Reasons for Judgment 

Introduction

[1] The trial of this matter was heard before Mr. Justice Brine, who, in January 2009, became very ill and unable to render a judgment.

[2] On February 23, 2009, this matter was re-assigned to me by the Chief Justice pursuant to R. 64(10) of the Rules of Court.  Since then, I have had two case management conferences with counsel and the defendants by teleconference.  I ordered and obtained a full transcript of the proceedings for my use, and directed that copies be provided to counsel and the defendants at no cost to them.  I also directed that electronic recording of the proceedings at trial be produced in CD form and that copies be provided to counsel and to the defendants.  I have read the transcripts of the 20 days of trial, including the parties’ submissions.  I have listened to portions of the recording of the trial proceedings, which I considered necessary. I have also completely reviewed the filed exhibits, including a VHS tape recording, submissions of counsel and the defendants, and the legal authorities relied upon.

[3] I invited the parties to advise me if any further trial proceedings would be necessary before I began my consideration of this matter.  Neither counsel nor the defendants have done so.

[4] Counsel for the plaintiff and the defendants appeared before me on May 14, 2009, after each had reviewed the transcripts for the purpose of highlighting those portions to which I ought to have specific reference, or review the recording.  Counsel and the defendants also referred to areas in the transcript that they considered to be in error.  Neither party provided the Court with any additional evidence or further submissions, except to assist the Court to render reasons in this matter.  It is based on the foregoing that I consider myself able to render reasons for judgment in this case.

Overview

[5] Mr. Yusuf and Ms. Dunroe decided to build a new home at 4799 Fleming Street in Vancouver in 2003.  They saw a home in their neighbourhood on Grant Street that was under construction.  They were impressed with the plan and the quality of that home.  They decided to retain the contractor, the plaintiff, Western Homes & Management Ltd., to construct their new home.

[6] The plans describe a detached home of two stories of wood frame construction.  The ground floor is formed on a concrete slab on grade.  The second floor is formed by lumber joists and the roof is formed by prefabricated lumber trusses.  The house is clad with cement stucco with some cultured cladding adjacent to the front entrance.  The windows are double glazed in vinyl frames.  The doors are wood framed, some with glazing.  The roof is covered with concrete roof tiles draining into aluminum gutters and then into downspouts connected to a below-grade drainage system.  Attached to the house was to be a large deck partially constructed over a double garage on the east side.

[7] The parties entered into the construction contract on July 2, 2003 (the “contract”).  The plaintiff started construction at the beginning of August 2003, and proceeded to the “drywall stage” of construction.  The plaintiff sought payment at the conclusion of that stage on October 24, 2003, of $55,000.  The defendants’ bank appraised the property and released the funds to the defendants; but the defendants did not pay the plaintiff.

[8] The defendants say that when they made an earlier payment to the plaintiff at the “lock up” stage of construction, Mr. Yusuf pointed out several deficiencies to Mr. Mehar Sidhu (known as “Mick”), the principal of the plaintiff.  Mr. Yusuf says that Mr. Sidhu agreed that all of the deficiencies would be corrected before the drywall stage payment was to be made.  Mr. Sidhu disagrees and says that such a conversation never occurred.

[9] On November 6, 2003, the plaintiff’s counsel wrote the defendants demanding payment of the drywall draw, which the plaintiff said was overdue.  The defendants did not respond.  On November 10, 2003, counsel for the plaintiff advised the defendants by letter that they were in breach of the contract.  The letter states:

You are in breach of the contract between you and our client [the plaintiff] and our client hereby accepts your breach.  As a result of your breach our client will immediately cease all activities on the subject property and we will be taking all possible steps to protect our client’s interest without further notice to you.

[10] The plaintiff claims $55,000 that it asserts was due at the conclusion of the drywall stage.  The plaintiff also claims a loss of 15% profit on the total cost of the construction, which it anticipated it would receive at the completion of the project.

[11] The defendants say that it is the plaintiff who breached the contract by refusing to continue construction of the house; failing to fix the deficiencies; and asserting that the drywall payment was due, when the drywall was incomplete.  The defendants also claim damages for delay because construction of the house was not completed within the period specified in the contract.

Issues

1. Did the defendants breach the contract by refusing to make the payment of $55,000 to the plaintiff?

2. What is the effect of the defendants’ non-payment?

3. Is the plaintiff responsible for the deficiencies that the defendants have identified?

4. Are the defendants entitled to damages for the deficiencies?

5. Is the plaintiff liable to the defendants for delay in the completion of construction?

6. Is the plaintiff entitled to damages reflecting a loss of profit?

The Contract

[12] Mr. Yusuf prepared the contract.  He presented it to the plaintiff (Mr. Sidhu).  The parties entered into the contract on July 2, 2003.  The plans, which were provided by the defendants, were appended to the contract and formed part of it.

[13] Below are the provisions of the contract that are relevant to the matters in issue:

The undersigned agree that the following specifications are to be used in construction of the dwelling.  No representations which are not set out in these specifications shall be enforceable.

House to be constructed as per plan two level and specifications

Quality same or better standard finishing as demo house on Grant St. (2926) shown.

...

Garage and Driveway:            Standard cement finish

Sidewalks:                               Front sidewalk and steps to be standard concrete both sides are to be standard concrete broom finish

Final Grading of Property:       as per plan and or as City of Vancouver requirement

Exterior Finish:                        Acrylic stucco in the front and cultured stone as is 3496 Welwyn St. Vancouver

Windows:                                All the windows of the house to be double glazed, ½” Vinyl windows (white) Front window designs as on submitted plans

Heating:                                   Radiant heating throughout the whole house

Plumbing:                                Hot water tank: (50 gallons) with five year warranty parts and labor

Kitchen Sink: Upstairs double stainless steel sink and faucets also hook-up and

...

Downstairs double or single stainless steel kitchen sink in each suite with washerless faucets in each suite (owner will choose or decide). Two exterior water taps outside.

Floor Covering:                       Granite floor entry all washroom and kitchen floor are tiles.  Living room, dining room, hallway and stairs to be finished with Red solid oak hardwood floor with high-gloss finish ...  The hardwood floor lining design running towards the front window side (Fleming Street) including the hallway.

Landscaping:                           Front and backyard to be landscaped (levelled) completed with turf and concrete footing, black railing fence in the front, sides as wire fence and at the back wire fence with gate for driveway and the yard must be cleaned after complete construction.

Cultured Marble:                     All window sills are to be cultured marble finish in the house upstairs and downstairs.

Exterior Walls:                         Walls acrylic stucco. Cultured stone in the lower part of the front face as is at 3496 Welwyn Street, Vancouver, B.C.

Sundeck:                                 Fiber glass

Two Skylights:                         One above the main stairway and one above the back hallway.

Kitchen Hood Fans:                Sakura (double fan) hood upstairs.

Downstairs single hood fan above the stove in each suite.

Lights Upstairs:                       ...four pot lights in the living room.  All the lights are to have separate switches as a single light switch.

Drive Way                               To be concreted as discussed (Broom Finish).

Completion Time                     To be completed in 3 ½ months but no later than 4 months...

1. If the construction is not fully completed within four months and the occupancy permit is not issued to the owner by the builder, the builder should pay One Hundred and Twenty-Five Dollars ($125.00) per day to the owner from the total cost of the construction or the owner may deduct the amount from the total payment.

...

This is a legal and binding contract.  This agreement has been entered into and shall be construed in accordance with, and governed by, the Laws of Province of British Columbia and the Law of Canada applicable therein.

TOTAL COST FOR THE PROJECT

Will be One Hundred and Seventy-Six Thousand Dollars ($176,000.00) including GST and PST, any other tax or fees, all the city and construction fees etc.  The contract price includes... permits, property demolition, clearances, insurances, mandatory 2/5/10 warranty, sub-contractors, labours, materials, power equipment and services to perform the work in accordance with the plans and the construction specifications of the new house.  The builder will apply for the building permit.

TERMS OF PAYMENT

1^st Payment – The payment of $5,000 will be paid directly to Western Homes & Management Ltd. (Mick Sidhu) on acceptance of this contract and submitting the building application to the city.  On the same day Five Thousand Dollars ($5000.00) including GST and PST will be paid.

2^nd Payment – Forty-Five Thousand Dollars ($45,000.00) including GST and PST upon the completion of lock-up (as soon as the bank appraises the property and the project and releases the money to the owner).

3^rd Payment – Fifty-Five Thousand Dollars ($55,000.00) including GST and PST after the drywall, (as soon as the bank appraises the property and releases the money to the owner)

4^th Payment – ...

1.       Did the defendants breach the contract?

[14] The contractual provision relating to the third payment states that $55,000 will be paid to the plaintiff “after the drywall, (as soon as the bank appraises the property and releases the money to the owner).”

[15] There is no dispute that the bank appraised the property and released the money to the owner.  The defendants did not provide payment to the plaintiff in accordance with the contract term.

[16] The defendants say that the drywall stage was not complete, and in any event, the plaintiff was not entitled to this payment until the plaintiff corrected the deficiencies that were identified by the defendants at the time the lock up (2^nd) payment was made.

Was the drywall complete?

[17] Pierre Gallant, an expert witness called by the plaintiff, defined the conclusion of the drywall stage as when the boards are up, mudded, taped, and sanded.  Mr. Sidhu says that the drywall was completed except for the textured ceiling, which would have been completed later.  He agreed that there may be some further need for drywall work after the sprinklers are installed in the ceiling and to fix any holes or damage to the drywall.  The drywall contractor would come back at a later stage to touch it up.

[18] Tirath Kang, the drywall contractor, says that he saw Mr. Yusuf at the construction site a couple of times while he was performing work on the drywall.  Mr. Yusuf did not complain to Mr. Kang about any aspect of the drywall installation.

[19] Mr. Yusuf says that significant amounts of the drywall work remained: there were holes in the drywall, it had not been boarded or mudded, and sanding was incomplete.  The drywall had not been primed or textured or cleaned up ready for painting.

Side Agreement

[20] The defendants say that the plaintiff is not entitled to payment because of a specific agreement (the “side agreement”) made between Mr. Yusuf and Mr. Sidhu at the time the lockup payment of $45,000 was made.  Mr. Yusuf says that this side agreement concerned specific deficiencies that Mr. Yusuf pointed out to Mr. Sidhu at the time he made the second payment at the conclusion of the lockout stage on October 2, 2003.  Mr. Yusuf says that Mr. Sidhu agreed to rectify these before he received the third payment.

[21] The list of deficiencies included:

1. One skylight was installed in the house rather than the two skylights shown on the plans. The plans showed that a skylight was to be installed above the main washroom, and that skylight was not installed.

2. The skylight that was installed over the main staircase was smaller than was shown on the drawings.  The drawings specified a skylight 4 feet by 2 feet and the skylight that was installed by the plaintiff was 3 feet by 2 feet.

3. Only three pot lights were installed in the living room where the contract referred to four pot lights.

4. The plans called for “side roofs” on the north and south side of the house.  They were to be placed between the first and second levels of the house as shown on the drawings.  They were not installed.

5. The windows installed overlooking the back deck were smaller than those specified on the plans.

6. The windows installed were not stamped as tempered glass as required by the contract.

7. The concrete floor on the second level of the residence was not constructed to permit hardwood floor installation in accordance with the contract or as shown on the drawings.

8. The deck at the rear of the house was not surfaced with fibreglass as provided in the contract.  The plaintiff surfaced the deck with vinyl.

9. The deck did not slope away from the house as shown in the drawings.

10. The radiant floor heating system was not installed properly.

11. The stucco on the residence was not installed properly.

12. The plaintiff installed used drain pipes where the contract specified that the materials used in building the residence were to be new.

13. The garage doors had not been installed on the attached garage.

[22] Mr. Yusuf says that he stated to Mr. Sidhu at the time he made the lockup payment of $45,000:

Before I give you this cheque... I told him, ‘Mick, this is for all the work you did now, but, you know, like, I know you are telling me that you’re going to do later on, later on.  But, please make sure that you do this thing work.  If you are not going to ... complete the [deficiency] work, I’m going to hold your payment’.

[23] Mr. Yusuf says that he specifically mentioned to Mr. Sidhu the side roofs, windows, skylights, and garage doors.

[24] Mr. Yusuf continues:

I told him that whatever else is missing and it’s not according to the plan or the contract, please make sure you complete it before you’re going to be asking me another money.  Because I know you haven’t done it...

[25] Mr. Yusuf says that Mr. Sidhu stated:

Mr. Mohammad [Yusuf], don’t worry about it.  Everything is going to be fine.  The reason I am asking you to give me the cheque now even if the work is not completed, so I can pay the lumber... and I don’t have to pay any interest or anything like that.

[26] Mr. Yusuf says he told Mr. Sidhu that he had the money ready to make the third payment but he wanted the work to be corrected.

[27] Mr. Sidhu denies that such a conversation took place.  He says that when the lockup payment was made, Mr. Yusuf did not say anything to him about any terms connected with that or any future payment.  He says that Mr. Yusuf discussed his concern about side roofs that were shown on the drawing not being installed, the window sizes not being in accordance with the plans, the fibreglass not being installed on the deck, the skylights, the direction of the sleepers for the hardwood floors on the second floor, the radiant heat pipes “floating up” and the elevation to the foundation.  There were no other concerns discussed between Mr. Sidhu and Mr. Yusuf at the time the second payment was made.

[28] I find that the contractual provisions regarding the payments are clear.  Particularly in regard to the third payment, the drywall payment, the payment is to be made to the plaintiff “as soon as the bank appraises the property and releases the money to the owner.”  There is no dispute that the bank performed the appraisal and released the money to the owner.  The owner refused to provide payment to the plaintiff.

[29] I do not accept Mr. Yusuf’s evidence concerning the state of the drywall and his position that it was incomplete.  The contractual provision directs that payment is triggered by the bank appraisal and release of the money to the owner.  It does not allow, or indeed contemplate that the owner, Mr. Yusuf, is the arbiter of whether the drywall stage has been completed.  Further, based upon the evidence of Mr. Sidhu and Mr. Gallant, I am satisfied that the drywall stage was substantially complete and that while further drywall activities would be required, this would not be performed until a further stage of construction.

[30] In respect of the “side agreement”, Mr. Yusuf is adamant that he attached conditions to the third payment to which Mr. Sidhu agreed. Where there is a dispute in the evidence such as this, it is necessary that I consider the credibility of the parties, and which position is consistent “...with the probabilities that surround the currently existing conditions”: Faryna v. Chorny, [1952] 2 D.L.R. 354 (B.C.C.A.).

[31] I find it unlikely that Mr. Sidhu would have agreed to add conditions to a clear contractual requirement concerning the third payment.  The parties had expressly agreed to the terms of payment.  Mr. Sidhu would not have agreed to circumstances where the receipt of the third payment was more difficult than was defined in the contract.  While Mr. Sidhu agrees that Mr. Yusuf raised some of his concerns about the project at the time the lockup payment was made, he is certain that there were no conditions that were to be attached to the third payment.  Further, the nature of the conditions, which Mr. Yusuf says were attached to the third payment, simply do not make sense.  For example, Mr. Yusuf states that Mr. Sidhu agreed to change the window size after the drywall was done but before payment would be made.  If Mr. Sidhu had agreed to change the window size, it is not logical that he would have proceeded to place the drywall first and then adjust the window size.  I therefore reject the defendants’ evidence that there was a side agreement that entitled them to withhold payment from the plaintiff despite the clear words of the contract.

[32] I conclude that when the bank released the funds for payment to the contractor at the conclusion of the drywall stage, the contract required that payment be made to the plaintiff.  The defendants breached the contract when they refused to provide payment to the plaintiff.  The plaintiff is entitled to the payment of $55,000.

2.       What is the effect of the defendants’ non-payment?

[33] Counsel for the plaintiff demanded payment of the sum of $55,000 to the plaintiff on November 6, 2003, by letter delivered by courier to the defendants.  At para. 2 of that letter counsel states:

Demand is hereby made for the immediate payment to our client in the sum of $55,000 and if immediate payment is not made we will take all steps possible to protect our clients interests and construction will cease.

[34] The defendants did not respond to that letter.

[35] On November 10, 2003, counsel for the plaintiff advised the defendants, by letter delivered by courier, that the defendants were in breach of the contract and that the plaintiff accepted the breach.  Counsel for the plaintiff advised the defendants that the plaintiff would “immediately cease all activities at the subject property...”.

[36] In G. Fridman, The Law of Contract in Canada, 5th ed. (Toronto: Carswell, 2006), the author states that while a breach of a condition is not an automatic termination of the contract, the effect of a breach may ‘discharge’ the contract to relieve the innocent party of its obligations to perform under the contract.  The breach of the condition does not result in a discharge of the contract unless the innocent party elects to make it so: (see pp. 481-482).

[37] In 1394918 Ontario Ltd. v. 1310210 Ontario Inc. (2002), 57 O.R. (3d) 607 at para. 22 (C.A.), the Court reviewed the case law regarding whether acceptance of a repudiation of the contract ‘terminates’ the contract. The court concluded that:

Accrued obligations under the contract continue to exist, at least in the form of a secondary obligation to pay damages.  To the extent that there remain in existence contractual obligations, it cannot be said that the contract ceases to exist.

[38] The effect of the plaintiff’s acceptance of the defendants’ repudiation of the contract discharges the plaintiff from future obligations.  The obligations that have already arisen are not extinguished.  In the context of this case, the defendants are entitled to claim for deficiencies arising from the work the plaintiff performed up to and including the drywall stage.  However, the plaintiff is not responsible for any further work, or any deficiencies arising from work performed by others.  For clarification, the plaintiff is not required to compensate the defendants for the completion of the home, as the contract was terminated at the conclusion of the drywall stage.

3.       Is the plaintiff responsible for the deficiencies that the defendants have identified?

[39] On November 21, 2003, counsel for the defendants provided the plaintiff with a list of deficiencies.  In many cases, the deficiencies refer to specifications in the contract that would be constructed after the drywall stage was completed. Examples are “electrical not completed, house number not done,” and landscaping.   I will not list them, as they are numerous, but if I do not refer to them, either above (para. 21) or below (para. 40), the defendants’ claims for damages related to those deficiencies are dismissed.

[40] I will therefore consider only those items on the defendants’ list of deficiencies that relate to the construction work performed by the plaintiff.  For clarification, I have divided those deficiencies into those that arose and were known at the conclusion of the drywall phase (those enumerated at para. 21, above); and those that became known after the plaintiff had left that site, but may be related to work it performed before it left the site.  This second category includes:

1. Foundation and grading at the north side of the garage.

2. Wiring for the kitchen fan hood.

3. Headroom over the main staircase.

4. Self closing hinges on the main floor doors.

5. Roof leaks.

6. Installations required for the suites in the basement.

7. Gas hook-up for fireplace.

8. Garage plumbing.

9. Leaking and mould.

Skylights

[41] The defendants have two complaints about the skylights: the first is that the plan shows two skylights: one 3 feet by 2 feet above the main washroom on the second level and one 2 feet by 4 feet above the main stairway on the second level.  The defendants say that the skylight installed on the main stairway was 2 feet by 3 feet rather than 2 feet by 4 feet; and that the second skylight was not installed.  Mr. Yusuf claims that both the number of skylights and the size installed should reflect what is in the plans.  He acknowledges that the written contract suggests that the second skylight was to be located in the rear hallway; however, the plans show that the second skylight was to be above the main washroom.  Mr. Yusuf says that he clarified this while construction was ongoing and understood that the second skylight would be located above the main washroom.

[42] Mr. Sidhu states that he had a discussion with Mr. Yusuf and Ms. Dunroe concerning the skylight in the washroom.  He says that the defendants suggested that the skylight referred to in the contract as going in the back hall should be placed in the washroom instead.  Mr. Sidhu says that he suggested that the washroom was too small particularly once the fan and light were installed in the ceiling.  He says that he also told the defendants that in his experience the shower steams up the skylight and forms mildew over it.  He says that he told them “it’s not really a good idea to have it in the bathroom.  You can have it anywhere else”.  Mr. Sidhu says that he also advised the defendants that the skylight in the back hall interfered with the roof ridge and that the defendants said “yeah, okay, if you can’t have it, you can’t have it”.

[43] In regard to the skylight installed above the main stairway on the second level, Mr. Sidhu stated that he installed a skylight that was 2 feet by 3 feet, rather than 2 feet by 4 feet as provided in the plan.  Mr. Sidhu says that the framers suggested that the skylight be smaller because Mr. Yusuf wished to install a chandelier there and there was limited ceiling space.  Mr. Yusuf was present when the framer made the suggestion and Mr. Sidhu told Mr. Yusuf:

Okay, this is what [the framer’s] are saying and it is up to you, if you want a chandelier… this is what they’re suggesting and I think… they’re right, it’s a good idea.  You need a little bit more room because chandeliers are… a little bit heavier than regular lights.  And if you have… a little bit more extra room… it’s more solid.

[44] Mr. Sidhu says that a decision was made among Mr. Yusuf, the framers, and Mr. Sidhu, that a smaller skylight would be installed.

[45] Mr. Yusuf takes the position that the plan called for a larger skylight and that is what should have been installed.  He also asserts that there is sufficient room to accommodate both a skylight measuring 4 feet by 2 feet and the chandelier.  The court asked Mr. Yusuf to provide a photograph of the skylight and the chandelier in order to determine whether there was sufficient room.  Mr. Yusuf provided a photocopy of the ruler that he says he used to measure the distance between the skylight and the chandelier, which he asserted demonstrated that there was sufficient room to install the larger skylight.

[46] The framing contractor, Jasbir Samra, supports Mr. Sidhu’s position that a discussion of the larger skylight occurred among Mr. Samra, Mr. Sidhu, and Mr. Yusuf.  Mr. Yusuf decided that he wished to have the chandelier and therefore the skylight should be smaller.  Mr. Samra says that Mr. Yusuf was present when the window company representative was on site doing the measurement for the windows and the skylights.  He did not raise any objection with the window company representative at the time about the size of the skylight that would be installed above the main stairway.

[47] The defendants deny that these discussions took place and maintain that the skylights were to be installed in accordance with the drawings.

[48] I find that the defendants specifically agreed to delete the skylight in the main washroom and reduce the size of the skylight above the main stairway.  I accept the evidence of Mr. Sidhu and Mr. Samra in that regard, and further, that their explanation as to why only one skylight was installed and the re-sizing of that skylight is logical.  I therefore dismiss the defendants claim in respect of deficiencies relating to the skylights.

Pot Lights

[49] The contract refers to four pot lights to be installed in the living room, and only three were installed.

[50] There is no significant discussion in the evidence concerning the reason why there were only three pot lights installed in the living room.  I find this to be a deficiency for which the plaintiff is responsible.

Side Roofs

[51] The side roofs were referred to as smaller roofs or overhangs to be installed on the side of the house just above the door level.  The side roofs were not installed and Mr. Sidhu acknowledges that while he is not certain why the framers did not install them, he accepts that it was a mistake on the plaintiff’s part.  It was not pointed out to him by anybody until they had installed the stucco.  Mr. Sidhu says he discussed the matter with the defendants and told them that it was “sort of too late” to install them.  Mr. Yusuf stated that the side roofs were to provide shelter from the rain and snow for the windows and doors on the first floor of the house and to help keep the pathways on the side of the house clear from snow.  He also stated that the side roofs provided a more uniform look to the house.

[52] I find that the omission of the side roofs from the structure is a deficiency for which the defendants can claim.

Windows

[53] There are three deficiencies claimed by the defendants in respect of the installed windows:  the first is that some of the windows installed were smaller than those specified in the plans; the second is that the installed windows were not stamped as tempered glass as required by the contract; and the third issue concerns water egress and whether the window facing the back deck was installed properly.

[54] The defendants say that the installed windows were smaller than specified.  The windows looking over the deck were to be 5 feet by 5 feet.  The windows that were installed are 5 feet by 4 feet.

[55] Mr. Sidhu says that at the time when they discussed the size of the skylight he, Mr. Samra, and Mr. Yusuf also had a discussion about the windows.  Mr. Yusuf said that the windows were small and not according to the plan.  Mr. Sidhu says that he responded “well I’m not aware of that… I never told the framers or anyone else to change anything, other than the plans”.  Mr. Sidhu also says that Rajwandjit Sandhu, the representative from the ABS Windows (the manufacturer and supplier of the windows) measured the window openings before the windows were installed and that Mr. Yusuf was there while Mr. Sandhu was doing the measuring.

[56] Mr. Sidhu pointed out in his evidence that the framing crew were not his usual framers.  Mr. Yusuf insisted on using the framers.  Mr. Sidhu also pointed out that if the owner (Mr. Yusuf) instructs them to make a change, they will do so.  The framers are supposed to advise the contractor if there is a change resulting in a price difference, but did not do so in this case.

[57] Jasbir Samra agreed that he and his framing crew were not Mr. Sidhu’s regular framers.  They had never done any work for Mick Sidhu or Western Homes before Mr. Yusuf’s project.  Mr. Samra said that while they were doing the framing, Mr. Yusuf was at the site two or three times a day.  He and Mr. Yusuf had a discussion concerning the size of the back windows that overlooked the deck.  The plan called for the window to be 5 feet by 5 feet.  Mr. Samra said he discussed with Mr. Sandhu the fact that windows of that size do not provide privacy.  He suggested that the windows to be installed be 5 feet by 4 feet, to which Mr. Yusuf responded “fine okay”.  The effect of the change results in the wall below the windows becoming 1 foot higher.

[58] Jasbir Samra confirmed that Mr. Yusuf asked Mr. Samra to make the change in the window size and he therefore made the change.

[59] Mr. Sandhu confirmed  that Mr. Yusuf was present when he measured the window sizes and further that Mr. Yusuf attended at his shop and showroom to see the windows, before they were manufactured.

[60] Mr. Yusuf denied that he had any conversations with Mr. Samra concerning the size of the windows.  He says that the defendants wanted larger windows for more light and the suggestion that smaller windows provide increased privacy in the house is difficult to accept.  Mr. Yusuf points out that the defendants only needed to install curtains or blinds to provide privacy.

[61] In all the circumstances, I find that the window size was discussed between Mr. Samra and Mr. Yusuf, and Mr. Sandhu and Mr. Yusuf.  Mr. Yusuf was aware of the window size because he was on site when Mr. Sandhu measured the window size.  I find further that Mr. Samra changed the size of the window upon the instruction of Mr. Yusuf.  The window size is not a deficiency.

[62] The defendants’ second concern about the windows is that the installed windows were not stamped tempered glass as was required.  Mr. Yusuf points to a building bylaw of the City of Vancouver requiring the windows to be stamped as tempered glass.  It is also written on the back of the plaintiff’s copy of the house plans.  Mr. Sidhu agreed that the windows were to be tempered glass.

[63] Mr. Sandhu says that the windows his company provided were all tempered glass.  He says there is a small stamp on the glass in a kind of etching solution on each window.  Further, Mr. Sandhu says that when the windows are provided, his company always issues a letter that says that all the glass that is used is tempered glass.  He says that his company takes the responsibility for all the glass that is being supplied as tempered glass.  Mr. Sandhu stated that the City Inspector must be satisfied that the glass used in the windows and skylight is tempered glass.

[64] The defendants third complaint about the windows is that the windows leak and cause mould and deterioration.  Mr. Sandhu says that if water ingress is a problem, and the customer calls his company, he sends a service man out to determine what the problem is and to fix it.

[65] Scott Croasdale, the expert engineer called by the defendants, describes the leakage through the window as “potential” but nevertheless recommends new windows with improved flashings, membranes, and sealants.

[66] I do not find there are any deficiencies associated with the windows.  I accept that the size of the windows was a change made by Mr. Yusuf and that he directed Mr. Samra to make the change.  In respect of the tempered glass, if Mr. Yusuf considers that the windows are not tempered, his remedy lies with the window manufacturer, which he has not pursued.  The same result exists with the potential leak of the windows: Mr. Sandhu suggested that if a customer has a concern about a window leak, his company provides a serviceman to address the problem.  There is no evidence that Mr. Yusuf sought assistance from Mr. Sandhu or his company regarding window leaks.

Hardwood Floors

[67] The defendants complain that the concrete floor on the second level of the residence was not constructed to permit hardwood floor installation in accordance with the contract.  Mr. Sidhu described that sleepers are embedded in the concrete to which the hardwood floor is nailed.  Mr. Sidhu admitted that the sleepers were installed in the wrong direction.  It would not affect the engineered floor but was not in accordance with the direction of the hardwood planks as provided in the drawings (running towards the front of the house).

[68] Mr. Yusuf, late in his evidence, stated that the hardwood floor has been installed, but that it is temporary and it was intended to address allergies that his children experience.  Further, Mr. Yusuf says the floor is not what they wanted.

[69] I find the matter of the direction of the planks of the hardwood floor to be a deficiency for which the plaintiff is responsible.

The Deck

[70] The defendants have two complaints with regard to the deck at the rear of the house.  The first complaint is that the deck was not surfaced with fibreglass as required by the contract.  The second complaint is that the deck does not slope away from the house.  The defendants argue that this deficiency appears to have contributed to problems with the building envelope.  The slope problem, the defendants assert, is responsible for the pooling of water on the deck that freezes in winter and can become a safety hazard when walking on the deck.

[71] Mr. Sidhu agrees that the contract specified that fibreglass was to be used to finish the deck.  He said that vinyl was installed because it is a better product and one that he uses on all his new houses.  Mr. Croasdale, the defendants’ expert suggested that a higher end vinyl material would be much better than fibreglass because fibreglass does not have as much flexibility. I reject the defendants’ claim that the finishing of the deck in vinyl rather than in fibreglass is a deficiency.  The defendants have not demonstrated that vinyl is an inferior product to fibreglass, but, rather, that vinyl is superior to fibreglass.

[72] The second complaint about the deck is that its slope is not away from the house as shown in the drawings.

[73] Mr. Croasdale described ponding on the deck which, in his opinion, means that the deck does not have enough slope to keep the ponding water off.  He says that “2% deck sloping is pretty much the industry standard where you’ll get no ponding”.

[74] There was a great deal of evidence concerning the slope of the deck.  Mr. Gallant, the plaintiff’s expert, testified that the deck has a slope of 1.35%.  He said further that he sees decks with this degree of slope that have no ponding problem, and the difference between 2% and 1.35% can be due to wood shrinkage.

[75] In the circumstances, I find that the deck is sloped and that the difference between 1.35% and 2% is insignificant as it could be due to wood shrinkage.  The defendants have not proven that the plaintiff engaged in deficient construction.  I therefore find that the slope of the deck is not a deficiency.

Radiant Floor Heating

[76] The defendants say that the radiant floor heating system has demonstrated problems since the defendants moved into the house.  During the cooler winter months, the defendants have had difficulties raising the interior temperature of the residence to normal room temperature, particularly on the second floor.  Beginning in 2004, when the defendants attempted to raise the temperature, the pressure release valve discharged and released water onto the floor under and around the boiler for the heating system.  In November 2003, Mr. Yusuf discovered that one of the pipes leading from the boiler system had burst and a large volume of water was discharging onto the main floor.

[77] The defendants say that the boiler makes noise and sputters.  Attempts to fix it have been unsuccessful.

[78] The defendants’ plumbing expert, John Sadler, inspected the heating system in 2004 and 2007.  He concluded in 2004 that there were defects in the heating system including:

1. The pressure valve for both the water heater and the boiler were not piped to a safe location to prevent scalding of somebody standing in the vicinity;

2. The piping for the system should have been 3/4 inch diameter whereas 1/2 inch diameter pipes were installed.  At the location where the pipes were joined with clamp fittings, the diameter was reduced to 3/8 inch;

3. The system required two circulation pumps but only one was installed;

4. A high limit and a thermostat should have been installed at the radiant supply;

5. A mixing valve should have been 1 inch in diameter whereas the installed pipe is only 3/4 inch in diameter;

6. The wire to the boiling controls had not been connected;

7. The gas connections had not been connected; and

8. A seismic restraint had not been installed for the water heater.

[79] Mr. Sandler concludes that the system had not been installed to any recognizable acceptable standards.

[80] In 2007, Mr. Sandler observed that the radiant piping had no balancing valves installed and no air vents, which prevented the bleeding of the air from the system.  If air is trapped in the heating system the water cannot circulate and the result is a lack of heat.

[81] Mr. Sidhu disagreed with Mr. Yusuf’s suggestion to him that the radiant heating system was not installed properly.  He explained that at the time he left the site the boiler had been installed temporarily, for the purpose of drying the drywall.  The plumber would return later to do the final plumbing.

[82] Malkit Rahelu is a licensed plumber who did the plumbing at the defendants’ home.  He explained that he does 40 to 50 radiant heat installations each year.  In 95% of those installations he uses one pump not two.  Mr. Rahelu said that the last time he was at the defendants’ house in October or November 2003, the boiler had been installed temporarily.  Mr. Rahelu said that he had installed the heating system at 2926 Grant Street, and it was the same heating system as was installed and would be refined at the defendants’ home.  At the time he left the site the piping was done but the final wiring and piping for the pressure release valve and for the hot water and the boilers were not complete.  Mr. Rahelu said that the heating system he installed in the defendants’ house was in accordance with the usual standards and practices of the heating industry with respect to houses of this size in the City of Vancouver.

[83] While the defendants may have preferred a heating system like that described by Mr. Sadler, their contract provided that the standard of the installation, including the radiant heat system, was to be of a quality that was the same or better than the demo house at 2926 Grant Street.  The heating specifications stated: “radiant heating throughout the whole house”.  Mr. Rahelu confirmed that the radiant heat system, which he installed on Grant Street, was precisely the same radiant heating system that he installed for the defendants.  Because construction halted when the defendants breached the contract by refusing to pay the plaintiff the third payment, work on the house by Mr. Rahelu also ceased.  He stated that if he had had the opportunity to complete the work, he would have ensured that the temporary hook-ups were done permanently and the radiant heat system was working properly.

[84] I therefore conclude that the radiant heat system is to the standard provided in the contract, and further, whatever problems exist with the radiant heat system result from the fact that the system was not fully installed when the contract between the plaintiff and the defendants ended in November 2003.  The defendants breached the contract, the plaintiff accepted that breach.  Deficiencies related to non-completion are not the plaintiff’s responsibility.

Exterior Stucco

[85] The defendants assert that the stucco of the residence was not installed properly according to the appropriate two stage process, and contained impurities.  The defendants rely on the expert report of Mr. Croasdale where he opines that the stucco is gypsum based rather than portland cement based.  A gypsum based stucco, according to Mr. Croasdale, is not appropriate for use on the exterior of a building.  In addition, the defendants rely on an opinion from Robert Skugins of Dunbar Masonry and Construction Limited, who provided a report in which he stated: “the stucco job is an average standard job in my opinion.”

[86] Mr. Sidhu stated that the subcontractor that placed the stucco on the defendants’ residence was the same subcontractor that installed the stucco on Grant Street.

[87] Mr. Skugins also stated that when he viewed the property in September 2005, he observed minor cracking in the stucco that required caulking and minor stucco repair in one area of 4 x 4 inches.  Mr. Sidhu was not surprised that two years after he left the site, there was caulking to be done because stucco can shrink over time.

[88] I find that there is no deficiency claim arising from the stucco.  The evidence is that it is of an average standard.  The defendants have not demonstrated that the standard of the stucco on their residence is inferior to that performed on the Grant Street residence.  The same subcontractor performed the work on both places.  I therefore decline the stucco installation is deficient.

Used Drain Pipes

[89] The defendants assert that the contract indicated that the residence was to be new and that the plaintiff installed used drain pipes.

[90] Mr. Sidhu explained that he did not use any old material in this new project but if there is new material, such as drain pipe, which is left over from another excavation job, the excavators bring it and install it in the new structure.  It is not “old pipe”, it is new material from another work site that is unused.  Further, Mr. Sidhu explained, the drains were inspected before they were covered and were found to be satisfactory.  The inspector determined that the pipe was up to code.

[91] I find that the defendants have failed to prove that the plaintiff installed old material in their residence.  The plaintiff installed new material that was not used in other projects, but that is not a deficiency.

Garage Doors

[92] The defendants assert that the lockup stage required that the garage doors be installed on the garage that is attached to the house.  Mr. Yusuf reasons that if all the doors and windows are to be installed at the lockup stage, the garage doors should have been installed as well.

[93] Mr. Sidhu explained that the garage doors are not placed on the garage until after the drywall is complete.  The drywall has to be sprayed, including the ceiling.  If the garage door is installed, the spraying will be over the tracks upon which they operate.  It will interfere with the operation of the garage doors in opening and closing.

[94] I find that this “deficiency” results from the defendants’ breach of the contract and the plaintiff’s acceptance of that breach.  The construction of the garage had not progressed to the point of installing the garage doors; it was not an oversight.

The Foundation

[95] The defendants have several complaints relating to the foundations.  First, Mr. Yusuf says that the top of the concrete on the north side elevation of the garage is stated on the plans as 185.30 degrees, following through to the south side of the garage, but Mr. Yusuf says it was not built that way.  It was built lower by 10 inches by the door and it is built lower by 10.4 inches at the garage starting point location.  Mr. Yusuf also says that the northwest elevation location was built 1 inch lower, the southwest elevation corner was built 1.32 inches lower, the middle/south starting point of the garage was lower by 1 inch and the southeast corner was lower by .48 inches.  The east middle post has a difference of 11.16 inches.

[96] The defendants claim that the east side foundation elevations are clearly shown separately on the drawings as “rear elevation”.  The defendants also complain that the slab elevations were not built according to plan.  The slab height is the same height as the foundation according to the plan.  The defendants claim that the present height of the slab is “quite different” than on the city approved plans, which were to be followed to construct the house.  The defendants claim this to be a building envelope deficiency.  The defendants assert that the height of the foundation needs to be fixed.

[97] The plaintiff points out that part of the problem with the grade along the north side of the garage is due to Mr. Yusuf’s sidewalk contractor, who attended the site after the plaintiff had left. The sidewalk contractor did not adjust the grade of the sidewalk to account for height differences as required for the stucco.

[98] While I accept that the foundations may not be strictly in accordance with the drawings, I do not accept that these are deficiencies for which the plaintiff is responsible.  I am not satisfied that the difference in the slab in relation to the drawings is a defect.  Further, the building of the sidewalk was done after the plaintiff had left the site.  The plaintiff did not have an opportunity to establish a final grade.

Wiring

[99] The defendants assert that the wiring for the hood fan in the kitchen on the second floor was not installed.  Mr. Sidhu asserts that the wiring is probably behind the drywall.

[100] I find that while the wiring for the hood fan was contemplated in the contract, the lack of it does not result in a deficiency.  This is something that the plaintiff could have addressed had he continued with the construction to its conclusion.  He did not have that opportunity due to the defendants’ breach of the contract.

Headroom above the Stairs

[101] The defendants assert that the headroom above the stairs was not constructed according to the drawings or the bylaws of the City of Vancouver.  The constructed headroom clearance is 5 feet 8 inches, rather than 6 feet 8 inches as shown on the drawing.

[102] Mr. Sidhu, when asked by Mr. Yusuf whether the height of the stairs was according to the “code” for the City of Vancouver, stated that his understanding was that the framing inspection was passed and there were no concerns expressed by the City inspectors over the headroom.  Mr. Sidhu says that the stairs are constructed according to the plan and that the clearance, though he did not measure the height, was sufficient.  Mr. Sidhu stated:

It looked like it was done to the plan, one step one landing, and then it did pass the framing inspection.  To me, the height was not a problem because... nothing was brought to my attention that it was.

He stated later in his evidence that if the headroom over the stairs was not in accordance with the city’s requirements, it would not have passed inspection.

[103] The headroom above the main staircase is not a deficiency.  I accept Mr. Sidhu’s assertion that the construction of the stairs was in accordance with the plan that was provided to him by the defendants.  The plaintiff met the contract requirements.  If the headroom is too low, that is a design error for which the plaintiff is not responsible.  Further, Mr. Yusuf did not complain about the headroom to Mr. Sidhu while the plaintiff was at the site and under a contractual obligation to the defendants.

Self closing hinges on the main door

[104] Mr. Yusuf complains that the self closing hinges on the doors were not installed.  Mr. Sidhu says that the self closing hinges and settings are done by the finisher at a later stage of construction.

[105] I find this is not a deficiency, but rather a detail the plaintiff did not have an opportunity to perform before the contractual relationship between the plaintiff and the defendants ended before that stage of construction.

Roof Leaks

[106] The defendants assert that the roof was leaking and continues to leak.  Mr. Yusuf says that he pointed out the signs of leaking and wet sheeting on the inside roof above the main washroom on the second floor to Mr. Sidhu when he was working on the house.  He asserts that the plaintiff said he would look into it but did not.  The result is that there is a bigger leak in the same area that is causing mould in the attic.  There also appears to be a leak at the ridge/peak of the roof.  Mr. Croasdale gave evidence that his technician found the leak in the roof in 2007.

[107] I find that the roof leak is not attributable to the plaintiff.  When Mr. Croasdale initially visited the site on May 18, 2005, no signs of leakage were noted through the roofing system.

[108] There is simply no basis to conclude that the roof leak and other problems associated with that leak are attributable to the plaintiff, who left the site in November 2003.

Basement Installation

[109] The defendants assert that there were to be two suites constructed in the basement and that the plaintiff was obligated to install plumbing and wiring to accommodate kitchens and bathrooms.  Mr. Sidhu explained that he did not complete the wiring, and the plumber did not complete the plumbing before the contract ended.  In any event, Mr. Sidhu asserted he would not have installed plumbing and heating for suites in the basement unless the defendants had a permit from the City of Vancouver to construct the suites.

[110] I find that this is not a deficiency in the construction.  It was the defendants’ responsibility to obtain the requisite permits in order to allow the construction of suites in the basement.  This did not occur before November 2003, when the defendants breached the contract and the plaintiff left the site.

Gas hook up for the fireplace

[111] The defendants maintain that the gas hook up for the fireplace was not completed.  Mr. Sidhu says that hooking up the gas for the fireplace would occur at a further stage of construction, which stage was not reached before the contract ended.

[112] I find that this is not a deficiency for which the plaintiff is responsible.  The contract ended before the gas hook up was to take place.

Garage Plumbing

[113] The defendants assert that there was to be plumbing in the garage in order that Mr. Yusuf could use the garage for his work as a mechanic.  There is no plumbing shown on the drawings nor referred to in the contract.

[114] The lack of plumbing in the garage is not a deficiency.  It was not included in the contract and therefore is not something that the plaintiff contracted to build.

Leaking and mould

[115] The defendants refer to leaking, which has caused mould throughout the home.  The leaking is caused by a variety of factors identified by Mr. Croasdale in his report of May 29, 2007.  He describes the sidewalks on either side of the building as not being completed, which causes leaking.  He refers to the central post located between the two garage doors being wood framed and terminating at finished grade.  He notes moisture at the base of the wall, which indicates that the wood framing may be wet.  He also describes several exterior electrical boxes that were not covered with a plate or fixture where the wires are exposed to exterior moisture.

[116] Mr. Croasdale also refers to leaking on the deck resulting from the PVC membrane that extends onto a drip edge on three sides and laps up the second floor wall under the stucco of the building.  Moisture accumulating on the deck surface simply drains over the edge.  Mr. Croasdale also notes a small hole in the membrane at the south side of the wall termination.  The membrane terminates at the front of the threshold and wraps into the door opening.  At the interior side of the door, Mr. Croasdale notes that the floor was wet and water appeared to be entering through the door threshold.  He also notes moisture staining on the drywall ceiling of the garage below the door.

[117] Mr. Croasdale concludes that there was leaking around the vinyl framed windows because no sealant was applied between the window frame and the adjacent stucco cladding.  He also notes that the flashing for the window extends past the window frame, but is not well sloped to the exterior and does not include end dams.  He makes the same observation with regard to several of the exterior doors.

[118] Mr. Croasdale also notes leaking through one of the vinyl windows and the roof.  Because of these “defects in construction” Mr. Croasdale opines that water penetrates into the interior of the home, which damages finishes and results in the growth of mould.  Mr. Croasdale warns “continue leakage will lead to further mould growth and damage [that] will eventually lead [to] deterioration of the structural framing which is [a] health and life safety risk to the occupants of the building”.

[119] Mr. Gallant, the plaintiff’s expert, prepared a response to Mr. Croasdale’s report in his letter of August 1, 2008.  He points out that many of the defects to which Mr. Croasdale refers are not examples of inappropriately constructed items, but rather examples of incomplete work.  He gives, as examples, the exterior electrical boxes, which are not covered; the draining over the edge of the deck; and the lack of guardrails on the east deck.

[120] Mr. Gallant states that he does not know what caused the hole in the PVC deck membrane.  He is not critical of the flashing or lack of end dams because the use of end dams is rarely seen in single family housing construction.  The design detail does not call for end dams.

[121] In regard to the door frames and the leaking, Mr. Gallant states:

Preferably, there ought to be a 10 mm gap between the frame and stucco cladding in order to properly apply a sealant joint.  To apply a fillet sealant bead to the existing condition... without a 10 millimetre gap, is not as effective.  It is, however, often seen.

[122] Mr. Gallant does not believe that the hole Mr. Croasdale observed in the deck membrane is the cause of the dampness and mould in the adjoining room.  He describes the hole as located on the upturn vertical surface of the membrane, which is not subject to standing water.  Moisture ingress caused by the hole would therefore be minimal.  Mr. Gallant suggests that it is more likely the dampness and mould in the adjoining room is caused by the interface detail between the door frame and threshold and the deck membrane.  The water ingress around the door, Mr. Gallant suggests, could be easily rectified by fixing the interface detail and reinstalling the door.

[123] Mr. Gallant points out that the leaks should have been addressed by the defendants expeditiously in order to avoid the increase in water damage to the structure.  This applies to the roof leak, the stucco coating, the finished grade on the north side of the building of the residence, and the rear door at the deck level.

[124] Mr. Gallant opines that the standard of construction for the defendants’ home is “average or at least to an often seen standard”.  He continues “the standard construction is typically better assessed nearer to the completion after the deficiencies are addressed”.  Mr. Gallant does not see widespread failure of the structure based upon the inspection performed by Mr. Croasdale in 2005.

[125] The defendants’ position in this regard raises a dilemma.  They are responsible for the plaintiff leaving the site before construction was complete, which exposed them to incomplete construction.  Many of the problems would not have occurred had the contractor received his drywall draw and continued to perform construction on the house to its completion.  It also appears that there was work performed by others to complete the house, which created deficiencies for which the plaintiff is not responsible.  Further, rather than repair problems, particularly with leaking and moisture build up, when they were observed by the defendants, these matters were not addressed, which has caused greater damage and now could impair the structural integrity of the building.  The plaintiff is not responsible for the defendants’ work on the residence after November 2003, nor for the defendants’ failure to address the concerns in a timely manner so as to avoid resulting and substantially more serious problems.

[126] While I accept that there are significant leaking and mould problems in the defendants’ house, they have not satisfied me, on a balance of probabilities, that these leaks are due to deficient construction methods employed by the plaintiff.  I cannot over-emphasize the predicament the defendants have created for themselves by not making payments in accordance with the contract, which was a breach of the contract accepted by the plaintiff.  But to be clear, it is not the plaintiff’s predicament.

4.       Are the defendants entitled to damages for the deficiencies?

[127] I have determined that there are some deficiencies for which the plaintiff is responsible.  These include the lack of a pot light in the living room, the failure to install side roofs on the north and south sides of the house, and the error in installing the sleepers embedded in the concrete floor on the second floor, which did not permit the hardwood floor installation in accordance with the contract or as shown on the drawings.

[128] The defendants assert that damages for the deficiencies ought to reflect the cost of their remedy.  In other words, the plaintiff is responsible to pay the cost of the installation of the additional pot light, the installation of the side roofs and replacing the hardwood floor in order to have the planks in the direction as shown on the drawings.  Mr. Croasdale addressed the cost of remediation.  No cost was provided for the installation of the pot light.

[129] Mr. Croasdale, an expert engineer produced by the defendants, describes that in order to install these side roofs, the stucco would have to be removed beyond the extent of the roof structure to tie into the existing wood framing.  New framing would be required, a new roof, wall membranes, and flashings would have to be integrated into the existing frame, which would then be covered by new stucco, and a finish coat.

[130] The estimate for the work to install the side roofs is $18,750 plus $6 per square foot to refinish the stucco.

[131] The defendants assert that the cost of installing the hardwood floor in accordance with the plans should be borne by the plaintiff.

[132] The defendants refer to Swagger Construction Ltd. v. University of British Columbia, 2000 BCSC 1839, where Hood J. described an owner’s right to set off amounts for the contractor’s breach of contract at para. 20:

... when a claim is made by a Contractor for the price of work and labour done, the Owner is entitled, in the absence of a provision in the Contract to the contrary,  to set-off against the amount claimed any damages which he has suffered as a result of the Contractor’s breach of the Contract under which the work and labour was done.  It is a matter of contract.

[133] The defendants are also claiming the cost of completing the project, $68,580.30; construction costs they incurred directly, $58,741.67; and the estimated cost to remedy the deficiencies, $121,370.

[134] The defendants also assert the defects that have caused the leaking and the mould require that the builder ensure that the work is done in a good and workmanlike manner, that the materials are suitable, and that the building is fit for habitation: Strata Plan NW2294 v. Oak Tree Construction Inc. (1991), 47 C.L.R. 1 (B.C.S.C.).

[135] The plaintiff refers to M. Furmston, Cheshire, Fifoot and Furmston’s Law of Contract, 14th ed. (London: Butterworths, 2001) at p. 677, where the authors refer to damages relating to deficiencies:

There are many earlier cases in which the courts have held that the measure of damages for a defectively carried out building contract is sometimes the difference in value and sometimes the cost of cure.  In deciding which measure to adopt, the courts have often referred to the question of whether cure would be reasonable in all the circumstances and also to whether the injured party would be likely to carry out the cure.

[136] While I have found there to be deficiencies in three areas, none affect the value of the property.  None affect the integrity of the building.  The concerns of the defendants relate only to aesthetics.  It has not been shown that the additional pot light, the side roofs, or the direction of the planks of the hardwood floor effect the defendants in any practical way.  I conclude that ordering these matters to be “cured” is unreasonable in the circumstances, particularly in that the difference is aesthetic.

[137] I find that the defendants are entitled to a nominal amount of damages to reflect the deficiencies for which I have found the plaintiff to be responsible.  I award the defendants $5,000 in respect of those deficiencies.

5.       Is the plaintiff liable to the defendants for delay in the completion of construction?

[138] The defendants claim for delay and liquidated damages in accordance with the contract.  Their position is that the contract contained an express term that entitled the defendants to a liquidated amount of $125 per day if the plaintiff failed to complete the work within a four month period.  The contract date was July 2, 2003, and thus, according to the defendants, the plaintiff must pay damages because it failed to complete the work before November 2, 2003.  The defendants say that the liquidated damages start to accrue on November 3, 2003, and, because the residence was not completed by the plaintiff, 1,411 days had accrued between November 2003, and the date this trial commenced in August 2007.  As at the commencement of the trial, the defendants claim liquidated damages of $176,375.

[139] The plaintiff asserts that liquidated damages is a “penalty” and is therefore unenforceable: The Law of Contract in Canadaat p. 774.

[140] As I have noted, construction of the residence did not begin until the beginning of August 2003.  The time for completion can only run from the date that construction commences, not the date the parties signed the contract.   It is unreasonable to determine that the four months for completion runs from the date the contract was entered into.  Further, the defendants were aware that construction was underway and not complete within four months by January 2, 2004.

[141] I have found that the defendants breached the contract by refusing to make the drywall payment on October 24, 2003.  The plaintiff accepted the defendants’ breach on November 10, 2003.  I have determined that the defendants’ breach and the plaintiff’s acceptance of that breach, ended the contract.  Because the contract was over, the plaintiff had no obligation to complete the project within four months, or at all.  That obligation was not an accrued obligation and does not continue to be a contractual obligation.  Thus the liquidated damages clause is an obligation under the contract that ceases to exist.

[142] The defendants claim for liquidated damages is therefore dismissed.

6.       Is the plaintiff entitled to damages reflecting loss of profit?

[143] Mr. Sidhu said that the plaintiff’s profit at the conclusion of construction was anticipated to be 15% of the total amount of the contract of $176,000, which would amount to $26,400.  The plaintiff claims that if construction had continued the plaintiff would have used his trades at the defendants’ and other projects more efficiently.  Alternatively, the plaintiff claims that it suffered damages as a result of the defendants’ breach of the contract, which resulted in its loss of profit, even if it were prorated to reflect the percentage of the work that had been performed prior to the defendants’ breach.

[144] The defendants do not specifically address this claim, except by their submission that their damages far exceed the price as provided in the contract as well as any profit the plaintiff is claiming.

[145] I accept that there was a loss of profit that was built into the contract, and that it was anticipated by the plaintiff that upon the completion of construction, the plaintiff’s profit would be 15%.  I further accept that the profit is accrued as the construction proceeds.  Because the defendants breached the contract, which the plaintiff accepted, the plaintiff did not have an opportunity to achieve the profit it anticipated on the whole of the project.  This, however, arises from the plaintiff’s acceptance of the defendants’ breach and, it follows, the plaintiff is only entitled to a loss of profit on the work that was performed up to the drywall stage.  The plaintiff was entitled to have received, by that stage of the work, $105,000.  The loss of profit on that amount is $15,750.  I award the plaintiff that amount in loss of profit.

Summary

[146] The defendants breached the contract when they refused to provide payment to the plaintiff at the drywall stage.  The defendants shall pay the plaintiff the “third payment” as required under the contract of $55,000.

[147] The defendants have already paid $6,300 to the plaintiff and are entitled to credit of that amount.  The amount remaining is $48,700.

[148] The effect of the plaintiff’s acceptance of the defendants’ breach is to discharge the plaintiff from any future obligations arising after acceptance.  The obligations that arose prior to the acceptance of the breach are not extinguished.

[149] The plaintiff is responsible for the following deficiencies, which arose prior to its acceptance of the defendants’ breach: (1) lack of a pot light in the living room; (2) failure to install side roofs on the north and south sides of the house; and (3) error in installing the sleepers embedded in the concrete floor on the second floor of the house.

[150] The defendants are entitled to nominal damages for these three aesthetic deficiencies in the amount of $5,000.

[151] The plaintiff is not liable to the defendants for delay in the completion of construction.

[152] The plaintiff is awarded $15,750 representing a 15% loss of profit on the work performed up to acceptance of the defendants’ repudiation at the drywall stage.

[153] Judgment is granted to the plaintiff in the amount of $59,450, which is the total owing to the plaintiff after setting off the defendants’ deficiency claims.  Court Order interest is to be applied from the date the defendants refused to make the third payment, the date the contract was breached: October 24, 2003.

Costs

[154] Unless there is something of which I am not aware, the plaintiff is entitled to its costs.

“Gropper J.”