When negotiating a contract for construction work, both parties must understand the agreed-upon terms. Otherwise, disputes can arise, business operations can be delayed, and liens for unpaid work may be placed on property. In the recent case of R&V Construction Management Inc. v. Baradaran before the Ontario Superior Court of Justice, a defendant was out of luck when his interpretation of a contract was considered incorrect in a motion for summary judgment.

The plaintiff and defendant construction company disagreed on scope of work

A flood broke out in the defendant’s home in spring 2015. His insurance company authorized him to retain a contractor for the necessary repairs. The defendant then retained the plaintiff to repair the damage from the flood and do other renovations.

In total, three contracts were made between the parties. However, the defendant maintains that two of the three were not meant to be binding. The second contract he understood to be prepared for insurance purposes only. He believed that the third, supplemental contract was only binding if the defendant’s insurer agreed to pay for it (which it did not).

Regardless, the work was performed, and the defendant made some payments to the plaintiff. The defendant believed the work to be paid in full, which the plaintiff disputed. While litigation was pending, the defendant sold the property, citing issues with the plaintiff’s work. Security was posted into Court to clear the plaintiff’s claim for lien and certificate of action under the Construction Lien Act.

The Court assessed whether summary judgment was appropriate in this case

The plaintiff brought a motion for summary judgment on its claim and requested the judgment amount be paid from the security funds held by the Court. The defendant sought an order to discharge the plaintiff’s lien on the property and dismiss the action for summary judgment. He also requested the lien security funds to be paid out to him, as well as compensation for the decrease in property value caused by work and mortgage renewal costs incurred due to the plaintiff’s delays.

There were many issues in this case, but for this article, we will focus on whether a summary judgment was appropriate for this case as it pertained to the price and scope of work as well as the validity of the contracts.

What is a summary judgment?

A summary judgment is a court order that decides a case without a trial based on written documents and affidavits. A summary judgment can be granted if there are no factual issues in dispute and the plaintiff is entitled to judgment as a matter of law.

In Ontario, summary judgments are available only in cases where there is no genuine issue of material fact and where the party seeking the judgment has made out their case on a balance of probabilities. The party seeking the judgment must prove that their version of events is more likely than not true and that those facts support a judgment in their favour.

Rule 20.02(2) of the Ontario Rules of Civil Procedure states that summary judgments are available where there are no genuine issues that require a trial. The Court in this case relied on the Supreme Court of Canada’s decision in Hryniak v. Mauldin, which states:

“[T]here will be no genuine issue requiring a trial if I am able to reach a fair and just determination on the merits.  That will be the case where this process allows me to make the necessary findings of fact, allows me to apply the law to the facts, and is a proportionate, more expeditious, and less expensive means to achieve a just result[.]”

The test for summary judgment

There are two steps to determine whether the case for summary judgment has been established:

1. The Court must determine whether there is a genuine issue that requires trial based on the evidence brought to court and without using the fact-finding powers contained within the Rules of Civil Procedure. If all evidence that is needed to ensure a fair decision is on record and summary judgment is a good alternative, it may then be granted.
2. The second step is taken only if a genuine issue requiring a trial is found. Then, the Court must determine if a trial could be avoided while still upholding the interests of justice.

Court used fact-finding powers under court rules

The Court in R&V Construction Management Inc. opined that a trial was not required to resolve the dispute. Due to conflicting opinions on the purpose of the second contract, the Court had to use its enhanced powers under rule 20.04(2.1) of the Rules of Civil Procedure:

Powers

(2.1) In determining under clause (2) (a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1.  Weighing the evidence.

2.  Evaluating the credibility of a deponent.

3.  Drawing any reasonable inference from the evidence.

According to the plaintiff, the second contract was executed at the defendant’s request, who wanted to increase the scope of the work. The defendant’s position was that the second contract was executed only for “claiming repayment from the insurer for an artificially inflated contract price.”

As for the third contract, the plaintiff again believed it was executed for additional work that the defendant had requested. While the defendant agrees that it was indeed for extra work, he stated that the parties agreed it would only be completed if his insurer would cover it.

Evidence did not support defendant’s arguments

In using its powers to weigh the parties’ conflicting evidence, the Court found the plaintiff’s case to be more credible for the following reasons:

1. During his cross-examination, the defendant unequivocally confirmed that he read and understood the second contract at the time of signing, including the scope of work and price.
2. The defendant argued that the scope of work did not change between the first and second contract, but failed to explain why there were items of work in the second contract that were not listed in the first.
3. There was no evidence corroborating the defendant’s statements that he and the plaintiff agreed the work under the supplementary (third) contract would be conditional on the insurer approving and agreeing to pay for it. The contract itself also had no language to this effect.
4. The defendant took the position that the third contract was unenforceable. However, the evidence demonstrated that he had paid the deposit set out in that contract and failed to provide any explanation for doing so if the contract was not meant to be executed.
5. The defendant admitted to paying the plaintiff more than $30,000 over the amount he believed to be the total contract price. He provided no explanation for doing so.
6. The defendant provided no evidence to demonstrate his insurance company’s unwillingness to cover the cost of the third contract and may have misunderstood communications from the insurer.

For these reasons, the Court found that there was no genuine issue that required a trial as it pertained to the price of work, the scope of work, and the terms of the contract that each party agreed to. The Court held that the second contract was the governing contract as it included the additional work. The third, supplementary contract was deemed to apply as well. As such, the plaintiff was awarded a lien on the property and a judgment against the defendant in the same amount, plus pre-judgment interest.

Contact Campbell Litigation for Your Construction-Related Disputes

At Campbell Litigation, we understand that the construction industry involves many moving parts, people, and stages. Disputes can be incredibly disruptive and expensive to everyone involved. Our skilled team, led by Richard Campbell, has extensive experience assisting clients at all stages of the construction pyramid. We have represented planners, builders, developers, property owners, and financial institutions and handle issues relating to financing, liens, property remediation, and contract disputes. To speak with a member of our team, please reach us online or call us by phone at 519-886-1204 today.