2017 ONSC 1103, 2017 ONSC 1103

CITATION : Delta Construction v. Paula MacMillan, 2017 ONSC 1103 DIVISIONAL COURT FILE NO.: 208/16 DATE: 20170320 SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT RE: DElta construction , Plaintiff/Appellant AND: Paula Macmillan , Defendant/Respondent BEFORE: Kiteley J.

COUNSEL: Satish Mandalagiri , for the Plaintiff/Appellant Abba Chima , for the Defendant/Respondent HEARD at Toronto: February 8, 2017 ENDORSEMENT [ 1 ] This is an appeal from the judgment pronounced by Deputy Judge Gannage on March 24, 2016 dismissing the plaintiff’s claim and the defendant’s set off claim with no costs awarded to either party. For reasons that follow, the appeal is dismissed without costs. Background [ 2 ] The appellant is a contractor.

After providing a quote based on the job description, the parties entered into a contract dated July 19, 2010 which contemplated three projects and subsequently two change orders as follows: Lowering basement floor $35,400/-+ tax Back addition $18,900/-+ tax Basement entrance/walkout $14,800/-+ tax Total $69,100/-+ tax Change orders $750 and $1,850 $ 2,600 TOTAL $71,700+ tax [ 3 ] The work was undertaken and the respondent made payments although not strictly in accordance with the payment

schedule attached to the contract. The parties agree that the respondent had paid a total of $56,900. [ 4 ] In December, 2010 the appellant stopped work because the respondent was in default of payment and he exercised his option pursuant to provision 11 of the contract. The respondent agrees that she stopped making payments but she said it was because of a dispute about the stairs he had installed. [ 5 ] The appellant issued the claim in March 2012 in which he claimed $18,326.60 and pre-judgment interest from December 24, 2010 at 10%.

The appellant obtained default judgment in the amount of $18,326 plus interest at 5% and filing fees of $115.00. When he garnisheed the respondent’s wages in 2015, she brought a motion to set aside the default judgment. In an endorsement dated April 23, 2015, a Deputy Judge set aside the judgment conditional on a defence being filed on or before May 15, 2015. In the endorsement the Deputy Judge ordered that “no defendants claim may be issued as it is statute barred”.

She directed that the funds in court as a result of the garnishee be paid to the appellant as costs. [ 6 ] The respondent filed a defence dated May 14, 2015 attached to which is a 3 page

summary of her position including her complaints about the quality of the work, an assertion that the work not completed should be valued at $16,000; and her assertion that in order to finish the work she hired a contractor and paid $21,000. [ 7 ] The parties attended a settlement conference on July 2, 2015. [ 8 ] The respondent filed a “Notice of Redraw” dated July 31, 2015 with this content: Paula MacMillan withdraws defence, form 9A, put before Court: May 14, 2015; Paula MacMillan keep exhibits in case put June 18, 2015; Paula MacMillan’s defense is redrawn.

[ 9 ] It appears that the respondent had filed a brief of documents with the court referred to as “exhibits in case” that included the same 3 page

summary that was in her defence followed by documents organized as schedules A, B and C. [ 10 ] The respondent filed a defence dated August 10, 2015 which consisted of the following: I, PAULA MACMILLAN: Have no evidence or facts a contract exists between I and DELTA CONSTRUCTION; Have no evidence or facts I owe a debt to DELTA CONSTRUCTION; Have never been presented a verifiable bill from DELTA CONSTRUCTION: I will swear before open court that all herein be true. Trial [ 11 ] The trial was scheduled for November 10, 2015. On that date, the appellant was represented by a paralegal licensee, Mr. Luthra.

The Respondent did not have a lawyer. In the preliminary discussion, it was clear that the respondent was not permitted to bring a counterclaim; that she had filed a second defence in which she asserted three defences; that the Notice of Redraw indicated that she continued to rely on her “exhibits in case” filed July 18, 2015 except for the 3 page

summary of her position labeled

schedule A; that the respondent took the position that she did not owe anything to the appellant; that the respondent insisted she had never received a “verifiable bill”. [ 12 ] Before commencing the trial, the Deputy Judge, for the first of many times, encouraged the parties to try to settle, particularly since they had never had a settlement conference based on the second defence. When the trial was adjourned to January 13 and then to March 24, he again encouraged the parties to discuss settlement.

In addition, throughout the 3 days of the trial, he encouraged and eventually insisted that the parties meet to provide a written document that demonstrated the parties’ agreement as to the work that the appellant had done, how much the respondent had paid, and the work that had not been done. [ 13 ] On November 10 Mr. Luthra made an opening statement and then Jagdeep Khalsa gave evidence. Throughout the three days of trial, much was said as to the corporate or business status of Delta Construction and the relationship between Delta Construction and Mr.

Khalsa. [1] Over approximately 30 pages the examination-in-chief of Mr. Khalsa was focused on the formation of the contract; the stop work in December pursuant to provision 11; the attempts to serve the respondent with the claim and the efforts to enforce the default judgment. In the 50 pages of cross-examination, the respondent focused on the status of Delta Construction; the scope of the projects; the payment

schedule and the payments she made; whether GST or HST was payable; the four different versions of the amount the appellant alleged was owed; the controversial stairs and whether the building inspector had approved the stairs when formed and prior to pouring or had not approved the stairs at all; whether the appellant was charging for work he did not do; whether she had been served with the claim. At page 91 of the transcript Mr.

Luthra agreed on behalf of his client that the respondent had paid $56,900 as she alleged and she had documented. [ 14 ] In the context of the many questions about the status of Delta Construction and whether the respondent contracted with it or with Mr. Khalsa, at pages 93 and 97 the respondent asserted that “my whole defence is [that I] have no contract with Delta” which was consistent with her defence filed in August 2015. [ 15 ] At page 111, in response to a question from the Deputy Judge, Mr.

Khalsa agreed that the respondent had told him she would not pay him because of the stairs. [ 16 ] In her cross-examination, the respondent did not ask questions about

schedule B of her document brief which listed the monies she said she spent to finish the work cross-referenced against items in the job description that formed part of the original quote. Nor did she ask questions about

schedule C which is described as “correspondence demonstrating efforts to sort things out”. [ 17 ] In re-examination, Mr. Luthra asked about the corporate status, the inspection of work, and whether the tax was 5% or 7% or 13%. [ 18 ] At pages 117, 118, and 119 the Deputy Judge pointed out that the onus was on the appellant to prove his claim and, as he said more than once throughout the trial, he was having difficulty trying to figure out what the claim was for. [ 19 ] After the recess, Mr.

Luthra provided a calculation at 5% GST for a total of $16,425 although he did not concede whether it should be 5% or some other percentage. [ 20 ] The respondent made an opening statement and then called her witness Paul Wilson who gave evidence about the work that he had done after the appellant left the job site. He referred to two invoices that he said were referable to cleaning up after the appellant left; one for $1695 dated January 20, 2011 and the other for $1638.50 dated August 19, 2011. [ 21 ] The brief cross-examination focused on the work that he had done and what he had observed at the site.

In her re-examination, the respondent exceeded the bounds of questions arising from the cross-examination and introduced the new issue of the structural beam. As a result, the Deputy Judge gave Mr. Luthra an opportunity to resume cross-examination during which Mr. Wilson agreed that he did not know whether the appellant had installed the beam. [ 22 ] The trial was adjourned to January 6, 2016 at which time Franklin Ulrich attended and asked the Deputy Judge if he could

“help” the respondent who he described as his “friend”. The Deputy Judge acquiesced. However, Mr. Ulrich’s participation led to some challenges in that he was not present for the first day of the trial, he insisted on the court clarifying whether it was a “statutory court or common-law court” and, without giving evidence, he contributed information he had about the corporate status of Delta. His involvement added to the pre-existing challenges in the trial and by page 17, the Deputy Judge indicated that if Mr.

Ulrich was not able to “help”, then the Deputy Judge would “have to deal with it”. [ 23 ] At page 14, the respondent took the witness stand and took an oath. However her evidence did not start until page 18 at which point the Deputy Judge directed her to start presenting her evidence without Mr. Ulrich asking her questions. The transcript shows ongoing conflict about Mr. Ulrich’s role. [ 24 ] At page 48 the Deputy Judge directed both parties to prepare a written

summary sheet that included the appellant’s version of the scope of the work done and what he was not paid for along with the response by the respondent to individual items. [ 25 ] In the 24 pages of her examination-in-chief, the respondent gave evidence as to the lack of a “verifiable bill”; whether the contract provided for tax and whether the appellant could charge tax; and with whom she had contracted. At pages 39-40 the respondent said that the amount she “had to payout to finish the things itemized as in the style of contract was “20,000 . . . . $20900” and she referred to

schedule B of her exhibit 2. She was also asked about the implications of her Notice of Redraw as well as the cost of correcting the stairs that she said was $2500. [ 26 ] The cross-examination took about 40 pages in which she was asked to identify her signature and initials on the documents; whether tax was required pursuant to the contract; her insistence she did not have a contract with Delta because Delta was not the person she contracted with; the deficiencies and whether she had given Mr.

Khalsa the opportunity to fix them; her insistence on being given a “verifiable invoice”; her insistence that she had paid the appellant for what he had done except the stairs which she had to correct and set off against what she owed him; and her insistence that he was charging her for work he did not do. [ 27 ] In re-examination, the Deputy Judge queried whether she had created a

summary of her position as he had urged and the respondent produced a document that was marked exhibit 4. Mr. Luthra objected because he had “closed his case” and, based on the defence, he said it was not relevant. Mr. Ulrich described it at page 102 as “the

summary of a set-off of a debt that was alleged”. [ 28 ] The Deputy Judge received the exhibit because it was in response to the requests he had made in November that the parties collaborate to provide a

summary as indicated above. The Deputy Judge adjourned for a third trial date at which time Mr. Luthra would continue his cross-examination, limited to exhibit 4. [ 29 ] The trial resumed March 16 and after preliminary comments about the contents of exhibit 4, Mr. Luthra asked for a recess to review it with his client.

At many points the Deputy Judge pointed out that he was looking for the parties to try to help him, that he was still trying to figure out the claim, and that the onus was on the appellant to prove his claim. [ 30 ] In response to the urging of the Deputy Judge to clarify the basis of the claim, at page 33, Mr. Luthra confirmed the agreement that the contact and change orders totaled $71,700 as indicated above. He said that his client confirmed that “90% of the work had been completed” which he calculated at $64,530.

The Deputy Judge then calculated the difference between $64,530 and the amount the appellant agreed the respondent had paid, namely $56,900 and he observed that the difference was $7629.20 which led him again to urge settlement. [ 31 ] In re-examination Mr. Ulrich asked the respondent about a calculation the appellant had made during the recess, predicated on the “90% theory”. Judgment [ 32 ] The Deputy Judge gave oral reasons for decision on March 24, 2016. He referred to the claim and the three issues raised in the defence. At page 7 he indicated that the issues were as follows: 1. Is there a contract? 2.

Has there been a breach? If so, by whom? 3. What are the damages, if any? 4. Does the set-off claim in the Defence have merit? 5. Does the defendant owe any H.S.T.? Issue #1: [ 33 ] The Deputy Judge held that there was a contract. He dismissed the challenge made by the respondent that there was no contract.

Issue #2: [ 34 ] The Deputy Judge held that Delta had breached the contract by failing “to furnish all materials and labour necessary to improve [the] premises in a good, workmanlike and substantial manner”; that Delta’s work was incomplete and deficient; and that MacMillan had not waived any defects or uncompleted work. [ 35 ] Under the heading “Unpaid Work” the Deputy Judge referred to the appellant’s submission that 90% of the work had been completed and the unpaid work consisted of: partial underpinning; partial back addition; and front stairs. He referred to the acquiescence of Mr.

Luthra on behalf of the appellant on the last day of trial that the total outstanding was approximately $7,550. And he

found that 90% was an overestimate of the percentage of the work completed. [2] [ 36 ] Under the heading “Deficiencies and Remedial Work” the deputy judge listed the items in the three categories from the basement entrance, lowering the basement floor, and the back addition which totaled $20,900. He noted that in addition there was work that was not done or completed and he listed 5 items.

The Deputy Judge then reviewed the evidence about the stairs and he noted that the cost to fix the stairs was $2,500 that was to offset any outstanding amount owed by the respondent. [ 37 ] The Deputy Judge summarized the evidence of Paul Wilson including the invoices in January and August 2011 for removal of debris and other work including installing doors, drywall and insulation that totaled $3,333.50. [ 38 ] The Deputy Judge referred to provision 13 of the contract and held that the respondent had not unconditionally accepted the project and had not waived non-compliance.

Furthermore, he found that she had given Mr. Khalsa a chance to complete the contract and remedy the defects. Issue #3: [ 39 ] The Deputy Judge held as follows: What are the damages, if any? The purpose of a damage award for a breach of contract is to place the innocent party in the position that that party would have occupied had the contract been performed. In such circumstances as here the law attempts to put the homeowner, Ms.

MacMillan, in the position she would have been in had the contract not been breached by the plaintiff, Delta, while at the same time ensuring that the homeowner is not unjustly enriched or gets a windfall. This is only fair. Damages are assessed below. Issue #4: [ 40 ] The Deputy Judge held as follows: Does the set-off claim in the Defence have merit?

Section 111 of the Courts of Justice Act , R.S.O. 1990, c. c. 43 permits set-off. It reads: 111(1) In an action for payment of a debt, the defendant may, by way of defence, claim the right to set off against the plaintiff’s claim a debt owed by the plaintiff to the defendant.

(2) Mutual debts may be set off against each other even if they are of a different nature. Judgment for defendant

(3) Where, on a defence of set off, a larger sum is found to be due from the plaintiff to the defendant than is found to be due from the defendant to the plaintiff, the defendant is entitled to judgment for the balance. I have specified certain work to be reasonable expenses paid by MacMillan. These items total, as I said, $20,900.08 [sic]. How much has MacMillan paid to complete the work? According to my calculations, overall she has paid $20,900 [sic] + $56,980.80.

That totals $77,880.88 [sic] for the completed project, specifically for: Lowering a basement floor Back edition[sic] The basement entrance walkout from the front. Plus specified demolition, removal, enlarging garage back door, site cleanup and disposal. Is Paul [sic] MacMillan out of pocket? No. I am not satisfied that she overpaid to have the work completed properly. In fact it seems she ended up with a better deal with respect to the project. As I said she paid $77,880.88 [sic]. Had Delta completed the contract satisfactorily MacMillan would have had to pay $71,700, plus 13% H.S.T. That’s $81,000.21.

So she paid less than this. She paid $77,880.88 [sic]. She would have had to pay $81,000. So there are no damages. Further while MacMillan asked to recover damages for loss of square footage, additional extra costs, loss of rental income and loss of income (see Defendant’s Exhibit 2, Tab C), she did not produce any evidence to support these claims. They are therefore dismissed. In sum, the defendant’s set-off claim is unproven and is therefore dismissed. Issue #5: [ 41 ] The Deputy Judge held that the defendant did not owe any H.S.T.

Supplementary Reasons for Judgment [ 42 ] The Deputy Judge issued supplementary reasons for judgment dated June 7, 2016 that contained the following: Upon recently reviewing the transcript of my oral reasons for judgment delivered March 24 2016, I make the numerical amendments below. Under “ 2.

Breach of Contract ”, subheading “Deficiencies and Remedial Work” (p 13): $944.59 install door to cold storage area” should be deleted as this item and amount are recorded twice. “The total is $20,900.08” should be amended to read: “The total is $17,955.45.” This total should be carried forward to my later discussion under “ 4. Set-off ” (pp 18-19) amended as follows: I have specified certain work to be reasonable expenses paid by MacMillan. These items total, as I said, $17,955.45. How much has MacMillan paid to complete the work? According to my calculations, overall she has paid $17,955.45 + $56,980.80.

That totals $74,936.25 for the completed project, . . . Is Paul [sic] MacMillan out of pocket? No. I am not satisfied that she overpaid to have the work completed properly. In fact it seems she ended up with a better deal with respect to the project. As I said she paid $74,936.25. Had Delta completed the contract satisfactorily MacMillan would have had to pay $71,700, plus 13% H.S.T. That’s $81,000.21. So she paid less than this. She paid $74,936.25. She would have had to pay $81,000. So there are no damages. These amendments are made for the sake of accuracy.

It should be apparent that they are inconsequential to the result. These amendments and supplementary reasons do not change the disposition. Standard of Review [ 43 ] The standard of review of a Deputy Judge’s decision is correctness on questions of law. Findings of fact are not to be reversed absent palpable and overriding error. Palpable errors include findings that are clearly wrong, unreasonable or unsupported by the evidence.

Questions of mixed fact and law lie along a continuum. [3] Analysis [ 44 ] The notice of appeal and the factum reflect issues that were not raised during oral submissions and accordingly, I will deal only with the four issues relied on in submissions. As is apparent from the

summary above, I have had to refer extensively to the evidence in an effort to do what the Deputy Judge also had to do, namely figure out the claim asserted by the appellant. It was challenging with transcripts, let alone as the evidence was unfolding.

Furthermore, closing submissions were not recorded so I do not have the benefit of the analysis advanced by each party to the Deputy Judge. [ 45 ] The first issue is that the appellant takes the position that the Deputy Judge made an error in fact and law when he interpreted the contract and held that the appellant was in breach. [ 46 ] The appellant insisted he had exercised his right pursuant to provision 11 which allowed him to stop work if the owner failed to make a payment. The appellant agreed that the respondent had told him she would not pay him because of the stairs.

That and other evidence was a basis upon which the Deputy Judge could find that the appellant was in breach of the contract by not providing the materials and labour necessary to improve the premises in a good, workmanlike and substantial manner. His findings on this key issue of breach of contract were largely factual and based on his opportunity to hear and consider the testimony and the exhibits. It may be that the Deputy Judge made a few mistakes about the evidence, such as attributing a discussion to having occurred on December 27. But those are inconsequential mistakes.

The appellant has failed to demonstrate a palpable and overriding error and accordingly this ground of the appeal fails. [ 47 ] The second issue is that the appellant takes the position that the Deputy Judge erred in law when he calculated a set-off even though there was no defence in set-off. [ 48 ] In her defence filed in August 2015, the respondent asserted that there was “no evidence or facts” that she owed money.

In her evidence she emphasized that she did not enter into a contract with Delta (which the Deputy Judge did not accept) but she also gave extensive evidence as to expenses she had incurred to address deficiencies and to complete the work. At the outset of his oral reasons for decision, the Deputy Judge identified set–off as one of the issues.

Section 111 of the Courts of Justice Act provides that a defendant may assert a claim for a set-off in a defence. I am satisfied that the Deputy Judge did not err in law in accepting that the respondent had properly asserted a claim for set-off. [ 49 ] Under the heading “what are the damages, if any?” the Deputy Judge went on to address the set-off claim and ultimately concluded that the respondent did not establish damages and then he dismissed her claim for set-off . Those passages referred to above from his oral reasons indicate two errors: confusion between set-off and damages; and consideration of a claim for damages when the

Deputy Judge who set aside the default judgment precluded the respondent from bringing a claim for damages. [ 50 ] However, those errors of law did not affect the outcome. The Deputy Judge had found that the appellant breached the contract. He had said repeatedly that the onus was on the appellant to prove on a balance of probabilities what he claimed which included a reliable description of the work he did and did not perform. The appellant failed to meet that onus. During her evidence on January 6, 2016 the respondent produced a

summary in an attempt to respond to the repeated requests by the Deputy Judge. Mr. Luthra objected to its introduction but his client had not produced such a

summary and Mr. Luthra was given until March 16 to prepare for his cross- examination. It was not a surprise that the Deputy Judge chose to rely on the only

summary he had been given. [ 51 ] While the Deputy Judge ought not to have considered the damages claim, in effect he dismissed it. The Deputy Judge did appropriately consider the set-off claim. Based on the unchallenged evidence that the respondent paid $2500 to redo the stairs that the appellant agreed that the respondent had been critical of and the unchallenged evidence that the respondent paid Mr. Wilson $1695 for clean-up and removal of debris, the Deputy Judge could have minimally found that the claim for set-off amounted to $4195. As indicated above, during the hearing on March 16 Mr.

Luthra effectively agreed that the amount owing was only $7629. Given the absence of reliable evidence even as to the $7629, it was not an error of law for the Deputy Judge to have dismissed the appellant’s claim for recovery of any amount because he did not prove his claim.

I reject this ground of appeal. [ 52 ] The third issue is that the Deputy Judge made an error in law and fact when he issued supplementary reasons for judgment “ suo moto ” and without any notice to parties and any hearing and whether the Deputy Judge was “ functus officio ”. [ 53 ] The Deputy Judge simply corrected the arithmetic and, as indicated, it did not affect the outcome of the appeal. I reject this ground of appeal. [ 54 ] The fourth issue is that the conduct of the Deputy Judge raises a question of reasonable apprehension of bias.

In the factum, counsel for the appellant relied on submissions in the “preceding paragraph”, namely the third issue in the appeal, that the Deputy Judge had “made an error in law and on facts” when he issued supplementary reasons for judgment. [ 55 ] I did not ask counsel for the respondent to make submissions on that ground of appeal. As articulated, there is no basis for suggesting that the Deputy Judge demonstrated a reasonable apprehension of bias. Furthermore, having read the transcript of the three days of evidence, it is apparent that Mr.

Luthra did not accept some of the evidentiary and procedural rulings made by the Deputy Judge. He was quite assertive in continuing to make his position known. At page 18 of the transcript of the trial on March 16, Mr. Luthra observed that he thought the Deputy Judge was “biased towards me personally” but the transcripts of the three days of trial do not provide any objective basis for his subjective conclusion. I reject this ground of appeal. Costs [ 56 ] In this court it is expected that counsel will make best efforts to agree on the amount of costs, subject to success. In this case they did not agree.

The appellant provided a costs outline that listed fees of $6215 and disbursements (including transcript preparation in the amount of $2376) in the total of $9477.09. Counsel for the respondent provided a bill of costs on a partial indemnity basis that totaled $8438.40. [ 57 ] Those costs bear no relationship to the amount at stake in this case which was at the most $18,326 and as little as $7600.

While the respondent has been successful in both the trial and the appeal, pursuant to s. 25 of the Courts of Justice Act , I consider it just and agreeable to good conscience that neither party pay or recover costs in a trial and an appeal that should never have happened. ORDER TO GO AS FOLLOWS: [ 58 ] The appeal is dismissed without costs. _______________________________ Kiteley J. Date: March 2017