Legal Blog

Betterment #2

In our September 2002 newsletter, we discussed the case of Maisonneuve v. Burley, a 2001 decision of the Saskatchewan Court of Queen’s Bench. In that case, a handyman, who was not so handy, built a retaining wall for the grand sum of $15,000. The cost to rip out and replace the un-engineered and deficient wall was $78,000. The judge awarded $25,000 because that cost was “wholly disproportionate relative to the value of what might be achieved through performance.”  We then noted, “A court will not do something that it perceives as unreasonable.”

Within months, we learned of the case of McGuffin v. Terry Howald Pools Inc., a decision of the Ontario Superior Court of Justice. The judge in that case did exactly what we said a court would not do. We therefore had a problem; we could summarise the case and attempt to explain it away, or ignore it as an anomaly. We chose to ignore it, until now that we have read the decision on appeal.

AT TRIAL

This time, the structure was a swimming pool. Its cost was $21,000. Unfortunately, the contractor did not properly build the retaining wall. This caused a bowing in the wall, the migration of the pool in one direction, and the separation of some of the pool wall panels. The contractor did some remedial work and it appeared that this work would ensure that the pool remained structurally sound and functional. However, some additional work still had to be completed.

The judge found that the retaining wall and portions of two walls of the pool could be properly designed and reconstructed to ensure adequate support for the anticipated earth loads. At the same time, the concrete decks had to be replaced and the pool walls had to be caulked.

The question that the trial judge posed was whether the patch-up job set out above was what the homeowner had bargained for. He answered in the negative. He determined, notwithstanding his findings of fact, that there seemed to be little choice but to rip out the entire structure and start all over again. He awarded damages of $54,000 plus interest.

This, we suggest, was unreasonable. The judge made the award 6 years after installation of the pool. To that time, the owner had not spent a penny on repairs and had used the pool without incident. Further, regardless of the quantum of the damages, why should the owner receive interest on money that had not yet been  spent?

On Appeal 

The Court of Appeal, in a short endorsement, held that the trial judge erred in refusing to assess damages based on the patch-up job. Once the judge held as a fact that a patch-up job was sufficient to remedy the problem, he had no right to order payment of the cost of a new pool. In doing so, he ordered a substantial gratuitous benefit rather than compensation.

The court awarded damages of $25,000 and refused to award any interest.

The purpose of the Court of Appeal is to correct errors. In doing so, with a little luck, it will ensure that our original statement holds true: “A court will not do something that it perceives as unreasonable.”

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BESTMENT

(More Betterment) 

The concept of betterment arises on a regular basis. Accordingly, as long as we are talking about betterment, we might as well discuss one other line of cases. What happens when a product has to be replaced earlier than its life expectancy? Is the owner compensated by the replacement cost or is there some other measure of damages?

The Standard 

The Ontario Court of Appeal discussed the issue in 1992 in Upper Lakes Shipping Ltd. v. St. Lawrence Cement Inc. In that case, the owner had to replace a conveyor belt three years into a 15-year life expectancy. The defendant was liable for the replacement and the issue was the appropriate measure of damages.

The court stated the general principle: “The plaintiff should have deducted from the award the amount by which his property is improved (betterment) but is compensated to the extent he has to put out money prematurely to obtain that betterment.”

Accordingly, the trial judge had awarded interest on the replacement cost for the 12 years of the premature replacement. However, he simply took interest on a yearly basis and multiplied by the 12 years. The Court of Appeal noted that simple interest was inappropriate. It should instead be the present value of the annual interest amounts over the 12-year period.

An Example

This issue arose in Dominion Sheet Metal & Roofing Works v. 4701 Steeles Holdings Inc., a 2002 decision of the Ontario Superior Court of Justice. The owner claimed that a roof that the contractor installed was deficient and had to be replaced. The judge held that there was no negligence or breach of contract on the part of the contractor, but, in case she was wrong, went on to assess the damages.

The contractor installed the roof in 1984. The owner claimed damages equivalent to the cost of a new roof. The old roof was 18 years old and the evidence was that, on average, a similar roof would have to be replaced after 15.8 years. The judge therefore refused to assess any damages for the premature replacement of the roof, because the roof had already lasted beyond the average expected life span.

Do the facts sound unrealistic? Yes and no. They came about because the contractor had originally commenced the action against the owner for monies owed. The owner raised the issue by way of a defence. We suspect that the owner would not have raised the issue if the contractor had not claimed the monies owed to it for work that it had performed.

Delay 

Unfortunately, the reasons for decision did not set out the facts regarding the contractor’s claim. It cannot, we hope, have arisen out of the original work that the contractor had done 18 years prior. Even if the action had been commenced at the end of the then 6-year limitation period, this would mean that it could have taken 12 years to get to trial, an unconscionably long time. We suspect that the work was done at another project and that the owner was using the roof in this case as an excuse for non-payment of the contract price.