We have discussed the necessity of giving notice before a claimant may claim for extras or damages (see newsletter of July 2012). Almost, invariably, prime contracts and subcontracts demand notice and a claimant who ignores those contracts often pays a steep price for doing so. On the flip side, what happens when, say, a general claims the right to backcharge a sub for deficiencies? Can the general simply correct the deficiencies without allowing the sub an opportunity to correct them? This question was discussed in Rocksolid v. Bertolissi, a 2013 Ontario Superior Court decision.
A stone mason sub claimed $20,000 for unpaid work; the owner had already paid it $23,000 towards a $48,000 contract and, the sub said, $5,000 of work remained after it left the site. The owner, who was also the general, counterclaimed for $18,000 to complete the sub’s work and for $47,000 to remedy claimed deficiencies in the sub’s work.
The sub stated that it left the jobsite because it was waiting for the owner to provide the remaining stone for the sub to install. The owner alleged that the sub abandoned the site.
The judge spent 24 pages analysing the evidence and then found for the sub on every issue. He held that the owner had improperly ordered the sub from the site and, in doing so, had repudiated the contract. He also held that the sub’s $5,000 estimate of the remaining work was reasonable.
But this type of dispute is run-of-the mill. The interesting aspect of the case deals with the backcharges for deficient work.
There were deficiencies – not overly important deficiencies – but real deficiencies. The sub had offered to repair them in the spring. The owner refused to allow the sub to do so. Instead, he retained another tradesman to repair them – in the spring.
The owner claimed that it cost $47,000 to fix the deficiencies, but provided no evidence other than that of the tradesman he hired to do the work. The judge held that, based on the tradesman’s testimony, the actual cost to remedy the work was about $10,000, not the inflated amount the owner claimed.
However, given that the judge found the owner to have repudiated the contract and the sub willing to return to correct the deficiencies, the judge had this to say:
I find that it was reasonable for the owner to provide the contractor with an opportunity to return to correct the deficiencies in order to mitigate their damages. I further find that if the owner fails to provide the contractor with a reasonable opportunity to correct the deficiencies in its work, which do not constitute a fundamental breach of the contract and where there is no urgency, the owner is not entitled to claim damages based on his or her cost to have the deficiencies repaired by a third party contractor.
Unfortunately, the judge referred to “fundamental breach,” a concept that the Supreme Court of Canada has abolished. What he really meant, we assume, was that the deficiencies were not so serious that they breached a condition of the contract that would otherwise have allowed the owner to terminate the contract.
Deficiencies may be so serious that an owner cannot possibly trust the contractor, who caused the deficiencies, to remedy them. Therefore, the owner has, and should have, a right to terminate and retain someone else to remedy the deficiencies. Conversely, if the deficiencies are minor, then the owner has no reason not to allow the contractor to correct them and the owner’s refusal is treated as a failure to mitigate damages.
The same issues arise on a commercial site. A general cannot simply fix minor deficiencies and backcharge the sub for their cost, without giving the sub a chance to remedy its work. Then again, no responsible general would do so.