Tag Archives: evidence

An “Interest”ing Decision – A contractual interest claim gone wrong

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What an awful Blog post title. My apologies.

The Decision of Madame Justice Pierce in 1188710 Ontario Ltd. v. Gartner, 2012 ONSC 6110 (CanLII) is a good reminder of how judges trying to do perceived justice between parties sometimes finds the law bent (or worse – disregarded) in favour of perceived justice.

The facts of the case aren’t particularly remarkable – contractor does work, owner takes issue with various things and doesn’t pay all invoices, contractor liens, lawsuit follows.  Same old story.  Sometimes the contractor comes out on top and sometimes it is the owner that prevails.  In this case, Pierce J. interpreted the agreement between the contractor and the owners and the evidence that was presented at trial almost entirely in favour the contractor.

The two aspects of the Decision that prompted me to write this short post are:

  1. Pierce J. found a contractual entitlement to interest and awarded the contractor interest at 5.5% per annum; and
  2. Pierce J. declared that the contractor has a lien against the Defendants’ property for an amount that includes the interest that she found to be owing.

Contractual Interest

If Pierce J. had just addressed the issue of interest as one of damages (the contractor’s losses based on interest the contractor had to pay on its line of credit or to its own suppliers) rather than as interest and if the contractor had presented better evidence on this point, I don’t think there would be an issue.  However, because Pierce J. expressly found that there was no agreement as to interest (see paras 37 & 40), I think she should have been foreclosed from awarding contractual interest.  Nonetheless, she (wrongly in my view) reasoned that a contractual obligation to pay invoices within a specified time implied an agreement to pay interest if payment was not made within that time (see para 44).  If Pierce J. were right on this, it would effectively mean that every contract that obliges a party to pay contains an implied agreement to pay interest if payment isn’t made.  I don’t think that this is the law and I don’t think this accords with longstanding jurisprudence that parties should, as a general rule, be held to their bargains – if the contractor had wanted to negotiate a contractual entitlement and rate of interest, he could easily have done so.

The next part is that there seemed to be some very loose (it seems to have been given just in oral testimony at trial) evidence that the contractor had suffered some sort of losses based on having to dip into his line of credit and charges from his own suppliers as a result of the owner not paying all of his invoices (see para 100, for example).  It was this evidence that Pierce J. used to determine the rate of “interest” that the contractor should be entitled to (5.5% was the contractor’s rate on his line of credit…so Pierce J. somehow made that the contractual rate of interest “agreed to” between the contractor and the owner).  I wouldn’t be so offended by this had Pierce J. just characterised the amount payable as damages rather than interest.  However, even then, the problem would be that she found as a fact that, “Unfortunately, there is no evidence about how much [the contractor] had to draw on his line of credit for this project, or how much interest he paid.”  In effect, she awarded damages in the absence of any evidence of the proven quantum of those damages.

I think that there should have been found to be no agreement as to interest and so only pre-judgment interest payable to the contractor pursuant to the Courts of Justice Act.  Further, should Pierce J. have been inclined to find a breach of an obligation to pay on the part of the owner, she could have still found damages to have resulted from the breach but she should have then found (on the evidence described by the Decision) that the contractor did not adduce sufficient evidence to support his claim and then awarded no damages on the basis that quantum had not been proven.  Instead we are left with, in my view, a bad Decision (on this point) that could come back to haunt other litigants arguing this sort of contractual interest dispute.

Lien for Interest

On the second point, section 14(2) of the Construction Lien Act expressly says that, “No person is entitled to a lien for any interest on the amount owed to the person in respect of the services or materials that have been supplied by the person, but nothing in this subsection affects any right that the person may otherwise have to recover that interest.”  As such, Pierce J. erred in law by including the interest she awarded the contractor in the declared amount of the lien she declared the contractor to have over the owner’s lands.  The interest should have been included in the money judgment but should not have been included in the value of the lien.

The Unhelpful Expert

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The opinion evidence of experts is not always admissible at the hearing of a motion or a trial.

The Ontario Divisional Court recently handed down its Decision in Mastermeter Products Canada Inc. v. Corporation of the City of North Bay, 2012 ONSC 1887 (CanLII).  The hearing involved an application for judicial review of the City of North Bay’s award of a contract for the supply and installation of water meters.  Mastermeter complained that it had been treated unfairly by the City in the course of its procurement process and lost out on the contract as a result.

While the Decision is primarily concerned with procurement issues, my interest in it is the Court’s ruling to exclude opinion evidence of an “expert” where the supposed expertise of the witness was on matters/issues within the expertise of the Judges hearing the application. The interesting bit for me is at paragraphs 21-23 of the Decision which read:

The Admissibility of an Expert Opinion

[21]          Counsel for the applicant proffered an expert witness statement of Rishi Kumar, M.Sc. Eng, P.Eng. Mr. Kumar was retained to provide an opinion for this application for judicial review on the following question:

Whether or not the bid process under RFP 2009-006 was conducted responsibly and with the requisite degree of fairness, openness and transparency applicable to major competitive procurement process.

[22]          Mr. Stieber, counsel for the City, objected to the admissibility of the proffered opinion on the ground that it does not meet one of the criteria for the admission of expert evidence from R. v. Mohan, 1994 CanLII 80 (SCC), [1994] 2 S.C.R. 9, in that it is not necessary to assist the court.

[23]          We agree that the proffered opinion does not meet the necessity criterion because the Court can form its own conclusion about the fairness of the City’s procedure without the assistance of the proffered expert testimony.   Therefore, the affidavit of Mr. Kumar was struck at the outset of the hearing.

Without getting into details of the rules and jurisprudence around expert evidence, as a general statement, the Court is to exercise a “gatekeeper” function - admitting the opinion evidence of experts where the subject matter of the evidence is outside of the expertise of judges (and provided it meets certain other criteria) and excluding the rest.

Legal theory aside, one of the reasons that this gatekeeper function is so important is that expert evidence can be very expensive and can drive up the cost of litigation substantially.  As such, only that expert opinion evidence which is helpful and necessary to the court to decide the case should be admitted.  This is particularly true of construction litigation where expert opinion evidence is very, very common and the lawsuit often evolves into a “battle of the experts”.

Too often, in my view, courts are prone to allowing parties to introduce “expert” evidence in areas where the judge has sufficient expertise and does not require assistance.  In my view, if litigants can have the confidence that the court will exercise the gatekeeper function properly, as it did in this case, when an opposing party serves an “expert” report that is unhelpful and unnecessary to the court in deciding the issue for which the evidence is introduced, the recipient of that report can more confidently chose to avoid the time and significant expense of responding the the report and simply seek its exclusion at the trial or hearing.

“I said ¾ of an inch. Look – it’s right there in the contract”

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D’Urzo Demolition Inc. v. Damaris Developments Inc., 2012 ONSC 1912 (CanLII), released by the Ontario Superior Court of Justice on March 26, 2012, serves as a good reminder to owners and contractors of the importance of ensuring a mutual understanding of the specifications and other requirements of the work and then properly incorporating those documents and requirements into the construction contract.  For litigation lawyers, it also serves as a good reminder of the importance of ensuring that adequate and flexible evidence of damages (whether Plaintiff’s damages or a Defendant’s claim for set-off) is obtained and brought to trial.

Basic Facts

In a nutshell, D’Urzo Demolition Inc. (“D’Urzo”) was the successful bidder to demolish structures on a property in Toronto and then mechanically reduce the rubble into smaller crush.  The owner, Damaris Developments Inc. (“Damaris”), took the position that the contract required D’Urzo to crush the concrete to ¾ inch and to also demolish curbs and asphalt and remove same from the site. D’Urzo took the position that it only had to reduce the rubble to size of 3 inches (and that a smaller crush would constitute an extra) and that demolishing the asphalt and curbs and removing same from the site was not included in the scope of work and, again, constituted an extra.  At the end of the day, D’Urzo was substantially successful at trial – Damaris succeeded only in achieving a finding that the asphalt and curbs had to be demolished – D’Urzo succeeded in convincing the Court that the contract only required a 3 inch crush, that the asphalt should not have been required to be removed from the site and disposed of, and that Damaris was in breach of the contract for failing to pay.

Take Away Notes

Of note for contractors and owners – the work was put out for tender, there were competitive bids, and the parties used a standard form (CCDC2) contract and they still ended up in protracted litigation (the lien was filed in May, 2007 and trial did not conclude until December, 2011 – almost 5 years!) arising from a failure to clearly and properly set out what work was required by the contract.  If you are going to go to the trouble of putting a job out for tender and then use a detailed and established form of contract, spend the time and money to make sure that the specifications and drawings that establish the scope of work are both clear and properly incorporated by the contract.

Of note for lawyers – Damaris claimed $50,400.00 as its back charge to remove and dispose of the asphalt and curbs and provided evidence that this was what it cost.  But Master Albert found at trial that D’Urzo only had to remove the asphalt, not dispose of it.  Because Damaris’ evidence didn’t breakdown the back charge between removal and disposal, Master Albert had only D’Urzo’s evidence that the cost to remove the asphalt was $2,643.75 and he awarded that amount. This outcome highlights the risk of evidence limited to global amounts that aren’t broken down into component parts in case of divided findings at trial.