuff, you know, that was not… Q. 796 But didn’t Consolidated take a 10 % mark up on each of those? A. That’s got nothing to do with it.

Q. 797 Didn’t they agree to… A. That’s got nothing to do with it. Q. 798 Well, it does if you have acknowledged and paid for the work. A. I don’t… Q. 799 That’s the thing that I’ve got a hard time with, Mr. Dubé. A. Well, the thing… Q. 800 It’s kind of hard to figure what the actual problem is here. A. The problem is that Mr. Diotte contracted with me to do the lessee’s---

Q. 801 Right. A. ---improvements, okay? Q. 802 Right. A. I want to know what is my share of that. Q. 803 Your share of that? A. Okay? Because I’m not to pay… I’m not to pay… I’m getting the money from the Department. It’s my money, okay? Q. 804 H’m. A. He wants to get paid for that. I want to know before I pay him how much he owes me for that. The work done there, there was… Q. 805 The credit for the work that was to be included in the contract, the washrooms and the four (4) or five (5) offices? A. Offices and everything, yeah.

Q. 806 So it has nothing to do with the extras that were charged, the extras that he has got here on the invoices… A. These… Q. 807 I’m going to give you a… A. These figures, as far as I’m concerned, they’re not… They do not mean anything to me, okay? Q. 808 Well… A. There’s no reason, you know, that… I paid these things until I figured that, you know: “I’m stopping to pay now, until we settle this thing.” You know, he says I owe him money. Q. 809 Right. A. I say I don’t owe him that money. Q. 819 Yeah.

A. I paid… When the final came in, I said no, okay? This is-- Q. 820 Okay. A. ---where we’re going to settle this thing, because I figured he owed me something. Q. 821 Right. A. That’s it. You know? Whether it says I paid this, I paid that, it doesn’t matter. Q. 822 Right. A. I still… You know, he sent me a final invoice and that final invoice, I refused to pay it because of that. Q. 823 Okay. A. I just said: “You promised under the contract to do those offices and those lessee’s improvements. What are they worth? Q. 824 H’m. A. Okay? “I’m keeping $48,000 here to pay for those. You know?

If it’s not $48,000, well let me know.” That’s the way I looked at it. Q. 825 Okay. A. Maybe I looked at it the wrong way, but that’s the way I looked at it. (Emphasis is mine) [ 47 ] There is no evidence to suggest that Consolidated has been denied payment of any of its invoices from PWC. There is no suggestion that Consolidated has not been fully paid by PWC pursuant to their contract. The experts: [ 48 ] Subsequent to the filing of the Mechanics’ Lien in March 2009, Mr. Dubé hired engineer Jacques Mallet to do an overall inspection of the two buildings. At that time, the scope of Mr.

Mallet’s investigation as described in his first report of May 19, 2009 was as follows:

Following your request, I visited the site on or about May 6, 2009 to take measurements related to the rentable space as defined by Public Works Canada and made an overall inspection of the two buildings involved. (Emphasis is mine) [ 49 ] Mr. Mallet was provided with a complete copy of the lease documentation, the contract signed between the parties, the plans prepared by Sophie Perron, as well as the truss and wall specifications from the manufacturer, Léon Chouinard & Fils. Mr. Mallet raised several issues following his initial assessment.

He raised concerns with respect to the drainage around the storage building, the fact that there were no stamped drawings from the truss manufacturer nor were there stamped drawings with respect to the buildings themselves. Mr. Mallet also questioned the storage building’s compliance with the National Building Code. Mr. Mallet noted that there was some air leakage in the garage, and also queried the 100-amp electrical entrance in the garage. [ 50 ] Subsequent to Mr. Mallet’s initial report, there was a flurry of expert reports prepared in this matter.

Diotte hired Ernest Hachey of Hachey Consultants who prepared a report on July 28, 2010 in response to Mr. Mallet’s report. Mr. Mallet responded to Mr. Hachey’s report with his second report dated October 28, 2010. Mr. Diotte then responded by hiring Stephen Brigham of Delray Engineering who furnished a report on behalf of the plaintiffs dated February 12, 2011. Mr. Mallet replied to the Delray Engineering report in his third report dated April 4, 2011. In the interim, Daniel Desprès of Léon Chouinard & Fils provided stamped drawings for the trusses and walls. Mr.

Desprès also provided an opinion that the walls of the garage were designed and constructed pursuant to

Section 9 of the National Building Code. Mr. Mallet responded to Mr. Desprès’ reports on October 24, 2011. Mr. Mallet provided his final report on January 14, 2013, which essentially summarizes his various complaints with respect to the storage building as set out in all the previous reports. [ 51 ] Consolidated presented as an expert witness, in the field of estimating the costs of construction projects Régis Castonguay, the owner of V.C. Renovations. Mr. Castonguay provided an estimate to affect all of the repairs that have been recommended by Mr. Mallet for the garage. This estimate totals $98,972.10.

In addition, Mr. Castonguay estimates that the cost to fix the drainage problem near the storage building is $31,579.41. Finally, Mr. Castonguay estimates the cost of adding an additional two feet to the back of the storage building is $53,932.76. All of these prices are inclusive of HST. POSITION OF THE PARTIES: [ 52 ] Diotte maintains that they furnished all of the labour and materials required to complete their contract with Consolidated. They submit that Consolidated had no complaints with respect to their work and voiced no complaints with respect to their invoices.

Diotte suggests that Consolidated simply decided to withhold payment of Diotte’s last invoice in the hopes they could negotiate a further deduction in the contract price. Diotte points out that Consolidated has identified no problems with respect to the structures to date and has effected no remedial measures to the buildings as suggested by their expert. Diotte highlights that the expert reports of Mr. Mallet were only obtained by Mr.

Dubé after Diotte filed their Mechanics’ Lien and insisted on payment of their outstanding issue. [ 53 ] Further to the reports of Jacques Mallet, Consolidated alleges that Diotte did not meet the contract specifications as follows: 1) Diotte did not build the garage to the specifications set out in the contract since there is 6.5 useable square meters (70 square feet) missing; 2) Diotte did not provide blueprints and building plans approved by a qualified professional; 3) Diotte did not provide proper elevation of the floors in the building to permit natural site drainage thus resulting in lack of proper drainage; 4) Diotte did not provide plans and drawings for the buildings; and 5) Diotte did not build the second building, thus the storage building, to meet the

requirements of the National Building Code as contractually required. [ 54 ] In addition, Consolidated seeks the following relief from the Court: 1) An amount of $13,000 to provide for proper drainage; 2) An amount sufficient to rectify the shortfall of 6.5 square meters missing in the garage; 3) An amount sufficient to provide for a 200-amp electrical entrance in the garage; 4) An order that Diotte provide the defendant with an approval by a competent engineer or architect to ensure the building meets all Canada’s National Building Code requirements; and 5) An order that if the building does not meet such National Building Code requirements, the defendant be provided the necessary funds to modify the building to meet such requirements.

ISSUES : [ 55 ] The issues for the Court to resolve in this matter, as framed by the parties in their briefs, are as follows: (

a) Was Diotte responsible, within the original contract price of $318,500 to complete the tenant fit-ups requested by PWC/DFO? (

b) Did Diotte provide a sufficient credit to Consolidated for the office fit-ups? (

c) Was Diotte responsible under the contract to have all plans approved by a professional engineer? (

d) Did Diotte fail to provide the required rentable space in the storage building? (

e) Did Diotte fail to construct the two buildings at sufficient elevation in comparison to the adjacent street and storm drains? (

f) Did Diotte fail to construct the two buildings within the requirements of the National Building Code? (

g) Was Diotte responsible, under the terms of the original contract, to install a 200- amp electrical service entrance and heaters? (

h) Was Diotte responsible, under the terms of the original contract, to install bollards to protect the entrance of the storage shed? (

i) Is Diotte entitled to interest on any amounts properly outstanding under the contract? (

j) Is Consolidated entitled to $13,000 to provide for proper drainage?

(

k) Is Consolidated entitled to an amount sufficient to rectify the shortfall of 6.5 square meters missing in the garage? (

l) Is Consolidated entitled to receive from Diotte the approval by a competent engineer or architect to insure the building meets the National Building Code, and if it does not, to provide Consolidated with funds to modify the building to meet such requirements? LAW AND ARGUMENT: [ 56 ] This case is about the

interpretation of a contract and the determination of each party’s respective rights and obligations pursuant to the contract. Justice Drapeau in Capital Safe and Lock Service et al., (2000) 230 R.S.N.B. (2 nd ) 117 (CA), discussed the Court’s approach to ambiguities in the

interpretation of a contract as follows: Of course, any apparent vagueness in the terms of a written contract becomes inconsequential if the parties' intention can be distilled from a consideration of the words employed by the parties and the overall context in which those terms were used. [ 57 ] The key question to resolve in this matter is what exactly did Diotte contract to provide to Consolidated? The plans attached to the contract speak for themselves. They set out a storage building and an office building. Initially, the office building only contained washrooms, a janitor’s closet and an electrical room.

Thereafter, following negotiations, four or five offices were added to the building. I accept that these were the parameters of the original contract. Furthermore, everyone was clear that when the contract was signed, Diotte would have absolutely no responsibility for any of the exterior work. Consolidated agreed to pay $318,500 to Diotte to construct these buildings within these parameters. Following six days of trial and the review of several exhibits, I have no doubt that on November 19, 2007, this was the general understanding reached between the parties.

Furthermore, I find that there was no disagreement or misunderstandings between the parties as to the terms of this contract while the project was underway. The alleged ambiguity with respect to the contract only became an issue when payment of the last invoice was withheld, after all of the work was complete. Who was responsible for the lessee’s improvements?: [ 58 ] The contractual clause relied upon by Consolidated to suggest that Diotte had agreed to be responsible for all of the lessee’s improvement is Clause 3 from

Article 1.2 of the contract. This clause states as follows: “The contractor also agrees that the price quoted includes all the lessee’s improvements (i.e. four or five offices, washrooms, closets, janitor’s rooms, etc.). ” [ 59 ] The closets and janitor’s room were on the original plans prepared by Ms. Perron. The four or five additional offices were agreed upon by the parties at the time the contract was signed and a sketch was prepared of these thereafter. There is no question that there was a meeting of the minds with respect to those issues.

Consolidated maintains that the “ etc. ” tacked on to the end of that clause makes Diotte responsible for all the lessee’s improvements. [ 60 ] Consolidated’s argument with respect to the lessee’s improvements is not borne out by the facts. Diotte prepared bids for the fit-ups or lessee’s improvements for both the garage and the office building. These bids were accepted. Thereafter, the invoices for the work done on the fit-ups were paid.

Clearly, if Consolidated was genuinely of the view that all of these matters, which together totaled more than $100,000, were included in the contract price of $318,500, not one penny of those invoices would have been paid. [ 61 ] Consolidated’s pleadings acknowledge that they had the contract with PWC for the lessee’s improvement. Paragraph 8 of Consolidated’s Amended Statement of Defense and Counterclaim states as follows:

The defendant entered into a second separate contract with the Department of Public Works to complete the lessee’s improvements inside the office building and the garage. [ 62 ] Mr. Dubé decided he did not want to pay the last invoice because he felt there should be further negotiations on the lessee’s improvements. He argued that he did not receive credit for the four to five offices Diotte had agreed to build within the original contract price. I find as fact that Consolidated did receive a credit from Diotte in the fit-ups for the office building in the approximate amount of $5,800.

Consolidated did receive an appropriate credit for the office fit-ups as originally agreed upon between the parties. I further find that Consolidated’s refusal to pay Diotte’s last invoice on the basis that Diotte was responsible for all the lessee’s improvements within the original contract price of $318,500 was unreasonable, unfounded and raised only as a means to elicit further deductions from Diotte for the work completed under the contract. Did Diotte exercise due diligence?: [ 63 ] Diotte did not exercise due diligence in the drafting and signing of this contract. Mr.

Diotte acknowledges that he never read the contract or the lease documentation. Ms. Perron was preparing her first contract on her first project months following her graduation. Neither Ms. Perron nor Mr. Diotte had carefully reviewed the lease documentation before agreeing to the revised contract as proposed by Mr. Dubé. Was Diotte responsible to consult an engineer?: [ 64 ] Mr. Diotte was aware that Mr. Dubé did not have an engineer or architect involved in this project. Mr.

Diotte has been in construction for many years, and although has limited formal education, is clearly an accomplished businessman and a very good contractor. Mr. Diotte would have known that Mr. Dubé was relying upon the expertise of his company in drafting the plans and constructing the buildings. Diotte was aware that they alone were responsible for designing the building and they had a duty to ensure that it was designed properly. Diotte had a duty to ensure that the buildings met all the necessary requirements of the National Building Code. [ 65 ] I accept the evidence of Mr. Diotte that he recommended to Mr.

Dubé that an engineer be consulted. I further accept the evidence of Mr. Diotte that Mr. Dubé did not see the necessity of same and did not want to incur the additional costs associated with hiring an engineer. Consolidated cannot demand that Diotte provide the approval of a qualified engineer as to the construction of the buildings now when they did not want to consult an engineer at the outset of the project.

What Building Code applied?: [ 66 ] Jacques Mallet suggests that Diotte ought to have constructed the building pursuant to the 2005 National Building Code, as it was available at the time, although not in force. At the time this contract was signed in 2007 and the construction was under way, the 1995 National Building Code was in place. The 2005 National Building Code only came into force on October 1 st , 2009. I find as a fact that the 1995 National Building Code was the appropriate code to be used in the construction of this project. [ 67 ] Consolidated argues that

Annexe “C” of

part 3, article 1(3) of the lease documentation provided by PWC mandates that Diotte was required to construct the building pursuant to the 2005 National Building Code as it was in existence although not yet in force. This clause reads as follows: 1. Codes

(1) L’immeuble et ses systèmes doivent être conformes à toutes les lois, à tous les règlements et à tous les codes applicables de tous les gouvernements et paliers d’administration, y compris les gouvernements fédéral et provinciaux et les administrations territoriales, régionales et municipales. Les lois et les règlements en question comprennent le Code national du bâtiment du Canada, le Code canadien du travail, le Code national de prévention des incendies du Canada (1995), le Code canadien de l’électricité et la

Loi canadienne sur la protection de l’environnement.

(3) En cas d’incompatibilité entre les exigences ou les normes fixées à la présente

annexe et les exigences ou les normes fixées dans les lois , les règlements et les codes susmentionnés au paragraphe (1) ci-dessus, les exigences ou les normes les plus strictes

s’appliqueront. (Emphasis is mine) [ 68 ] I reject Consolidated’s argument that according to the aforementioned clause of the lease specifications, the 2005 National Building Code applies to this project. The 2005 National Building Code was not law in 2007 and 2008. The 1995 National Building Code was law and in force and the appropriate code to be consulted in this matter. [ 69 ] Mr. Mallet suggests that the buildings could not have been constructed pursuant to

Section 9 of the National Building Code because they were not seasonal in nature. The 1995 National Building Code describes the scope of

Part 9 as follows: 1) Except as provided in Subsection 2-1.5,

Part 9 applies to buildings of 3 storeys or less in building height, having a building area not exceeding 600 m 2 and used for major occupancies classified as:

a) Group C, residential occupancies (see Appendix A- 9.1.1.1.),

b) Group D, business and personal services occupancies,

c) Group E, mercantile occupancies, or

d) Group F, Division 2 and 3, medium and law hazard industrial occupancies. I am satisfied that these buildings properly fall under

Section 9 of the National Building Code. Is there a problem with the garage as constructed?: [ 70 ] Mr. Mallet explains the problem with the garage and the shear forces caused by wind and earthquake given the size and height of the building in his report of May 19, 2009 as follows: “This building has 5480 mm (approx. 18 feet) ceiling height without any interior partitions to assist in the building stability. The large 16’ x 16’ opening (overhead door) in the end wall will create large interior wind pressures on the walls and ceiling.

The foundation walls have been raised approximately 610 mm (2 feet), I assume, to reduce the wooden stud length. Table 9.23.10.1(1) of the NBC does not permit wood stud (38 x 140) (2 x 6”) with a length above 4870 (approx. 16 feet). The shear forces caused by the wind or earthquake and loads combination acting on the stud requires this building to be designed under

Part 4 of the NBC.” [ 71 ] Diotte’s expert, Mr. Hachey, determined that only one wall of the garage did not meet the requirements of the National Building Code. Mr. Hachey’s findings in this regard are explained in his report of July 28, 2010 as follows: “A lateral structural analysis was carried out on the storage building. All walls except the wall on the east elevation meets the requirements of the National Building Code of Canada 1995 and the 086.1-94 Engineering Design in Wood (Limit States Design). The east wall must be reinforced as show in sketch SK-1. The cost of repair for the east wall is estimated to be between $3,000.00 to $5,000.00 plus HST.”

[ 72 ] Mr. Mallet was skeptical of Mr. Hachey’s recommendations as to the corrective action necessary to bolster the shear strength of the wall of the garage. Mr. Mallet maintains that Mr. Hachey ought to have used the 2005 National Building Code. Mr. Mallet comments in his October 28 th , 2010 report as follows: “Rather than using the latest codes, Mr. Hachey chose to use the National Building Code of Canada 1995 and the 086.1-94 instead of the National Building Code of Canada 2005 and the 086.1-08. A significant change occurred with the wind load imposed on the buildings with the latest codes.

The latest codes version need to apply at the time of construction.” (emphasis is mine) [ 73 ] As explained previously, I am of the view that at all material times the 1995 National Building Code applied to this project. [ 74 ] Diotte also retained the services of Stephen Brigham of Delray Engineering Inc. to comment on the status of the garage and any remedial measures required. In his report of February 12, 2011, Mr. Brigham endorses Mr.

Hachey’s recommendations with some additional suggestions of his own as follows: “The wind / seismic analysis of the walls by Giffin Engineering shows that the walls (with the exception of the front wall) are acceptable to resist shear forces with a considerable design reserve, based on 12 mm plywood and nails spaced at 150 mm c/c around the plywood perimeter (nail spacing at interior studs should be at 300mm).

The nailing pattern of the plywood for the building can be reviewed when the wall adjacent to the overhead door is exposed for modification (as noted below), to verify that the nail size and pattern that was used for the plywood, meets the required grid spacing (nail spacing here should be indicative of the rest of the building). If it is found that nail spacing is further apart than 150mm around the perimeter, the design can be reassessed since there is a considerable design reserve.

Based on design review, the proposed modification to the left front wall adjacent to the overhead door by Hachey Consultants’ sketch SK-1, is acceptable. In order to tie this portion of wall to the roof system, it is recommended that 6 – Simpson LS70 clips be used to tie the top plate to the gable end truss, which is not shown on the sketch. Also (since it is not indicated on the drawings), it should be site verified that there are hurricane clips installed at each end of the trusses.” [ 75 ] The extensive reports of Mr. Mallet, in addition to the report of Mr. Hachey and Mr.

Delray, highlight a difficulty with the garage. This building is high with a garage door that measures 16 x 16. The size of the building and the fact that it is an open concept garage without interior partitions renders the calculation of the wind loads more complicated than a typical building constructed pursuant to

Section 9 of the National Building Code. I accept the opinion of Mr. Mallet, as do Mr. Hachey and Mr. Brigham, that

Section 4 of the National Building Code should be consulted to calculate the appropriate loading factors for the walls of the garage. [ 76 ] It is reasonable to assume that Consolidated, in contracting with Diotte to construct this building, had reason to believe that Diotte would have had the capacity and the manpower to construct the building properly. There is a problem with at least one of the walls in the garage, and I am satisfied that the building does need to be bolstered to ensure that it could withstand excessive wind forces. [ 77 ] The proposals suggested by Mr.

Mallet to rectify and strengthen the storage building are extensive. Mr. Castonguay, who has been in the construction business for the past 30 years, commented that he has never seen a building built pursuant to the standards Mr. Mallet suggests are required. Mr. Mallet has provided recommendations for remedial measures, which would strengthen the garage to the point that it could be considered a “Post Disaster” strength building. Diotte did not contract to provide Consolidated with a “Post Disaster” quality building.

[ 78 ] I am satisfied that at no time prior to the commencement of this litigation was Diotte ever apprised of the fact that Consolidated expected this project to be undertaken pursuant to “post disaster” standards. The suggestion that Diotte is responsible to provide Consolidated with a “post disaster” quality building is untenable and flies in the face of all evidence tendered at trial. In his report of October 24 th , 2011, Mr.

Mallet explains his reasoning in attaching heightened standards to the construction of the garage as follows: “The garage/warehouse is used by the Federal fisheries to store their boats/vehicles etc. This organization can very well be involved in rescue operations where the Code requests an “importance factor of 1.4 instead of 1.0” for buildings involved in post disaster.

In other words, the Code wants this building construction above “normal construction” by 40% because the Code wants this building to withstand hurricane winds/earthquake better than a normal construction in case they are required to assist with their equipment and tools. This is above normal Part (4) requirements.” (Emphasis is mine) Is Consolidated entitled to compensation for deficiencies with respect to the garage?: [ 79 ] In my view, Consolidated is entitled to compensation to allow for the strengthening of the garage.

Consolidated is not entitled to compensation which would provide for a “post disaster” quality building. Consolidated is entitled to receive from Diotte what Diotte contractually agreed to provide, a structurally sound storage building. The recommendation of Mr. Hachey that tie-downs be placed would cost in the vicinity to $3,000 to $5,000, whereas Mr. Mallet’s recommendation exceeds $87,000. The question for the Court to determine is what is the reasonable assessment of an appropriate amount to allow Consolidated to bolster the wall strength should they chose to do so.

Rather arbitrarily, considering the additional items recommended by Mr. Delray, I assess the costs to Consolidated to bolster the wall strength of the garage at $8,000. [ 80 ] Consolidated has been provided with a storage building that is less than the square footage set out in the plans or the contract. The storage building set out in the plans and the garage as constructed vary significantly. There is clearly no washroom or workbench area set out in the plans, which now exists in the building.

To a certain extent, one has to wonder if a portion of the lost footage is due to the change in the layout of the building. Consolidated maintains that Diotte is responsible for this loss of space, as the plans provided otherwise. Diotte acknowledges that the manner in which the foundation was constructed did protrude into the building floor space, thus accounting for approximately a loss of 4 of the 6.5 meters. [ 81 ] In the circumstances, I accept that Consolidated is entitled to some compensation for the loss of square footage in the garage.

However, to date, Consolidated has experienced no loss as a result of this missing square footage. DFO, the tenant of the building, has accepted the building as provided, and paid the rent as negotiated. Mr. Dubé speculates that this perhaps will not happen in the future, and he could, therefore, occasion a loss. This is speculative at best. Mr. Diotte did offer to the extent possible to enter the building and rectify the problem. Mr. Dubé denied access to the building to complete these repairs.

Again, the difficult question with which the Court must grapple is what and how to compensate Consolidated for this particular loss. Under the circumstances, I accord Consolidated $2,000 for the loss of the square footage in the garage. [ 82 ] Mr. Dubé has yet to effect any of the repairs recommended by any of the experts. Mr. Dubé would not allow Diotte back onto the property to do repairs that they had offered to do. I am of the strong suspicion that even if the Court is to grant compensation to Consolidated to reinforce the garage or increase the usable space, the work will never be done.

It is significant that Mr. Dubé conceded at trial that he has noticed no problems with the buildings to date. There are no cracks in the ceilings or the foundations. There have been no problems with the garage during wind storms to date. One can be certain that there have been windy days in Charlo, New Brunswick between November 2007 and November 2013. These factors weighed heavily in my assessment of $10,000 as reasonable compensation to Consolidated for the deficiencies identified with the garage.

The bollards and the drainage issue: [ 83 ] In terms of the exterior of the building, all parties are crystal clear that Diotte was in no way responsible for any of the exterior work. Mr. Dubé acknowledges that the bollards were part of the exterior work, as was all grading, landscaping and asphalt. Under the circumstances, Diotte did not contract to look after the grading of these buildings, nor any issues with the surrounding landscape, including water build up.

Consolidated is not entitled to claim from Diotte any costs associated with remedying its water drainage issues, as these were not caused by the construction of the buildings, nor were they part of the construction of the buildings. The contract is clear that Diotte is not responsible for any exterior work including grading. Diotte is not resopnsbile for any costs associated with fixing the drainage problems at the property. Similarly, Diotte is entitled to be paid by Consolidated for the bollards, which were put on site at Consolidated’s request and are clearly an exterior component.

The electrical entrance: [ 84 ] According to Mr. Diotte, initially the storage building was to have minimal electrical power and minimal heating. The electricians advised Mr. Diotte that the 60-amp electrical panel would be inadequate and it would be too late for them to upgrade the electrical once the underground wiring was in place. According to Mr. Diotte, he asked Mr. Dubé if he wanted to increase the electrical panel, and Mr. Dubé refused giving the additional price. Mr. Dubé denies that this conversation took place. Mr. Diotte went ahead and asked the electricians to increase to the 100 amperes despite Mr.

Dubé’s refusal to pay the additional costs. Mr. Dubé now suggests the electrical entrance for the garage should have been 200 amperes and Diotte is responsible to upgrade the electrical panel at its costs. I accept Mr. Diotte that he recommended upgrades of the panel to Mr. Dubé during construction. This claim is denied. [ 85 ] Diotte claims from Consolidated the amount of $815 representing payment of an invoice from McIntyre & Levesque for provision of a third heater in the garage. According to Mr. Diotte, this heater was installed at Mr. Dubé’s request because there was insufficient heating in the garage.

There is no evidence before the Court with respect to this invoice and that claim is therefore denied. Interest: [ 86 ] Diotte claims interest on the amounts owing pursuant to the contract. The contract itself is strangely silence as to the issue of interest, although it does set out the terms of payment.

Article 6.2 of the contract states as follows: The contractor shall make application for payments, together with supporting sworn statements and/or other documents when required by the contact documents on or before the 20 th day of each month (herein called the “submission date”) to the owner for approval and due processing. The amount claimed shall be for the value, proportionate to the amount of the contact work performed and products delivered to the place of the work up to the 30 th day of the month.

The owner shall pay the contactor no later than 30 days after the submission date or 10 days after the date of a Consultant Certificate for payment, whichever is the latter. Eight-five percent of the amount applied for or such other amount as the contractor or the consultant determines to be properly due.

Where the owner or the consultant makes any changes to the amount of the applications for payment, as submitted by the contractor, the contractor shall be notified promptly in writing by the owner or the consultant if changes is given the opportunity to defend the contractor’s submission without delay.” (Emphasis is mine) [ 87 ] Diotte maintains that as the contract provided for a 30-day payment cycle, there was an anticipation of some penalty should the payment term not be respected. Diotte suggests that interest as provided for in the Judicature Act , R.S.N.B. 1973, Chap.

J-2, would be appropriate in calculating interest owing. Consolidated denies that Diotte is entitled to interest as the contract is silent with respect to any interest terms. [ 88 ] Diotte is not entitled to interest from the date of the issuance of its invoice as this was not provided for in the contract. Diotte was the author of the contract. It was within their power and their responsibility to clearly set out the interest terms in the contract were these anticipated. In the absence of a clear contractual term providing for interest, the Court is unwilling to infer one.

I will exercise the discretion conferred by subsection 45(1) of the Judicature Act and allow simple interest at the rate of 2% from June 17, 2009 to the date judgment is entered. Section 45(1) of the Act states as follows: In any proceedings for the recovery of any debt or damages, the Court may order that there shall be included in the sum for which judgment is given interest on the whole or any part of the debt or damages for the whole or any part of the period between the date the debt was due or the amount subsequently awarded as damages ought reasonably to have been paid and the date of judgment.

THE PLEADINGS: [ 89 ] Consolidated filed the second action in this matter, C/C/23/2011, to claim damages from Diotte due to alleged faulty workmanship in the construction of the buildings. Consolidated suggests a second action was necessary as it was unable to

prosecute its claims against Diotte pursuant to a counterclaim within the main action as the main action, C/C/41/09 was filed pursuant tothe Mechanics’ Lien Act. Following the Court of Appeal’s decision in SNC-SNAM, G.P., a partnership between SNC-Lavalin Inc.and Snamprogetti Canada Inc. and Snamprogetti Canada Inc. v. Opron Maritimes Construction Ltd et al, 2011 NBCA 60, Consolidated can maintain a counterclaim in the Mechanics’ Lien action. The Court of Appeal in SNC-Lavalin v. Oprondetermined that counterclaims are governed by the Rules of Court which by virtue of

Section 33 of the Mechanics’ Lien Act, also applyto Mechanics’ Lien actions.

Section 33 of the Act states as follows: “A lien may be enforced by action in the court, according to the ordinary procedure of that court, except where the same is varied bythis Act.” [90] Mr. Justice Bell explained the Court of Appeal’s reasoning in SNC-Lavalin v. Opron in arriving at theconclusion that Atlantic Paving Co. Ltd v. Cameron Properties et al (1956), (NB CA), 37 M.P.R. 271, [1955]N.B.J. No. 10 (C.A.) which held that a party could not bring a counterclaim within an action filed pursuant to the Mechanics’ Lien Actwas no longer determinative of the issue. Mr.

Justice Bell explains at paragraphs 56 to 59 as follows: [56] Until now, only one reported case has considered the effect of the 1992 amendments on the precedentialsignificance of Atlantic Paving. In AMEC Americas Ltd., Russell J. entertained a motion to strike out a defendant’s counterclaim in amechanics’ lien action.

He reasoned that although “one might be tempted [because of the repeal of certain provisions of the Act] to saythe ordinary procedure [now] permits a counterclaim”, “[t]he Act is designed […] to provide expeditious relief usually to tradespeople” and that a “counterclaim which may relate to a completely different subject matter from the mechanics’ lien claim could foil theintent of the Act by delaying the Plaintiff interminably.” He therefore ruled that “until the legislature specifically allows a counterclaim,as it did in Ontario, a counterclaim should not be permitted in this mechanics’ lien action” (para. 10). [57] With great respect, I do not agree that the precedential value of Atlantic Paving on the matter of counterclaimssurvives the 1992 amendments.

In my view, one of the effects of the 1992 reform is to allow counterclaims in mechanics’ lien actions. [58]

Section 33 of the Mechanics’ Lien Act says that “[a] lien may be enforced in the court, according to theordinary procedure of that court, except where the same is varied by the Act”. There is no longer anything in the Act that can be said tovary the ordinary procedure of the Court of Queen’s Bench. In repealing some of the procedural provisions of the Act, the Legislaturenevertheless retained s. 43(1), which provides that “[a]t the trial of the action the judge shall proceed to determine all questions thatarise therein, or that are necessary to be tried to dispose of the action completely and, subject to

section 42, to adjust the rights andliabilities of the persons appearing before him or upon whom the notice of trial was served.” It also retained s. 43(2), which requiresthe judge to attempt to “finally dispose of the action and of all matters, questions and accounts arising in the action, and subject tosection 42, to adjust the rights and liabilities of and give all necessary relief to all parties to the action or who have been served with thenotice of trial.” However, s. 61(2) was repealed. It provided as follows: 61(2) The object of this Act being to enforceliens at the least expense, the procedure shallbe, as far as possible, of a

summary characterhaving regard to the amount and nature ofthe liens in question. [Emphasis added.] 61(2) Le but de la présente loi étant d’assurerl’exercice des privilèges avec le minimum defrais, la procédure doit être, autant quepossible, d’un caractère

sommaire, comptetenu du montant et de la nature des privilègesen question. [Je souligne.] [59] It appears obvious to me that the intent of the 1992 amendments was to make the procedure provided in theRules of Court applicable to mechanics’ lien actions so that judges would follow that procedure in fulfilling their mandate under s. 43 ofthe Act. With the repeal of the provisions that had been found to vary the “ordinary procedure of the court,” there is no longer anystatutory impediment to making a counterclaim or a cross-claim in a mechanics’ lien action.

This is not to say, however, that thepurpose of the Mechanics’ Lien Act changes. The 1992 amendments simply reflect the reality that the object of the Act can be attainedwithin the parameters of the ordinary procedure provided in the Rules of Court. After all, the purpose of the Act is not much differentthan the stated purpose of the Rules: “to secure the just, least expensive and most expeditious determination of every proceeding on itsmerits” (Rule 1.03(2)). (Emphasis is mine)

RESOLUTION OF THE ISSUES: [ 91 ] The Court resolves the issues as framed by the parties as follows: (

a) Diotte is not responsible for the tenant fit-ups as requested by PWC/DFO within the original contract price of $318,500. (

b) Diotte did provide a sufficient credit to Consolidated of $5,800 for the office fit-ups. (

c) Diotte was not responsible under the contract to have all plans approved by a professional engineer. (

d) Diotte did fail to provide the required rentable space in the storage building. (

e) Diotte did not fail to construct the two buildings at sufficient elevation. (

f) Diotte failed to construct the storage building/garage with sufficient shear strength. (

g) Diotte was not responsible under the original contract to install a 200-amp electrical service entrance. (

h) Diotte was not responsible under the terms of the original contract to install bollards in front of the storage building. (

i) Diotte is not entitled to interest on any amounts properly outstanding under the contract. (

j) Consolidated is not entitled to $13,000 to provide for proper drainage. (

k) Consolidated is entitled to an amount sufficient to rectify the shortfall of 6.5 square meters missing in the garage. (

l) Consolidated is not entitled to receive approval of the buildings by a qualified engineer. CONCLUSION: Assessment of claim and set-off: [ 92 ] Diotte is entitled to payment of its outstanding invoice of February 4, 2009 in the amount of $51,181.91.

Diotte is entitled to payment of the invoice of June 23, 2008 for provision of the bollards in the amount of $ 3,955. [ 93 ] Consolidated is entitled to an amount of $10,000 as a set off to the amounts owing to Diotte for the deficiencies in the garage pertinent to the shear strength of the walls and the lost square footage. [ 94 ] Consolidated is entitled to counterclaim against Diotte in the main action, C/C/41/09 filed pursuant to the Mechanics’ Lien Act . Diotte is entitled to judgment against Consolidated in the amount of $45,136.91 ($51,181.91 + $3,955 - $10,000).

Consolidated’s Statement of Claim in action C/C/23/2011 is dismissed without costs.

Interest: [ 95 ] Diotte is entitled to interest on the amount of $45,136.91 at a rate of 2% from June 17, 2009 until the judgment is entered pursuant to Section 45(1) of the Judicature Act . Diotte is entitled to post judgment interest at a rate of 7% pursuant to Section 46(1) of the Judicature Act and the Rules of Court. Costs: [ 96 ] This matter has been ongoing since 2009, and has undoubtedly cost the parties significant amounts in both legal fees and expert fees. The evidence indicates that Consolidated refused to pay the last invoice from Diotte because they felt they should be accorded additional credit.

The Court has determined that they had been accorded appropriate credit, and that this reason to deny payment was unwarranted and unreasonable. Thereafter, Consolidated set out to identify any potential problem with the construction of the building, arguing that this provided set-offs against amounts owing to Diotte. [ 97 ] There is no question in the Court’s mind that had Mr. Diotte accepted to walk away from his last invoice, Mr. Mallet would have never visited that building, and there would have been no litigation on suggested deficiencies. Mr.

Dubé frequently acted for Consolidated, thus saving legal fees of which Mr. Diotte did not have the benefit. Under the circumstances, I am of the view that solicitor/client costs are not appropriate as requested by Diotte, but that costs should be accorded on an increased scale. Considering an amount involved of $45,136.91, Diotte is entitled to costs pursuant to Scale 5 in the amount of $6,300 plus HST. Diotte is also entitled to its reasonable disbursements pursuant to Tariff “D” of Rule 59.

Order Pursuant to Mechanics’ Lien Act: [ 98 ] The Court orders that the plaintiffs have a valid lien in the amount of $52,318.91 ($45,136.91 + $6,300 + $822) and asks the plaintiffs to prepare a draft judgment under the Mechanics’ Lien Act for the Court’s consideration and execution providing inter alia for the sale of the property in default of payment of money into Court. I remained seized of this matter for such purpose. Application may be made for any further directions required in that regard. DATED at Campbellton, N.B. this 2 nd day of December 2013. ___________________________ Tracey K.

DeWare, judge Court of Queen’s Bench of N.B. Trial Division