Legal Blog

Betterment

On occasion – rare of course – contractors breach the terms of a building contract and the work does not conform to the plans and specifications. Regardless of liability, what are the damages? In many cases, damages are not all that they seem to be. A good example is set out in Maisonneuve v. Burley, a 2001 decision of the Saskatchewan Court of Queen’s Bench.

Overreaching 

Owners purchased a cottage in 1997 for the grand sum of $30,000. There are benefits to life in Saskatchewan. The cottage was at the top of a steep hill that led down to the lake. The owners noticed soil erosion and called a contractor. The contractor informed the owners that they needed a series of three retaining walls. The contractor was really only a handyman but he purported to have the experience to design and complete the job. The price for the job was to be approximately $15,000.

After a number of problems, one of which was the building of the wall on the neighbour’s land, the contractor completed the job. The owners almost immediately noticed that one of the walls was starting to bulge. The contractor told them not to be concerned; it was normal. The next year, the owners noticed that the bulging was worse. The contractor told them that the bulging was just the dirt settling in. Later that year, the owners again notified the contractor of the bulging. The contractor put some metal straps on the wall to reinforce it.

The owners were not satisfied and hired an engineer. The engineer found that the contractor failed to use long enough railroad ties, used no tie backs in portions of the wall, used inadequate spikes, did not use a rigid enough method of tie-backs, and did not compact the fill. Not surprisingly, the walls were bowing and would probably fail.

The contractor admitted at trial that he did not have sufficient expertise to perform this job but alleged that the owners told him what to do. This did not fly. The trial judge held that the contractor breached the contract because the work performed was not of a reasonable workmanlike quality and was not fit for the purpose for which it was done.

The trial judge also held that the contractor negligently performed the work.

Damages 

The engineer had re-designed the retaining walls. The owners presented two quotes to rip out the old walls and construct the new walls: one was for $73,000 and the other for $78,000, each including GST. The engineer’s fees for design and supervision were $5,000. Accordingly, the owners claimed $78,000 for damages.

To put these damages in context, recall that the value of the cottage was $30,000 and the cost for the original job was $15,000.

There are a number of ways in which to measure damages for breach or negligent performance of a construction contract. One can look at the cost of performance or the diminution in the value of the project lands. If the cost of performance is out of proportion to the diminution in the value of the lands, the cost of performance may not be the proper measure of damages.

As an example, assume a project called for a cast-in-place steel railing. The contractor constructs the railing and then the owner notes that, contrary to the specifications, there is a minor aesthetic deficiency with the steel used in the railing that can be detected only if viewed very closely. The contractor has breached the specifications but the owner cannot expect the contractor to rip out the steel railing and install a new one. The deficiency would not have affected the value of the lands at all. In this instance, the contractor may have to pay some minor damages but would not be forced to pay for the cost of remedying the breach.

The trial judge in Maisonneuve noted that “The plaintiffs are entitled to recover the cost of performance, that is the estimated cost of bringing the retaining wall up to the standard originally intended, less, speaking generally and keeping sight of what is reasonable, so much of such cost as would have been incurred by the plaintiffs in building the wall to that standard in the first place.”

To translate, this means that one takes the cost of remedying the problem and then deducts what it would have cost the owners to have done the job right in the first place. If the contractor had known what he was doing, he would have charged the owners far more than $15,000 for doing the work. If the owners were paid the total cost of completing the project with properly designed walls and without deduction, they would have received much better walls than those for which they originally paid.

The Decision 

The judge noted that the cost of performance was not reasonable and that the amount claimed was “wholly disproportionate relative to the value of what might be achieved through performance.”

Unfortunately, the quotations did not break down the cost of repairing the walls into its constituent elements, including the cost of demolition of the old walls. Accordingly, the judge was left to assess the damages as best as could be done under the circumstances. The judge ultimately awarded damages of $23,500. The judge obviously concluded that it would have cost significantly more than $15,000 to construct and design the walls correctly.

The case sets out a theme that pervades the law. A court will not do something that it perceives as unreasonable.