Legal Blog

Expectations

Problems arise in the construction context, as in most situations, when one party fails to either manage or meet the expectations of the other. This was readily apparent in World Stone & Tile Inc. v. Ezekiel, a 2012 decision of the Ontario Superior Court of Justice.

Dispute

Homeowners retained a contractor to install tile in their home. The homeowners planned (expectation #1) to use their home as a showcase for the prowess of the husband’s skill as a general contractor/homebuilder. This did not happen.

The homeowners were not pleased with the final product and refused to pay any more money to the contractor. Instead of moving to another job and licking its wounds, the contractor registered a lien and commenced an action to enforce it. The contractor claimed the grand sum of $22,000 (i.e. $24,000, plus extras of $11,000, less $13,000 already paid). The homeowners denied that there were extras and claimed that the flooring was defective throughout and had to be ripped up and replaced.

Who Dat

The contractor claimed under World Stone & Tile Inc., its correct name. Unfortunately, the contract eliminated the word “Inc.” The homeowners swore that they never knew of an incorporated entity, just the individual running the show, and the contractor could not produce anything to demonstrate that it had notified the homeowners of its corporate existence.

Section 7 of the Business Names Act (the “Act”) proscribes a person (individual or corporate) from carrying on a business under a name and style other than his or its own name without registering that name and style. As a penalty for breaching that requirement, a person may not carry on court proceedings connected to the business without leave of the court. The court must grant leave if the person satisfies the court that the failure to register the business name was inadvertent; no one had been misled or deceived; and, at the time of the request for leave, the person no longer contravened the Act.

Accordingly, when faced with a defence that a plaintiff has failed to comply with the Act, what should the plaintiff do first? If you thought, “Register the name, dummy,” you would be correct. In addition, the plaintiff might amend the statement of claim to join the individual as an additional plaintiff, just in case.

The corporate plaintiff did neither. Are we then surprised that the trial judge refused the contractor’s request for leave? The judge noted that the plaintiff submitted no evidence regarding inadvertence, did mislead the homeowners, and never registered the name and style. The court therefore dismissed the contractor’s action.

The contractor breached the homeowners’ second expectation (i.e. we are dealing with an individual, not a corporation) and did nothing to change that expectation.

We again remind you (see newsletters of July 1997 and May 2004 – which, of course, you still have) that, under the Act and under the Business Corporations Act, when a corporation carries on business in a name other than its corporate name, the corporation must use its correct corporate name on all contracts, invoices, cheques, and orders.

Standard

The contract stated that the tiles would be installed in a workmanlike manner according to standard practices. The homeowners claimed that they expected the work to be done to a “Bellagio” standard. The judge found that this expectation (#3) was not reasonable given the express standard set out in the contract.

The judge held that the tiles in the hallway and master bathroom were not perfect, but, with the exception of three tiles, were within standard practice.

However, based on the experts for both parties, the judge held that there were problems with the kitchen tiles. They were uneven. In addition, insufficient bonding resulted in cracking and misalignment. The contractor’s attempt to fix the problems was unsuccessful and made the flooring look unsightly. Worse, the tiles continued to stress and crack.

Extras

The contractor included its remedial work in its claim for extras. This, the judge disallowed; the cost to remedy a deficiency is not compensable. However, the contactor did perform work in the garage and basement that was not covered in the contact. Since the homeowners could not have expected (#4) that the contractor was performing this work out of the goodness of its heart, the judge allocated $7,000 for it. The judge therefore assessed the contractor’s unpaid work at $18,000.

Counterclaim

Why was the judge calculating the amount of the extras when he had already dismissed the contractor’s action? He was determining the state of accounts for the homeowners’ counterclaim, a counterclaim in which they had joined the corporate contractor and the individual.

The homeowners’ expert persuaded the judge that the kitchen tiles were so bad that spot remedial work was simply inadequate. He agreed that the whole floor had to be removed and replaced – to meet the homeowners’ expectation (#5) that they would not have to put up with a substandard and unsightly floor.

The cost to remove and re-install the floor, which also necessitated the temporary removal of all kitchen cabinets, was $45,000. The judge added another $750 to compensate the homeowners for the three deficient hall and bathroom tiles and calculated the homeowners’ damages at $27,750.00, after deducting the $18,000 due to the contractor.

In the circumstances of this case, it did not matter that the judge had dismissed the contractor’s claim; it still received credit for the work that it had done. However, had the homeowners not had a valid counterclaim, the contractor’s sloppy business practices would have cost it $18,000.

Lien

The contractor had emailed the homeowners on Dec 6 stating that the job was 99.9% completed. The contractor registered its lien on February 11, 67 days later. The contractor tried to extend the start date to December 28 when its forces did some minor cleanup work. The judge held that this remedial work could not extend the time limits and held that the lien was “improvidently filed.”

The law gives a contractor a remedy that almost no other claimant has, a right to file a lien before the merits of the claim are adjudicated. A liened party expects (#6) that this right be exercised according to law and in strict compliance with the time limits specified for filing a lien and commencing an action.

Costs

There is no reported decision on costs. However, given the results, we expect that the contractor will be hammered. It did not properly enter into a contract and did not register its business name. Its work was substandard. It registered a claim for lien when it had no right to do so. And it was found liable on the counterclaim. In short, it failed to meet expectations and caused the homeowners undue expense, including the costs of its legal counsel and expert.