Swanby v Tru-Square Homes Ltd

Court of Queen’s Bench of Alberta

Citation: Swanby v Tru-Square Homes Ltd, 2022 ABQB 215

Date: 20220318

Docket: 1301 10836

Registry: Calgary

Between:

Craig Swanby and Georgina Swanby

Plaintiffs

(Defendants by Counterclaim)

- and -

Tru-Square Homes Ltd. and James Frederick Metcalfe

Defendants

(Plaintiffs by Counterclaim)

_______________________________________________________

Reasons for Decision

of the

Honourable Mr. Justice M. David Gates

_______________________________________________________

Table of Contents

I. Introduction and Overview...................................................................................................... 3

II.

Facts.................................................................................................................................. 6

Issues .............................................................................................................................. 12

Evidence ......................................................................................................................... 13

III.

IV.

A. James Metcalfe ............................................................................................................. 13

B. The Plaintiff’s Experts.................................................................................................. 14

1.

2.

3.

David Matthews.................................................................................................... 14

Dana Bjornson ...................................................................................................... 14

Cameron Kraychy................................................................................................. 15

Page: 2

C. The Defendants’ Expert................................................................................................ 15

V.

Analysis .......................................................................................................................... 17

A. Concurrent Liability in Contract and Tort .................................................................... 17

B. Liability in Contract...................................................................................................... 18

1.

2.

3.

The Lock-Up Contract .......................................................................................... 19

Was the Lock-Up Contract Amended or Varied?................................................. 22

Breach of Contract ................................................................................................ 29

C. Liability in Tort............................................................................................................. 30

D. The Deficiencies ........................................................................................................... 31

1.

2.

3.

4.

5.

6.

7.

8.

9.

The Foundation..................................................................................................... 32

The Leaking Windows.......................................................................................... 33

Bonus Room.......................................................................................................... 40

The Garage............................................................................................................ 44

Door Threshold Cut-Outs ..................................................................................... 45

Interior Electrical .................................................................................................. 46

Foundation, Framing and Nail Floor Wall Connection ........................................ 47

Kitchen Floor ........................................................................................................ 49

Walk-Out Header.................................................................................................. 51

10. Missing Point Load............................................................................................... 52

11. Sound Proof Insulation ......................................................................................... 53

12. Roof....................................................................................................................... 54

13. Main Attic Insulation ............................................................................................ 58

14. Deck ...................................................................................................................... 61

15. Stucco.................................................................................................................... 66

16. Stone Work ........................................................................................................... 69

17. Building Envelope, Eaves & Soffits..................................................................... 71

18. Exterior Decorative Beams................................................................................... 72

19. Mechanical Room & Plumbing ............................................................................ 73

20. Other Deficiencies Identified by Bjornson ........................................................... 74

E. Other Possible Breaches................................................................................................. 74

1.

2.

Metcalfe’s Lack of Involvement in the Project..................................................... 74

Failure to Keep the Plaintiffs Informed ................................................................ 74

Page: 3

F. Application of Liability in Contract ............................................................................... 75

G. Application of Liability in Tort .................................................................................... 75

1.

2.

3.

4.

Inherently Dangerous Work.................................................................................. 76

Fraud ..................................................................................................................... 78

Piercing the Corporate Veil .................................................................................. 81

Inducing Breach of Contract................................................................................. 91

H. Alberta New Home Warranty Program (“ANHWP”) .................................................. 93

Damages ......................................................................................................................... 95

A. Quantification of Damages ........................................................................................... 95

VI.

1.

2.

3.

4.

Contract Price to Lock Up .................................................................................... 98

Extras and Upgrades ............................................................................................. 99

Amount Paid to Tru-Square................................................................................ 105

Amounts Paid to TGC for Remediation Work ................................................... 105

B. Consequential Damages.............................................................................................. 111

C. Non-Pecuinary General Damages............................................................................... 113

D. Punitive Damages ....................................................................................................... 115

E. Aggravated Damages.................................................................................................... 122

F. Contributory Negligence .............................................................................................. 123

G. Mitigation of Damages ............................................................................................... 125

H. Improvement............................................................................................................... 129

VII.

Counterclaim ................................................................................................................ 130

VIII.

IX.

X.

Conclusion.................................................................................................................... 130

Costs ............................................................................................................................. 130

Pre-Judgment Interest................................................................................................... 131

I. Introduction and Overview

[1]

The Plaintiffs, Georgina Swanby (“Ms. Swanby”) and her husband, Craig Swanby (“Mr.

Swanby”), seek damages from the Defendants, Tru-Square Homes Ltd (“Tru-Square”), and

James Frederick Metcalfe (“Metcalfe”) relating to the construction of their home west of

Carstairs, Alberta.

Page: 4

[2]

The Plaintiffs filed a Statement of Claim on September 13, 2013 and an Amended

Statement of Claim on March 12, 2014. In their Amended Statement of Claim, the Plaintiffs

allege breach of contract and negligence on the part of the Defendants, citing multiple

construction deficiencies, as well as material breaches of the construction contract and a failure

to follow the building plans. Further, the Plaintiffs allege that the Defendants failed to meet the

requirements of the Alberta Building Code (the “Code”) and employed methods and materials

that were sub-standard so as to render the property uninhabitable.

[3]

The Plaintiffs maintain that the Defendants’ construction deficiencies, and their failure to

correct these deficiencies, amount to negligence. As such, the Plaintiffs say that the Defendants

failed to meet the standards of a reasonably competent general contractor and home builder. In

the alternative, the Plaintiffs contend that the Defendants’ actions constitute a breach of contract.

[4]

As more fully discussed below, the Plaintiffs maintain that Tru-Square and Metcalfe are

legally indistinguishable and invite the Court to pierce the corporate veil.

[5] Further, the Plaintiffs allege fraud on the part of the Defendants. Specifically, the

Plaintiffs point to the Defendants’ concealment of construction deficiencies, misrepresentations

as regards the state of the construction project and diversion of funds from the Plaintiffs’ project

to another construction project underway at the same time (the “West Highlands residence”), as

amounting to fraud.

[6]

With respect to the West Highlands residence, the Plaintiffs seek pre-judgment injunctive

relief, an order tracing the funds paid by the Plaintiffs to the Defendants, restitution of any funds

that can be traced, an accounting and a declaration that the Plaintiffs hold an interest in the West

Highlands residence.

[7]

In addition to damages for negligence and, alternatively, breach of contract, the Plaintiffs

also seek aggravated damages for financial losses and increased costs incurred as a result of the

actions of the Defendants. The Plaintiffs cite emotional upset, distress and a diminishment in

their quality of life. Further, the Plaintiffs seek Punitive Damages as a result of the deliberate and

fraudulent actions of the Defendants.

[8]

Finally, the Plaintiffs seek pre-judgment interest pursuant to the Judgment Interest Act,

RSA 2000, c J-1, and costs on a solicitor-client basis.

[9] The Defendants filed a Statement of Defence on April 17, 2014 and a Counterclaim on

April 24, 2014. In their Statement of Defence, they deny any defects in their work and deny that

they at any time attempted to deceive the Plaintiffs or to hide defects or deficiencies in the

construction of the residence. The Defendants seek dismissal of the Plaintiffs’ action in its

entirety, as well as costs. In their Counterclaim, the Defendants allege that they paid a total of

$879,404.72 to suppliers of goods and services relative to the project. Further, the Defendants

allege that they are owed not less than $450,000 pursuant to the construction contract for work

completed. The Defendants state that this $450,000 includes lost profit for work that they were

not able to complete after they were denied access to the property. They seek costs in relation to

the Counterclaim.

[10] The Defendants say that Metcalfe never had a contractual relationship with the Plaintiffs.

Further, they maintain that the Plaintiffs have failed to establish any legal basis upon which the

Court can find Metcalfe liable for any alleged negligence on the part of Tru-Square. The

Defendants maintain that the Plaintiffs cannot prove the four required elements of fraud. They

Page: 5

also deny that any funds received from the Plaintiffs were directed to the construction of the

West Highlands residence.

[11] The Defendants contend that the work for which they are responsible is covered by the

Alberta New Home Warranty Program (“ANHWP”) Single Family Residence Warranty

Certificate that forms part of the contract between the parties. They say that all of their work is

free of defects or structural defects as defined in the Warranty Certificate. The Defendants also

maintain that the Plaintiffs are in default of the “Homeowner Obligations” set out in clause 4 of

the Warranty Certificate. In this regard, the Defendants allege that the Plaintiffs are in breach of

the Construction Agreement in commencing this action when some of the matters that form part

of the Plaintiffs’ claim should have been referred to arbitration in accordance with the

Arbitration Agreement.

[12] The Defendants further contend that the Plaintiffs failed to mitigate any damages for

which the Defendants may be liable and contributed to the damage to the residence.

[13] The Plaintiffs filed a Defence to Counterclaim on June 20, 2014, in which, amongst other

things, they denied owing $450,000 to the Defendants. The Plaintiffs maintain that the amount

claimed in the Counterclaim relates to work that was never performed and is based on an invoice

or invoices issued for the sole purpose of justifying the Counterclaim and set-off claimed by the

Defendants. The Plaintiffs say that the work performed by the Defendants was deficient and not

carried out in accordance with the requirements of the contract. Further, the Plaintiffs allege that

the amount claimed in the Counterclaim represents over - or double-charging insofar as it

includes invoices issued for progress payments, as well as for payments made directly to

suppliers and sub-contractors. The Plaintiffs seek dismissal of the Counterclaim and costs on a

solicitor-client basis.

[14] Initially, this matter was heard from April 8-18, 2019, the time scheduled for the trial.

However, significant additional time was required to complete the matter. The trial was

continued on April 23-25, 2019, May 8-17, 2019, October 15-18, 2019, and November 27-28,

2019. Instead of the 9 days originally scheduled, 26 days were required.

[15] The Plaintiffs called seven witnesses, including themselves. Three expert witnesses were

called to provide opinion evidence in relation to structural engineering, building envelope

engineering, and the standard of care associated with the construction and remediation of custom

residential homes.

[16] The Defendants called nine witnesses, including one expert, Metcalfe and various trades

who worked on the construction project. They also called a municipal building inspector, a

representative of a supplier of framing materials, and the Plaintiffs’ designer, Shawn Carm.

[17] At the conclusion of the evidence and oral argument on November 28, 2019, I reserved

my decision. On September 30, 2021, counsel for the Plaintiffs supplied a 122-page written

argument, combining their response argument to the Defendants’ oral submissions delivered on

November 28, 2019 with the written argument that was to follow their own oral submissions

delivered on November 27 and 28, 2019. Counsel for the Defendants filed a brief written

response argument on October 8, 2021.

[18] The Court wrote to counsel on February 7, 2022, seeking clarification on two matters.

First, the parties were invited to respond to a question relating to Invoice 118. Second, the parties

were invited to make further written submissions on the legal relationship, if any, between the

Page: 6

parties following the completion of the lock-up contract. The parties submitted further written

submissions on February 18, 2022 and February 24, 2022, respectively.

[19] These are my Reasons for Decision.

II. Facts

[20] The Plaintiffs have resided in the family home that is the subject of this litigation since

August 2015. The home is located just west of Carstairs, Alberta. Previously, the Plaintiffs lived

on Ms. Swanby’s family farm also located in the Carstairs region. The Plaintiffs operate a grain

farm east of Carstairs.

[21] Ms. Swanby completed Grade 12 and then qualified and worked as a hairstylist. During

her career, she has owned, operated, and sold two businesses, a Telus Mobility store and a

courier company.

[22] Mr. Swanby is a power engineer, holding a certificate from SAIT obtained in 1991. For

the past nine years, he has worked out of the country as an oilfields manager. At present, he

works for Glencore on a 28-day on/28-day off rotation in Chad, Africa. As such, he spends a

great deal of time outside of Canada. Mr. Swanby has no experience as a structural engineer and

neither he nor Ms. Swanby has any background or experience in house construction.

[23] Mr. Swanby gave evidence that he planned to pay for the construction of the residence,

including the Plaintiffs’ initial mortgage, sometime in 2019, at which point he would terminate

his overseas work commitments. As a result of the need to finance the remediation work and the

other associated costs relating to the delayed completion of the project, he testified that he did

not expect to be able to consider retirement for at least another ten years, approximately 2029.

[24] The Plaintiffs acquired the land on which the home is built in 2009 or 2010. They were

looking to move to a new location and searched for land that had either a mountain or coulee

view. The planned home was to serve as a retirement home that could accommodate a

wheelchair on an all-purpose ground floor, as well as a home for their then teenaged daughters.

Their plans included a walk-out basement and multiple windows overlooking the view of the

coulee. They had known for some time that they would build a home and had collected

photographs from magazines over the years depicting house ideas that they wished to

incorporate.

[25] The Plaintiffs met Shawn Carm (“Carm”) at the Carstairs arena while attending a hockey

game. They learned that Carm was a designer who had built some large, custom-built homes in

the past. Carm told them that he “gets to do the pretty stuff,” but did not know how to do the

other tasks associated with new home construction. The Plaintiffs liked Carm’s ideas.

[26] Carm provided them with some home design ideas and introduced them in late 2010 to

Gordon Snell (“Snell”), an architectural draftsman employed by Innographic Design and

Drafting (“Innographic”). The Plaintiffs provided Snell with a rough sketch they had prepared

(which no longer exists), together with magazine photographs gathered over the years. They

discussed with Snell their interest in having stone on the bottom portion of the home’s exterior,

as well as granite or concrete counter tops in the kitchen and stone around the stove. Snell told

them that they would require a robust floor in the kitchen area to support these heavy building

materials. Carm attended the last couple of meetings with Snell and assisted the Plaintiffs with

Page: 7

their design ideas, including the design of a large exterior deck to be incorporated into the plan,

as well as interior beams and an interior staircase.

[27] Snell produced a design for the Plaintiffs’ home based on the materials and input they

provided. The drawings that he ultimately prepared for the Plaintiffs addressed this enhanced

load requirement. Carm provided additional design ideas once the Plaintiffs received the

drawings. Ms. Swanby recalled that the drawings were completed in mid to late 2010, though it

could have been later. She identified Exhibit 1-A-1 as the drawings prepared by Snell, the final

version of which was dated May 8, 2011. A few minor modifications were made to the drawings

prior to the start of construction, but such modifications related only to the placement of doors.

Snell told the Plaintiffs that he thought they should employ an Insulated Concrete Form (“ICF”)

foundation for their planned home.

[28] The Plaintiffs had no written agreement with either Carm or Snell for the work that they

performed.

[29] Carm proposed that the Plaintiffs engage a builder in Calgary with whom he had worked

in the past. The Plaintiffs met this builder on two occasions. During their second meeting, the

Calgary builder provided an oral estimate of approximately $1.4 million to build the home based

on his review of the Snell drawings.

[30] Mr. Swanby hoped to find a builder in their local area. In late 2010, the Plaintiffs

approached Metcalfe to find out if he was interested in building the home. Metcalfe previously

had built custom homes for Ms. Swanby’s brother, Mr. Swanby’s cousin and friends they knew

in the area. Metcalfe was also the next-door neighbour of Ms. Swanby’s brother. The Plaintiffs

were familiar with the Defendants’ work as a home builder, having seen Tru-Square signs on

homes in the Carstairs area. According to the Plaintiffs, Metcalfe had a great reputation in the

Carstairs region.

[31] When first contacted by telephone, Metcalfe indicated that he was looking to wind-up his

construction business and was not really interested in taking on the project. He told them that he

was about to go to Phoenix for the winter and had plans for a cross-Canada road trip with his

wife the following year. In the spring of 2011, the Plaintiffs contacted Metcalfe again and asked

if he would be interested in being their general contractor for the residence. While he was

hesitant to take on the job due to his upcoming travel plans, he agreed to discuss it with his wife.

He responded a short time later, indicating that he was possibly interested, but only in terms of

construction to the lock-up stage given his upcoming holiday plans. Ms. Swanby understood that

the lock-up stage included pouring the foundation, framing, and installation of doors and

windows. Following a further meeting with the Plaintiffs, Metcalfe agreed to build the home to

the lock-up stage.

[32] Metcalfe was advised from the outset that the home was to be both a family home and the

Swanbys’ planned retirement home. He was shown the Snell drawing that included the interior

beams, a very large exterior deck, and the requirement for a robust floor construction to support

the stone and granite features in the kitchen. Metcalfe advised the Plaintiffs that this was the

largest project he had ever built and that he probably would require a subcontractor to complete

what he described as the complicated framing for the planned house.

[33] Metcalfe provided the Plaintiffs with three separate quotes for the job. The initial quote

was for $500,000 to complete construction to the lock-up stage. The second quote, dated July 6,

Page: 8

2011, for a total cost of $578,875.40, including GST, added interior drywall and exterior stucco

to the contract price: Exhibit 1-C-2.

[34] The Plaintiffs’ bank required a price quote for the entire cost of building the home,

including all interior finishing. During an in-person meeting in early August 2011, Metcalfe

provided a quote for the entire construction project. The written quote (Exhibit 1-C-3) is dated

August 4, 2011 and totals $1,064,348.00. It sets out specified allowances to cover exterior and

interior finishes. Metcalfe subsequently provided the Plaintiffs with a document dated August 21,

2011 (Exhibit 1-C-20) that set out in great detail the projected costs to construct the entire

residence. After listing a number of items totalling $352,251.00, he added the “part from Tru-

Square Homes”, $659,510.00, for a total of $1,011,761.00.

[35] Metcalfe expressed no reservations about his ability to follow the plan and construct the

home. He told the Plaintiffs that he would fly back from Phoenix periodically to keep a handle

on the job.

[36] The parties signed three separate contracts at a sod farm near the location of the

Plaintiffs’ recreational trailer on August 22, 2011. The meeting lasted approximately 40 minutes,

during which time there was a discussion regarding Tru-Square’s obligation to meet Code

requirements and to ensure that all trades on site would have insurance and WCB coverage.

While the parties signed more than one contract at the time, there is no dispute that the

agreement reached that day required the Defendants to build to the lock-up stage only, with

framing to start in late September 2011 and completion to lock-up stage by early 2012.

[37] The first contract, Exhibit #1-C-5, involved construction of the residence to the lock-up

stage, including stucco and drywall, in the revised amount of $692,485.50.

[38] A second contract was signed the same date for a total contract price of $1,011.760.00,

plus GST of $50,588.00, for a total contract price of $1,062,348.00, Exhibit 1-C-6. That contract

was for the construction of the residence to completion.

[39] A third pre-printed form of contract, Exhibit 1-C-4, the ANHWP contract, was brought to

the meeting by the Plaintiffs. This contract also covered the construction of the entire residence

at a cost of $1,062,348.00.

[40] The Plaintiffs obtained a building permit from the county. At the request of the county,

they also obtained a geotechnical inspection (Exhibit 1-A-3) dated July 2011, prepared by Curtis

Engineering Associates Ltd of Calgary. The report recommended the use of Type 50, Sulphate

Resistant Portland Cement for the foundation due to the soil composition. A copy of the report

was provided to Metcalfe.

[41] The Plaintiffs retained Quality Dirt Works (“Quality”) to do excavation work and pour a

concrete pad for a planned future workshop on the property. While James Quartz, the principal

of Quality, was on site, Ms. Swanby suggested to Metcalfe that Quality undertake the excavation

work for the property. Metcalfe, who was familiar with Quality’s work, agreed as Quality’s

equipment was already on site. The Plaintiffs paid Quality’s invoice of $16,803.15 (Exhibit 4) as

excavation was not part of the contract with Tru-Square.

[42] As noted above, Snell recommended that the Plaintiffs use an ICF foundation for the

residence. However, Metcalfe advised that he did not like ICF foundations and would never

install one. He told the Plaintiffs that if they wanted him to build their home, they would have to

accept a standard foundation. They agreed, though they told Metcalfe that he was required to

Page: 9

otherwise follow Snell’s plan. At one point, the Plaintiffs asked Metcalfe if any new drawings

would be required in light of the change in foundation. Metcalfe indicated that no further

drawings would be required and that any necessary adjustments could be made along the way.

[43] Metcalfe also testified that Ms. Swanby was also opposed to ICF foundations. However,

this was never put to her in cross examination. Moreover, there is nothing in her evidence to

suggest that she had any experience with building foundations so as to afford her a basis upon

which to form an opinion.

[44] After the foundation was completed, Metcalfe told Ms. Swanby that it was a pretty good

job and just a little off, but nothing that would affect anything. Later, Metcalfe told her that the

framing was just a bit off because it was a difficult foundation due to all the jut-outs in the house

design. He told her that there was nothing to be concerned about as it could be addressed during

the framing. Ms. Swanby was not concerned by these comments and had full trust in Metcalfe.

[45] During the framing process, Ms. Swanby spoke to John McEwen, the framer, on a regular

basis. On one occasion, he told her that the foundation was “off” and that there were some issues

with the framing. He also told her that Metcalfe was not being particularly helpful, that the

trusses were not fitting on the foundation and that there was not enough material on site. He

reported that he had to salvage some of the used cribbing material. According to Ms. Swanby,

McEwen related that Metcalfe had provided the direction to use whatever material was available

on site. When she subsequently asked Metcalfe about the issues that McEwen had raised,

Metcalfe told her that the foundation was not quite square but that this was a common occurrence

in construction and there were no issues at all in terms of the overall project.

[46] Metcalfe was on site only occasionally during the framing process and generally not as

frequently as the Plaintiffs had anticipated. During the summer of 2012, he went on his planned

cross-Canada road trip. He was also frequently away on camping trips and trips to Saskatchewan.

According to Ms. Swanby, a number of trips “popped up” and Metcalfe would advise of his

planned absences. Prior to entering into the contract with the Defendants, the Plaintiffs were

aware only of the planned cross-Canada road trip.

[47] The Plaintiffs hired the Defendants to manage the various subtrades. Due to Metcalfe’s

frequent absences, the project did not proceed as rapidly as expected. When issues arose during

the construction, the Plaintiffs were left to try to reach Metcalfe to attempt to resolve them.

[48] According to Ms. Swanby, the construction was progressing slowly and not in

accordance with the schedule that had previously been provided. At one point, Metcalfe told her

that some of the delay was on account of poor weather. He also reported that there were some

issues with the trusses.

[49] Ms. Swanby described in detail some of the specific problems that arose during the

construction. Tiles were being installed in one of the bathrooms by Metcalfe’s brother, John.

Ms. Swanby recalled that she and Carm stopped by the project while the tiling was taking place

and raised concerns with the way some of the tiles were placed. John Metcalfe responded that he

was doing the best he could. When the concerns were relayed to Metcalfe several days later, he

told her that if they were going to be that picky they could find their own tiler. Shortly thereafter

John Metcalfe’s tools and equipment disappeared from the job site and he never returned to

finish the job. The Plaintiffs were then forced to go out and hire their own tiler to correct the

Page: 10

mistakes and finish the job. According to Ms. Swanby, Metcalfe’s general attitude towards the

project changed after John Metcalfe walked off the job.

[50] Metcalfe provided the name of his flooring supplier, Deerfoot Carpet, Ms. Swanby found

the flooring she liked, but was told that it would be difficult to get due to labour problems in the

USA. Metcalfe told her that she was going to have to outsource the product herself.

[51] Metcalfe also advised Ms. Swanby that his supplier would not build the staircase set out

in the design plans and that she would have to outsource the stairs. As a result, the Plaintiffs had

to seek out, hire and pay their own tradesperson to rough in the staircase.

[52] Metcalfe suggested his own painter for the interior painting. Ms. Swanby knew that this

painter had done a poor job on her brother’s residence. When she suggested another painter,

Metcalfe threw his hands up in the air and told her to find her own painter.

[53] At one point, Metcalfe referred the Plaintiffs to his cabinet supplier in Red Deer who

submitted a quote for the job. Carm suggested that they obtain other quotes from other suppliers.

He wanted to bid on this part of the project himself as he had his own cabinetry company.

[54] On May 23, 2013, several weeks prior to the scheduled possession date, Ms. Swanby was

notified by the flooring subcontractor that water was leaking into the residence through the

windows. The initial leak was detected in the main floor Great Room, as well as in the Bonus

Room located over the garage. Ultimately, it was determined that all of the main floor windows

and many of the second-floor windows leaked.

[55] Metcalfe was advised of the leaking windows by Ms. Swanby that same day, but he did

not attend the site to investigate the matter for several days. I accept Ms. Swanby’s evidence that

when Metcalfe finally attended, he denied any responsibility for the problem. Rather, he blamed

Carm for the leaking windows, citing his inset or recessed window installment specifications as

the cause of the problem. Metcalfe refused to assist the Plaintiffs in investigating the cause and

extent of the window leaks.

[56] On May 29, 2013, Troy Snyder (“Snyder”), Director of Operations and President of

Western Form Works, attended the residence at Carm’s request to inspect the leaking windows.

Snyder had approximately 25 years of experience in residential and commercial construction and

was, amongst other things, a project manager as well as a ticketed carpenter, log home builder,

and excavator. Metcalfe was present during this inspection. Snyder subsequently issued a report

(Exhibit 1-D-5) in which he noted, amongst other things, that the windows had not been installed

in accordance with the specifications that Carm had previously provided to Metcalfe.

[57] Snyder noted that it started to rain during the course of his visit and he observed water

leaking through the soffits. He recommended that the roof be assessed to determine how water

was getting into the soffit.

[58] While Snyder had no recollection of the homeowners being present during his inspection,

I accept Ms. Swanby’s evidence that she was present. I also accept her evidence that Snyder told

Metcalfe to fix the windows, to which Metcalfe responded, “Not my responsibility”.

[59] Metcalfe took no action to repair the windows or to offer up any possible solutions to

remedy the problem in either the short-term or the long-term. Shortly thereafter, the Defendants

left the construction site and never returned.

Page: 11

[60] As more fully described below, the Swanbys began to investigate the installation of the

leaking windows commencing in July 2013. This led to the investigation of other construction

deficiencies identified by the engineers and others hired by the Swanbys to assist them in

uncovering the construction deficiencies and in recommending and executing the required

demolition and remediation work.

[61] Around July 17, 2013, Ms. Swanby personally served Metcalfe with a letter listing the

deficiencies. By the terms of the letter, July 26, 2013, was set as the deadline for Metcalfe to

address the leaking windows. The Swanbys’ then counsel sent a follow-up letter dated July 30,

2013 (Exhibit 1-G-11) referring to earlier correspondence from the Defendants, apparently

seeking access to the property to conduct an inspection. (The Defendants’ earlier correspondence

was not produced at trial.).

[62] Metcalfe sent an email to Ms. Swanby on July 22, 2013 (Exhibit 1-G-15) outlining the

mediation/arbitration processes associated with the ANHWP. He expressed his willingness to go

to non-binding mediation if the Swanbys were prepared to agree. Failing agreement, Metcalfe

advised that that “final option” would be for him to trigger the arbitration process. Metcalfe

made no reference in this communication to any intention to address any of the deficiencies

identified in Ms. Swanby’s July 17, 2013, correspondence.

[63] Ms. Swanby responded to Metcalfe’s email on July 23, 2013 (Exhibit 1-G-10), advising

that someone would be hired to repair the damage caused by the leaking windows if Metcalfe

was not prepared to act. She expressed a willingness to attend mediation after the necessary

repairs had been completed.

[64] Ms. Swanby subsequently contacted the ANHWP and learned that the fact that the

contract amounts owing to Tru-Square had not been paid in full, and that the Plaintiffs did not

have possession of the home, meant that there was no building warranty in place. Ultimately, no

mediation or arbitration ever took place.

[65] Metcalfe’s failure to respond to the substantive concerns raised in their letters led the

Swanbys to conclude that Tru-Square and Metcalfe had repudiated the contract.

[66] In July 2013, the Swanbys hired Tamata’s General Contracting & Consulting (“TGC”),

an experienced construction and remediation contractor, to begin the investigative and

demolition work required to determine the nature and scope of the construction deficiencies.

During his initial examination of the premises, TGC’s principal, Mike Juniper (“Juniper”), found

water-damaged drywall in every room of the home. Juniper provided a written quote dated

August 8, 2013, based on his understanding of the scope of work as of that date: Exhibit 1-F-3.

At the time, he estimated that the total cost would be $19,140. On August 19, 2013, he provided

a revised quote based on an enhanced scope of work in the amount of $41,701.80. He

subsequently produced a detailed budget quote dated January 2014 (Exhibit 1-F-9) in which he

estimated the total cost of all repairs to be $802,597.11. Juniper ultimately produced a detailed

written report regarding his involvement in this matter: Exhibit 1-F-35. Juniper explained that the

scope of work greatly expanded as a result of the testing and investigative work undertaken by

the Plaintiffs and the two engineers hired to oversee the remediation process.

[67] The Plaintiffs also retained Dana Bjornson (“Bjornson”), a building envelope engineer,

and David Matthews (“Matthews”), a structural engineer, to assist them in investigating

Page: 12

suspected construction deficiencies. Both subsequently were called as expert witnesses during

the trial.

[68] As more fully set out below, Matthews concluded that there were numerous building

Code deficiencies and failures to meet industry best practices in Tru-Square’s construction.

[69] The Plaintiffs asked Bjornson to examine the condition of the building envelope,

including if there were any deficiencies or Code deviations. Bjornson found that the building

envelope was not properly constructed and required remediation. She concluded that there were

numerous building Code deficiencies and failures to meet industry best practice in Tru-Square’s

construction of the building envelope.

[70] Remediation work did not begin until July or August 2014. This work was undertaken by

Juniper and TGC, working closely with Bjornson and Matthews to correct the various

deficiencies identified, and to ensure that the remediations were Code-compliant and met the

custom homebuilding industry’s accepted standards of practice. Juniper’s involvement in the

remediation process continued until approximately August 2015. The Plaintiffs finally took

possession of the fully remediated residence in late August or early September 2015, more than

two years after the initial occupancy date.

III. Issues

[71] Numerous issues, both factual and legal, arise in this matter:

(a) Can the Defendants be concurrently liable in both contract and tort?

(b) What were the terms of the parties’ contract?

(c) Was the parties’ contract amended and, if so, what were the amended terms?

(d) Did Tru-Square and/or Metcalfe have a duty of care to the Plaintiffs?

(e) What were the deficiencies in the house as constructed?

(f) Did the Defendants, or either of them, breach the contract with the Plaintiffs?

(g) Are the Defendants, or either of them, liable to the Plaintiffs in tort?

i. Was the Defendants’ work inherently dangerous?

ii. Was Metcalfe’s conduct fraudulent?

iii. Is it appropriate to pierce the corporate veil in this case?

iv. Did Metcalfe induce Tru-Square to breach its contract?

(h) Is the ANHWP’s dispute resolution process applicable?

(i) What is the appropriate measure of the Plaintiffs’ damages?

i. Are the Plaintiffs entitled to consequential damages?

ii. Are the Plaintiffs entitled to non-pecuniary damages?

iii. Are the Plaintiffs entitled to punitive damages?

iv. Are the Plaintiffs entitled to aggravated damages?

v. Was there contributory negligence by the Plaintiffs?

vi. Did the Plaintiffs appropriately mitigate their damages?

vii. Have the Plaintiffs benefitted from improvement?

(j) Are the Defendants entitled to payment under their Counterclaim?

Page: 13

IV. Evidence

[72] As will become clear later in these Reasons, my findings on the credibility and reliability

of the witnesses, both lay and expert, has an impact on my subsequent determinations.

A. James Metcalfe

[73] According to the Plaintiffs, the Defendants’ case rests on Metcalfe’s testimony. They

maintain that Metcalfe was not a credible or reliable witness and that the Court should approach

his testimony with great caution. Due to his frequent and extended absences from the job site, the

Plaintiffs say that Metcalfe cannot speak with any authority to the quality of the work of his

subtrades. His evidence in this regard is entirely self-serving. The Plaintiffs further contend that

Metcalfe’s failure to produce any contemporaneous notes, documents or photographs tracking

the progress of the project negatively impacts the reliability of his evidence. In the result, the

Plaintiffs argue that little or no weight should be given to his evidence.

[74] In terms of his credibility, the Plaintiffs cite several instances where Metcalfe gave

inconsistent, even contradictory, evidence during the trial. I would summarize some of these

instances as follows:

a) In the Statement of Defence, the Defendants conceded that Metcalfe was the general

contractor for the project to the lock-up stage. He made the same admission during

questioning. However, at trial, Metcalfe suggested that Carm was the general

contractor. Later, in cross-examination, he was insistent that the Swanbys were their

own general contractors. Further, Metcalfe swore an affidavit on April 18, 2016,

deposing that he was not the general contractor. Finally, in his response to the Notice

to Admit Facts, Metcalfe stated he was a “builder” and not a “general contractor”.

b) In the Agreed Statement of Facts, Exhibit 2A, para 66-67, it was admitted that Tru-

Square’s insurance coverage during the construction of the Swanby residence was

held by Metcalfe as a sole proprietor and, further, that the insurance policy was

cancelled on or about May 13, 2013. Metcalfe testified in chief that the insurance had

no relevance at all to the construction of the Swanby residence. However, during

cross-examination, he conceded that he had taken out property and liability insurance

as a sole proprietor on behalf of Tru-Square Homes, but that the insurance was

cancelled in May 2013 (Exhibit 35).

c) In direct examination, Metcalfe testified that he had been up on the roof and inspected

the work of the roofing subtrade. He stated that the work appeared to be

unexceptional and in order. In cross-examination, he confirmed that he had been up

on the roof, but conceded that he never inspected the work.

d) In his evidence, Metcalfe suggested that the complexity of the interior finishing on

the residence served as a disincentive to his continued involvement in the project

beyond the lock-up stage. However, in cross-examination he conceded that the

complexities associated with the house related to the foundation and the framing, both

of which were clearly within the scope of his work.

e) In the Agreed Statement of Facts, Metcalfe admitted that several aspects of his work

were deficient, but his testimony was to the contrary.

Page: 14

[75] The Defendants, on the other hand, urge me to accept the evidence of Metcalfe and to

prefer his evidence over that of the Plaintiffs where there is a conflict.

[76] I have several concerns with Metcalfe’s evidence generally. First, I agree with the

Plaintiffs’ contention that Metcalfe’s frequent and extended absences from the job site, and

indeed Alberta, adversely impact the reliability of his evidence respecting the key events. He was

not present for almost 50% of the time from the outset of construction to the completion of the

lock-up stage. His lack of contemporaneous notes, documents, or photographs contributes to my

concern about the reliability of his evidence relative to events that took place many years ago.

[77] I also have concerns with Metcalfe’s credibility. I accept the Plaintiffs’ assertion that

Metcalfe gave conflicting, even contradictory, evidence. As a witness, I found him to be highly

combative and quick to deflect responsibility for most, if not all, of the extensive deficiencies

discovered by the Plaintiffs’ experts after Metcalfe abandoned the project. Generally, he was

unwilling to acknowledge any responsibility for the very serious issues that arose during the

project. As more fully set out later in these reasons, I reject the evidence of Metcalfe on several

key matters in dispute. The combined impact of these adverse findings relative to Metcalfe leads

me to approach the entirety of his evidence with considerable skepticism.

B. The Plaintiff’s Experts

[78] The Plaintiffs called three expert witnesses at trial: Bjornson, Matthews, and Cameron

Kraychy. All of them gave their evidence in a clear, straight-forward manner and were not

seriously challenged in cross-examination.

1. David Matthews

[79] Matthews was qualified by the Court as an expert in structural engineering and qualified

to give opinion evidence with respect to building code compliance, applicable industry standards

and best practices relating to the design, construction, and constructional components in custom

residential home construction in Alberta. His curriculum vitae was marked as Exhibit 11.

Matthews provided two reports to the Court, an initial report dated April 7, 2017 (Exhibit 12)

and an Expert Rebuttal Report dated October 30, 2017 (Exhibit 13).

[80] Matthews is the principal of Madden Matthews Engineering Ltd, with experience in

structural engineering over a span of 30 years. His expertise is directly applicable to the various

issues that arose in this litigation. His expert report is the result of extensive examination,

investigation and on-site testing. He gave detailed and comprehensive evidence that I found to be

highly credible. I accept his evidence.

2. Dana Bjornson

[81] Bjornson is a professional engineer registered with the Association of Professional

Engineers and Geoscientists of Alberta (“APEGA”) as well as the Leadership in Energy and

Environmental Design (“LEED”) Rating Systems. She is an engineering graduate from the

University of British Columbia (1994) and holds a Master of Architecture degree from the

University of Oregon (1999). Her curriculum vitae was marked as Exhibit 15.

[82] Bjornson has worked in the field of building envelope engineering for over 30 years. She

has extensive experience in relation to residential and commercial construction projects. She

serves as a member of the Alberta Building Envelope Council (“ABEC”) and is the principal of

Page: 15

her own firm, Optimize Envelope Engineering Ltd. As of the date of her court appearance in this

matter, she had reviewed over 300 building envelopes in the preceding two years. She has

previously given expert evidence in the Provincial Court of Alberta.

[83] The Plaintiffs asked Bjornson to examine the condition of the building envelope,

including if there were any deficiencies or Code deviations. Bjornson submitted an expert report

to the Plaintiffs on April 7, 2017, having inspected the site on July 10, September 8, October 18,

2013, and October 24, 2014: Exhibit 16. Bjornson reviewed the condition of the windows,

exterior doors, stucco, stone, decks, soffits, interior vapour barrier, interior insulation, drainage

systems, and roofing. The deck was also flood-tested on July 10, 2013. She provided an Expert

Rebuttal Report dated September 12, 2017. Her CV was marked as Exhibit 15.

[84] Bjornson was qualified by the Court as an expert in building envelope engineering and

permitted to give opinion evidence in the areas of building code compliance, applicable industry

standards, and best practices relating to the design and construction of building envelopes in

Alberta custom residential construction. She gave very detailed and comprehensive evidence that

I found to be highly credible. I accept her evidence without reservation.

3. Cameron Kraychy

[85] Cameron Paul Kraychy (“Kraychy”) was qualified by the Court as an expert in the field

of general contracting in the context of custom home building. He was qualified to give opinion

evidence on the role of the general contractor and the applicable standard of care in the custom

home building industry in Alberta, and as regards the remediation of custom homes and

renovations.

[86] Kraychy provided an Expert Report dated March 28, 2017 (Exhibit 27) and an Expert

Rebuttal Report dated September 19, 2017 (Exhibit 28).

[87] I found Kraychy’s evidence to be of considerable assistance in relation to a number of

issues. First, he provided the perspective of a seasoned custom home builder on the need to

engage engineering support relative to structural design, including design changes, as well as

structural issues arising during construction. Second, he provided important evidence on the role

of the general contractor on a construction project in terms of overall project oversight and the

effective management of subtrades. Third, he gave evidence as to the appropriate

communications strategy to be employed by a general contractor relative to the customer or

homeowner so as to ensure that they are fully apprised of the progress of the project and, in

particular, problems or issues arising during the project and the proposed strategy to address such

matters. Based on his qualifications and experience, I accept Kraychy’s evidence regarding the

industry standards and best practices applicable to a general contractor working in the custom

home building field.

C. The Defendants’ Expert

[88] The Defendants called Doug Mark Hamman (“Hamman”) and sought to have him

qualified in the following areas:

a) The field application of the requirements of the Code;

b) Field design and construction of structural support systems;

c) Field design and construction of building envelope systems for construction projects;

Page: 16

d) Construction project management, including budgeting, scheduling, trades oversight,

and the inspection of completed work to confirm Code compliance has been met.

[89] The Plaintiffs urged the Court to find that Hamman was not qualified to give expert

evidence and to decline to admit his report into evidence. After hearing extensive argument from

counsel, I qualified Hamman as an expert homebuilder and project manager in the four areas

proposed by the Defendants. However, I declined to allow him to give expert evidence as an

engineer in any of those areas. I also note that Hamman was not qualified to give expert evidence

as either a custom home builder or a remediation expert given his lack of experience in both

domains. Accordingly, Hamman provided no evidence regarding the standard of care applicable

to custom residential homebuilding. Subject to these and other limitations more fully set out

below, Hamman’s Expert Report dated July 17, 2017 was received in evidence (Exhibit 48).

[90] The Plaintiffs urge the Court to approach Hamman’s evidence with great caution,

particularly given his alleged cursory examination of the actual construction project and the fact

that he offered conclusions based on limited visual examination and without the benefit of

destructive testing or comprehensive investigation. The Plaintiffs argue that Hamman’s evidence

should be restricted to the determination of Code compliance and structural components in

residential home construction.

[91] Hamman’s report was based on three visits of approximately 1.5 hours duration each.

Given the size of the residence and the nature and number of alleged deficiencies, I am satisfied

that Hamman’s opportunity to fully inspect the residence was necessarily limited by the time

constraints. Further, his comments and conclusions were based on his observation of pre-exposed

areas of the residence. He conducted no independent testing. This stands in sharp contrast to the

comprehensive investigation undertaken by the Plaintiffs’ experts and Juniper. I would also note

that Hamman’s report is silent on several deficiencies noted by Bjornson, Matthews and Juniper.

[92] Of note, Hamman acknowledged the deficiency of the Defendants’ work in quite a

number of instances. He expressed agreement with many of the conclusions reached by the

Plaintiffs’ experts.

[93] I accept the Plaintiffs’ contention that Hamman’s assessment of the individual

deficiencies was incomplete. A number of the assumptions that form the foundation of some of

his conclusions are not substantiated by the evidence. This and the other constraints previously

identified lead me to place very limited weight on Hamman’s evidence. I do not, however, go so

far as to accept the Plaintiffs’ assertion that the weight to be attributed to Hamman’s evidence is

credibility-based. In my view, the difficulties with Hamman’s evidence are related to the

reliability of that evidence, not to his credibility.

[94] I do not view Hamman’s report as a technical response to the engineering evidence of

either Matthews or Bjornson or a response to the custom home building expertise of Kraychy. In

this regard, I accept the Plaintiffs’ caution as regards the treatment of Hamman’s expert

evidence. As the Plaintiffs properly point out, Hamman’s more limited accepted areas of

expertise place significant restrictions on his ability to challenge or otherwise undermine the

opinions and findings of the Plaintiffs’ engineering expert witnesses. In my view, this is the

natural consequence of the Defendants’ decision not to call engineering experts of their own to

challenge the Plaintiffs’ experts.

Page: 17

[95] Indeed, the Plaintiffs go so far as to suggest that there is essentially no defence to the

deficiencies aspects of the case. While I accept the general thrust of this argument, it is still

necessary to consider carefully the evidence of the engineering experts and Kraychy, and all of

the other evidence in this case, to determine whether the Plaintiffs have satisfied the burden

resting on them to establish the individual alleged deficiencies. I would simply add that

Hamman’s reports and trial testimony have been carefully considered in this process.

[96] The Defendants appear to rely on Hamman’s report as offering to the Court an alternative

remediation work plan reflected in the budgeting exercises that he undertook. He compared his

proposed scope of work with a quote that TGC prepared before remediation efforts were

commenced. The Plaintiffs challenge the weight to be given to Hamman’s comparative

remediation budgets. They say that Hamman’s budgets are unreliable given that his credibility

was impugned and his primary conclusions have been found to either be incorrect or

untrustworthy. As noted above, I do not find that Hamman lacked credibility.

[97] The law does not require the cheapest or most economical solution to effect remediation,

but only that reasonable efforts be made in this regard. Cost is only one factor to be taken into

consideration. The Plaintiffs say that, only three weeks from their anticipated possession date,

their trust in their contractor had been destroyed. While the Defendants argue that the costs

incurred were too high, the Plaintiffs respond that there is no evidence that should cause the

Court to doubt, let alone reject, the investigation results of Bjornson or Matthews, their

remediation recommendations and, ultimately, Juniper’s charges. This issue is more fully

explored later in these Reasons in the section dealing with the calculation of damages.

V. Analysis

[98] This matter raises numerous legal and factual issues.

A. Concurrent Liability in Contract and Tort

[99] The Plaintiffs maintain that a building contractor can be liable concurrently in contract

and tort unless the terms of the contract clearly and expressly limit or exclude liability in tort.

They maintain that the contract in this instance is entirely silent on the issue of limiting or

excluding tort liability. I agree.

[100] The Plaintiffs rely on Vermillion & District Housing Foundation v Binder Construction

Limited, 2017 ABQB 365 at paras 123-25, where the Court explained:

The conduct of a contractor may constitute not only a breach of contract but also

negligence: Heintzman and Goldsmith, at 7-2. Generally speaking, there is a duty

of care owed by a contractor to an owner: University of Regina v Pettick (1991),

90 Sask R 241, 6 CCLT (2d) 1 (CA). What is undertaken by the contract will

indicate the nature of the relationship that gives rise to the common law duty of

care, but the nature and scope of the duty of care that is asserted as the foundation

of the tortious liability does not depend on specific obligations or duties created

by the express terms of the contract – the distinction is between what is to be done

and how it is to be done: Central & Eastern Trust Co v Rafuse, [1986] 2 SCR 147

at 204, [1986] SCJ No 52.

Page: 18

In Fraser-Reid v Droumtsekas, [1980] 1 SCR 720 at 726, [1979] SCJ No 125,

Dickson J. for the majority stated the relevant question as being: “Did the builder

act as a competent and careful builder would have acted in what he did or did not

do?”, citing Batty v Metropolitan Property Realizations Ltd, [1978] 2 All ER 445

(CA) and Dutton v Bognor Regis United Building Co Ltd, [1972] 1 All ER 462

(CA).

An owner may sue a building contractor alternatively or concurrently in contract

and tort, and a contractor who is negligent in the performance of a contract to

build is liable in tort to any person suffering resultant injury to person or property,

unless such liability is limited by the contract: Dominion Chain Co v Eastern

Construction Co (1976), 12 OR (2d) 201, [1976] OJ No 2104 (CA), aff’d without

reference to this point [1978] 2 SCR 1346, Dabous v Zuliani (1976), 12 OR (2d)

230, 1 CPC 48 (CA), Central Trust Co; BG Checo International Ltd. v British

Columbia Hydro & Power Authority, [1993] 1 SCR 12, [1993] SCJ No 1.

[101] Briefly stated, the plaintiff in Vermillion advanced claims for breach of contract and

negligence by a general contractor in the construction of an addition to an existing building. The

contractor ultimately was found to have breached the contract and to have been negligent for

failing to exercise reasonable care and skill in ensuring that the construction was undertaken in

accordance with the accepted standards of a reasonable contractor.

[102] The Court in Vermillion confirmed at para 179 that in breach of contract, “the wronged

plaintiff is entitled to be put in as good a position as he would have been in if there had been

proper performance by the defendant” [citations omitted]. In tort, “[T]he purpose of an award of

damages...is to put the innocent party back into the position as if the tort had not occurred”

[citations omitted]: at para 181. With respect to potential concurrent liability in both contract and

tort, the Court stated at para 183 that “it would seem anomalous to award a different level of

damages for what is essentially the same wrong on the sole basis of the form of action chosen,

though particular circumstances or policy may dictate such a course”.

[103] There is no dispute that Vermillion also stands for the proposition that the contractual

measure is the preferred approach in cases of concurrent liability in both tort and contract: see

para 22. Ultimately, I am satisfied that it makes no practical difference whether a case is assessed

as a tort claim or a contract claim. In both instances, the measure of damages is the same, ie., to

put the plaintiff back in the position they ought to have enjoyed but for the breach of contract or

the breach of a duty of care.

[104] While the overall approach to both liability and damages may be the same under both

contract and tort, contractual liability is limited to the specific contracting parties, in this case

Tru-Square, other than in circumstances involving the lifting of the corporate veil. By contrast,

the Plaintiffs contend that both Tru-Square and Metcalfe can be held liable in tort. The Plaintiffs

argue that Metcalfe can be found personally liable for negligence, as well as fraud.

B. Liability in Contract

[105] To establish liability under contract, the Plaintiffs must prove the existence of an

enforceable agreement, the breach of an obligation(s) under that agreement and a resulting loss

that was foreseeable and not too remote.

Page: 19

1. The Lock-Up Contract

[106] The parties’ Agreed Statement of Facts includes the following statements relating to the

three contracts they signed on August 22, 2011:

a) On August 22, 2011, Tru Square (by Metcalfe) and the Plaintiffs executed an

Alberta New Home Warranty Program (ANHWP) form of agreement valued

at $1,062,348.

b) On August 22, 2011, Tru Square (by Metcalfe) and the Plaintiffs executed two

additional forms of agreement for construction services valued at $1,062,348

and $692,485.50, respectively.

c) Metcalfe typed up and prepared both forms of agreement other than the

ANWHP agreement.

[107] All of these contracts were fixed-price contracts and included a four-stage draw payment

to the Defendants. The first contract (Exhibit 1-C-5) involved construction of the residence to the

lock-up stage (the “Lock-Up Contract”), including stucco and drywall, in the amount of

$692,485.50. It excluded all interior finishes, any stone, any fireplaces and any exterior services.

The homeowner was responsible once the drywall was finished. Work performed by others was

specifically the responsibility of the homeowner.

[108] The Lock-Up Contract refers to the design prepared by Innographic, but states that “the

building spec or design of plan drawings may not always be followed as suggested by

draftsman”. Further, the contract stipulates:

This contract shall replace the contract that covers the entire home but shall have

all the warranty on all work done by Tru-Square Homes Ltd. as covered by the

ANHW program.

[109] The second, unnumbered paragraph of the Lock-Up Contract stipulates the inclusions and

exclusions. Included in the contract price of $692,485.50 are the following:

...foundation (excluding excavation, backfill), framing, windows/doors installed,

overhead doors installed (allowance of $7000 for 3 doors), shingles, acrylic

stucco (all built-outs are extra – includes $5000 allowance for built-outs in price),

eavestrough, plumbing, heating, electrical (including pot lights but not rest of

fixtures), insulation, drywall, concrete finished in basement and garage.

[110] Excluded from the Lock-Up Contract are the following: “any exterior services (water

line, septic, power, gas, road, etc.), any fireplaces, any stone, any interior finishes (except

plumbing, heating and some electrical)”. In another portion of the Lock-Up Contract, the

owner’s responsibility for all interior finishing after drywall, including false beams, is repeated.

Later, it stipulates:

Once the building is completed to the point where the drywall is finished, then the

home owner takes over the overseeing and responsibility of finishing the home

except those that are the responsibility of Tru-Square Homes. All interior

finishing is the responsibility of the homeowner.

[111] Under the heading “Comments or Specs”, the Lock-Up Contract included a term relating

to the construction of the foundation:

Page: 20

Basement has 8” concrete wall, not ICF. Finished ceiling height to be

approximately 9’1”. Concrete to be 25 MPA (type 50) with two rows of 2 (10

mm) rebar in the 9 foot wall and 1 row of 2 rebar in 4’ wall. Footing to have 2

bars in as well. Concrete walls to step down to walkout as grade allows.

[112] The Lock-Up Contract stipulates that Tru-Square is responsible for ensuring that the

residence meets building codes and that it will “strive for high quality”. Trades are to have WCB

coverage or private insurance, while the homeowner is required to have building and liability

insurance. A four-step payment schedule is set out in the final portion of the contract as follows:

1. After completion of the foundation- $110,000.00;

2. Framing complete, including doors/window installed, roof complete, rough in

plumbing, heating, electrical, insulation and vapour barrier installed, concrete

basement poured - $350,575.00;

3. Insulation and drywall complete, heating equipment installed - $130,000,00;

4. Stucco completed, concrete exterior pads, finals on electrical, heating, plumbing,

eavestrough and garage doors installed - $101,910.50.

[113] The second signed contract contemplated construction of the residence to completion for

a total price of $1,062,348.00. This second contract repeats many of the terms set out in the

Lock-Up Contract, including that payments are due “after completion of 4 stages as per ANHWP

contract”.

[114] While this contract provided details as to the construction of the basement, no reference

is made to the type of concrete to be used, unlike the Lock-Up Contract. The second contract

does, however, specify that the basement walls are not ICF. Unlike the Lock-Up Contract, the

cost of excavation and backfill were not excluded from the second contract.

[115] The second contract includes allowances for exterior and interior finishes, namely:

$ 5,000.00

Stucco build outs (installed)

$30,000.00

Stone (installed)

$ 8,000.00

Two fireplaces (installed)

$30,091.00

Finish material (not including cabinets)

$15,000.00

False beams and ceiling timber/beams (installed)

$ 6,000.00

Window/door upgrades

$ 2,000.00

Interior stair upgrades

$27,000.00

Deck covering material with railing (installed)

$10,000.00

Appliance allowance

$33,660.00

Floor coverings (supply and install main floor)

$14,735.00

Floor coverings (supply and install lower level

$54,710.00

Cabinets (supply and install)

Page: 21

$ 2,736.00

$ 5,471.00

$ 3,000.00

Wall tiles (supply and install)

Electrical fixtures (does not include pot lights which is part of electrical)

Steam shower (supply and install)

[116] Finally, the second contract specifies that trades are required to have WCB coverage or

private insurance that meets the standards. The homeowner is stated to be responsible to have

building and liability insurance and is also responsible for the supply of power. Unlike the Lock-

Up Contract, this contract states that Tru-Square belongs to the ANHWP.

[117] Metcalfe brought both of these contracts (1-C-5 and 1-C-6) to the meeting. Both are on

Tru-Square letterhead. The Plaintiffs had never seen the documents before, but reviewed them

briefly and then signed them.

[118] The third form of contract, the pre-printed ANHWP contract, was brought to the meeting

by the Plaintiffs. This contract also covered the construction of the entire residence at a cost of

$1,062,348.00. Unlike either 1-C-5 or 1-C-6, it specified a completion date of June 30, 2012.

[119] While this third contract is stated to be between Craig and Georgina Swanby and Tru-

Square Homes Ltd, it was signed only by Craig Swanby, though both Plaintiffs initialled each

page of the multi-page document. Of note, some of the blanks are filled in with the following

information:

a) Under paragraph (f), the construction section, the following was added: “Custom Plan

from Innographic Design and Drafting (Gordon Snell) with changes as outlined in

Part 2 of contract”;

b) Under paragraph (g), the price of the home was stated to be $1,011,76.00 plus GST of

$50,588.00, for a total contract price of $1,062,348.00.

c) Under paragraph (h), the terms of payment were stated as follows:

(i) 0 deposit;

(ii) 0 upon the removal or satisfaction of Conditions in paragraph 21;

(iii) $169,975.68 on completion and inspection of foundation (16%);

(iv) $350,574.84 upon completion and inspection of ready to drywall (33%);

(v) $276,210.48 upon completion and inspection of drywall complete, heating

installed (26%);

(vi) $265,587.00 being the balance of the total price and interest, if any, on the

completion and possession of the home, whichever occurs first.

d) The purchaser was stated to be responsible for utility connections, building permit,

utility costs, and building/liability insurance (paragraph M);

e) Completion date was stated to be June 30, 2012, though the builder did not guarantee

this date in the event of delays for which the builder may not be responsible

(paragraph N);

f) Under the heading “warranty” (paragraph S), the contract provided:

The Builder agrees to provide the Builder Warranty set forth in

detail in the Warranty Certificate appearing on page 6 of this

Agreement as the minimum requirement on the part of the Builder.

Page: 22

The Builder may provide warranty coverage in addition to the

minimum required in the said warranty and in such event, the

additional warranty coverage shall be contained in an addendum in

writing signed by the Builder and attached to this Agreement.

Additional coverage is provided solely by the Builder and the

Program does not warrant the Home beyond the terms, conditions,

limits and exclusions contained in the Warranty Certificate.

[120] A Single Family Residence Warranty Certificate was attached to the contract.

[121] It seems clear that the detailed quote provided by Metcalfe and dated August 21, 2011,

was in furtherance of the Plaintiffs’ request for information, presumably for their bank, as to the

total cost to complete the project. Metcalfe’s breakdown confirms that at that point in time, the

agreement was for him to build to the lock-up or drywall stage only. The document also includes

a handwritten timeframe for the projected completion of various stages of construction. Of note,

the timeframe indicated that drywall would be completed by the end of February 2012, with

work on the interior to commence on March 1, 2012. The document also confirmed that the

initial quote was for $551,310 and referred to a “new” quote of $659,510, the new quote to

include exterior stucco, a concrete garage pad, entrance pad and deck pad, soffit, facia,

eavestrough, ANHWP fees, and other items.

[122] I am satisfied that at the time of the August 22, 2011 meeting that led to the signing of the

three contracts, the parties had come to an agreement that the Defendants would construct the

home to the lock-up stage only. As such, their agreement was that the Lock-Up Contract (1-C-5)

was to apply. At that time, the Plaintiffs contemplated completing the residence on their own.

2. Was the Lock-Up Contract Amended or Varied?

[123] The parties take very different positions on the question of whether there was an

agreement reached that committed the Defendants either to finish the construction of the

residence or to complete some aspects beyond the lock-up stage.

[124] In Hyslip v Macleod Savings & Credit Union Ltd, [1988] 90 AR 141 (QB), the Court

held that a contract may be varied by agreement. At para 30, the Court stated:

It may be stated as a general principle that the parties to a concluded agreement

may by agreement vary the terms of their concluded agreement, and that such

variation may be by express agreement or may be implied by conduct. An

agreement varying an existing agreement must in itself amount to a valid contract.

To effect a variation the parties must be ad idem in the same sense as for the

formation of a contract, and there must be consideration passing. Where an

agreement is varied it then operates according to the variation, and the original

term or terms cannot be set up by one of the parties against the other. A variation

cannot occur by a unilateral notification by one party to the other, without any

agreement, but if the variation is made unilaterally by one party and accepted by

the other party and there is valid consideration passing a variation of the original

contract can occur.

[125] According to Metcalfe, the agreement to build to the lock-up stage was the only

agreement that was ever reached. However, he also says that the total contract consisted of 1-C-

5, the Lock-Up Contract, as well as portions of 1-C-4, the ANHWP contract relating to warranty

Page: 23

coverage for the work performed by the Defendants. This ignores the fact that 1-C-4 expressly

refers to an agreement to construct the entire residence. The Defendants’ reliance on a portion of

1-C-4 as forming part of their agreement is, in my view, not supported by the evidence. There is

no evidence before me that the parties ever reached a consensus that a portion of 1-C-4, the full

construction contract, was to be included as part of their agreement. However, it is not necessary

for me to resolve this.

[126] The Defendants say that a plain reading of the terms of the Lock-Up Contract reveals that

it “replaced” the full contract. As such, they maintain that the Plaintiffs did not have the option

of making anything other than the Lock-Up Contract the document governing the parties’ legal

relationship.

[127] In my view, the plain meaning of the first paragraph of the Lock-Up Contract is that it

was intended by the parties to replace the full contract. While I accept the Defendants’

contention that it was not open to the Plaintiffs unilaterally to re-activate the earlier agreement, it

was certainly open to the parties to reinstate the earlier contract upon a further agreement to this

effect. Likewise, it was open to the parties to vary the Lock-Up Contract to incorporate some or

all of the terms of the full house contract.

a) The Fall 2011 Amendment

[128] Both Mr. and Ms. Swanby say that, about three-quarters of the way through the framing

process, they concluded that completion of the residence post lock-up stage was beyond their

capability. They decided to ask Metcalfe to complete the project. According to Ms. Swanby, she

had a discussion with Metcalfe while standing close to the doorway of the unfinished kitchen in

which he agreed to build the residence to completion. She did not recall the exact words that he

used, but he verbally agreed to complete the construction of the residence. Ms. Swanby

mentioned to Metcalfe that they already had a signed contract for the completion of the

residence, but he did not respond. The Plaintiffs maintain that the Defendants thereby committed

to completing the residence in accordance with the full price contract signed on August 22, 2011

(Exhibit 1-C-6).

[129] Metcalfe acknowledges that he did have a conversation with Ms. Swanby at some point

regarding him taking on the completion of the residence, but disputed he agreed to finish the

home or to be bound by the full contract, either 1-C-4 or 1-C-6.

[130] I accept Ms. Swanby’s evidence that she had a discussion with Metcalfe in which he

agreed to build the residence to completion. I am satisfied that the parties came to an agreement

in the fall of 2011 to vary the terms of their existing contract. By the terms of this oral

agreement, the Defendants agreed to complete the construction of the residence. As such, the

parties agreed to be bound by the terms of the fixed-price, full contract signed on August 22,

2011, for $1,062,348.00, Exhibit 1-C-6, as constituting an amendment or variation of the Lock-

Up Contract. Under the terms of the revised contract, Metcalfe remained the general contractor.

[131] In their written submissions, the Defendants contend that the Plaintiffs abandoned their

argument that they ever exercised the option to proceed on the full contract. The Defendants say

that this abandonment took place during counsels’ oral submissions at the conclusion of the

evidence. I have carefully reviewed the evidence of both Mr. and Ms. Swanby and am satisfied

that they both testified as to their belief that they reached an agreement with Metcalfe to vary the

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terms of the Lock-Up Contract so as to incorporate the terms of the full house contract. I accept

the assertion of counsel for the Plaintiffs that this argument was never abandoned.

[132] That said, it seems clear that this first variation agreement reached in the fall of 2011 had

limited practical implications for the progress of the project. At the time, the Defendants were

still very much engaged in those aspects of the construction of the residence that formed part of

the Lock-Up Contract. The Plaintiffs maintain that all of the deficiencies claimed in this action

flow from the Defendants’ work to the lock-up stage. As such, the Plaintiffs say that whether or

not the parties subsequently entered into a new contract for the construction of the entire

residence is not material to the resolution of this litigation.

[133] Save for the possible involvement of the stone mason in the leaking windows, I agree

with the Plaintiffs’ contention in this regard. On the evidence before me, it is clear that the terms

of the agreement reached between the parties relative to the completion of the project beyond the

lock-up stage are largely irrelevant to the issue of liability. There is no dispute between the

parties that virtually all of the deficiencies relied upon by the Plaintiffs in this litigation were

items covered by the Lock-Up Contract. While the installation of the exterior stone was not part

of the Lock-Up Contract, its removal was necessitated by the deficient stucco work that clearly

was covered. This is discussed in greater detail later in these Reasons.

b) The May 2012 Amendment

[134] The second amendment alleged by the Plaintiffs is potentially more significant.

[135] The Plaintiffs assert that the full price contract was varied in May 2012. Ms. Swanby’s

evidence was that this new agreement was prompted by the Plaintiffs’ escalating concerns about

the sub-contractors hired by the Defendants to complete the interior work on the residence. As

noted above, when Ms. Swanby raised concerns with respect to the quality of John Metcalfe’s

work, he walked off the job, leaving the Plaintiffs to hire their own tile sub-contractor to re-do it.

Issues also arose with the Defendants’ painting sub-contractor and cabinet supplier. Further,

Metcalfe was unable or unwilling to meet the Plaintiffs’ requests relative to flooring and a

planned staircase. Finally, Ms. Swanby was growing increasingly frustrated by the delays

occasioned by Metcalfe’s frequent absences from the job site and his continuing refusal to assist

in keeping track of the various allowances established for the interior work.

[136] The full price contract included a list Metcalfe had prepared of allowances to complete

the interior finishings. Ms. Swanby understood that the full price contract was a fixed price

contract and that the itemized amounts were Metcalfe’s guidelines as to what could be spent to

complete the interior. When Metcalfe subsequently refused to provide regular budget updates

relating to these allowances, Ms. Swanby turned to Carm to assist her in preparing budgets to

ensure that they knew exactly where they were at relative to each line item. Exhibit 1-I-37 was

the first budget that she developed with Carm when the required information was not

forthcoming from Metcalfe. Exhibit 1-I-20 was a later version of this same budget. These

spreadsheets were created in late 2012 or in early 2013 when bills started to arrive from the

various interior trades.

[137] Ms. Swanby testified that she, Metcalfe and Carm met in May 2012 and arrived at a

verbal agreement under which the Plaintiffs agreed to pay the Defendants either 5% or 10% of

the cost of work completed by subcontractors, depending on whether the subcontractor was

identified and hired by the Plaintiffs or by Metcalfe. It was also agreed that Metcalfe would

Page: 25

receive and process all of the sub-contractors’ invoices and then seek reimbursement from the

Plaintiffs. While the terms of this alleged variation were not reduced to writing, Ms. Swanby

believed that Metcalfe and Tru-Square continued as the general contractor for the project. She

and Mr. Swanby both testified that they believed it was only fair to provide some compensation

to the Defendants for their continuing work on, and oversight of, the full price contract even if

the Plaintiffs hired some of the sub-contractors.

[138] According to Metcalfe, he was approached by Ms. Swanby and Carm in May 2012, just

prior to the completion of the drywall, and told that the Swanbys were unable to sell their other

property and were therefore in a difficult financial situation. Metcalfe asserts Carm asked him if

he would be willing to pay certain invoices with a 5% or 10% mark-up just to assist the Swanbys

for a period of time. Metcalfe agreed. Carm set up a schedule on one of the budgets that added

the 5% or 10% mark-up. Metcalfe says he had no input as to whether he was given 5% or 10%

for the various trades. He insists that he simply agreed to receive and process the invoices of the

sub-trades beyond the lock-up stage. The Defendants strongly dispute that Metcalfe retained any

oversight function for the project beyond the completion of the lock-up stage.

[139] Carm’s evidence on this point was very limited. He confirmed that a meeting took place

with Metcalfe and Ms. Swanby in May 2012, during which they reviewed on an item-by-item

basis the various finishing items and determined whether Metcalfe would receive a mark-up of

5% or 10%. Carm referred to a budget he prepared dated May 21, 2012, Exhibit 1-I-21, which

includes various 5% and 10% mark-ups identified as “Jim’s percentage” or “Jim’s mark-up”.

Carm’s May 15, 2012, budget did not include these mark-ups. A subsequent budget prepared by

Carm dated January 1, 2013, revealed that Metcalfe’s mark-up was reduced to 5% in certain

instances where, according to Carm, Metcalfe was unable to provide the trade for the required

interior work.

[140] Carm was never questioned about Metcalfe’s version of what took place at this meeting,

nor was he asked to confirm his alleged initiation of this discussion or his alleged proposal to

assist the Swanbys through difficult financial circumstances. Metcalfe’s version of events also

was never put to either Mr. or Ms. Swanby during cross-examination.

[141] No arguments were advanced at trial regarding the possible application of the so-called

rule in Browne v Dunn, 6 R 67, 68 (H L 1893), even after the Court invited further written

submissions on the nature of the legal relationship between the parties, if any, beyond the terms

of the Lock-Up Contract.

[142] I accept the evidence of the Plaintiffs. Given the Defendants’ failure to put this key issue

to the Plaintiffs in cross-examination or to their own witness, Carm, in direct examination, and

for other reasons discussed below, I place little weight on Metcalfe’s version of events.

[143] There is no evidence to support Metcalfe’s contention that the cost-plus arrangement

came about because of financial difficulties experienced by the Plaintiffs when they were unable

to sell their other home. To the contrary, the evidence indicates that the Plaintiffs had obtained

full financing from the bank to cover the construction of the entire residence: Exhibit 1-H-22.

Further, Carm testified that he was unaware of any financial difficulties on the part of the

Swanbys. While Mr. Swanby gave evidence about financial strain that arose during the

remediation process that required them to cash in some of their retirement investments, I am

satisfied that this arose much later than the timeframe relied upon by Metcalfe.

Page: 26

[144] The Defendants forcefully assert that they retained no supervisory or oversight

responsibilities beyond the scope of work set out in the Lock-Up Contract. They advance two

arguments to support their position that they were not the general contractor and, as such, not

responsible for the work of the trades involved in the finishing work post lock-up. First, the

Defendants, relying on Carm’s evidence, maintain that Metcalfe’s only role relative to the trades

for which he received a 5% mark-up was to simply pay their invoices. According to the

Defendants, “[I]t is not commercially reasonable that Mr. Metcalfe would not have a role in the

hiring or supervision of these trades but would be responsible for deficiencies in their work”:

Defendants’ Response to Additional Reply Submissions of the Plaintiffs, para 12.

[145] The Defendants called Carm as a witness at trial, which obviously imposed limitations on

their ability to challenge his evidence. Absent an application under the Canada Evidence Act,

RSC 1985, c C-5, or the Alberta Evidence Act, RSA 2000, c A-18, or under the common law, to

have Carm declared an adverse or hostile witness, the Defendants were precluded from cross-

examining him. No such application was made. The Defendants must accept Carm’s evidence as

given.

[146] Carm’s evidence was to the effect that Metcalfe’s responsibilities relative to those trades

identified by the Plaintiffs, and for which Metcalfe was entitled to a 5% mark-up, were limited to

the payment of the invoices submitted by that particular trade. However, when questioned as to

who would be responsible for issues pertaining to the quality of work undertaken by any of the

so-called 5% trades, Carm offered two responses. First, he suggested that he would be

answerable to the Plaintiffs if trades associated with his company, C & S Fine Furniture Ltd,

performed sub-standard or deficient work. Second, he suggested that if another of the 5% trades

performed substandard work, that trade would be called back to correct the problem. Carm also

made it very clear that his role on the project did not include any personal responsibility for any

deficiencies arising from the work of any of the 5% trades. When then asked who would be

responsible to call back the affected trade to correct the matter, he suggested that anyone from

the team could make the call.

[147] I attach very little weight to Carm’s understanding of the chain of responsibility for

performance issues and deficiencies related to the finishing trades. There is no evidence that

Carm is legally trained. He was not qualified as an expert witness to give legal opinions. While

no objection was taken to his responses to hypothetical questions clearly touching on legal

matters, I do not attribute to this aspect of his evidence the significance advanced by the

Defendants. In my view, Carm was merely sharing his views as to his personal sense of

responsibility for trades that he brought to the project either personally or through the Plaintiffs.

As a practical matter, he believed that trades should be called back to correct sub-standard or

deficient work. At the same time, he clearly saw very significant limits on his personal

responsibility insofar as he was quick to point out that he would not bear any personal financial

responsibility in such circumstances. Moreover, Carm was adamant that he was not the general

contractor and that this role was played by Metcalfe from the outset of the project until the

Defendants abandoned it in June 2013. In the result, I am unable to accept Carm’s views as being

in any way determinative of the underlying issue relating to legal responsibility.

[148] In my view, Metcalfe’s evidence that the cost-plus variation of May 2012 was a financial

arrangement only is not credible. It is inconsistent with his continued regular presence on the

job-site, a presence that would not have been required for someone exercising an invoice

payment function only. It is also inconsistent with Carm’s time sheets and the various email

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exchanges between Carm and Metcalfe and others that confirm Metcalfe’s continuing active

involvement in the project. In rejecting this aspect of Metcalfe’s evidence, I reiterate that

Metcalfe’s alleged financing arrangement was never put to either Mr. or Ms. Swanby in cross-

examination. Likewise, it was never put to Carm notwithstanding the key role Metcalfe claimed

he played in the discussion leading to this new financial arrangement. My rejection of Metcalfe’s

evidence on this key issue significantly impacts my overall assessment of his credibility as a

witness in these proceedings.

[149] The Defendants advance a series of arguments regarding Carm’s role throughout the

construction project, but most particularly relative to the finishing trades involved in the post

lock-up phase of the process. Carm identified a number of these trades, including his own

company, C & S Fine Furniture Ltd, which was involved in furnishing and installing much of the

interior cabinetry. Several of the other trades, including the stone mason, Lawrence Masonry,

were identified and hired by the Defendants.

[150] Carm’s role in this construction project is the subject of significant disagreement between

the parties. The Defendants suggest that he played a significantly more active role than simply

the Swanbys’ designer. The Plaintiffs, on the other hand, view the Defendants’ focus on Carm as

nothing more than an attempt to deflect responsibility for the supervision and oversight of the

project away from Metcalfe. In my view, the Plaintiffs’ argument finds support in Metcalfe’s

contradictory evidence regarding his role described earlier in these Reasons.

[151] Carm was hired by the Plaintiffs as their designer and paid $85 per hour for his work

throughout his involvement in the project. He was required to keep track of his time. He did not

have a written contract with the Plaintiffs and there was never a contractual relationship between

him and the Defendants.

[152] I am satisfied that Carm’s involvement in the project created some confusion for

Metcalfe, who testified that he had never worked with a designer before. Metcalfe’s initial email

communication with Carm on August 27, 2011, days after the parties signed the contracts for the

construction of the residence, confirms Metcalfe’s uncertainty about the arrangement: Exhibit 1-

G-23. The final paragraph of the email reads as follows:

I’m sure the clients appreciate your input into their new home and hopefully we

can work together as smoothly as possible so that the owners can get the best

product possible for a reasonable price. I gather this is something neither one has

done before (work together) so we will need to communicate what is happening

as the project continues. I will try to remember to keep you informed on the

progress and schedule but I imagine you will be by regularly to see for yourself

which will be good as you may pick up something that I may have missed that

works toward the finished house.

[153] Carm testified that the Swanbys initially invited him to take on the role of general

contractor, but he declined on the basis that he lacked the required technical knowledge and

experience. According to Carm, he was the designer on the project and, as such, his work

involved design, budgeting and the coordination and scheduling of some of the finishing trades.

[154] Nonetheless, Carm had significant experience in the design process, as well as in the

finishing processes that follow the lock-up stage. The Plaintiffs placed great reliance on his input

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and advice throughout. He acted somewhat as a “go-between” for the Plaintiffs in their dealings

with Metcalfe throughout the construction project.

[155] I am satisfied that part of Metcalfe’s confusion regarding Carm’s role flowed from the

fact that Carm frequently acted as the Plaintiffs’ voice in dealings with Metcalfe and others. This

confusion was compounded by Metcalfe’s significant time away from the job site when

circumstances required Carm to step into the breach during these absences to try to keep the

project rolling. On occasion, when Metcalfe’s travel schedule rendered him difficult or

impossible to contact, Carm filled some of the oversight vacuum created by Metcalfe’s absences

from the site, including relaying messages to and from Metcalfe.

[156] The Defendants cite several examples of circumstances in which Carm is alleged to have

played a key role in the oversight and supervision of the project, particularly after the lock-up

stage was reached. For example, the Defendants suggest that Carm’s email to Metcalfe on

September 19, 2012, makes it clear that he was assuming responsibility for the project with the

result that Metcalfe and Tru-Square cannot be found to have been responsible for the work of the

finishing trades.

[157] Carm’s email (Exhibit 1-I-46) contained a list of fourteen items that he suggested

required Metcalfe’s attention. The heading at the top of the email is “Items I need you to finish

before I take over the project”. At the conclusion of that email, Carm asked Metcalfe to sent out

an email to all of the trades to notify them that “I will be the contact person for the project”. On

September 22, 2012, Metcalfe sent an email to Carm listing the names and contact information

for ten of the trades working on the project. The email read as follows:

Hi Shawn,

Sorry for the delay but have been extremely busy of late.

True Blue Plumbing and Heating – Jason 540-8230

Eagle Electric – Jim 556-9853

Amax Exteriors – Allan 559-4539 (eavestrough, soffit/fascia)

Glen Coulter – drywaller 507-9840

Diamond Fireplace – 273-0000

John Lawrence – 874-3413 – stone

John 561-1270 – tile

Kory 507-3783 – concrete

Lumberding Exteriors 888-8504 (shingles)

M+K Stucco (Merlin) 944-1077

I believe you have any others that I have missed. If not, you can phone my cell (it

is no extra cost as long as I am in the country) or email but I won’t have access all

of the time. Any questions – phone. The other unfinished items will be delt [sic]

with on my return.

[158] Carm sent a further email that same day acknowledging receipt of Metcalfe’s earlier

message and stating: “[T]hank u when are u leaving and when approximately will u be back?

Have a great trip.”

[159] According to Carm, this email exchange took place in the context of Metcalfe’s planned

absence from the province for a period of three weeks, during which there would be periods of

time when he could not be reached via cellphone or email.

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[160] What I take from this email exchange is that Carm was taking over the temporary

supervision of the project during Metcalfe’s absence. On the evidence before me, it is clear that

Metcalfe was regularly away from the job site for personal reasons, including pre-planned

vacations. On occasion, when Metcalfe’s travel schedule rendered him difficult or impossible to

contact, Carm was required to fill some of the gap created by his absence, including contacting

the trades directly. In my view, given the oversight vacuum created by Metcalfe’s frequent

absences from the site, it is not particularly surprising that Carm provided guidance and advice to

the Plaintiffs at various stages of the construction process. This email exchange was situation-

specific and involved Carm covering for Metcalfe during an extended absence from the project.

[161] To the extent that the Defendants are suggesting that this email exchange reflects some

sort of general transfer of the oversight responsibility for the project from Metcalfe to Carm, I

am unable to accept this contention. Carm insisted that it never occurred to him that Metcalfe

was not the general contractor. Further, Carm’s evidence was that he did not instruct any of the

trades on how to perform their functions. He maintained that he was not paid by the Plaintiffs to

supervise the trades. I accept his evidence on all of these points. Metcalfe’s role and legal

responsibilities as general contractor remained unchanged.

[162] As regards the finishing work that took place following lock-up, Carm’s increased

oversight role was, in my view, consistent with his role a designer for the project. However, I

reject any suggestion by the Defendants that Carm was ever the general contractor on the project.

On the evidence before me, I am satisfied that this was Metcalfe’s role throughout.

[163] Metcalfe’s contradictory evidence on this point is, as previously stated, troubling. I am

satisfied that Metcalfe’s failure to properly supervise the project as a result of his personal travel

commitments, together with his focus on his upcoming retirement, are the principal reasons that

he failed to note and address the short-cuts and construction deficiencies of the various sub-

trades that plagued the project to the lock-up stage. While I accept the proposition that it is

important to consider carefully Carm’s role in some of the key decisions taken during the course

of construction, I approach Metcalfe’s evidence in this regard with some considerable

skepticism, particularly his attempts to deflect responsibility to others, notably Carm.

[164] I am satisfied that Metcalfe and Tru-Square remained the general contractor for the

project after agreeing to complete the residence on a cost-plus basis.

3. Breach of Contract

[165] The Plaintiffs led a substantial quantity of evidence highlighting the various deficiencies

that were discovered by experts retained following the Defendants’ refusal to address the leaking

windows and, ultimately, the Defendants’ abandonment of the project. This evidence is set out in

the various expert reports prepared by Bjornson, Matthews, and Kraychy, as well as the evidence

of the Plaintiffs’ remediation contractor, Juniper. In response, the Defendants led evidence

challenging some of the observations and conclusions of the Plaintiffs’ experts and called their

own expert.

[166] The Plaintiffs rely on these specific construction deficiencies in support of their

contention that the Defendants are in breach of contract relative to their construction of the

Plaintiffs’ residence. I will address those deficiencies in detail later in these Reasons.

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C. Liability in Tort

[167] The Plaintiffs contend that the Defendants owed a duty of care based on their contractual

obligation to construct the residence, that they breached that duty of care through the negligent

performance of their contractual obligations, and that the Plaintiffs suffered damage as a result.

[168] The Plaintiffs also say that Metcalfe should be held personally liable for the negligent

construction performance of Tru-Square. Specifically, the Plaintiffs assert that the law provides

that principal individuals may be held personally liable where the work performed is inherently

dangerous or where a principal of the defendant contractor induces a breach of contract.

[169] Metcalfe was aware from his pre-contract discussions with the Plaintiffs that they were

seeking his assistance in the construction of their dream retirement home. Before entering into

the agreement, Metcalfe had occasion to review the Swanbys’ architectural plans and, as such,

was aware of their design specifications. Further, Metcalfe presented himself as a custom home

builder who had at least some experience in building high quality homes.

[170] In their written brief, the Plaintiffs suggest that Tru-Square and Metcalfe were under a

duty of care “to fulfill the contract in the manner expected of a reasonable [sic] competent and

careful custom home builder, having mind to established industry custom and practice.” In this

regard, the Plaintiffs cite Vermillion at para 124, wherein the Court, citing Dickson J (as he then

was) for the majority in Fraser-Reid v Droumtsekas, [1980] 1 SCR 720 at 726, states that the

relevant question is, “[D]id the builder act as a competent and careful builder would have acted

in what he did or did not do?”.

[171] I accept the Plaintiffs’ contention that the scope of the Defendants’ duty of care is

informed by both the terms of the contract and other general principles. In this instance, the

terms of the contract specified that the Defendants were to meet Code requirements and to

“strive for high quality”.

[172] On the expert evidence before me, I am satisfied that the Code represents only the

minimum standards required by law. In this regard, the Plaintiffs cite Holtslag v Alberta, 2006

ABCA 51 at para 35, where Sulyma J (ad hoc) for the Court stated:

The provisions of the Code are technical requirements relating to minimal health

and safety standards and the use of safe and adequate building materials (see para.

10 and excerpt from the Preface to the National Building Code of Canada 1990 in

Part D above). As the respondent submitted, the Code cannot be said to be a

textbook on building design. ...The statute establishes a regulatory scheme for

building products and is intended only as a set of minimum standards for the

benefit of the public at large.

[173] The Plaintiffs maintain that the standards applicable to custom home building are higher

than those prescribed in the Code. Bjornson, Matthews and Kraychy all testified that the Code is

a set of minimum construction standards. The Defence expert, Hamman, confirmed that a

reputable construction manager seeks a higher standard then merely meeting the minimum

requirements in the Code: Evidence of Hamman (Cross), October 15, 2019, at 11:41 a.m.

[174] In her expert report, Bjornson stated that many of the provisions of the Code either are

outdated or have been withdrawn by the Standards Association, and that, for this reason, the

building industry relies on other standards. Her evidence was that the Code’s minimum building

Page: 31

standards typically lag behind practices and standards generally applicable to the construction of

custom-build luxury homes: Evidence of Bjornson (Direct) – April 22, 2019 (am). As more fully

discussed later in these Reasons, she expressed the view that in relation to roofing, the Alberta

Roofing Contractors Association (“ARCA”) Roofing Application Standards Manual is the

accepted standard for roofing installation purposes, not the Code’s “extremely outdated”

provisions.

[175] Kraychy stated that Metcalfe placed undue reliance on the minimum requirements of the

Code. Given that Metcalfe was hired to build a custom, luxury home, Kraychy maintained that

the Code’s minimum standards did not reflect the required accepted standard. He provided

particulars as to some of the attributes and duties of a reasonably competent and careful custom

home builder, including:

a) Providing advice and assistance to clients relative to project budgeting;

b) On-going communication with clients to ensure they are aware of changes,

problems and delays in construction;

c) Working with clients to resolve issue or problems arising during the course of

construction so as to ensure that clients are properly informed of the status of

the project. In this regard, the custom home builder is required to offer

solutions to problems or issues that may arise without compromising overall

building performance;

d) Oversight of design and shop drawings to ascertain changes, either required or

made, and consulting engineering professionals as required to ensure

satisfactory building performance. Changes to the designed structural

foundation or framing elements require the custom home builder to seek the

advice and direction of engineering professionals;

e) Oversight of sub-contractors to ensure work quality.

Evidence of Kraychy (Direct) – April 25, 2019 (10:45 am – 12:20 pm).

[176] As regards to his responsibility for the material and labours supplied by his sub-

contractors, Metcalfe acknowledged that “My contractors are my responsibility”: Exhibit 29 at

84:9-12. Hamman described the general contractor’s responsibility for his sub-contractors in the

following terms: “if I’ve hired trades, they are me”: Evidence of Hamman (Cross), October 18,

2019, 2:15 p.m.

[177] As noted above, the Plaintiffs rely on construction deficiencies in support of their

contention that the Defendants are in breach of contract relative to their construction of the

Plaintiffs’ residence. The Plaintiffs rely on these same deficiencies as supporting their claim that

the Defendants breached their duty of care and are, as such, also liable in tort.

D. The Deficiencies

[178] Before turning to consider whether or not there was a breach of this contract and, if so,

whether the Plaintiffs sustained damages as a result of the breach, I would note that the decision

in Vermillion confirms that there are implied terms in every building contract. At para 122, the

Court held:

Page: 32

Unless the contract or the circumstances indicate otherwise, the contract will

contain an implied term that the work will be done in good and workmanlike

manner, the workmen employed on the work will possess the ordinary skill of

those exercising the particular trade, and the materials will be of good quality and

reasonably fit for the purpose for which they are used: Heintzman and Goldsmith

at 4-50. In G Ford Homes Ltd v Draft Masonary (York) Co (1983), 43 OR (2d)

401, 1 DLR (4^th) 262 (CA), Cory J., as he then was, observed that a contractor

undertaking to do work implicitly undertakes that it will be undertaken with care

and skill and in a workmanlike manner and will be reasonably fit for the purpose

for which is it required, unless the circumstances of the contract exclude such

liability.

[179] As previously stated, the Plaintiffs led a substantial quantity of evidence highlighting the

various construction deficiencies. I turn now to reviewing that evidence in detail.

1. The Foundation

[180] The Plaintiffs contend that the Defendants failed to meet the appropriate standard of care

as a general contractor in the custom home trade when they failed to engage an engineer

regarding the change to architectural design drawings relative to the foundation. Specifically, the

Defendants elected to pour a traditional foundation, rather than the ICF foundation specified in

the drawings.

[181] There is no dispute that an ICF foundation consists of the standard 8-inch wide poured

concrete wall supplemented by rebar reinforced polystyrene forms that remain in place. In a

traditional foundation, the temporary forms are removed after the concrete has cured.

[182] I accept Kraychy’s evidence that this change should have been reviewed and approved by

an engineer to ensure that it did not impact on other structural elements of the construction.

According to Kraychy, Metcalfe should have obtained the proper engineered drawing for the

new foundation. Similarly, he needed to make sure that the consulting engineer contacted

ZyTech to discuss the implications, if any, of using a different type of foundation on the overall

planned framing structure for the residence. I am satisfied that Metcalfe failed to take any of

these steps.

[183] While I note that Metcalfe was insistent that the change in the type of foundation

employed in this instance had no impact in terms of the dimensions of the perimeter walls, I am

satisfied that it represented a sufficiently significant deviation from the original plan as to

warrant expert review. In a November 19, 2012 email to the Plaintiffs, Metcalfe apologized for

the quality of the framing, noting: “I really appreciate how patient and understanding you have

been during the building process and am sorry that the framing wasn’t done as well as it should

have been which has caused us some problems especially in the bathrooms”: Exhibit 1-G-23, p

83. It is not clear whether or not these framing issues were related to the wall overhang relative

to the foundation.

[184] In his written report, Matthews noted the lack of vertical alignment of wood framed walls

supported on foundation walls at the east elevation of the residence. Specifically, he noted (at p

5) that “the bottom plate of the stud wall supported at grade level was projecting significantly

beyond the face of the foundation wall, and vertical support for the wall was compromised”. By

way of remediation, he noted that the thickness of the concrete foundation wall was increased to

Page: 33

provide support for the full thickness of the supporting wall (at p 5). He also noted (at p 6) that

the “substitution for ICF with conventional formwork has potentially significant structural

impacts”.

[185] The Defence expert, Hamman, expressed the view that the wall overhang was Code-

compliant and, as such, acceptable. He recognized, however, that the overhang would have to be

addressed in subsequent framing steps. Matthews, on the other hand, felt that the as-built

condition was not satisfactory. He conceded that the situation was Code-compliant, but asserted

that it did not satisfy industry standards. Both Matthews and Kraychy believed that the change

from the ICF to traditional foundation was a likely cause of the wall misalignment.

[186] In my view, the remediation recommended by Matthews was a reasonable response to the

concern relative to the vertical support available to the wall.

[187] In final argument, counsel for the Defendants suggested that Juniper’s evidence was to

the effect that this recommended repair was never actually made. Assuming that to be the case,

then Juniper obviously did not bill the Swanbys for this work.

[188] Bjornson also raised issues with respect to waterproofing and damp-proofing relative to

the foundation. In her report, and confirmed in her rebuttal report, Bjornson observed that

waterproofing and damp-proofing did not meet s 9.13.2.4.(2) of the Code, which required that

holes in dampproofed concrete walls be sealed off with cement mortar or damp-proofing

material. No treatment to the concrete ties at the foundation damp-proofing was observed on the

SE elevation, contrary to s 9.13.2.4.(2). Bjornson also suggested that best practice is to include a

drainage mat installed to the foundation perimeter, as per s 9.14.5.1 of the Code.

[189] The Defendants challenge certain aspects of Bjornson’s evidence in this regard, notably

her conflicting evidence as to whether or not the absence of a drainage mat amounts to a Code

violation. The Defendants also question the extent of the absence of damp-proofing observed by

Bjornson, though I note that the Hamman made no observations in this regard. In accepting the

evidence of Bjornson on this latter point, I note that there is no evidence that the Plaintiffs took

any steps to address this issue during the remediation process. Accordingly, it is not strictly

necessary for me to make any specific findings in this regard.

2. The Leaking Windows

[190] Ms. Swanby first became aware of the leaking windows on May 23, 2013. She observed

water pooling by the great room window on the main floor. Water was also present half-way

across the 800 square foot Bonus Room above the garage, as well as in the doorway above the

downstairs bedroom and leaking into the basement. As described earlier in these Reasons,

Metcalfe was immediately alerted to the situation by Ms. Swanby, but took several days to attend

the job site. He denied responsibility for the problem and failed to take any steps to assist the

Plaintiffs in the assessment or remediation of the problem.

[191] When Snyder attended the residence to inspect the leaking windows, he was provided

with a copy of recessed window installation detail that Carm had given to Metcalfe as an

example of this type of installation, Exhibit 1-A-4. He conducted a detailed examination of some

of the leaking windows. After removing the stone sill, Snyder determined that a lot of the details

set out in the drawing, Exhibit 1-A-4, had not been followed. Specifically, he referred to the fact

that there was no weeping rope and no foam rod and sealant. He also determined that some of the

laps (waterproofing) had not been installed properly. Further, Snyder noted that the metal

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flashing at the bottom of the window was bent upward “a little bit” by the stone sill. He noticed

that the bottom flashings on other windows were also slightly bent.

[192] While on site, Metcalfe suggested to Snyder that the impact of the stone sill pushing up

the metal flashing was the cause of water entering the residence. Snyder disagreed with this

suggestion, observing that if the window had been properly sealed, the fact that the flashing was

somewhat bent would not result in water leaking into the residence.

[193] Snyder subsequently issued a report, Exhibit 1-D-5, in which he concluded:

Upon inspection of the windows (Master bedroom & Bonus room) we noted that

the window was not completed as per drawing specifications due to water pooling

behind the stone Lintel. We did not observe weeping ropes or tubes used to drain

access water from the windows in question. It is also noted the drip flashing was

bent on a reverse grade towards the window with no foam rod and sealant

observed throughout. These issues created the water to pool behind the lentil [sic]

and break the window wrap therefore allowing water to penetrate the wall.

[194] In terms of corrective actions, Snyder’s report recommended the following:

Stone to be removed as needed and lintel lowered to accommodate drip flashings

installation as per drawing details. (Positive slope, Foam Rod and Sealant).

After stone (as needed) is removed verify building wrap installation is as per

drawing details and correct if necessary, before reinstalling stone.

Weeping ropes/tubes to be installed under lentil [sic] as per drawing details.

[195] Snyder provided a quote to repair the windows (Exhibit 1-I-22) in the amount of

$11,530.00, inclusive of GST.

[196] Water damage was observed by Bjornson at all main floor windows on the rear elevation

of the residence and below the windows of the Bonus Room above the garage. Bjornson found

that this water damage was consistent with the Swanbys’ reports of water leakage. In her report,

Bjornson noted that there were water stains visible on the floor above the garage, under the

windows at the back of the house, and in the master bathroom area. In conjunction with her

investigation, Bjornson conducted flood testing by applying a light spray of water via hose onto

the exterior of various windows. Flood testing on the second story window above the garage

showed water entering the window sill at two locations within minutes.

[197] The Plaintiffs maintain, relying on Bjornson’s expert opinion, that the windows were

improperly installed by the Defendants, and that this improper installation gave rise to the

ensuing leaks. The Plaintiffs contend that the window leaks were not the result of deficient or

problematic design issues, as alleged by the Defendants, but rather the improper installation

undertaken personally by Metcalfe and the framer. The Plaintiffs point to the fact that Metcalfe

was personally responsible for the application of the peel-and-stick membrane associated with

the required creation of a continuous moisture barrier, during the window installation.

[198] The Defendants advance several different arguments in their denial of any responsibility

for the leaking windows. First, they suggest that the stone mason, John Lawrence, damaged the

installed window assembly when installing the sill stones. According to the Defendants,

Metcalfe’s role was complete by that point in time as the installation of the stone occurred well

after the lock-up stage had been reached. Second, the Defendants seek to attribute to Carm a

Page: 35

good deal of the responsibility for the leaking windows on the basis that he initiated this change

from the original design and provided the design detail to complete the recessed installation.

Third, the Defendants say that Metcalfe warned Ms. Swanby and Carm that the recessed

windows were a bad idea and that he would not provide a warranty that they would not leak.

According to the Defendants, McEwen also warned Carm about the recessed installation.

Finally, the Defendants challenge the Plaintiffs’ decision to replace all the windows, rather than

effecting the repairs proposed by Snyder.

[199] There is conflicting evidence relating to the installation of recessed, as opposed to flush-

mount, windows and doors. It is common ground that the original design called for flush-

mounted windows. I accept Ms. Swanby’s evidence that, following the signing of the contract,

Carm proposed, and the Swanbys agreed to, a change in the design to recessed installation of the

windows. Carm provided Metcalfe with a drawing used on a previous project to help explain the

concept, specifically the framing and installation requirements, as Metcalfe was confused by the

specifications. Carrm also provided Metcalfe with some photographs illustrating this earlier

installation, though these photographs are not in evidence. Metcalfe advised Ms. Swanby that he

had never previously undertaken such an installation and was not sure that it would work. The

framer, McEwen, was also unfamiliar with this type of window installation and was “leery”

about this specification.

[200] Metcalfe’s evidence was that he believed from the outset that the recessed design was a

mistake. McEwen testified that he told both Metcalfe and Carm that he did not think that the

recessed windows were a good idea given his belief that they would leak. According to McEwen,

Carm assured him that he had figured out the recessed installation. Ultimately, McEwen agreed

to install the recessed windows, but told Metcalfe and Carm that he would not guarantee that the

windows would not leak. McEwen had no recollection of ever speaking to the Plaintiffs about

the recessed windows and doors.

[201] According to Carm, neither Metcalfe nor McEwen ever expressed any concerns to him

regarding the recessed installation specification. He maintained that Metcalfe or McEwan could

have easily indicated their reluctance or unwillingness to install the windows in this fashion but

did not do so. In this regard, I note that Metcalfe refused to undertake the project if the Plaintiffs

insisted on the use of an ICF foundation as specified in the design drawings. Whatever hesitation

or reluctance Metcalfe may have had about the recessed installation of the windows, there is no

dispute that he went ahead and installed the windows in that fashion and subsequently billed the

Plaintiffs for recessed windows.

[202] I approach McEwen’s evidence with some caution. His evidence contained repeated

references to “I would have” or “I would not have” without certainty as to what he actually did in

this instance. For example, he seemed uncertain as to whether there was a building permit for the

project. At one point, he indicated that he was not sure, but later gave evidence regarding the

permit being a one-page document. Overall, he seemed to have a limited recollection of what

actually took place in this instance.

[203] I accept Carm’s evidence that Metcalfe was confused by the specification, and that this

was the reason that he provided a drawing used on an earlier project, together with some

photographs. Significantly, the drawing Carm provided included disclaimers that the drawing

was for design purposes only and that the responsibility for proper installation of the windows

lay with the contractor. Carm also gave evidence that he met with Metcalfe on several occasions

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to discuss the recessed window installation and, specifically, the special framing requirements to

accommodate the stone returns around the recessed windows and doors.

[204] After the windows had been installed, Metcalfe presented Ms. Swanby with the invoice

covering the window installation and advised her verbally that he would not cover the warranty

on the windows. In his testimony, Metcalfe conceded that he did not disclaim any warranty on

the installation of the windows until he issued Invoice 118 on September 1, 2012, well after the

windows had been installed: Exhibit 1-C-11. The invoice contains the following language:

Peel and stick, chaulking (sic), extra lumber and personal labor for framing to

recess doors and windows (does not include extra labor from framer) As this does

not meet building code warranty is void in regards to any moisture entering

building (emphasis added).

[205] Metcalfe’s disclaimer makes no reference to any specific provision of the Code. In cross-

examination, Metcalfe conceded that he made no investigation to determine whether or not the

recessed installation was Code compliant or not.

[206] In my view, Metcalfe’s disclaimer of responsibility for the installation of the recessed

windows came too late to relieve him and Tru-Square of responsibility for any deficiency arising

from the installation of the windows. Under the circumstances, Metcalfe should have either

refused to install the recessed windows, as he refused to utilize the ICF foundation, or sought

written instructions from the Plaintiffs to proceed with the recessed installation at the Plaintiffs’

sole risk.

[207] The Defendants seek to buttress their denial of responsibility for the leaking windows on

a number of other grounds. First, they point to the fact that the Plaintiffs ultimately elected not to

reinstall the windows in a recessed configuration given Juniper’s advice that he would not

warranty windows installed in this fashion. Bjornson also expressed concerns relating to some of

the details associated with the original plan set out in Exhibit 1-A-4 and recommended to the

Plaintiffs that they flush-mount the reinstalled windows.

[208] While Bjornson had reservations about some of the details of the design, she expressed

the view that it was “not unexecutable.” She also indicated that the recessed windows should

have had a design detail specifically prepared for this house, saying “It is a difficult design, but it

can be achieved.”

[209] I am not persuaded that the after-the-fact views of either Juniper or Bjornson in this

regard are of any assistance to the Defendants. The fact that the Plaintiffs followed the strong

recommendation not to reinstall the windows and doors in a recessed fashion during the

remediation process does not change the fact that Metcalfe installed the windows without ever

providing a similar strong recommendation.

[210] The Defendants also rely on the terms of their agreement with the Plaintiffs to construct

only to the lock-up stage. In particular, the Defendants cite the provision of the contract, Exhibit

1-C-5, that specifically excluded the exterior stonework. As such, the Defendants say that they

are not responsible for the work of Lawrence, the stone mason. According to the Defendants,

Lawrence bent the window flashings while installing the stone sills underneath the windows,

thereby causing the windows to leak.

[211] Lawrence was called as a defence witness and gave evidence with respect to the leaking

windows. He testified that he had no experience installing stone sills where the windows were

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recessed. He could not recall if he was provided with a copy of Exhibit 1-A-4, the recessed

window detail that Carm provided to Metcalfe.

[212] There is no evidence before me as to any specific discussions between Lawrence and

Metcalfe regarding the special requirements of the recessed window installations. According to

Carm, Metcalfe was on site frequently during the time that Lawrence was engaged in the

installation of the stone veneer to the exterior of the residence. As such, Carm assumed that they

must have had discussions, though Carm claimed that he was not a party to any such discussions.

[213] Lawrence had some difficulty installing some of the stone stills so that they would fit

under the windows. Some of the stones had to be made thinner to fit. He also indicated that some

of the flashings “got pushed up a bit”, but that it was “OK” and he did not feel that it was a big

issue. In response to the question whether he had any concerns about the windows leaking,

Lawrence responded (May 14, 2019 (Direct), 11:24 a.m.):

Q

Did you have any concerns about the window openings

leaking?

A

Well, I had never seen a design like that, and to me it’s

creating a trap, looking at the design.

Q

A

Q

A

Q

A

What do you mean when you say creating a trap?

Well it’s creating a spot for water to pool.

And where would it pool?

At the sills.

At the sill where the sill meets the house?

Yeah.

[214] Lawrence confirmed his familiarity with weeping ropes and tubes but explained that

weep holes and ropes are not installed in a closed system like the one he was dealing with at the

Swanby residence.

[215] The Code is silent on the installation of windows but requires at section 9.27.1.1 that no

precipitation penetrate the interior of the building:

Minimizing and Prevent Ingress and Damage

1) Except where exterior walls are protected from precipitation or where it can be

shown that precipitation ingress will not adversely affect occupant health or

safety, exterior walls shall be designed and constructed to

a) Minimize the ingress of precipitation into the assembly; and

b) Prevent the ingress of precipitation into interior space.

[216] According to Bjornson, the discontinuous moisture membrane and holes around the

windows allowed water to enter under the window framing and enter the building around the

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rough opening. Bjornson concluded that the breaks in the moisture barrier below the windows

caused the leaks and led to the long-term damage to the interior components and the potential for

fungal growth. I accept her evidence that the deficiencies were related to installation issues and

not design issues. She maintained that if the windows had been properly installed, “they were not

likely to leak”: Evidence of Bjornson, Re-Direct, April 24, 2019, 4:29 p.m.

[217] Notwithstanding that the working drawings for the installation of the windows called for

the use of sealant, a minimal sill flashing was installed at the base of the windows with an

inadequate slope and no sealant. Moisture was directed along the window flashing, contrary to s

9.7.4.2 of the Code, which requires the application of caulking to prevent the entry of water into

the structure.

[218] At the base of the windows, a minimal sill flashing was installed with an inadequate slope

and no sealant, despite sealant use being indicated on the window installation drawings. Moisture

was directed along the window flashing, contrary to the Code requirements in section 9.7.4.2:

Caulking Compound

1) Caulking shall be provided between window frames or trim and the exterior

siding or masonry in compliance with Subsection 9.27.4.

9.27.4.1 Required Caulking

1) Caulking shall be provided where required to prevent the entry of water into

the structure.

2) Caulking shall be provided between masonry, siding or stucco and the

adjacent door and window frames or trim, including sills, unless such

locations are completely protected from the entry of rain.

[219] Batt insulation was installed between the window frame and rough opening. While this

installation did not violate the Code, Bjornson expressed the view that it is inconsistent with best

practices. As such, she pointed to the 2014 Code at section 9.7.6.1.13: “Windows, doors, and

skylights shall be sealed to air and vapour barriers.” According to Bjornson, this change to the

Code represents formal acknowledgement of a best practice. She recommended that spray foam

be applied consistently to the full depth instead of having a discontinuous barrier.

[220] Hamman confirmed that the window installation was not Code-compliant. Specifically,

he found that the rough openings were not properly framed, leading to water being directed into

the building.

[221] According to Juniper, all but four or five of the windows had to be replaced. All the main

floor windows showed signs of leakage. I accept Bjornson’s evidence that the window

installation did not satisfy Code or industry standards or best practices. Based on the evidence

before me, it seems clear that several factors contributed to the leaking windows, including:

a) The windows’ rough openings were improperly framed such that the sill stone

directed water towards the building, rather than away from the structure;

b) The required peel and stick membrane was not installed properly so as to interrupt the

continuity of the seal and to direct moisture towards the interior;

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c) There was no back dam at the interior side of the framing at the rear of the window

cavity. Sloping the window framing or installing a shim would have met this

requirement;

d) The flashings were bent and flat, as opposed to having a 6% minimum slope. There

were no flashings between the stucco and the stone on the horizontal cladding

transitions. Similarly, there were no end dams on any of the flashings;

e) As installed, the windows did not accord with the specifications in the building

drawings. Specifically, there was no weeping rope and no rain screen fabric installed

behind the stone veneer. Likewise, there was a mix of foam and batt installation

around the windows when the drawings called for foam only.

[222] I am satisfied that the windows were improperly framed and installed by the Defendants

and their framer, and that this improper installation led to the various leaks. Bjornson and

Hamman agreed that the rough openings for the windows had been improperly framed.

Moreover, Metcalfe was fully aware of the special framing requirements associated with the

recessed installation, including the space required to accommodate the stone returns. Bjornson

also identified a series of additional installation deficiencies that compounded the framing

problems.

[223] I do not accept the Defendants’ contention that the leaking windows were entirely the

result of Lawrence’s installation of the stone sills that pushed up and bent the previously

installed metal flashings. Snyder rejected Metcalfe’s assertion that this was the cause of water

entering the residence. Having carefully considered the detailed evidence adduced at trial on this

issue, I find that the slightly bent flashings were not a factor contributing to the leaking windows.

While bent flashings were clearly not a “best practice”, the underlying cause of the window leaks

was entirely the result of improper installation, including improper framing of the rough

openings for the windows.

[224] Regardless of Metcalfe’s role post lock-up, I am satisfied that he had a responsibility to

take reasonable steps to ensure the integrity of the window installations that clearly formed part

of the Lock-Up Contract. This responsibility included collaborating with Lawrence on the

installation of the doors and windows. Metcalfe’s lack of experience with the installation of

recessed windows and doors should have heightened his diligence in ensuring that Lawrence was

fully aware, and fully understood, the special requirements for this somewhat unique feature. I

am satisfied that Metcalfe failed to take these steps.

[225] Lawrence was one of the Defendants’ trades, hired by the Defendants to complete the

stonework on the exterior of the residence. I am satisfied that the Defendants were responsible

for at least this aspect of Lawrence’s work on the project, either as the general contractor or as a

project coordinator with some oversight responsibilities for the project. I am satisfied that these

oversight responsibilities at the very least included the obligation to work collaboratively with

Lawrence on a very complex window installation that had been largely completed under the

terms of the lock-up contract.

[226] The Swanbys accepted Bjornson’s advice not to re-install recessed windows. In addition,

Juniper told Ms. Swanby that he would not warranty the labour on the installation of the new

windows if the recessed design was retained. He gave evidence that he believed that the design

of the recessed windows was “poor” and that there were lots of avenues available for the

Page: 40

windows to fail. The flush-mount reinstallation involved some additional framing costs, but such

costs were considerably less than the anticipated costs associated with a recessed re-installation

and, overall, a less costly repair option.

[227] Bjornson recommended replacement of the windows. Her inspection of the removed

windows revealed residual foam and sealant, damaged frames, and broken flanges. She also

noted that the operation of some of the windows appeared to be difficult. Further, her

understanding was that the manufacturer’s product warranty was likely voided once the windows

were removed. She acknowledged that it might be possible to re-use the windows in certain

circumstances, but that the contractor would have to be confident in accepting responsibility for

the used product.

[228] Juniper explained that when a window is removed, it is no longer a “new” window. A re-

installed window would no longer be covered by the manufacturer’s warranty, though the labour

would be covered by warranty. Juniper testified that 4 or 5 windows in the home were found to

have no issue and were never removed or replaced.

[229] Hamman confirmed that a contractor would warranty the re-installation of windows only

if it was certain that they were in proper condition. He said his experience suggested that the

windows could be reinstalled without affecting the manufacturer’s warranty if care is taken not

to damage them during the removal process. In his written report, Hamman recommended that

the windows be re-used following the Code method of lapped blueskin. During his testimony, he

acknowledged that the Code does not refer to such a method, but stated nonetheless that it was

best practice. He acknowledged that his expert report was in error in this regard.

[230] Hamman acknowledged that he did not have an opportunity to inspect the windows after

they had been removed. In cross-examination, he conceded that, to the extent that Bjornson’s

conclusions regarding the condition of the windows was correct, they would need to be replaced.

He did not factor window replacement in his suggested remediation budget.

[231] I am satisfied that the Plaintiffs’ decision to replace the windows was reasonable under

the circumstances. In my view, the level of confidence required for a contractor to re-install and

provide a warranty for the used windows was missing in this instance. I am also satisfied that the

manufacturer’s product warranty would have been voided due to damage on removal.

[232] The Plaintiffs spent approximately $31,000 to replace all of the windows, save for the

four or five windows that were determined not to require replacement and the decision to

eliminate one of the windows that had been removed. I am satisfied that this was a reasonable

expenditure under the circumstances.

3. Bonus Room

[233] The Plaintiffs maintain that there were several construction deficiencies relating to the

Bonus Room, a large room located above the garage.

a) Roof

[234] During the course of their investigative work, the Plaintiffs determined that the roof

trusses in the Bonus Room were cut and not properly connected to the ridge beam. A number of

trusses were also found to be oriented on their weak axes. Further, the 34-foot long steel I-beam

was found to lack proper connection to the outside walls.

Page: 41

[235] In his report (at p 10), Matthews expressed the following concerns with respect to the

Bonus Room roof:

a) Lack of connection of steel ridge beam to supports;

b) Structural inadequacy of support header above windows at east and west walls;

c) Absence of hangers at trusses at numerous locations;

d) Non-approved field-modification of trusses by cutting;

e) Missing nails in hangers;

f) Lack of fit of trusses evidenced by trussed not fully seated at hangers;

g) Split wood components due to nailing;

h) Absence of nails at dimensional lumber components at truss support detail at walls.

[236] In his evidence, Metcalfe acknowledged that he was personally involved in some of the

framing in the Bonus Room. He maintained that that there were no cuts or other modifications to

the trusses supplied by Zytech. He also stated that the I-beam was well secured and that he was

satisfied that it had been wedged into position in such a fashion that it was not likely to move.

Further, to the best of his knowledge, Metcalfe believed that the hangers supplied by Zytech had

been installed. Finally, he challenged one of the photographs presented to him as even being a

truss, “guessing” that it had been cut during the process of de-construction.

[237] I accept Matthews’ evidence that the roof system in the bonus room was significantly

compromised as a result of the structural irregularities he noted in his report and related in his

evidence. Specifically, he testified that good practice requires proper connection of the trusses to

the ridge beam. Similarly, good practice dictates that truss members should not lie on their weak

axis and should not be modified on site. In this regard, he observed that the roof is a critical

structure, the failure of which poses significant safety risks to the occupants of the residence.

Hamman conceded that the roof in the Bonus Room lacked some connection details and required

additional blocking.

[238] According to Matthews’ report (at p 10), “extensive remedial structural work was carried

out to address the numerous deficiencies observed.” Matthews prepared detailed drawings

illustrating remediation details, Exhibit 1-A-7, including SK-C, a drawing detailing the required

Bonus Room truss support, and SK-D, the required Bonus Room truss support cradle.

b) Floor

[239] According to Juniper, the Bonus Room floor was missing at least some of the blocking

between the floor joists stipulated in the Zytech drawings. In addition, Juniper testified that a

portion of the tongue and groove sub-floor had been cut out in the area near the windows. He

also observed that there was a floor joist missing.

[240] Metcalfe and McEwen both testified that blocking was installed but referenced a Zytech

drawing that indicated blocking was not required. In support of their contention in this regard,

they produced Exhibit 38, a drawing that appears to be an enlargement of a portion of the

complete Zytech drawing, Exhibit 1-A-9. Metcalfe’s evidence was that he did not notice that a

floor joist was missing.

[241] I accept Juniper’s evidence that the complete Zytech drawing for the Bonus Room

included a requirement for blocking. The fact that Metcalfe and McEwen included some

blocking strongly suggests that this was always a structural requirement. No satisfactory

Page: 42

explanation was ever provided as to how Exhibit #38 came into existence or that it was actually

relied upon by the Defendants.

[242] The recommended remediation involved installation of a new sub-floor, the requisite

blocking identified in the Zytech drawing (Exhibit 1-I-35, p 18, top photograph) and installation

of the missing floor joist.

[243] Under the circumstances, I am satisfied that the remediation work effected by the

Plaintiffs in this regard was both reasonable and appropriate.

c) Insulation and Ventilation

[244] In the vaulted areas of the attic, Bjornson reported that the thickness and installation

method of insulation blocked the soffits, thus preventing effective cross-ventilation between truss

cavities. She stated that this amounted to a violation of the Code.

[245] During his investigation, Juniper removed some of the drywall in the Bonus Room

ceiling and determined that the insulation batts were touching the plywood roof sheeting such

that there was no room for air to circulate between the roof and the insulation.

[246] The roof and attic ventilation requirements are outlined at section 9.19.1.2.(3) and section

9.25.2.4(6) of the Code:

9.19.1.2 Vent Requirements

3) Required vents may be roof type, eave type, gable-end type or any combination

thereof, and shall be distributed

a) Uniformly on opposite sides of the building;

b) With not less than 25% of the required opening located at the top of the

space, and

c) With no less than 25% of the required openings located at the bottom of

the space...

9.25.2.4 Installation of Loose-Fill Insulation

6) Where soffit venting is used, measure shall be taken

a) To prevent loose-fill insulation from blocking the soffit vents and to

maintain an open path for circulation of air from the vents into the attic or

roof space, and

b) To minimize airflow into the insulation near the soffit vents to maintain

thermal performance of the material.

[247] According to Bjornson, the ventilation in the Bonus Room was not compliant with the

Code, in that the insulation prevented proper air flow as it was installed too close to the roof

sheathing. In addition, there were no continuous ridge vents. Further, the vents were not properly

connected. Specifically, the Code required two-inch to three-inch spaces between the cavities,

whereas the as-built state involved only one to one-half inch space between cavities.

[248] Hamman did not inspect the attic space of the Bonus Room. The Defendants made no

observations about the ventilation space at the trusses, though they pointed to the fact that there

was a four-inch space on top of the insulation allowing for ventilation. Nevertheless, Bjornson

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expressed the view that four-inch spaces in the individual cavities were insufficient for the

purposes of cross-ventilation.

[249] At Bjornson’s direction, Juniper installed Styrofoam baffles next to the roof sheeting and

then insulation batts in order to create sufficient room for air to circulate between the insulation

and the roof. In order to increase the R factor to R-40, Bjornson also directed Juniper to apply

spray insulation over the insulating batts. He estimated that spray insulation is approximately

twice the cost of insulation batts, but noted that there was insufficient room in the cavity to

accommodate R-40 batt insulation and, further, that no plastic vapour barrier was required when

using spray insulation.

[250] I accept the evidence of Bjornson and Juniper as regards these deficiencies and the

necessary remediation. While the Defendants challenge the need for a building envelope

engineer to make this type of recommendation, I am satisfied that this fell within the proper

scope of Bjornson’s very thorough review of the as-built construction of the residence at the time

of her involvement.

d) Stairs

[251] There is a conflict in the evidence as to the as-built condition of the Bonus Room stairs,

particularly the connection between the stairs and the floor.

[252] According to Juniper and Matthews, the stairs were not connected to the floor system

either with bolts or hangers, as required by the Zytech drawings: Exhibit 1-A-2, SWA922.

Limited finishing materials, including drywall, were holding the stairs in place, together with a

few nails. Matthews’ evidence was that the stair to floor connection was very deficient and

presented a risk of detachment or collapse. He noted the lack of fasteners in suggesting that the

construction represented poor workmanship.

[253] Metcalfe’s evidence was that McEwen installed the stairs, attaching them at the top, but

that Metcalfe was personally involved in nailing and screwing every joist to wall studs. McEwen

pointed to Exhibit #38, which appears to be an enlargement of the Zytech drawings. As in the

case of the Bonus Room floor blocking, the portion of the drawing containing detailed

specification notes is missing from the enlarged version.

[254] McEwen’s evidence was that he “would have screwed” the stairs into the floor system

and then to the walls and that he was the person who put the screws in: Evidence of McEwen

(Direct), May 13, 2019, 2:16 p.m. In my view, there are some serious issues with the reliability

of McEwen’s evidence generally. As previously noted, it was replete with language such as “I

would have...” or “I wouldn’t have...” without certainty as to what he actually did. I am satisfied

that, though well-meaning, he had limited recollection of what actually took place. In the result, I

find that his evidence is not reliable and I attach little weight to it.

[255] Hamman made no observations as to any defects relative to the stairs. His evidence was

simply that they appeared to be pinned at both ends and that he conducted no further

investigation.

[256] Given the contradictions in the evidence of Metcalfe and McEwen in terms of who

actually installed the screws alleged to have been employed to connect the stairs to the floor, I

prefer the evidence of Juniper and Matthews on this point. I am satisfied that the stairs were only

minimally connected to the rest of the structure and presented a significant risk of collapse.

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[257] The Plaintiffs’ remediation, connecting the Bonus Room stairs in accordance with the

Zytech drawings through the use of bolts, hangers and backers, was both appropriate and

reasonable under the circumstances: Exhibit 1-F-35, pp 13, 17 (remediated stairs).

4. The Garage

[258] The as-built state of the garage raised a number of concerns. First, the division walls

between the house and the garage were not insulated to prevent the migration of C0-2 gas from

the garage into the residence. Second, the garage doors had to be re-installed with new springs.

Third, open heat runs were found buried in the insulation in the ceiling space with no connection

to registers: Exhibit 1-G-35, p 15, bottom photograph; p 16, bottom photograph. Juniper said he

had never seen such a configuration before. Fourth, electrical wires that were intended to be

connected to various exterior electrical outlets were rolled-up and located behind drywall:

Exhibit 1-G-35, p 20, lower photograph.

[259] The garage floor was also determined to be off the foundation’s footing and floating

above it: Exhibit 1-F-35, p 126, bottom photograph; p 127, top photograph. In other words, the

concrete slab that represented the garage floor was not connected to the footing.

[260] The Defendants made no submissions, either orally or in writing, relative to this

particular construction deficiency.

[261] Metcalfe offered no explanation relative to the insulation of the division walls between

the garage and the residence or the need to re-install the garage door. With respect to the open

heat runs, he maintained that this was common practice, relying in part on hearsay statements of

the heating contractor, who did not give evidence during the trial. Metcalfe’s evidence with

respect to the electrical wires located behind drywall was to the effect that the wires would have

been connected during the final walk-through. The electrician, Dueck, testified that he did not

complete his work on the residence due to unpaid invoices, but that he would normally do a

walk-through at the end of a job to test circuits and label wires.

[262] Metcalfe gave evidence that there was gravel located underneath the garage pad, together

with a Styrofoam floor heating system. He also stated that there were piles located every 8 feet.

However, he offered no evidence to confirm his assertions regarding the piles or Styrofoam.

Further, his evidence on this point was never put to Juniper in cross-examination. Hamman’s

report makes no reference to this alleged deficiency.

[263] Metcalfe also maintained that the garage doors were not part of the contract as they were

one of a number of items that were listed as an allowance. However, I note that the final draw

invoice 137, Exhibit 1-C-17, lists this allowance as a credit.

[264] Juniper testified that the remediation work in the garage included installing spray foam

on the walls separating the garage from the main residence, as well as the ceiling, to protect the

Bonus Room and the living areas from CO-2 gas. I am satisfied that the Plaintiffs’ remediation in

this regard was appropriate to address the underlying issue.

[265] I reject Metcalfe’s explanation that the rolled wires concealed behind the drywall would

have been detected and connected during the final walk-through. Even assuming that to have

been the case, there would have been costs associated with the necessary disruption and repair to

the drywall, as well as the cost of connecting the wires to individual outdoor electrical boxes at

the time of the final walk-through. As such, I am satisfied that the remediation costs were more

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or less the same as would have been incurred under the scenario outlined by Metcalfe. In my

view, the Plaintiffs acted reasonably in pursuing this course of action.

[266] I am also satisfied that the Plaintiffs acted reasonably in adding rebar to the garage pad

and in pouring concrete underneath the slab to connect the pad to its footing, thereby avoiding

the risk of breaking the concrete pad. To address this issue, Juniper testified that additional

concrete had to be poured to fill the void and establish a connection between the footing and the

garage pad.

5. Door Threshold Cut-Outs

[267] There is conflicting evidence on the cutting of the sub-floor in the area of the exterior

door thresholds for the purpose of making space for the installation of stone sills underneath.

[268] According to Matthews, the floor sheathing at door thresholds on the east elevation of the

residence, that is at the rear of the residence leading to the deck, had been cut out by a saw. He

expressed the view that these cut-outs were neither Code-compliant nor acceptable practice. He

testified that he had never seen this done before. I accept the evidence of both Bjornson and

Juniper that water entered the basement through these threshold cut-outs and that water damage

was visible upon removing the drywall in various rooms in the basement. Similarly, daylight was

visible through the cut-outs. According to Bjornson, the moisture barrier failed at the threshold

cut-outs: Evidence of Bjornson (Direct) – April 17, 2019.

[269] Juniper gave evidence regarding the as-built condition, depicted in Exhibit 1-G-35, p 24,

top and bottom photographs. According to him, water was able to enter the basement as a result

of the discontinuous nature of the sub-flooring. He described the resulting damage to the drywall

in the rooms in the basement.

[270] Metcalfe acknowledged that he provided directions to the framer to cut the thresholds and

that this was not normal practice. He testified that he took directions from Carm on this matter.

McEwen’s evidence was to the effect that both Metcalfe and Carm provided directions to him to

cut the thresholds. In this regard, the Defendants rely on two emails Carm sent to Metcalfe.

[271] On December 22, 2011, Carm sent Metcalfe a short email that read as follows:

Jim see attached pictures. On the bottom of the doors there is a space for the stone

to fit in the larger the better but if I only end up with ¾” I will cut the stone to fit.

Attached to the email are three photographs. Two of the photographs depict windows, not doors,

while the third photograph shows two sets of double doors. I do not interpret this email as in any

way providing “instructions” to Metcalfe to cut the thresholds to accommodate the stone

installation.

[272] The second email is dated March 13, 2013, two months prior to the Plaintiffs’ discovery

of the leaking windows. The relevant portion of the email reads as follows:

...In our final walk through I pointed out that there was missing stone under three

doors. I was under the impression that he was going to install it before he packed-

up. He may not have installed it due to the fact the wood needs to be chiseled out

under the door in order for him to install it like the other doors.

[273] Carm says he provided no directions to Metcalfe or McEwen on how to ensure that there

was a minimum ¾” space below the door openings for stone installation. He maintained that he

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provided photographs to Metcalfe to illustrate similar installations. He testified that his only

involvement in effecting changes to doors or door openings involved a request made to a mason

to chisel down some wood at a door on the front side of the house. Carm never saw the changes

made to the exterior door thresholds and was surprised to see photographs depicting the as-built

details.

[274] I accept Carm’s evidence on this point, namely that his only involvement in effecting

changes to door openings involved one of the doors on the front of the house. Even if there was

some confusion as to which doors that Carm was referring to in his March 13, 2013 email, the

interpretation advanced by the Defendants is not reasonable given the language employed.

[275] It is significant, in my view, that Metcalfe was aware that Carm was not an engineer.

While Carm’s role in the project is the subject of some disagreement between the parties, as

discussed elsewhere in these Reasons, I am satisfied that his primary role was as designer and

co-ordinator and that he never had any responsibilities relative to the construction of the building

structure or the integrity of the building envelope.

[276] In my view, Metcalfe was responsible for the structural integrity of the building. Even if

Carm had provided such instructions, a finding that I am not prepared to make in these

circumstances, Metcalfe, the general contractor, cannot avoid responsibility on the basis that he

took instructions from a designer on a matter pertaining to a structural and building envelope

element. I also note that Metcalfe made no efforts to obtain an engineering opinion regarding the

threshold cut-outs. Finally, Metcalfe had previously refused to install the ICF foundation

specified in the Innographic drawings and, indeed, advised that Plaintiffs that he would not build

the home if they insisted on an ICF foundation. Under the circumstances, I reject his contention

that he directed McEwen to breach the integrity of the building envelope because he had been

directed by Carm to do so.

[277] Matthews directed remediation work, namely to cut back more of the floor sheathing in

order to tie the floor back in and extend it to the foundation. Juniper gave evidence regarding this

remediation process. All of the doors along the back deck were removed. At Matthews’

direction, TGC installed Blueskin silicon, flashing and spray foam in conjunction with the repair

work. Fortunately, all of the doors could be re-used.

[278] Hamman agreed that it was “absolutely necessary” to replace the cut-out sheathing:

Evidence of Hamman (Cross) - April 24, 2019, at 4:09 p.m.

6. Interior Electrical

[279] During the investigative process, live electrical wires were located in the master bedroom

taped up behind the drywall. Live wires were also located underneath the jet tub. Further, a plug

in the mechanical room had been covered with drywall. The investigative process was

complicated by the fact that the electrical box was not marked. During the remediation, TGC had

to trace all the electrical lines throughout the residence in order to label the electrical panel.

[280] As previously indicated, the electrician, Dueck, did not complete his work at the

residence because of nonpayment of his invoices. He testified that he had no recollection of any

wiring behind the drywall in the master bedroom, but did not deny any of the deficiencies

identified by the Plaintiffs in this regard. Rather, he stated that he does not energize wires until

he has completed his work and, further, that he would have found such wires through testing at

the time of completion. Dueck also testified that there were no electrical drawings for the project

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and that he would have labelled the main breaker box at completion. Notwithstanding Dueck’s

evidence that the wires were not energized, the Plaintiffs properly point out that the remediation

work required electrical power. The electrical system was, accordingly, activated during the

remediation process, including the live wires in the master bedroom.

[281] Metcalfe acknowledged the plug in the mechanical room that had been covered by

drywall. However, he denied that there were hot wires around the jet tub and stated that leaving

hot wires behind a master bedroom wall is common practice. I do not accept Metcalfe’s evidence

on this particular issue.

[282] The question of remediation on this particular matter was straight-forward. By all

accounts the work was not finished. As such, completing the project necessarily involved the

completion of the electrical work by TGC in conjunction with its overall remediation work.

7. Foundation, Framing and Nail Floor Wall Connection

[283] The Plaintiffs’ concerns under this heading fall into three related categories. The first

involves the wall off-set from the foundation. The second relates to the use of non-pressure

treated lumber near grade-level, while the third relates to alleged non-compliance with the

Code’s nail requirement for wall to floor connections.

[284] First, the Plaintiffs say that the deck wall overhung the foundation by approximately one

and one half to two inches. While this was Code-compliant, the Plaintiffs, relying on Matthews’

opinion, say that it was not satisfactory from a custom home construction standard. Further, the

Plaintiffs maintain that Metcalfe’s decision not to follow the Zytech drawings calling for an ICF

foundation in favour of a traditional foundation, changed the width of the foundation walls.

Despite Metcalfe’s assurances to the Swanbys that the foundation “looked good”, and his

direction to McEwen to adjust the framing of the walls to account for the fact that the foundation

was not square, Metcalfe failed to correct the wall off-set from the foundation: Evidence of

Metcalfe (Cross) – May 10, 2019, 10:20 a.m. Furthermore, Metcalfe knew in the fall of 2011 that

two wall sections were not square.

[285] Hamman stated that the wall overhang was Code-compliant and therefore acceptable, but

acknowledged that action would need to be taken to offset the overhanging foundation in

subsequent framing steps. He also conceded that he had not accounted for occupancy and live

loading in reaching this conclusion. Matthews, on the other hand, was of the opinion that the risk

of the wall off-set from the foundation was that the wall could lose the ability to support vertical

loads, thereby compromising overall stability.

[286] Kraychy opined that it is common practice to hire a surveyor to set the elevations

properly in conjunction with pouring a foundation. Further, he indicated that it is customary to

get engineered drawings for a foundation. He testified that he has never constructed a foundation

based on architectural design alone.

[287] Metcalfe failed to engage a surveyor or obtain engineered drawings for the foundation.

He also failed to consult Zytech or an engineer on the impact of his planned change to the

foundation. Both Kraychy and Matthews expressed the view that the change from the ICF

foundation to the non-ICF foundation was a likely cause of the wall misalignment.

Page: 48

[288] Matthews prepared a repair detail, Exhibit 1-A-7, S-1, to increase the thickness of the

foundation in this area. While he testified that he believed that this repair was made, Juniper’s

evidence was that this did not form part of his remediation work on the residence.

[289] I accept the Defendants’ contention that this alleged deficiency was never actually

addressed as part of the overall remediation work. Nonetheless, I accept Matthews’ evidence that

this misalignment of the foundation and the structural framework of the residence may have been

Code-compliant, but did not meet the expected standards of a custom home builder.

[290] The second concern related to the use of non-pressure treated wood below 150 mm above

grade. The Code requires that non-pressure treated lumber and OSB clear grade by a minimum

of 150 mm. This Code requirement is focused on the permeability of OSB and other types of

non-pressure treated lumber, particularly when located close to ground level.

[291] Both Matthews and Hamman expressed the view that this was not Code-compliant, with

Matthews explaining that there is a long-term moisture concern that underlies this requirement.

According to Juniper, while investigating the wall leading to the walk-out portion of the

residence underneath the deck, it was determined that the as-built construction involved the

placement of OSB next to the foundation and the use of other non-pressure treated lumber for the

sill plate. This irregularity was observed in approximately three-quarters of the east perimeter

wall of the residence.

[292] In framing the residence, McEwen used OSB on top of the wood ladder and also in direct

contact with the concrete foundation. Metcalfe knew that McEwen installed OSB between the

top of the foundation and the bottom plate on the underside of the wall. In his evidence, Metcalfe

acknowledged that he was aware that the as-built OSB detail was not compliant with the Code.

[293] Hamman testified that he did not believe that the placement of OSB next to the concrete

foundation was Code-compliant, though he suggested that he was not aware of any specific Code

reference that prohibited such a practice. He went on to express repeatedly that he did not believe

that this was good practice, notwithstanding that the foam gasket product used in this instance

was Code-approved in 2011. In terms of remediation, he recommended removal of the OSB.

[294] The Defendants point to the evidence of the Building Inspector, Stewart, and of McEwen

in suggesting that the use of OSB on the foundation wall was common practice at the time.

McEwen’s evidence was that this was a requirement in Airdrie, though the nature of this so-

called requirement was never explored.

[295] I accept Matthews’ evidence that the use of non-treated wood in contact with concrete

was not compliant with Part IX of the Code. He confirmed this in cross-examination, stating that

the foam gasket used was not impenetrable to moisture. I also accept his evidence, supported by

the evidence of Hamman, that this was not a good building practice. In my view, the fact that use

of this foam gasket may have been common or widespread is not relevant.

[296] To address these issues, Juniper testified that the lower 18 inches of the exterior sheeting

had to be removed to permit access to the foundation, the ladder and the sill plate: Exhibit 1-F-

35, p 46; Exhibit 1-E-5, 0644, 0645, 0646. He replaced the non-Code compliant material with

pressure-treated lumber, then nailed the wall into the floor to connect and stabilize the

construction. Overall, Juniper determined that approximately 20 feet of the ladder was not

constructed using pressure-treated lumber. On Matthews’ recommendation, the Plaintiffs

replaced the OSB and other non-pressure treated materials along the sill plate with pressure-

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treated materials. In my view, this was a reasonable course of action from a remediation

perspective.

[297] Finally, concern was raised with respect to the main floor bedroom, namely that the

sheathing did not extend to the floor, the wall-to-floor connection was not present, and there was

no nailing connection. In Matthews’ opinion, the as-built condition of the wall sheathing, and

wall-to-floor connection posed a risk to structural integrity. Hamman agreed that the Code’s

nailing criteria for floor-to-wall connection were not followed.

[298] McEwen’s evidence was that he did not extend the sheathing because that is accepted

practice in Alberta. Metcalfe acknowledged that he observed the wall sheathing not connected to

the floor in one location, but failed to direct McEwen to correct the situation to bring it into

compliance with the Code.

[299] I accept the evidence of Matthews and Juniper relative to this construction deficiency. In

my view, the remediation recommended by Matthews and implemented by Juniper was

reasonable under the circumstances.

8. Kitchen Floor

[300] In his written report, Matthews described the deficiency relating to the kitchen floor in

the following terms (at para 2.1.1): “[W]alking on the Main Floor structure in selected areas of

the kitchen resulted in a perceived significant and undesirable vibration response in the floor.

The vibration performance was excessive from a user perspective in a residence of this

standard.” As-built, the floor was subject to significant vibration, such that walking across the

floor caused water bottles to move across kitchen islands.

[301] The Plaintiffs maintain that the problems that emerged with the kitchen floor were not a

result of a design issue resting with ZyTech, but a result of Metcalfe’s failure to disclose to

ZyTech the homeowners’ unique requirements or to consult an engineering professional.

[302] The Defendants advance a number of arguments with respect to this alleged deficiency,

as well as to the remediation undertaken by the Plaintiffs. First, they deny that that the Plaintiffs

brought to their attention the need for a robust floor system. Second, they rely on the term of the

contract that design plan drawings “may not always be followed as suggested by the draftsman.”

Third, they challenge the need for the repair detail prepared by Matthews (Exhibit 1-A-7, SKG)

and, indeed, for the involvement of an engineer in the remediation process.

[303] The original Innographic design drawings for the residence called for spacing under the

kitchen floor of 12” on-centre to accommodate the anticipated extra load associated with the

stone-clad islands that formed part of the house design: Exhibit 1-A-1. The as-built spacing

under the kitchen floor was 16” on-centre, based on Zytech shop drawings that had not been

engineer stamped at the time of construction: Exhibit 1-A-2. On the evidence before me, it is

clear that the Defendants later obtained, and included as part of their document production after

this litigation had already been commenced, an engineer’s stamp on similar working drawings

containing the same 16” on-centre spacing.

[304] In his evidence, Metcalfe confirmed that he had no discussion with an engineer or anyone

at ZyTech regarding the spacing change in the shop drawings from those set out in the original

design. He did not take any steps to determine whether the added weight of the stone-clad

Page: 50

kitchen islands had been considered by ZyTech in producing the shop drawings for the kitchen

floor support system.

[305] Matthews stated that the kitchen floor system met the minimum Code requirements for

strength, but observed that the as-built joist span operated at its functional maximum, namely

98%. He concluded that the vibration criteria were not addressed and that the as-built condition

was inappropriate for a home of this standard, specifically as regards the load placed on the

joists’ span. He referenced unacceptable vibration and deflection of the kitchen floor. He also

raised concerns regarding the type of joist used as not ideal to address the as-built spacing and

with respect to the significant number of web-openings cut out of the joists.

[306] The Plaintiffs rely on Hickey’s Building Supplies Limited v Sheppard, 2014 NLCA 43, a

case involving the construction of a residence required to be wheelchair accessible. In that case,

the defendants wanted level transitions from hardwood to ceramic tile flooring materials. In

constructing the residence, the contractor employed transition strips between flooring materials.

While the use of such transition strips was compliant with the National Building Code, the strips

did not produce the level flooring sought by the defendants. In finding for the defendants, Welsh

JA (dissenting in part) held at paras 19 and 21:

In this case, the Contractor knew that the National Building Code permitted the

use of transition strips. The Contractor also knew that the Sheppards particularly

wanted a level floor, and the reason for that. Clearly, there was a potential for

conflict between what the Code permitted and what the Sheppards had requested.

The evidence accepted by the trial judge leads to the conclusion that, while the

Contractor was aware of this possible conflict, the Sheppards were not. Indeed,

the Sheppards were relying on the Contractor’s expertise and on the contractual

obligation in clause 15(b) that the house would be built in a workmanlike manner.

The trial judge accepted evidence that, without significant expense, a level floor

between hardwood and ceramic tile could be achieved by the use of appropriate

underlay.

...

In summary, the trial Judge did not err in concluding that the Sheppards had

contracted for a level floor and that the Contractor could not rely on the National

Building Code to permit the use of transition strips. In the result, compliance with

the contract required replacement of the ceramic tile, as well as the hardwood...

[307] The Plaintiffs maintain that Metcalfe was aware that they required a robust kitchen floor

given the extensive stonework that was planned for this particular room. As in Hickey’s, the

Plaintiffs say that the contractor cannot rely on a Code-compliant kitchen floor in the face of

actual knowledge of the customer’s enhanced requirements.

[308] I accept Ms. Swanby’s evidence that the Plaintiffs discussed with Metcalfe their very

specific requirement for a robust kitchen floor to accommodate their plan to incorporate

significant stone work on the kitchen islands. It is clear to me that this was a design element that

was important to the Plaintiffs throughout the planning process. The original Innographic

drawings’ incorporation of a re-enforced floor joist system support the Plaintiffs’ contention that

a strong kitchen floor system was a design element from the outset. Given the importance that

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this design element played in the Plaintiffs’ overall design, I cannot accept Metcalfe’s evidence

that he was never told of this requirement.

[309] Hamman acknowledged that there was a noticeable vibration and bounce in the floor joist

system and that the as-built state of the floor was deficient from a performance perspective. He

recommended checking all of the electrical and mechanical cut-outs in the existing joist system,

as well as the installation of backing plywood and drywall to the underside of the joists. He also

expressed the view that the criteria for the size and location of cut-outs to accommodate

electrical and mechanical installations was in accordance with ZyTech instructions. However, he

acknowledged that these instructions would have accompanied the materials to the construction

site and had not been produced in this litigation.

[310] The discrepancy between the kitchen floor joint span spacing in the original design

drawings and the ZyTech shop drawings should have led Metcalfe to conduct further inquiries.

The absence of an engineer’s stamp on the ZyTech shop drawings should have also raised a red

flag for Metcalfe and prompted him to consult an engineer or, at the very least, clarify the

situation with ZyTech. I accept Kraychy’s evidence that in such circumstances, it was incumbent

upon Metcalfe to have consulted ZyTech and specifically brought to their attention the

specifications set out in the architectural drawings and the unique loading requirements for the

kitchen floor given the Plaintiffs’ planned use of significant amounts of stone in the kitchen.

[311] My findings are significantly influenced by the fact that an engineer-stamped version of

the shop drawings was subsequently obtained and included in the Defendants’ litigation

production. In my view, this demonstrates a clear awareness of the significance of having acted

on the basis of plan drawings that had not been engineer-stamped and that differed in a material

way from the original design drawings.

[312] While both the Plaintiffs’ expert and the Defendants’ expert agree that remediation was

required to address the kitchen floor, there are some notable differences in their recommended

courses of action. Having carefully considered the underlying circumstances, I am satisfied that

the remediation action taken by the Plaintiffs was reasonable, namely the strengthening of the

flooring system through the addition of lumber at the bottom of the joists and the installation of

blocking.

[313] In my view, there is no merit to the Defendants’ suggestion that the involvement of

Matthews, a structural engineer, was somehow excessive in the circumstances. Given my finding

that a failure to consult an engineer in the first place lay at the heart of this issue, it was

eminently reasonable for the Plaintiffs to have relied on an engineer in their efforts to resolve the

problem.

[314] Matthews prepared an engineered repair detail, Exhibit 1-A-7, SKG, to illustrate the

required repair. According to Juniper, who executed the required repair, Matthews’ detail

specified the necessary nail patterns and the required glue. The remediated work is shown in

photographs incorporated into Juniper’s report at Exhibit 1-F-35, p 58, 59, 60. I am satisfied that

this was a reasonable approach to the remediation of this construction deficiency.

9. Walk-Out Header

[315] McEwen fabricated a header beam for the rear entry-level doors leading to the covered

area underneath the deck. The header beam was constructed of a single engineered ply-laminated

veneer lumber (“LVL”) beam that was attached to the interior face of two-plys of dimensional

Page: 52

lumber: Exhibit 12, p 12, photo #2. McEwen acknowledged that there was no design for the

beam and he did not consult an engineer before constructing the beam. He expressed the view

that the header beam was stronger than required as a result of him using LVL. He testified that

he had used this methodology in other projects.

[316] Both Matthews and Hamman expressed concerns with the construction of the beam and,

in particular, the use of different types of woods in combination.

[317] Metcalfe conceded that he observed some sagging of the beam and it appeared that the

doorframe was not totally straight. He also acknowledged that he saw a bow over the walkout

header, but took no steps to determine the cause of the deflection and, further, made no efforts to

repair the header.

[318] In his report, Hamman expressed the view that the Code’s span tables allowed a 3-ply

beam to span the 3.02 meter distance required in this instance. In his subsequent evidence, he

retracted this opinion once he became aware of the actual make-up of the beam and had an

opportunity to observe it in place. He stated that he would have consulted a structural engineer in

such circumstances, in part because the Code’s span tables do not apply to the as-built beam used

in this instance.

[319] Matthews expressed the view that the beam was inadequate in terms of the applicable

Code-loading tables and that the beam’s construction was not good practice. Further, he

expressed the view that the beam could have collapsed once subject to Code-sanctioned loading.

He also referred to the potentially serious implications on the building structure if the beam were

to collapse. In his view, this raised a safety issue.

[320] Matthews recommended remediation through removal and replacement of the header

beam. He prepared a repair detail to this effect: Exhibit 1-A-7, SKL. In addition to following this

recommendation, TGC also removed and reframed the adjacent wall of the structure. The

remediated header beam is depicted in Juniper’s report, Exhibit 1-F-35, at p 52, bottom

photograph. The top photograph on the same page shows the repair being effected.

[321] I am satisfied that the remediation effected by Juniper was reasonable under the

circumstances.

10. Missing Point Load

[322] During the investigative and remediation processes, Matthews examined the building

structure to confirm that load paths existed within the structure. This investigation revealed that

there were missing studs and blocking in the main floor joists at the east wall. According to

Matthews, this situation existed at a small number of different locations on the east wall. In

particular, he noted one instance where he observed the load from the roof ending at grade and

not finding a way down to the foundation.

[323] Matthews testified that there is a requirement that the “structure provide a load path for

loads to find their way to foundation”: Evidence of Matthews (Chief), April 17, 2019, at 4:10

p.m.

[324] Matthews explained that “if the design loads were imposed on the roof, that the posts

supporting that load, which comes down and lands on top of the floor plate, base plate, bottom

plate for the wall – that is sandwiching the sheathing, I would expect that there would be a high

likelihood of failure – that that post would want to push through the main floor structure.” He

Page: 53

described this as localized structural failure that would “certainly” pose a safety hazard to

residents, specifically the possibility of roof collapse: Evidence of Matthews (Chief), April 17,

2019, at 4:14 p.m.

[325] Juniper described one example of this problem relative to the kitchen. As depicted in

Exhibit 1-F-35, photograph 59 (bottom), Juniper assembled three 2 x 6’s next to the doors to the

basement walk-out to carry the load of the kitchen floor back down to the foundation. No such

point load existed in this location in the as-built condition. According to Juniper, Matthews

prepared an engineered repair detail, Exhibit 1-A-7, SKL, to illustrate the required repair.

[326] Neither Metcalfe nor McEwen offered any evidence on this deficiency. Likewise, the

Defendants provided no submissions, oral or written, with respect to this issue.

[327] I accept the evidence of Matthews and Juniper on this issue. I reject the conflicting

opinion evidence of Hamman given that it was largely based on a visual review of drywall

surfaces. I am not persuaded that the condition of drywall surfaces provides a proper basis to

assess the existence of proper load paths.

[328] In my view, the addition of studs and blocking, as per the recommendation of Matthews,

was appropriate under the circumstances.

11. Sound Proof Insulation

[329] There is conflicting evidence regarding the installation of sound insulation in the

basement ceiling, specifically under the main area below the ground level Great Room. Metcalfe

acknowledged that the initial plan included soundproofing. However, he testified that, during a

conversation with Ms. Swanby and Carm, it was agreed to dispense with this sound insulation

given the proximity of a stairwell opening and of piping. Carm recalled a discussion involving

Ms. Swanby, Metcalfe and himself during which Metcalfe raised concerns about the utility of

soundproofing under the Great Room. However, Carm testified that the decision was taken to

include insulation for sound proofing purposes above the girls’ basement bedrooms and in the

main area underneath the Great Room.

[330] No sound insulation was installed in the basement ceiling, though Juniper testified that

the as-built condition included some metal sound tracking in the ceiling of the room under the

Great Room. Juniper also found full sound proof insulation in two basement bedrooms.

[331] I accept Carm’s evidence that sound proof insulation was to be installed in the ceiling

under the Great Room. As such, I am satisfied that the Defendants failed to sound-proof this part

of the basement and did not credit back any amount for sound insulation until October 2013,

after the lawsuit was initiated. By that time, Metcalfe would have been aware from the contents

of the Statement of Claim that a claim related to sound insulation was included.

[332] The Defendants provided no submissions, either during oral argument, or in subsequent

written argument relative to this deficiency.

[333] In terms of remediation, the Plaintiffs elected to install QuickRock soundproof drywall

rather than attempting to place regular sound-proofing insulation between the joists. I accept the

Plaintiffs’ contention that the cost of QuickRock was greater than the cost of regular insulation,

but that the use of QuickRock was far less labour intensive and, overall, the cost of the two

approaches was more or less equal.

Page: 54

12. Roof

a) Structure

[334] Matthews raised a number of concerns relating to the roof-framing, citing non-

compliance with both the Code and the manufacturer’s recommendations. First, he referred to at

least three areas where the structural trusses were noted to have broken or removed components:

Exhibit 1-F-35, pp 84-85 (missing component). The breaks were described as having been

broken in a brittle manner, as opposed to having been clean-cut by a saw: Exhibit 1-F-35, p 84

(broken trusses). He explained how the absence of these component parts “radically” negatively

affects the performance of the truss: Evidence of Matthews (Chief) April 18, 2019, 12:05 p.m.

According to Matthews, the structural impact of these damaged trusses was critical, the failure

would lead to a localized collapse of the roof.

[335] Second, Matthews noted missing hangers and bracing and a missing rafter. Further, he

observed the absence of connection via hangers and that the rafters were generally toe-nailed. In

his view, toe-nailing is not good practice. He expressed the view that the impact of missing

hangers reduces the overall strength of the structure and risks potential failure under Code-

loading requirements. Finally, Matthews and Juniper both noted that some of the trusses were

oriented on the flat side, their weaker axis: Exhibit 1-F-35, pp 83, 86.

[336] Juniper also determined that one of the trusses over the kitchen area was not sitting on a

supporting beam. During his investigation, he discovered that the intended supporting beam was

not supported by the wall. Matthews provided Juniper with an engineered repair detail, Exhibit

1-A-7, SKJ, to effect the necessary repair. A metal bracket was added to connect the beam to the

wall: Exhibit 1-F-35, p 92, top photograph.

[337] In his direct evidence, Metcalfe testified that he did not notice any broken or damaged

trusses. According to McEwen, broken trusses may have arrived on the site, though he was not

certain whether any broken or unrepaired trusses were left in the roof. He did, however, confirm

the doubling-up on broken trusses. He also acknowledged one of the Plaintiffs’ photographs that

revealed one missing truss and member: Evidence of Metcalfe (Direct) – May 9, 2019, 11:44

a.m.; Evidence of McEwen (Direct) – May 13, 2019, 3:39 p.m.; 3:51 p.m.; Exhibit 12, p 19,

photograph 16; May 13, 3019, 3:52 p.m.; Exhibit 12, p 20, photograph 17.

[338] McEwen also testified that if a member on a truss is broken, the truss is usually repaired

on site. If a bottom or top cord of a truss is broken, however, the broken truss is not used. He

indicated that it was his practice to consult ZyTech, the manufacturer of the trusses, for field

repairs. There is no evidence that ZyTech was consulted regarding any field repairs in this

construction project.

[339] Hamman testified that damaged trusses happen from time to time, but they need to be

repaired in accordance with the directions of the manufacturer. He acknowledged that he would

not leave a roof in the condition depicted in the photographs of the as-built condition of the roof

structure: Exhibit #48, p 13; Evidence of Hamman (Cross) – October 18, 2019, 3:38 p.m.

[340] McEwen disagreed with Matthews regarding the requirement for hangers. He testified

that he installed the bracing in accordance with the plan drawings provided to him. With respect

to the installation of framing members on the weak axis, McEwen maintained that he had an

uneven amount of space to work with on either side of the ridge beam and had made adjustments

Page: 55

so as to avoid the necessity of reframing the roof: Evidence of McEwen (Direct) – May 13, 2019,

3:46 p.m.; Exhibit 12, p 18, photograph 14.

[341] Hamman agreed that there was a need to improve the support provided by the 2 x 4

members that were laying on their weak axis. Furthermore, he acknowledged that the framing

parts of the roof were not strong enough to sustain snow-loading and that his report did not take

into consideration the impact of actual occupancy of the residence or live-loading.

[342] The Defendants raise a number of issues with respect to this alleged construction

deficiency. First, they maintain that there is no reliable evidence as to when the broken trusses

described by Matthews and Juniper were first noticed. In their written submissions, at para 272,

they assert that: “Mr. McEwen’s evidence was that there were no broken trusses when he

completed the project.” In fact, McEwen’s evidence was that he did not believe that there were

any broken or damaged trusses in the as-built roof when he completed his work on the project.

[343] To the extent that the evidence of Matthews conflicts with that of Metcalfe, McEwen or

Hamman, I prefer the evidence of Matthews. I also accept Matthews’ evidence regarding the

repairs that were necessary to remediate these construction deficiencies.

[344] Based on his assessment of the situation, Matthews recommended that the Plaintiffs

undertake a de-loading of the trusses to allow the proposed repairs to take place: Exhibit 1-F-35,

p 90, bottom photograph. This included attaching plywood to strengthen the trusses and the

replacement of missing truss members. He created an engineered repair details to this effect:

Exhibit 1-A-7, SKB, SKH, SKK. Further, the recommended repairs involved building up the 2 x

4 members that were laying on their weak axes to more fully support the structure. In addition,

hangers and bracing were installed. Finally, a steel plate was installed at the base of the

supporting beam.

b) Roofing

[345] The Code outlines minimum roofing requirements in the following terms:

9.26.1.1. Purpose of Roofing

1) Roofs shall be protected with roofing, including flashing, installed to shed rain

effectively and prevent water due to ice damming from entering the roof.

9.26.8.2. Starter Strip

1) A starter strip shall be installed as in Article 9.26.7.2.

2) Starter strips required in Sentence (1) shall be laid in a continuous band of

cement not less than 200 mm wide.

[346] The Plaintiffs identified a series of deficiencies in the roofing installed on the residence.

Specifically, Bjornson and Juniper raised concerns regarding missing and damaged shingles, the

use of OSB roof sheathing, the absence of continuous roof underlayment and the use of closed

versus open valleys on the roof. There also was no proper eaves protection by way of a starter

strip or extra drip flashing under the shingles.

[347] Juniper gave evidence regarding the condition of the shingles. He observed that, while

they appeared to be fine when viewed from the ground, closer inspection revealed cracked and

split shingles, as well as multiple areas on the roof where shingles were missing: Exhibit 1-F-35,

Page: 56

p 117, bottom photograph; p 121, bottom photograph. Bjornson also observed missing and

broken shingles.

[348] The Defendants take the position that only a portion of the roof revealed damaged or

missing shingles. As such, they say that the Plaintiffs should have repaired only the damaged

sections of the roof and that they have not established a need to replace the entire roof. The

Defendants rely on the evidence of Shawn Lummerding of Lummerding Exteriors Ltd, the

roofing contractor who installed the shingles.

[349] Lummerding testified that he conducted an inspection of the roof back in 2014. He

acknowledged that he does not have an engineering background and was not personally involved

in the work on the Swanby residence. As such, he had no personal knowledge of the project at

the time of completion.

[350] Lummerding observed concentrated damage to the shingles on 2 or 3 areas of the roof.

He described this as mechanical damage caused by scaffolding and estimated that there was

damage to approximately 100 square feet of the roof. He believed that this damage was

repairable through replacement of the damaged shingles and that such a repair would have no

impact on the shingle manufacturer’s warranty.

[351] According to Metcalfe, the stucco contractor set up scaffolding near the front of the

garage that caused the shingles to crack. He initially testified that he went on the roof to conduct

an inspection of the shingles, but was challenged during cross-examination based on prior

inconsistent statements and ultimately acknowledged that he did not inspect the shingles.

[352] Bjornson recommended that all the shingles be replaced. As described below, she also

recommended that underlayment be placed on the full field of the roof and that ice and water

shields be installed in the valleys. She explained that asphalt shingles have a normal life of 40-50

years. She noted that some of the shingles were observed to be not performing after only one to

two years.

[353] Bjornson was asked about the shingle manufacturer’s warranty on their product. She

explained that the manufacturer guarantees only the product, not the installation. She went on to

say that, generally speaking, it is not the product that fails, but the installation.

[354] Concerns were also raised with respect to the use of OSB as the roof sheathing and the

fact that underlayment had not been installed on the entire surface of the roof. At p 56 of her

report, Exhibit 16, Bjornson included a photograph that illustrated the absence of underlayment

where a soffit panel had been removed.

[355] Bjornson stated that the use of OSB as sheathing and failure to install full underlayment

were contrary to best practice. She expressed concern about the use of OSB sheathing as roof

decking as it has a strong tendency to absorb water and not dry. She explained that the roof

absorbs a lot of moisture during construction and, as such, best practice dictates that OSB not be

used as roof decking. She went on to explain that her major concern was the lack of continuous

underlayment, thus depriving the roof of an added layer of protection.

[356] Lummerding was asked to inspect the roof to determine if underlayment had been

installed. He checked three or four areas of the roof and confirmed that existence of felt paper in

each of these areas. While he acknowledged that he did not check the entire roof, he was referred

to his company’s invoice relating to the Swanby residence and stated that the $854 charge “to

felt roof” suggested that the underlayment had been applied to the entire roof.

Page: 57

[357] As noted above, Bjornson expressed the view in her expert report that the ARCA Roofing

Application Standards Manual represents the industry standard for the installation of roofing,

particularly in light of the fact that many of the Code’s roofing provisions are “extremely

outdated”. In this instance, she maintained that the ARCA standard is the accepted standard for

roofing installation purposes. She referred to the following underlayment standard set out at

paragraph 2.5.1:

2.5.1 Materials

1. The field of the decking shall be completely covered with a minimum of one (1)

ply of CSA No. 15 non-perforated asphalt saturated felt prior to application of

the shingles.

[358] Bjornson explained that the Code does not specifically require underlayment on the entire

field of the roof, but stated that it is “very rare” to have a roof that does not have a complete

underlayment. She agreed that the roof as built met the Code’s minimum requirements, save for

the damaged shingles. However, she stated that it did not meet best practices.

[359] Lummerding testified that while he had heard of ARCA and is aware that ARCA issues

guidelines relating to roofing installation, his company is not a member of ARCA and does not

follow its guidelines.

[360] The final area of concern related to the use of closed versus open valleys in the roof.

Bjornson expressed the view that, though the Code does permit closed valleys, open valleys are

generally preferred because they better facilitate water management and prevent shingle wear.

She explained that a closed valley involves the shingles simply meeting in the valley, whereas an

open valley separates the shingles using a different material, generally a metal flashing. Bjornson

referred to the ARCA manual touching on this issue:

2.3.2 Valley Flashing

.2 Open Valleys must be employed for laminated and interlocking asphalt shingle

application.

.3 Where sloping surfaces of shingle roofs intersect to form a valley, the valley

shall be flashed with a minimum of one (1) ply of 914 mm (36”0 wide self

adhering modified bituminous membrane centered in the valley.

[361] Bjornson described the valley flashings in this instance as “quite distressed” and

“severely distressed and damaged.” She did not observe any ice shield on her inspection of the

roof, though valleys were stated to have been flashed with polyethylene/building paper with

provision for ice shield.

[362] Hamman briefly addressed this issue in his report. He acknowledged that the roof valleys

were distressed and cracking. He went on to state that “[T]he installed roof appeared to be clean

with straight lines and in my opinion would be subject to the lifetime warranty as provided by

the manufacturer”: at p 5. In his trial testimony, Hamman conceded that he did not inspect the

roof. I would simply add that I accept Bjornson’s evidence that Hamman’s observations

regarding the roof revealing “clean and straight lines” provide no basis for evaluation of the

roof’s performance.

[363] In terms of remediation, at the request of Bjornson, Juniper removed all the shingles and

replaced them over top of a full underlayment. In the process, Juniper replaced all the closed

Page: 58

valleys with open valleys. In my view, the Plaintiffs acted reasonably in accepting Bjornson’s

assessment of the situation and replacing the entire roof.

13. Main Attic Insulation

[364] Insulation is required to allow for circulation, not block vents and be of sufficient density

to preclude settlement. Section 9.25.2.4 of the Code provides as follows:

1) Except as provided in Sentences (2) to (6), loss-fill insulation shall be used on

horizontal surfaces only...

4) Where blown-in insulation is installed in above-ground or below-ground wood-

frame walls of new buildings,

a) the density of the installed insulation shall be sufficient to preclude

settlement,

b) the insulation shall be installed behind a membrane that will permit visual

inspection prior to the installation of the interior finish,

c) the insulation shall be installed in a manner that will not interfere with the

installation of the interior finish, and

d) no water shall be added to the insulation, unless it can be shown

that the added water will not adversely affect other materials in the

assembly.

[365] Metcalfe’s evidence was that he personally installed Cellulose insulation, a blown-in

product, in the main attic of the residence. He expressed the view that this product was denser

than fiberglass and, as such, the manufacturer’s guidelines indicated that only 10” was required

to obtain the R-40 value stipulated for this construction project. He acknowledged that Cellulose

settles 2”-3” over time.

[366] During Questioning in 2015, Metcalfe confirmed that he did not test the depth of the

insulation after installation. However, in his trial evidence, he expressed confidence that the

insulation had R-40 value when he left the project. He did not explain the basis for this degree of

confidence.

[367] The insulation had already been removed from the attic at the time of Bjornson’s

inspection of the property. She did, however, offer the opinion that blown-in insulation should

not block soffits as this is not Code-compliant, and that the thermal value of the insulation must

be maintained, ie. not compressed.

[368] At the time Juniper inspected the attic, he found only 6” of blown-in insulation in the

main attic area covered in mouse feces: Exhibit 1-F-35, p 87, top photograph. He explained that

he had expected to find about twice that amount of insulation and that 6” was roughly equivalent

to R-20. Juniper testified that he understood at least 12” was required to achieve the Code

required R-40 level.

[369] Hamman did not address the depth of the blown-in insulation in his report. Nevertheless,

he testified that he would have installed an additional 8” of blown-in insulation in the main attic

space. He saw no insulation on the exposed soffits but conceded that he inspected only a limited

number of soffits from outside the house.

Page: 59

[370] The Defendants produced no product material prepared by the manufacturer of Cellulose.

Likewise, counsel for the Defendants posed no questions about Cellulose to either Bjornson or

Juniper. Further, in their written submissions filed at the end of the evidence, the Defendants

simply suggested that there is “scant evidence of a general lack of insulation” in the areas of the

house where blown-in insulation was used.

[371] Given Metcalfe’s evidence that he never tested the depth of the insulation, there is no

evidence before me that the blown-in insulation ever met the R-40 level specified in the building

contract. All that is known is that Metcalfe believed that the R-40 level had been attained and

Juniper’s evidence that he only found 6” of blown-in insulation at the time of his inspection.

Even if Metcalfe’s belief was correct, it is clear that he failed to account for settlement, as

required by the Code. In my view, the circumstances required Metcalfe to take positive steps to

ensure that this contractual requirement for R-40 insulation had been met. He failed to do so.

[372] The Plaintiffs removed the blown-in Cellulose insulation to effect the required repairs to

the roof structure and replaced it with 15” of blown-in insulation up to a rating of R-50. The

original insulation could not be re-used due to the extent of the mouse feces found in the

material. Under the circumstances, I am satisfied that this was a reasonable approach to the

remediation of this issue.

a) Air/Vapour Barrier

[373] Section 9.25 of the Code outlines the requirements for the air and vapour barrier:

9.25.3.1 Required Barrier to Air Leakage

1) Thermally insulated wall, ceiling and floor assemblies shall be constructed so

as to include an air barrier system that will provide a continuous barrier to air

leakage

a) From the interior of the building into wall, floor, attic or roof spaces,

sufficient to prevent excessive moisture condensation on the room side

during winter and to ensure comfortable conditions for the occupants.

9.25.3.3 Continuity of the Air Barrier System

2) Where the air barrier system consists of flexible sheet material, all joints shall

be

a) Sealed, or

b) Lapped not less than 100 mm and clamped, such as between framing

members, furring or blocking and rigid panels...

6) Penetrations of the air barrier system, such as those created by the installation

of doors, windows, electrical wiring, electrical boxes, piping or ductwork, shall

be sealed to maintain the integrity of the air barrier system over the entire

surface.

9.25.4 Vapour Barriers

1. Required Barrier to Vapour Diffusion

Page: 60

1) Thermally insulated wall, ceiling and floor assemblies shall be constructed with

a vapour barrier so as to provide a barrier to diffusion of water vapour from the

interior into wall spaces, floor spaces or attic or roof spaces.

9.25.4.3 Installation of Vapour Barriers

1) Vapour barriers shall be installed to protect the entire surfaces of thermally

insulated wall, ceiling and floor assemblies.

2) Vapour barriers shall be installed sufficiently close to the warm side of

insulation to prevent condensation at design conditions.

[374] I accept Bjornson’s evidence that the building envelope, including the air and vapour

barrier must be continuous and structurally supported. Hamman agreed with this general

proposition: Code, s 9.25.3.1, .3, .43.

[375] According to Bjornson, the air and vapour barrier, typically a single entity in single

family residences - usually polyethylene sheets - did not meet Code requirements and required

remediation. She determined that the air and vapour barrier was not continuous on the building

walls. Specifically, she found that polyethylene sheets were sealed to the window opening

framing and not the window assembly. While this is common practice, it requires the application

of foam sealant to create a continuous barrier. In all of the windows that she inspected, Bjornson

found that the spray foam sealant was not applied in sufficient quantity and was not continuous.

[376] Bjornson also found that the air and vapour barrier was penetrated as the electrical wiring

and plumbing entered the barrier without proper sealing. Electrical wires were installed through

the air and vapour barrier without sealant. Further, she found that overlapping polyethylene

sheets were not sealed and clamped as required by the Code. Overall, she found that the Code

requirements had not been met.

[377] Juniper’s evidence was that none of the pot lights were sealed with either polyethylene or

blue vapour barrier boxes, as required by standard practice. He also testified that a number of

plumbing and mechanical holes in the attic were not sealed. The electrician, Dueck, gave

evidence that he observed water pouring through the pot light installations at one point: Evidence

of Juniper (Direct) – April 12, 2019, (p.m.); Exhibit 1-F-35, p 87 (p 92 – remediated); Exhibit

#29; Evidence of Dueck (Cross) – May 14, 2019 (p.m.).

[378] Hamman was not able to observe the air and vapour barrier at the transition from the

main floor to the attic because the blown-in insulation was covering the base of the attic. He

testified that it was not clear to him whether the air and vapour barrier overlapped. He

acknowledged, however, that if there was no overlap, the air and vapour barrier was deficient.

He also acknowledged that if water was coming through the pot lights, that indicated that the pot

lights had not been properly sealed.

[379] Both Metcalfe and Dueck gave evidence that the brand of pot light installed in the

Plaintiffs’ residence did not require polyethylene coverings. However, I note that the Defendants

adduced neither any evidence as to the brand of pot light used nor any information from the

manufacturer to support their contention. Given the evidence of their own expert regarding the

absence of a proper seal if water was coming through the pot lights, I am not prepared to accept

the Defendants’ contention that no polyethylene covering was required.

Page: 61

[380] Metcalfe also gave evidence to the effect that plumbing and mechanical holes were

sealed from below. He produced two undated and unidentified photographs, Exhibit 20 and

Exhibit 21, depicting plumbing and mechanical holes that appeared to be sealed from below in

support of his assertion in this regard. I accept Bjornson’s evidence that it is not common

practice to seal barriers from the underside and that bottom sealant does not produce a

continuous air seal and, as such, is deficient. She referred to her expert report, Exhibit 16, p 44,

photograph 8.45 as an example of a breach of the continuous air seal. While she acknowledged

in cross-examination that it may be possible in some instances to seal plumbing and mechanical

breaches of the barrier from below, I am not persuaded that this qualifies or otherwise limits her

overall findings regarding this deficiency. Bjornson’s findings in this regard are not, in my view,

undermined by that fact that both Metcalfe or Hamman gave evidence that it is common practice

to seal plumbing, electrical and mechanical holes from below. I am satisfied that this was

deficient practice that compromised the air and vapour barrier.

[381] By way of remediation, the Plaintiffs replaced polyethylene around the house, sealed the

pot lights using blue vapour barrier boxes, and sealed all of the plumbing and mechanical holes

in the attic with polyethylene: Exhibit 1-F-35, p 92, bottom photograph.

14. Deck

a) Connection to House & Blocking

[382] I accept the evidence of Juniper and Matthews that the as-built condition of the main

exterior deck did not meet the manufacturer’s requirements, had insufficient connection to the

main residence and, indeed, was pulling away from the house and sloping downward in one area.

Hamman inspected the deck on October 3, 2013, at which time part of it had been demolished

and all of the top decking had been removed. While he did not observe the deck pulling away

from the house, Hamman acknowledged the risk presented by the deck’s as-built condition to the

home’s occupants, and noted that “at some point that deck’s coming off the wall”: Evidence of

Hamman (Cross) – October 18, 2019, 3:33 p.m.

[383] At one point during the construction, Ms. Swanby approached Metcalfe and reported that

the deck did not appear to be level and, moreover, was pulling away from the residence. Ms.

Swanby recalled that Metcalfe put a small piece of lumber underneath the stairwell, but took no

further action.

[384] Both Juniper and Hamman confirmed that there were no lag bolts fastening the deck to

the residence. Rather, it was nailed to the house using framing nails, as opposed to galvanized

nails, screws or pressure treated nails. Both agreed that the wrong sized hangers had been used

and that the pre-drilled holes in the hangers had not been completely filled in. Likewise, they

agreed that either there was no blocking or blocking was missing in a majority of spots within

the deck’s floor system. According to Hamman, the deck not only required blocking, but repair

to the top surface. He acknowledged that the as-built state of the deck posed a safety hazard,

particularly relative to the walk-out area located underneath the deck.

[385] According to McEwen, the deck was constructed without the benefit of any plan for its

connection to the house. Both Metcalfe and McEwen testified that McEwen used five nails every

16” to fasten the deck joists to the residence. The Defendants produced two undated and

otherwise unidentified photographs, Exhibit 1-E-7 (photograph 3 and 4), as confirmation of their

overall approach to fastening the deck to the residence. These photographs were taken by

Page: 62

Hamman. While Hamman testified that he was able to observe only 40% of the nailing pattern

employed to fasten the deck to the residence, he stated that the Code allows for this type of

nailing pattern.

[386] While Metcalfe gave evidence that putting nails in all of the holes located on the hangers

can cause the joists to split, I accept Matthews’ evidence regarding the importance of fulfilling

the manufacturer’s specifications for the installation of hangers: Exhibit 14, Simpson Strong-Tie

specifications. In particular, Matthews explained that failing to fill all of the holes in the hanger

alters the design for the deck support, a change that ordinarily would require the support of an

engineering opinion or change detail. I note that even Hamman concluded that the as-built state

of the deck showed insufficient connection to the home.

[387] According to Matthews, the work on dismantling the deck was already underway when

he first observed it. At that time, he made a series of recommendations for temporary support

measures to ensure worker safety. He also prepared repair details that were subsequently relied

upon by Juniper in effecting the required remediation of the deck: Exhibit 1-A-7, SKF. Based on

his investigation, he concluded that the deck did not meet the manufacturer’s requirements. He

stated that consultation with an engineer was required in situations where a builder plans or

intends to deviate from the guidelines established by the manufacturer. There is no evidence to

suggest that Metcalfe ever sought such advice or direction from an engineer prior to installing

the deck in the manner described above. Indeed, the evidence of McEwen was that there was no

plan for the deck’s connection to the residence.

[388] The Defendants rely on the fact that the as-built construction of the deck was passed by

the building inspector, James Stewart. For the reasons that follow, I am unable to accede to this

argument. In my view, Stewart’s inspection reports and trial evidence do not offer any

meaningful validation or approval of the as-built construction of the deck.

[389] Stewart inspected the Swanby residence on September 15, 2011, and again on March 1,

2012. His one-page inspection reports, Exhibit 1-D-3 and 1-D-4, contain very cursory hand-

written notes detailing the scope of his inspections. Given the passage of time, Stewart had very

little, if any, recollection of either inspection. Rather, he relied on his usual practices and on his

limited notes made at the time. Stewart acknowledged that he is not an engineer by training and

that his work experience is as a journeyman bricklayer. He agreed with the suggestion put to him

in cross-examination that his inspections are preliminary or cursory and that he is looking for

blatantly obvious deficiencies only. Further, he agreed with the suggestion that he does not

undertake an assessment of the quality of the work that he is reviewing and, indeed, that he is not

qualified to do so. Finally, he agreed that his inspection does not purport to report that no other

construction deficiencies were present.

[390] Stewart’s September 2011 inspection was restricted to the foundation. His report

indicates that he was on-site for one half hour only. With respect to his subsequent inspection, he

acknowledged that the report refers to him having been on-site for one hour. However, he

conceded that this would include his travel time from the last inspection conducted prior to

attending the Swanby residence. During his time on site, he would have taken a look at the

framing of the roof and flooring systems, the ventilation system, checked the point loads on each

floor of the structure, checked the windows and checked the support posts in the basement.

[391] With one exception, Stewart’s hand-written notes on the report simply direct that

specified work is to be completed in accordance with building plans and specifications and in

Page: 63

compliance with the Code. The notes make no mention of any problem or deficiency. The only

specific item referred to relates to the deck, directing “Install hangers on rear deck treated joists

at ribbon plate.” Stewart could not recall how the deck joists were connected to the rest of the

structure, though he believed that they may have been toe-nailed at the time. Stewart assumed

that he had no other concerns about the connection since he made no other notes.

[392] Given the size of the Swanby’s residence and the fact that the entire process was

conducted in less than one hour, I find that Stewart’s inspection on March 1, 2013 was cursory at

best. He could not recall if any of the drywall was in place or if there was an I-beam under the

deck. Given his direction regarding the installation of hangers, it seems clear that the installation

of the deck was not complete at the time of his inspection. Under the circumstances, I attach

virtually no weight to the fact that Stewart ticked off a box indicating that there were no

observed deficiencies at the time of inspection when assessing the final as-built construction of

the deck. The Defendants’ reliance on this inspection is, in my view, misplaced.

[393] I am satisfied on the evidence before me that there were very serious issues with the as-

built connection of the deck to the rest of the building structure. I accept Hamman’s evidence

that the deck was so inadequately connected that it was only a question of time before it would

separate from the adjoining wall. I also accept Matthews’ conclusion set out at page 8 of his

report that:

The construction of the deck displayed a poor quality of workmanship, inattention

to details, and a lack of compliance with the ABC [Alberta Building Code]. The

observed deficiencies, also including .1 above, in the deck structure could pose a

significant safety risk to building occupants.

[394] In terms of remediation, it is noteworthy that both Matthews and Hamman made similar

recommendations. Hamman suggested that proper fasteners be used to attach the deck joists to

the rim board. He also proposed adding blocking to the deck in accordance with the requirements

of the Code. Matthews, on the other hand, recommended enhancing the deck beam connection

and repair to the rim board. The Plaintiffs opted to repair the rim board and joist connections and

to install blocking and hangers. According to Juniper, after a significant portion of the deck was

dismantled, approximately 50% of the original deck material was salvaged and re-used during

the remediation process.

b) I-Beam

[395] McEwen, Juniper and Matthews all testified that the steel I-beam supporting the deck

rested on, but was not attached to, two 2 x 6 posts. Rather, it was held in place by gravity.

Further, the beam rested on only a portion of a laminated beam. The laminated beam consisted of

four 2 x 6’s laminated together. One end of the I-beam rested on slightly more than half of the

laminated beam only. The other end rested on three quarters of the beam only: Exhibit 1-F-35, p

96, top photograph.

[396] McEwen testified that he bolted the I-beam to the underside of the deck: Exhibit 1-E-7,

photograph 7. He testified that he received no drawings regarding the installation of the beam

and simply installed it based on his experience in installing similar beams. He acknowledged that

he never brought the lack of an installation detail to Metcalfe’s attention and conceded that he

has no recollection as to how the beam was attached to the laminated beam.

Page: 64

[397] McEwen’s evidence regarding the bolt he installed to connect the beam to the deck was

seriously undermined by Juniper’s evidence that the I-beam was not connected to either the deck

or the supporting posts but was simply sandwiched in-between. As part of the remediation

process, Juniper testified that he bolted the I-beam to a 2 x 8 that ran the length of the beam into

which the deck structure was then nailed. Juniper was never presented with Exhibit 1-E-7, the

photograph identified by McEwen. I prefer the evidence of Juniper in this regard.

[398] Metcalfe said he inspected the I-beam before it was encased and prior to installing the

final deck surface. He was not, however, able to observe how the I-beam was actually connected

to the supporting posts. He acknowledged that he had never previously worked with an I-beam in

the construction of a deck. Notwithstanding his lack of experience in this regard, Metcalfe failed

to seek advice or assistance as to the adequacy of the deck construction.

[399] Matthews expressed the view that that I-beam support and connections were not Code

compliant or consistent with good practice. Hamman did not review the as-built condition of the

deck and his report is silent on the connection between the I-beam and the supporting posts. He

did, however, acknowledge in his evidence that the as-built condition violated the Code.

[400] By way of remediation, the Plaintiffs elected to have TGC build a cradle for the I-beam

that was Code compliant. Matthews prepared an engineered report detail in this regard: Exhibit

1-A-7, SKF. In addition, TGC fastened the beam to the supporting posts that were rebuilt to

prevent the beam from shifting. In my view, this was a reasonable approach to the remediation of

the deficiencies identified relative to the I-beam supporting the deck. Exhibit 1-F-35, p 98,

bottom photograph, depicts the fully-cradled beam after the remediation had been completed.

c) Waterproofing

[401] The Defendants were required to waterproof the deck to protect the covered space

underneath it from rain. On the evidence before me, I am satisfied that water leaked through

approximately 80% of the deck’s surface. Metcalfe conceded that the drainage system that he

personally installed was inadequate, though in his evidence he stated that he did not guarantee to

“keep water out”: Evidence of Metcalfe (Direct) – May 9, 2019, 11:58 a.m. Invoice 118 issued

on September 1, 2012, stipulated that the drainage system was “not guaranteed to drain all

water”: Exhibit 1-C-11. Similarly, in an August 7, 2012 email to the Plaintiffs, Metcalfe advised

that: “[P]lease note that great effort is made to drain all water but that is not guaranteed...”;

Exhibit 1-G-23, p 71.

[402] Hamman agreed that waterproofing the deck was appropriate remediation under the

circumstances. As more fully discussed below, he did not, however, include this in his

calculation of the budget for his alternate remediation work plan.

[403] I am satisfied that the as-built state of the deck did not provide any real water protection

for the space underneath. I am not persuaded that Metcalfe’s disclaimer, even if valid, was

sufficient to encompass the almost complete failure of the drainage system he installed.

[404] In terms of remediation, the Plaintiffs addressed the situation by treating the deck as a

roof system with drain holes membraned for water to pass into drains. The top decking was

replaced by cedar boards at less than half the cost of the composite decking initially employed by

the Defendants: Exhibit 1-F-35, p 113, bottom photograph.

Page: 65

d) Piles

[405] According to Matthews and Juniper, the most southerly concrete pile supporting the deck

was less than 4 feet deep and rested on disturbed soil. Hamman agreed that this concrete pile

required repair in that it was settling in disturbed soil and causing the deck to move. A second

concrete pile in the same general area was, according to Matthews, resting on concrete overpour

of the supporting pile and not anchored to the actual pile. Juniper testified that this was an area of

the deck that sloped. Hamman offered no evidence relative to this particular deficiency: Exhibit

1-F-35, p 101.

[406] Metcalfe personally poured the concrete piles for the deck. The piles were required to be

a minimum of 4’ in depth and resting on undisturbed soil. Metcalfe testified that, as built, the

piles met the depth requirement. However, he also suggested that soil erosion removed the top

level of the dirt. Further, he explained that he had repeatedly advised Ms. Swanby of the

requirement for a retraining wall to address the soil erosion issue.

[407] Given Metcalfe’s awareness of the erosion problem, the onus was on him to address this

apparently unexpected development. As the general contractor, he was under an obligation to

ensure that every aspect of the construction was Code-compliant and in accordance with best

practices. The Defendants have produced no document to confirm that this concern was ever

formally brought to the attention of the Plaintiffs. In my view, this would have been the

appropriate course of action under the circumstances. I also note that the Defendants failed to

cross-examine Ms. Swanby on this point. In the result, I reject Metcalfe’s attempt to deflect

responsibility for this deficiency.

[408] The posts resting on the concrete piles were also required to be centered. McEwen

testified that he pinned each post to the piles by drilling a hole into the centre of the pile and

drilling rebar into the hole. Based on my review of Exhibit 1-F-35, p 100, bottom photograph,

and the other evidence before me relative to this issue, including the evidence of Hamman, I am

unable to accept McEwen’s evidence in this regard.

[409] Matthews prepared an engineered repair detail, Exhibit 1-A-7, SKA, to address this issue.

According to Juniper, this entire portion of the deck had to be removed and replaced. TGC reset

one of the posts so that it rested properly on the concrete pile. With respect to the post resting on

disturbed soil, TGC excavated the surrounding soil to reach undisturbed ground. However,

during the course of the excavation, a very large boulder was encountered. Rebar and a concrete

footing were employed to support this deck pile in relation to this boulder. I am satisfied that the

Plaintiffs employed reasonable measure to remediate these construction deficiencies. The top

photograph on page 103 of Exhibit 1-F-35 depicts the work in progress relative to the pile

determined to rest on disturbed soil.

e) Columns

[410] According to Juniper, the stone-clad deck columns were completely finished when he

arrived on the worksite. At Matthews’ request, the bottom 24 inches of stone was removed from

the columns in order to investigate the connection of the structural posts inside the columns to

the ground. Mould and water damage was found on the revealed sheeting, Exhibit 1-F-35, top

photograph.

Page: 66

[411] Bjornson determined that the deck columns had been fabricated from non-pressure

treated material, though the deck posts within the columns were constructed from pressure-

treated material. She concluded that the improper use of OSB, improper lath installation, and the

risk of de-bonding required the removal of all of the stone from the columns. Hamman agreed

that some of the columns were located too close to the ground for the type of material originally

selected.

[412] Bjornson also opined that the mason had installed the metal lath vertically on the deck

columns, contrary to both good practice and the manufacturer’s requirements.

[413] The Defendants seek to deflect responsibility for this building deficiency by pointing to

the stone mason’s apparent lack of concern with the use of non-pressure treated materials in the

construction of the columns. In my view, there is no merit to this argument. Metcalfe and Tru-

Square were responsible for ensuring that their construction was Code-compliant and in

accordance with generally accepted building standards applicable to custom home building. The

Defendants’ work on this aspect of the construction project failed to meet these standards. The

fact that the stone mason, Lawrence, elected to complete his portion of the required work on this

element of the project in no way excuses or justifies the Defendants’ actions. In my view, it is

simply not relevant.

[414] TGC removed the stone and framing from the deck columns, re-framed them and sheeted

them with treated studs and ½” blue board sheeting, a pressure-treated and bug-resistant product.

A new moisture barrier and metal lath were then added before re-installing the stone over the

scratch and brown coats. This remediation work is depicted in progress in Exhibit 1-F-35, p 104-

05.

[415] In conjunction with the repair work undertaken on the deck columns, two small retaining

or pony walls were installed adjacent to the remediated piles described above. During the

remediation work, it was determined that during rain, the sloped earth leading to the final grade

at the rear of the residence was sliding down the slope and creating mud pools on the surface of

the walk-out area. In order to address this issue, two small retaining walls were built, one of

which is depicted in the bottom photograph of page 114 of Exhibit 1-F-35.

[416] I am satisfied that this was appropriate remediation under the circumstances.

15. Stucco

[417] As originally designed, the exterior of the residence was to be finished using a

combination of stone veneer and stucco. Some exterior features, including the fireplace chimney

and the deck columns were to be clad entirely in stone, while the upper portion of the residence

was, with some exceptions, to be clad in stucco.

[418] Metcalfe gave evidence that the final coat of acrylic stucco had not yet been applied in

May 2013, when the Plaintiffs discovered that the windows leaked and the Defendants

discontinued work on the project. He indicated that the second coat of stucco normally would be

applied approximately one month after the application of the scratch coat.

[419] According to the Code, the stucco on the residence had to comply with specified

thickness, cladding-continuity, and clearance-from-grade requirements. The stucco requirements

are outlined in Section 9.28.6.6(2) of the Code:

9.28.1.4 Clearance over Ground Level

Page: 67

1) Stucco shall not be less than 200 mm above finished ground level except when

it is applied over concrete or masonry.

9.28.6.3 First Coat

1) The first coat shall not be less than 6 mm thick, measured from the face of the

lath or masonry, fully embedding the lath.

2) The surface of the first coat shall be scored to provide a key with the second

coat.

9.28.6.4 Second Coat

1) The second coat shall not be less than 6 mm thick.

2) The surface of the second coat shall be lightly roughened to provide a key with

the finish coat if the finish coat is other than stone dash.

9.26.6.6 The second coat shall be continuous across the entire surface of the first

coat and have no gaps or voids.

[420] According to Bjornson, the stucco on the Swanby residence had extensive map cracking

on all elevations. Cracks extended as far as the entire depth of the stucco scratch coat and brown

coat and could be easily removed. These deep and extensive cracks could permit water to

penetrate through in bulk in breach of Code section 9.28.6.

[421] In her examination of the exterior finish of the residence, Bjornson identified several

issues with respect to the stucco. First, she noted that it was not sufficiently clear of grade around

the rear patio under the deck. While final grade was not present at the time of Bjornson’s work

on the residence, the concern was that the stucco would end up too close to grade in other areas

of the house. She noted that a special solution must be devised in accordance with Part 5 of the

Code in order to install stucco close to grade: Exhibit 16, p. 38, photo 8.34.

[422] Bjornson described the map-cracking on the as-built residence as amongst the ten worst

cases she had ever reviewed, including 300 installations in the two years immediately preceding

her trial evidence. She described the map-cracking as “extensive” and noted that the stucco was

easily removed. She also observed dark spots at the corners of the house, particularly in the

vicinity of the garage. She noted that the stucco was adequately thick in most areas on the

residence. Save for the rear patio area, and that it was of sufficient hardness: Evidence of

Bjornson, (Direct) – April 22, 2019, p.m.; (Cross) – April 24, 2019, at 3:11 & 3:20 p.m.; Exhibit

16, p 39, photo 8.63.

[423] The Defendants advance a number of arguments challenging the Plaintiffs’ decision to

remove all of the stucco on the residence. First, they rely on Hamman’s evidence that map

cracking is common and that he did not note any cracks exceeding 1/8” in depth. He also did not

find any Code violations relative to the stucco. Second, the Defendants appear to challenge

Bjornson’s evidence regarding the extent and severity of the stucco cracking, arguing that she

tested only one area of the residence and, further, that she was not able to identify the specific

cause of the map-cracking. Third, they appear to rely on information provided to Ms. Swanby by

an unidentified stucco contractor, who informed her that the stucco cracking was the result of it

having sat too long in an unsealed state. Finally, they challenge Bjornson’s reliance on the

presence of house-wrap under the stucco as a reason to remove all of the stucco.

Page: 68

[424] Hamman confirmed the map-cracking, but expressed the opinion that the first two coats

and the wire mesh were well-bonded to the wall. At the time of his site inspection on October 3,

2013, he did not observe any weak or falling areas.

[425] Hamman made a series of recommendations that appear to contradict his overall

conclusion that there were no issues with the stucco. First, he suggested the removal and

recoating of those areas where the brown coat was weak or failing. He also recommended

patching larger cracks with glass fibre tape prior to the application of the acrylic colour coat. As

such, he recommended the application of glass fibre tape to the entire surface as part of the final

colour coat.

[426] Bjornson rejected Hamman’s proposed remediation. In her view, glass fibre tape is only

appropriate to address telegraphing and very minor cracking. In her view, the map cracking in

this instance was both too thick and too extensive. Further, she raised the concern that the

extensive cracking evident in this situation would come through the final acrylic colour coat.

Hamman acknowledged he could not be certain that his recommended use of glass fibre tape

would prevent telegraphing in this instance.

[427] I accept the Defendants’ contention that Bjornson conducted destructive testing in only

one area of the residence. In her expert report, Exhibit 16, p 40, photo 9.37, shows the beginning

of the destructive testing in a two-foot area at the front of the house. The photograph shows an

area in the centre where the stucco has been removed. According to Bjornson, the rest of the

stucco in this area located between two stone sections was ultimately removed by hand. I am

satisfied that Bjornson conducted other testing in reaching her conclusions regarding the wide-

spread nature of the map cracking and, more significantly, the depth of these cracks. In

particular, she described observing Juniper easily remove stucco from other areas of the house

with the light tap of a hammer.

[428] In cross-examination, Bjornson clearly rejected the suggestion put to her by counsel for

the Defendants that prolonged exposure to the elements is a factor in the incidence of map

cracking. I accept Bjornson’s evidence in this regard. I also accept her evidence that map

cracking is generally caused by the stucco drying too quickly on account of warm outside

temperatures, or the drying stucco not being sufficiently hydrated. Given that she was not present

when the scratch and brown coats were applied, it obviously was not possible for her to

determine the precise cause of the map cracking in this instance. I am not persuaded that this in

any way undermines the weight to be placed on her findings and conclusions.

[429] In her evidence, Bjornson described the presence of Tyvek house-wrap under the scratch

coat. She explained that the concern is that the scratch coat will bond with the backside of the

wrap, thereby compromising the separate plane of protection afforded by the house-wrap.

According to Bjornson, it is common practice to either double up the house-wrap before

applying the scratch coat or not use house-wrap at all. While she did not observe any actual

bonding in this instance, she maintained that the concern remains that it may occur over time.

[430] While the Defendants appear to challenge Bjornson’s evidence regarding the presence of

Tyvek house-wrap in this instance, I note that this was not a point that was raised with her in

cross-examination. In my view, there is no merit to the Defendants’ challenge. I would also note

that Hamman agreed in cross-examination that the stucco would need to be removed if it had

been improperly installed over Tyvek.

Page: 69

[431] Bjornson recommended total removal of the stucco based on several factors, including

the extensive map-cracking, concerns relating to the stucco bonding to the house wrap, the grade

issues, and the problematic door and window installation. She rejection the option of partial

removal of the stucco because of her concerns about the extent of the map cracking and the

possibility of bonding to the house wrap. She also noted that it is very rare to do a partial

removal of stucco to effect this kind of repair. In her view, only total removal could ensure

second barrier continuance.

[432] Based on Bjornson’s recommendation, the Plaintiffs elected to remove the stucco. In

addition, TGC removed the building envelope down to the sheathing, then reinstalled the house

wrap and stone. Rather than re-installing stucco, the Plaintiffs elected to install Hardie Board. I

accept Juniper’s evidence that the use of Hardie Board was less costly in the circumstances than

reinstallation of stucco.

16. Stone Work

[433] There is considerable discrepancy in the parties’ evidence about the application of the

exterior stone veneer to certain portions of the residence, as well as the preparation of those

surfaces prior to the application of the stone. In addition, the Defendants take the position that

the supply and installation of the stone was specifically excluded from the contract with the

Plaintiffs and, as such, they bear no responsibility for any deficiencies that may have arisen

relative to the installation of the stone.

[434] The stone mason, Lawrence, testified that the stone was installed directly over the stucco

brown coat that was applied to the entire exterior prior to his arrival on site. He stated that the

mortar base was “whatever the stucco guy used”, and then explained that he could tell by the

colour that it was a Portland lime mix. He confirmed that he used a Type S mortar to apply the

stone to the building. Lawrence maintained that he had no concerns about applying the stone to

the surface as it existed when he arrived on site: Evidence of Lawrence, (Direct), May 14, 2019

(a.m.).

[435] According to Metcalfe, the stucco scratch coat was done at Carm’s direction. He

maintained that it was against best practices for stucco workers to do the preparation work for

masons. Hamman agreed with Metcalfe’s view that this was not good practice. Nevertheless,

Metcalfe directed that the stucco scratch coat be applied to the entire residence.

[436] Carm denied telling Metcalfe to have the stucco trades prepare the residence for the

masons. Rather, he testified that he discussed with Metcalfe the implications on the overall

project arising from delay in the shipment of the stone from India. These discussions went back

and forth around the possibility of completing the house wrap on the exterior of the residence

and the application of the scratch coats of stucco to the entire residence to allow work to

continue on the interior finishing while waiting for the stone to arrive. Carm maintained that he

has no knowledge as to the normal sequencing of stucco and masonry work. He was adamant

that he left this decision to Metcalfe, the general contractor.

[437] Carm also testified that he never provided instructions to the stucco contractor to apply

the scratch coat to the entire residence. He insisted that he was not paid by the Plaintiffs to

supervise the trades and that he did not instruct any of the trades on how to perform their

functions. He testified that Metcalfe was the general contractor.

Page: 70

[438] I accept Carm’s evidence and find that Metcalfe, as the general contractor, directed that

the scratch coat to be applied to the entire residence. I do not accept Metcalfe’s contention that

he was in any way “directed” to do this by Carm.

[439] I am satisfied that the stone mason, John Lawrence, did not prepare the house for the

application of the stone finish other than the deck columns. The moisture barrier, metal lath,

scratch coat and brown coat, had already been applied prior to Lawrence starting work. In his

evidence, he expressed the view that this is not common or typical practice.

[440] Bjornson expressed the view that the application of stone over the stucco brown coat is

not standard practice and is not Code-compliant as it does not allow for an adequate bond.

Bjornson explained that stone and stucco are different cementitious products and, as such,

require different mortar bases. Stone is a heavier material and requires Type-S mortar, while

stucco requires Type-N mortar. Further, she noted that the K2 Stone Nature Veneer used in this

instance specified in the installation guidelines that Type S mortar be used for installation.

[441] Bjornson reported that the thin stone veneer had a high probability of failure as a result of

the bonding issue. According to Juniper, the stone was not properly bonded to the walls and

came away by tapping with a rubber mallet. He explained that stone removal is ordinarily a very

labour-intensive process. Bjornson recommended that the stone be removed and replaced due to

the deficiencies.

[442] While Hamman’s evidence was that the stone appeared to be well-bonded to the walls, he

also stated that he had no issues with Bjornson’s observations to the contrary. I prefer the

evidence of Juniper and Bjornson in this regard.

[443] In terms of other deficiencies in the stone installation, Bjornson also identified loosely

bonded stone sills at the exterior doors on the patio. At the same time, she observed horizontal

mortar joints that had been left fully exposed to degradation from pooled moisture. Further, she

noted that mortar joints at stone sills were insecure and could be easily removed.

[444] Another issue involved the metal starter angle strip used to support and frame the actual

stone veneer. As built, the installed angle strips were attached using 2” screws. Upon

investigation, however, it was determined that many of the metal angle strips were not secure as

the screws were not sufficiently long to penetrate into the studs.

[445] During the investigation, it was determined that some of the stone had, in fact, been

properly installed. In the result, Bjornson and Juniper ultimately removed approximately 75% of

the stone that had been installed previously.

[446] The stone veneer requirements in the Code are outlined at section 10.5.1.

10.5.1 Thin Veneers secured individually by mortar adhesion

Thin veneers secured individually by mortar adhesion shall

a) be supported by structural backing;

b) have all of their joints filled with mortar that meets the requirements of

CSA A179; and

c) be secured to the structural backing by

Page: 71

(i) galvanized metal lath over structural backing other than

masonry or concrete, in accordance with the material,

specification, application, and fastening requirements for stucco

lath in Part 9 of the National Building Code of Canada;

(ii) a 6 mm scratch coat of Type M, S, or N cement plaster directly

over masonry or concrete, or over metal lath where the structural

backing is other than masonry or concrete; or

(iii) a 20 mm mortar bed of Type M, S, or N cement plaster applied

over the cured scratch coat and a bond coat of Type M, S, or N

cement plaster applied to the back of the veneer units and set into

the mortar bed.

[447] In terms of remediation, Bjornson recommended that the stone be removed to repair the

underlying stucco. Hamman agreed that if the stucco was improperly installed, then the stone

would have to be removed in order to remediate the stucco. Bjornson also recommended

replacement of the stone but accepted that the actual remediation undertaken in this instance

involved cleaning and re-installation of the stone initially installed. She expressed the view that

this was appropriate if the salvaged stones were in good condition. TGC was able to clean and

re-use most of the original stone.

[448] I am satisfied that the wrong mortar base was applied to the residence in those locations

that were to be finished with the natural stone veneer product. At Metcalfe’s direction, the stucco

scratch coats were applied to the entire residence. The stucco scratch coat and brown coat were

not the correct base for the stone installation, leading to inadequate bonding of the stone pieces

to the residence exterior as described by Bjornson and Juniper.

[449] Moreover, as described in the previous section of these Reasons, the stucco application

was so seriously deficient as to require its complete removal. Combined with the stone to stucco

bonding issues, I am satisfied that it was necessary to remove all the stone to address the

deficiencies associated with the underlying stucco. Since the stucco was clearly part of the

Defendants’ responsibilities under the contract, I find that the removal of the stone was a

necessary element of the remediation process for which the Defendants were responsible.

17. Building Envelope, Eaves & Soffits

[450] In her report and her trial evidence, Bjornson concluded that the building envelope was

not properly constructed and required remediation. She found numerous Code deficiencies and

failures to meet industry best practices.

[451] In her report, Bjornson explained that the moisture barrier provides the secondary layer of

protection for a building. The Code requires this secondary plane of protection in section 9.27.3:

9.27.3. Second Plane of Protection

9.27.3.1 Elements of the Second Plane of Protection (See Appendix A)

1) The second plane of protection shall consist of a drainage plane having an

appropriate inner boundary and flashing to dissipate rainwater to the exterior.

[452] Based on her extensive examination of the as-built construction of the residence,

Bjornson expressed the view that the moisture barrier was discontinuous and, therefore, not

Page: 72

Code-compliant. She noted that only a portion of the moisture barrier was visible at the time of

her review, though she indicated that additional areas were revealed during the investigative and

remediation processes. Due to the visible interior water leakage throughout the residence, she

concluded that the moisture barrier clearly had not provided the continuous protection envelope

required by the Code.

[453] She also observed that the house wrap did not extend past the soffit line and that the top

edge of the moisture barrier was susceptible to wind driven rain through the soffits’ perforated

material. Further issues with the discontinuity of the moisture barrier were also observed in

relation to the rear patio doors leading to the deck area. Water testing resulted in leakage below

the deck area and into the interior of the bar area below the deck. Water stains were observed on

the drywall in this area of the residence, indicating previous leakages.

[454] As a result of testing conducted on the roof, Bjornson determined that water was coming

out of the soffits and running down the exterior walls. She noted that the flashing was not

installed in accordance with best practice to protect the eaves under the shingles. Specifically,

she noted that there was insufficient flashing or drip edge behind the eavestroughs and fascia.

She concluded that the roofing installation was not Code-compliant regarding eaves protection

and drip flashing.

[455] Other witnesses noted that the eaves and soffits leaked. Juniper testified that he observed

water coming out of the soffits and running down the exterior walls. He noted that there was no

flashing present to prevent water from running down the walls. He referred to p 118 of his report,

top photograph, Exhibit 1-F-35, as depicting the work they were required to do to install flashing

on most of the roof.

[456] Metcalfe asserted that a drip edge and Tyvek house wrap were installed, but

acknowledged during questioning that he was aware there were issues with leaking soffits.

[457] In his report, Hamman expressed the view that the moisture barrier had been properly

installed. However, in cross-examination, he acknowledged that his conclusion was based on

information provided to him regarding the soffit installer’s usual methods of installing house

wrap to the soffit line. He also relied on a series of construction progress photographs that were

not identified during the trial. In the result, I place little weight on his opinion and prefer

Juniper’s evidence on this point.

[458] Bjornson recommended removal and replacement of the entire moisture barrier. TGC

replaced the entire building envelope, all eavestroughs, most soffits and fascia, and installed a

drip and break edge over the entire house. I am satisfied that this was an appropriate approach to

the remediation of the issues.

18. Exterior Decorative Beams

[459] The Defendants undertook an “extra” in terms of installing false beams in the gables over

the front entrance. A second decorative beam was to be installed in one of the gables at the back

of the home. McEwen confirmed that he assisted Metcalfe in installing these decorative beams.

The Defendants billed for this work.

[460] According to Juniper, the decorative beam at the front of the residence was not properly

connected to the structure. He determined that this beam was only tacked to the soffit with nails,

rather than being properly anchored and bolted to the exterior structure. He testified that he was

Page: 73

able to pull the beams away from the exterior structure easily by hand. He indicated that the

second decorative beam at the back of the house had been properly installed.

[461] In terms of remediation, a replacement beam has not yet been ordered or installed.

19. Mechanical Room & Plumbing

[462] Juniper described a floor joist in the mechanical room that had been cut to accommodate

the plumbing for a toilet in the room above. According to him, this was inconsistent with the

ZyTech shop drawing that called for an adjustment to the flooring to avoid cutting through the

floor joist: Exhibit 1-A-2. Neither Metcalfe nor McEwen offered any explanation for this

deviation from the shop drawing.

[463] Matthews issued an engineered repair detail regarding the cut out of this truss that

involved stiffening a three-foot section of the truss: Exhibit 1-A-7, SKI. TGC effected this repair

in conjunction with the remediation process. Juniper was also required to add blocking and nail

hangers to the floor system in the mechanical room.

[464] According to Juniper, the original boiler system that was installed in the residence was

inadequate to service the entire house, including the in-floor heating systems installed throughout

the residence. He testified that the pressure tank was too small for the intended purpose given the

number of zones in the residence that required service. Neither Metcalfe nor McEwen offered

any evidence on this point.

[465] As part of the remediation process, TCG upgraded the boiler system to meet the needs of

a house of that size by increasing the size of the pressure tank and installing a pressure regulator:

Exhibit 1-F-35, p 136.

[466] Juniper also gave evidence regarding a series of repairs or upgrades required in relation to

the electrical system in the residence. First, he described the considerable work that was required

to properly mark the main electrical box located in the mechanical room. He explained that this

is a step that is usually completed near the end of the construction process. In this instance, the

electrical box had not been marked by the original electrician prior to him abandoning the job

site. TGC was, accordingly, required to pull back substantial electrical wiring and to determine

the function of each wire to allow for the proper labelling of the electrical box and the

connection of wires to the appropriate electrical box or outlet: Exhibit 1-F-35, p 138, top

photograph.

[467] In effecting this remediation, TGC was able to re-use approximately 85% of the

plumbing and electrical materials. However, Juniper described this as “a great deal of work”:

Evidence of Juniper, April 12, 2019, p.m.

[468] Further, Juniper explained that a second electrical box was located adjacent to the

principal electrical box. During the remediation work, it was determined that the wire going into

the sub-panel was under-rated and had to be upgraded.

[469] Finally, while tracing electrical lines to mark the electrical panel, an electrical outlet was

discovered behind a completed plywood wall in the mechanical room: Exhibit 1-F-35, p 135.

This was also addressed during the remediation process.

Page: 74

20. Other Deficiencies Identified by Bjornson

[470] Bjornson’s expert report raised questions regarding several other aspects of the

construction of the home. It is not, however, necessary for me to deal with these specific matters

since there is no evidence that the Plaintiffs took any steps to address any of these issues during

the remediation process.

E. Other Possible Breaches

1. Metcalfe’s Lack of Involvement in the Project

[471] The Plaintiffs raise several concerns relating to Metcalfe’s role as their general contractor

during the course of the construction project and, in particular, his lack of oversight of the

various trades hired to perform different aspects of the work.

[472] In his testimony, Metcalfe acknowledged that a general contractor must be present on the

work site to oversee the work of the sub-trades. He also conceded that he had been away from

Alberta on personal business for a period of 8 to 9 months during the approximately 19 months

that he was involved in this project. The Plaintiffs point to the lack of progress reports and the

absence of any contemporaneous photographs taken by Metcalfe as one of the shortcomings

flowing from his extended absences.

[473] As more fully set out later in these Reasons, I am satisfied that Metcalfe’s frequent and

extended absences from Alberta left him in a state that he lacked proper knowledge of the details

of the work undertaken by trades acting under his supervision. I find that most if not all of the

construction deficiencies ultimately identified by the Plaintiffs’ experts related to matters that

were largely unknown to Metcalfe. This lack of up-to-date knowledge also was a contributing

factor in Metcalfe’s failure to engage expert assistance in relation to a number of issues that

arose during construction.

[474] I accept the Plaintiffs’ submissions that Metcalfe’s extended absences from the job site

severely impacted his ability to properly monitor and supervise the work of his sub-trades.

Combined with what I find to be his general lack of engagement in this project, Metcalfe was left

in a situation where he lacked essential information about the various issues that arose during

construction. Metcalfe’s general lack of knowledge about the project was manifested in a number

of ways, including the communication deficiencies that lie at the heart of the Plaintiffs’ concerns

discussed in the next section

[475] Based on the expert evidence of both Kraychy and the Defendants’ expert, Hamman, I

am satisfied that Metcalfe consistently failed to meet the standards expected of an experienced

custom home builder in terms of his knowledge and involvement in this project.

2. Failure to Keep the Plaintiffs Informed

[476] The Plaintiffs maintain that the Defendants failed to keep them properly informed of

important developments during the construction project, notably deficiencies and other problems

that arose. The Plaintiffs refer to Kraychy’s evidence regarding a software program he employs

to keep customers up to date on necessary changes to the plan and the associated cost

implications. He testified that sharing this information with customers on an on-going basis

Page: 75

allows them to be aware of the amount of the various allowances that are available, as well as to

keep track of the overall cost of the project.

[477] Both Ms. Swanby and Carm gave evidence that Metcalfe was reluctant or unable to

provide detailed financial information relating to the various allowances. Carm commenced a

budgeting process to assist the Plaintiffs with this aspect of project management, particularly in

relation to the interior work.

[478] The Plaintiffs maintain that Metcalfe failed to meet the requisite standard of care in

communicating openly and transparently with his clients once he knew deficiencies had been

identified. They assert that he was reckless in his failure to disclose and to confirm that other

aspects of the work were adequate. Hamman confirmed in cross-examination that, faced with

sub-trade deficiencies, he would take steps to review all of the other work undertaken by that

particular trade to confirm that it had been properly executed.

[479] Earlier in these Reasons, I referred to the important evidence of Kraychy, the Plaintiffs’

expert called to give opinion evidence in relation to a number of issues touching on custom

home-building. I accepted Kraychy’s evidence regarding the importance of effective, on-going

communication between a general contractor and his or her customers. He explained the need for

a general contractor to keep the customer fully apprised of the progress of the project and

actively engaged in the resolution of issues or problems arising during construction. I am

satisfied that there was a serious communication deficiency in this instance on the part of

Metcalfe. Unfortunately, Metcalfe’s poor communication with the Plaintiffs gave rise to an

erosion and, ultimately, a breakdown, in the Swanby’s confidence in him.

F. Application of Liability in Contract

[480] As already noted, the Plaintiffs rely on the deficiencies enumerated above in support of

their contention that the Defendants are in breach of contract.

[481] I find that the construction deficiencies enumerated above amply demonstrate that Tru-

Square breached its contract with the Plaintiffs. Contrary to their agreement, numerous aspects of

the construction failed to meet Code standards, let alone the higher standard advocated by the

Plaintiffs and their experts. Further, Tru-Square failed to provide proper supervision of the

subcontractors.

[482] The difficulty for the Plaintiffs is that their contract, whatever its terms, was with Tru-

Square only, not with Metcalfe. Therefore, no contractual remedy is available as against

Metcalfe. To impose liability on him personally, the Plaintiffs must establish that they are

entitled to such a remedy in tort.

G. Application of Liability in Tort

[483] The Plaintiffs say that the construction was deficient from a Code perspective in a

number of areas. Moreover, citing Ryan v Victoria, [1999] 1 SCR 201, the Plaintiffs say that

even if there was compliance with the Code, that does not absolve the Defendants from

negligence. At para 29, the Court in Ryan held:

Legislative standards are relevant to the common law standard of care, but the two

are not necessarily coextensive. The fact that the statute prescribes or prohibits

certain activities may constitute evidence of reasonable conduct in a given

Page: 76

situation, but it does not extinguish the underlying obligation of reasonableness.

See Saskatchewan Wheat Pool v Canada, [1983] 1 SCR 205. Thus, a statutory

breach does not automatically give rise to civil liability; it is merely some

evidence of negligence. See, e.g. Stewart v Pettie, [1995] 1 SCR 131 at para 36,

and Saskatchewan Wheat Pool, at p. 225. By the same token, mere compliance

with the statute does not, in the end of itself, preclude a finding of civil liability.

See Linden, supra, at p. 219. Statutory standards can, however, be highly relevant

to the assessment of reasonable conduct in a particular case, and in fact may

render reasonable an act or omission which would otherwise appear to be

negligent. This allows courts to consider the legislative framework in which

people and companies must operate, while at the same time recognizing that one

cannot avoid the underlying obligation of reasonable care simply by discharging

statutory duties.

[484] Further, the Plaintiffs rely on the evidence of Kraychy and the other experts regarding the

applicable standard of care. In particular, they point to the good workmanlike standard implied in

every building contract, the need to communicate effectively with homeowners, the requirement

to disclose deficiencies and to take appropriate steps to rectify such deficiencies, and generally to

ensure that the homeowners’ objectives are satisfied.

[485] I accept the Plaintiffs’ suggestion that the observations, opinions and recommendations of

their experts are largely unchallenged by the Defendants. Indeed, Hamman did not seriously

challenge any of the findings or conclusions of either Bjornson or Matthews. In some instances,

Hamman agreed with the Plaintiffs’ experts that the original construction was deficient.

[486] The Plaintiffs assert that the deficiencies described above establish that the applicable

standard of care was not met in this instance and that Tru-Square is liable in negligence.

Moreover, the Plaintiffs contend that Metcalfe may be held personally liable for that negligence.

They arrive at this conclusion via a number of different routes.

1. Inherently Dangerous Work

[487] First, the Plaintiffs say that Metcalfe should be held personally liable for Tru-Square’s

negligent construction because the work performed was inherently dangerous. They point to

several examples:

a) The bonus room stairs were not properly connected;

b) Unsecured steel I-beams in the Bonus room and the back deck;

c) The deck was not properly connected to the main structure;

d) One of the deck’s concrete piles was resting on disturbed soil and not of sufficient

depth;

e) Live wires were located behind the drywall in the garage and in the bedroom, as well

as under the jet tub in the master ensuite bathroom. All of these wires were, to

Metcalfe’s knowledge, energized without any final review by an electrician or any

warning provided to the Plaintiffs;

f) Threshold cut outs directed by Metcalfe undermined the structural integrity of the

residence and exposed the structure to serious water damage; and

g) Broken roof trusses were not repaired prior to being installed in the residence.

Page: 77

[488] The Defendants argue the Plaintiffs have failed to establish that any of the work actually

performed by Metcalfe resulted in damage and that the decided cases on this point do not cover

the risk of physical damage, only the actual occurrence of such damage. Further, they assert that

the Plaintiffs have failed to establish the probability of risk of physical injury flowing from the

Defendants’ negligence.

[489] The Defendants rely on the Court of Appeal’s comments in Vargo v Hughes 2013 ABCA

96 at para 43:

In our view, the trial judge had a sufficient basis to conclude that the threat of roof

collapse meant the house was dangerous. His conclusion was not palpably wrong.

He had before him expert evidence that if a sufficient snow load came onto the

roof tresses, there was a “good chance” they might collapse. This meets the

“reasonable likelihood” standard required by Winnipeg Condo.

[490] The Defendants challenge the Plaintiffs’ contention that either the deck or the Bonus

Room staircase was inherently dangerous. With respect to the deck, they maintain that the

Plaintiffs’ reliance on a statement attributed to Matthews by Ms. Swanby was not confirmed in

his actual trial evidence. In any event, the Defendants say that Matthews never observed the as-

built deck and, as such, his words to Ms. Swanby predicting its ultimate collapse, without more,

are insufficient to conclude that the deck construction was inherently dangerous.

[491] I am satisfied that there was reliable evidence regarding the inadequacy of the deck’s

connection to the main residence. Both Matthews and Juniper gave evidence about this and even

the Defendants’ expert, Hamman, acknowledged the risk posed by the as-built condition of the

deck, noting “at some point, that deck’s coming off the wall.”

[492] In my view, the as-built condition of the deck posed a significant risk to users of the deck

and the outdoor space accessed from the basement directly beneath the deck. I am satisfied that

the deck construction was inherently dangerous.

[493] The Defendants also challenge the Plaintiffs’ contention regarding the hazardous nature

of the Bonus Room staircase’s connection to the house frame. They rely on the evidence of

Metcalfe and McEwen regarding their personal involvement in this process. I prefer the evidence

of Matthews given what I find to be the contradiction in the evidence of Metcalfe and McEwen

on this point. As outlined elsewhere in these reasons, I also have serious reservations about the

reliability of Metcalfe’s evidence generally.

[494] In my view, the as-built condition of the Bonus Room staircase posed a significant risk to

the various trades who may have had occasion to use it during the course of construction. In

addition, the Plaintiffs and others using the staircase in the future would also have been exposed

to a significant risk of collapse given the inadequacy of its connection to the rest of the building

structure.

[495] I am satisfied that my findings do not require proof of actual injury to persons or of actual

collapse. The investigative work conducted by the Plaintiffs’ experts brought the danger to the

Plaintiffs’ attention prior to occupancy, thereby averting a likely accident once the deck and

staircase were subjected to normal use.

[496] I note that the Court of Appeal stated this in Vargo at paras 26 and 27:

Page: 78

The main policy justification given by the Supreme Court in Winnipeg Condo for

allowing the subsequent owner of a negligently constructed building to recover

the cost of repairing defects which present a real and substantial danger was to

encourage that subsequent owner to take preventative steps before physical

damage to persons or property resulted. If a plaintiff can show a reasonable

likelihood of a real and substantial danger to the building’s occupants, there is no

point in making the owner wait until the risk of injury manifests itself before

attending to the repair of the dangerous defect. ...

And, once it has been established that sufficient harm is reasonably likely to occur

within the useful life of the building, what, if anything, is gained by imposing an

imminence requirement on the harm? ...

[497] To be sure, Vargo dealt with the question of whether a negligent builder could be liable

to a subsequent owner of the building. In my view, however, it would be nonsensical to allow a

claim by a subsequent owner but bar recovery by the party who engaged the negligent builder.

[498] Accordingly, I find that the Defendants’ negligent construction of the residence created a

real and substantial danger to its occupants that permits recovery.

[499] The remaining difficulty, however, is that there was no reference in Vargo to the builder

operating through a corporation. Therefore, it is not clear to me that Vargo permits the Plaintiffs

to recover from Metcalfe personally, as opposed to from Tru-Square.

2. Fraud

[500] The Plaintiffs advance two arguments in support of their position that Metcalfe’s conduct

was not only negligent, but fraudulent. First, they say that Metcalfe “pacified” them into

believing that their dream home would be realized notwithstanding the existence of substantial

and dangerous construction deficiencies. They argue that his concealment of these deficiencies

amounts to fraud. Second, the Plaintiffs say that Metcalfe had Tru-Square send them invoices for

goods and services that were not provided.

[501] The Plaintiffs rely on the test for fraud set out in Bruno Appliances and Furniture Inc v

Hryniak, 2014 SCC 8 at para 21:

From this jurisprudential history, I summarize the following four elements of the

tort of civil fraud: (1) a false representation made by the defendant; (2) some level

of knowledge of the falsehood of the representation on the part of the defendant

(whether through knowledge or recklessness); (3) the false representation caused

the plaintiff to act; and (4) the plaintiff’s actions resulted in a loss.

[502] The Plaintiffs maintain that Metcalfe knowingly concealed construction deficiencies

within his actual knowledge or was reckless or wilfully blind to deficiencies he should have

known about through the exercise of reasonable diligence in his role as general contractor. They

particularize these undisclosed deficiencies as follows:

a) Failure to engage a qualified surveyor to mark and peg the foundation

notwithstanding that the cost of same was included in the contract;

b) Failure to engage an engineer or obtain engineered drawings relative to Metcalfe’s

decision to shift from an ICF foundation to a traditional foundation;

Page: 79

c) Failure to disclose that the foundation was off-set;

d) Failure to remedy the off-set foundation. Rather, Metcalfe told the framer to frame

the residence square off the foundation;

e) Metcalfe was aware that OSB and untreated lumber was improperly used at grade in

contravention of the Code;

f) Directing or permitting the framer to cut away floor sheathing at numerous door

threshold without first obtaining engineering advice on the positional impact on the

structural integrity of the building;

g) Failure to disclose the lack of proper connection of the staircase leading to the Bonus

Room above the garage;

h) Permitting the steel I-beam relating to the deck to be encased notwithstanding that it

was improperly supported. In this regard, Metcalfe failed to consult the Code to

obtain guidance as regards the minimum requirements;

i) Permitting the most southerly pile supporting the deck to rest on disturbed soil and at

a non-Code compliant depth;

j) Failure to disclose the existence of window leaks in the Bonus Room prior to the

Plaintiffs discovery of generalized window leaks in May 2013;

k) Failure to address leaking pot lights notwithstanding advice from the electrician that

water was observed to gush through the openings in the seal. Further, Metcalfe

personally installed blow-in insulation in the attic around these same unsealed pot

lights;

l) Failure to install sound insulation in the main basement ceiling area despite an

agreement with the Plaintiffs in this regard.

[503] The Plaintiffs assert that Metcalfe told Ms. Swanby the foundation “looked good”

notwithstanding that it was off-set or not square and that he failed to address the issue or to

consult an engineer. Further, Ms. Swanby testified that she had a conversation with McEwen in

which he reported that Metcalfe had told him not to disclose any framing problems to the

Plaintiffs.

[504] The Defendants assert that a November 19, 2012 email from Metcalfe to Mr. Swanby

“disclosed problems and concerns”. They also challenge Ms. Swanby’s evidence about the

alleged conversation with McEwen. Metcalfe denied having ever made such a statement to

McEwen. As well, the Defendants assert that McEwen denied ever having had such a

conversation with either Metcalfe or Ms. Swanby.

[505] I reject the Defendants’ argument that the November 19, 2012 email actually disclosed

problems and concerns. Rather, as discussed elsewhere in these Reasons, it set out a description

and attempted explanation for a series of cost over-runs associated with the project. In my view,

it says nothing about problems or concerns with the construction.

[506] Further, I accept Ms. Swanby’s testimony about the conversation with McEwen. Having

carefully reviewed his evidence, I conclude the McEwen did not deny the alleged conversation;

his denial pertained to something else.

Page: 80

[507] In considering whether Metcalfe’s conduct amounted to fraud, I have found instructive

these comments from the Court of Appeal in Motkoski Holdings Ltd v Yellowhead (County),

2010 ABCA 72 at paras 57 – 58:

The legal definition of fraud is well established... There are two branches to it.

Both branches are built on a finding that a false or inaccurate statement was made.

Under the first branch, fraud is established if the defendant “knew” that the

statement was false, and made it with the knowledge or intention that the plaintiff

would rely on it.

Under the second branch, it is sufficient if the defendant did not actually know the

statement was false, so long as the statement was made recklessly. “Recklessly”

in this context means that the statement was made “without caring whether it was

true or false”. “Recklessly” does not just mean the statement was made with “very

great negligence”, nor that it was made in a highly risky context, such that the

probability of someone relying on the statement to their detriment was enhanced.

As Lord Herschell said in Derry v. Peek at p. 375, “making a false statement

through want of care falls far short of, and is a very different thing from, fraud,

and the same may be said of a false representation honestly believed though on

insufficient grounds”. Under neither branch of the test is it sufficient that the

defendant “should have known” the truth, or should have been more careful and

made further inquiries; actual knowledge or actual indifference to the truth is

required.

[508] The Plaintiffs’ civil fraud claim is based on Metcalfe’s alleged concealment of

construction deficiencies that were within his actual knowledge or that he should have been

aware of through the exercise of reasonable diligence as a general contractor. Other than

Metcalfe’s statement to Ms. Swanby that the foundation “looked good”, the Plaintiffs’ argument

is founded on concealment or failure to disclose, as opposed to actual false or negligent

representations.

[509] Having in mind the above comments from Motkoski, I am not satisfied that Metcalfe’s

failure to disclose the construction deficiencies is sufficient to constitute fraud. Metcalfe’s

frequent and extended absences from the construction site resulted, in my view, in his being

largely unaware of how the construction was proceeding. While he was certainly negligent in his

oversight of the project and in his dealings with the Plaintiffs, I consider his actions to be more in

the nature of deflection or “want of care” than active concealment. Therefore, I am not prepared

to find that his conduct amounted to fraud.

[510] In a similar vein, I accept the Defendants’ argument that Metcalfe did not make verbal

representations to the Plaintiffs prior to the signing of the construction contracts regarding his

status as a “luxury custom home builder”. I do not interpret the Plaintiffs’ argument in this

regard to suggest that he did. Rather, the Plaintiffs say that they relied on the fact that Tru-Square

was a well-known builder in the area and they were personally aware that Tru-Square had been

the contractor for building custom homes for Ms. Swanby’s brother and a neighbour. Further, the

Swanbys had, through signage, seen evidence of Tru-Square’s work in the area. Through this

body of work, the Plaintiffs say that Tru-Square held itself out to be an experienced custom

home builder.

Page: 81

[511] With respect to their allegation of civil fraud on the basis of billing for work not

completed, the Plaintiffs refer to several instances in which they say Metcalfe invoiced them for

goods and services that were not provided. As discussed later in these Reasons, I have found that

a number of these invoices are properly payable by the Plaintiffs.

[512] In my view, this is not the Plaintiffs’ strongest argument. While I accept that there is

some evidence of anomalies in Tru-Square’s invoices, I am not satisfied that the Plaintiffs have

established fraud on this basis. Under the circumstances, given the relatively modest amount of

money involved, I am not prepared to infer that the Defendants had knowledge of the false

statements that form the basis of the Plaintiffs’ claim in this regard. Rather, I am inclined to the

view that these were careless, even negligent, mistakes or oversights on the part of the

Defendants that will need to be addressed in dealing with damages.

[513] In light of all of the foregoing, I am not prepared to find that Metcalfe’s conduct was

fraudulent, though I will say that I consider this case very close to the line.

3. Piercing the Corporate Veil

[514] Finally, the Plaintiffs suggest that there is authority for personal liability to be imposed

for non-dangerous defects in relation to individuals associated with closely held corporations.

The Defendants take the position that any acts of negligence occurred while Metcalfe was

engaged in the business of Tru-Square and therefore cannot be visited upon him personally.

a) The Law

[515] As far back as the seminal case of Kosmopoulos v Constitution Insurance co of Canada,

[1987] 1 SCR 2, the Supreme Court noted at para 12 that “The law on when a court may

disregard this principle by ‘lifting the corporate veil’ and regarding the company as a mere

‘agent’ or ‘puppet’ of its controlling shareholder or parent corporation follows no consistent

principle.” The Court added:

The best that can be said is that the "separate entities" principle is not enforced

when it would yield a result "too flagrantly opposed to justice, convenience or the

interests of the Revenue": L.C.B. Gower, Modern Company Law (4th ed. 1979) at

p. 112.

[516] The rationale underlying this inconsistency was discussed at some length by Slatter JA in

Hall v Stewart, 2019 ABCA 98 at paras 11-13:

The widespread recognition of the corporation as a separate legal person, coupled

with limited liability of those associated with the corporation, was one of the most

important legal-economic developments of the 19th century. The corporate legal

entity allowed the conglomeration of small amounts of capital into large pools of

capital needed for complex enterprises. It allowed those with managerial expertise

to exploit those sums, and those with cash but no expertise to put their assets to

work. A modern corporation can own property, engage in business, and sue and

be sued in its own name. A key feature of corporations is that the shareholders are

not personally liable for the debts and obligations of the corporation.

The recognition of a separate corporate personality, and the resulting limited

liability, is not a loophole or a technicality; it is an essential tool of social and

Page: 82

economic policy. There are, however, some situations where personal liability

remains, notwithstanding the concept of a separate legal personality and limited

liability. While the corporation is seen as a valuable economic and social tool, it is

recognized that it is a tool that can be misused. One area of potential personal

liability is when officers and employees of a corporation cause damage by a

tortious act. When will an employee or director be held personally liable,

notwithstanding that they only acted on behalf of the corporation?

Finding representatives of corporations personally liable for torts engages

competing policy objectives. One policy objective of the law of torts is the

compensation of injured persons. A competing policy objective of corporate law

is the limitation of personal liability for corporate acts.

[517] The difficulty in balancing these competing policy objectives manifests as a lack of

coherence in the courts’ approach to piercing the corporate veil. Over time, various attempts

have been made to bring some structure to this analysis. This was aptly expressed by Antonio JA

in Aubin v Petrone, 2020 ABCA 13 at paras 21-22:

The corporate veil is not impenetrable. The law provides for instances when the

veil may be “pierced” or “lifted”. Such instances are rare and difficult to

categorize, as the Supreme Court of Canada recognized in the seminal case of

[Kosmopoulos]…

Recognizing the variety of unpredictable situations in which it may be appropriate

to life the corporate veil, Kosmopoulos reserves to the courts a residuum of ability

to act to prevent injustice when necessary. However, the courts have been

appropriately leery of interpreting Kosmopoulos as free rein to trench on the

principle of corporate separateness. Some have tried to set out criteria or factors to

govern the determination of when the corporate veil should be lifted.

[518] Fundamentally, the courts have focused on two factual issues: the extent to which the

corporation was controlled by its parent or principal and the nature and egregiousness of the

alleged wrongdoing.

[519] In Tirecraft Group Inc (Receiver of) v High Park Holdings ULC, 2010 ABQB 653,

Justice Yamauchi provided a very thorough review of the law to that point, beginning with

Kosmopoulos. He referred to two Ontario decisions: Transamerica Life Insurance Co of

Canada v Canada Life Assurance Co (1996), 28 OR (3d) 423 (ONGD) and Clarkson Co Ltd v

Zhelka (1967), 64 DLR (2d) 457 (ONHC).

[520] The Court in Transamerica had refused to pierce the corporate veil, applying this test as

set out at paras 22-23:

As just indicated, the courts will disregard the separate legal personality of a

corporate entity where it is completely dominated and controlled and being used

as a shield for fraudulent or improper conduct. The first element, “complete

control”, requires more than ownership. It must be shown that there is complete

domination and that the subsidiary company does not, in fact, function

independently…

The second element relates to the nature of the conduct: is there “conduct akin to

fraud that would otherwise unjustly deprive claimants of their rights?”

Page: 83

[521] The Court in Zhelka also had declined to pierce the corporate veil, though it found at

para 86 that the case before it was “close to the line” after applying this test set out at paras 83-

84:

If a company is formed for the express purpose of doing a wrongful or unlawful

act, or, if when formed, those in control expressly direct a wrongful thing to be

done, the individuals as well as the company are responsible to those to whom

liability is legally owed.

In such cases, or where the company is the mere agent of a controlling corporator,

it may be said that the company is a sham, cloak or alter ego, but otherwise it

should not be so termed.

[522] Justice Yamauchi then enumerated several factors the courts have found significant in

determining whether a corporation is a “sham, cloak or alter ego”:

(a) the shareholder treats itself and the corporation interchangeably;

(b) the corporation is merely created to deflect monies from their proper usage;

(c) the shareholder intermingles the corporation’s affairs with its own, such that

the shareholder fails to recognize the corporation’s separate identity;

(d) the shareholder treats corporate property as though it belongs to the

shareholders without regard for the interests of those dealing with the

corporation;

(e) whether the corporation is independent from its shareholders;

(f) whether the corporation has its own assets, skills or employees; and

(g) whether the corporation has its own bank accounts, books or records.

[523] Justice Yamauchi recognized that these indicia of control, in and of themselves, are not

sufficient to justify piercing the corporate veil. Rather, he noted at para 25 that “It is only when

the promoter uses the corporate structure as a cloak, sham or alter ego in such a way as to

perform a wrongful, unlawful, fraudulent or improper act that causes third parties to suffer, will a

court pierce the corporate veil.” (Emphasis added.)

[524] Elbow River Marketing Limited Partnership v Canada Clean Fuels Inc, 2012 ABCA

328, a decision delivered by Picard JA from the bench, involved a consideration of whether to

pierce the corporate veil between two closely related corporations. Citing Transamerica, the

Court of Appeal held at para 16 that “Canadian courts will pierce the corporate veil only when a

corporation has been completely dominated and controlled and used as a shield for fraudulent or

improper conduct.” The Court of Appeal did not review the factors set out in Tirecraft, but

concluded that it was inappropriate to summarily dismiss the corporate veil issue and ordered

that it proceed to trial.

[525] In Spartek Systems Inc v Brown, 2014 ABQB 526, Justice Ross cited both Elbow River

and Tirecraft and concluded that piercing the corporate veil was appropriate in that case. She

stated as follows at para 282:

The circumstances in which 113 was formed demonstrate that Brown did not

distinguish between his own affairs and 113’s, and that 113 has no independent

Page: 84

existence apart from Brown. Brown transferred his own shares in Spartek to 113,

and directed 113 to transfer those shares to Spartek and to receive payment for

them. The evidence was that 113 had no objective and pursued no activity other

than receiving payments under the Share Sale Agreement for Brown’s tax

planning purposes. 113 was a mere alter ego of Brown.

[526] Justice Ross went on at paras 283-285 to find that there was wrongful conduct:

A wrongful act that justifies the lifting of a corporate veil does not have to amount

to fraud. Courts have described circumstances where the corporate veil can be

lifted as “improper conduct”, “wrongful conduct” or “conduct akin to fraud”:

Tirecraft at paras 16 and 19.

In this case, both Brown and 113, as Vendors under the Share Sale Agreement,

had joint obligations under the Confidentiality, Non-Solicitation and Non-

Competition Agreement. Brown went on to breach those obligations and to

conspire with the other Defendants. It is true, as Brown argues, that Brown was

not directing or acting on behalf of 113 when he breached his contractual

obligations and entered into the conspiracy. But that is because 113’s sole purpose

and activity, as determined by Brown, was the receipt of monies pursuant to the

Share Sale Agreement.

If the corporate veil is not pierced, 113 may receive the benefit of full payment

under the Share Sale Agreement while avoiding any responsibility for Brown’s

breach of the joint obligations under the Confidentiality, Non-Solicitation and

Non-Competition Agreement. This may result in serious inconvenience and/or

loss to Spartek, in the enforcement of its judgment against Brown. To permit

Brown’s alter ego to improperly benefit and potentially permit Brown to escape

from his obligations would be a result that should not be condoned by this Court.

…

[527] The Plaintiffs cited two decisions in which personal liability attached to individual

principals of corporations responsible for non-dangerous construction deficiencies. In 1469753

Alberta Ltd v Luxen, 2015 ABQB 282, Pentelechuk J (as she then was) imposed personal

liability, but the decision turned on the absence of any written estimate or contract for the

plumbing and heating services supplied by the plaintiff and on the defendants’ legitimate

assumption that they were dealing with a sole proprietor. The Court found a breach of s 10(8) of

the Business Corporations Act, RSA 2000, c B-9, requiring a corporation to set out its name in

all contracts, invoices, negotiable instruments and orders for goods or services. I would simply

add that in Luxen, the principal operating the plaintiff corporation did not perform any of the

plumbing or heating work that gave rise to the defendants’ successful counterclaim founded in

both contract and tort.

[528] In Koltai v Hauser, 2017 BCSC 1675, the Court, relying on Transamerica, concluded

that it was appropriate to pierce the corporate veil and find Hauser personally liable for breach of

contract relating to renovations undertaken by his corporation. While the written contract was

between the plaintiff and the corporation, Brown J found that the construction was so deficient as

to amount to fraud. Further, she found that the defendant had either misappropriated or not

properly accounted for the funds advanced by the plaintiff.

Page: 85

[529] In AVAC Ltd v Ceapro Inc, 2018 ABQB 44 at para 70, Justice Jones took an approach

similar to that in Elbow River:

I am satisfied, based on the foregoing discussion, that CTI was “completely

dominated” by Ceapro Inc. The question is whether there is a wrongful act in this

case sufficient to justify piercing the corporate veil. …

[530] However, Justice Jones went on at paras 71-73 to note the need for caution in considering

the issue of wrongful act:

There is no suggestion that the formation of CTI or the plan to operate the

Ceaprove business through it was in any way fraudulent. As discussed above, this

was done for the legitimate purpose of isolating potential liability arising from the

production of a product for human consumption. Moreover, it is clear from the

evidence that AVAC was aware at all times that CTI was the contracting entity

under the Ceaprove Agreements. The only wrongful act here is the breach of the

Ceaprove Agreements.

This case is distinguishable on its facts from Spartek. In that case, both Brown

and 113 were parties to the contract, but only Brown was in breach and the

question was whether the non-breaching party should be held liable. In this case,

the only party to the Ceaprove Agreements is CTI. Ceapro is neither in breach of

the Ceaprove Agreements nor a party to them.

The type of wrongful act which justifies ignoring the separate corporate identity

of CTI must be something more than CTI’s non-compliance with the Ceaprove

Agreements. Were I to pierce the corporate veil in these circumstances, I would

be disregarding the need for a wrongful act and relying solely on the extent of

control of CTI by Ceapro Inc. That would be tantamount to concluding that the

corporate veil may be pierced in any situation in which a subsidiary is closely

associated with its parent.

[531] In Aubin, Antonio JA considered the application of the corporate veil in the family law

context and made reference to Transamerica at paras 23-24:

In [Transamerica], the Ontario Superior Court General Division held that the

separate identities of a parent company and its subsidiary can be disregarded if (i)

there is complete control of the subsidiary, such that the subsidiary is the “mere

puppet” of the parent corporation; and (ii) the subsidiary was incorporated for a

fraudulent or improper purpose or used by the parent as a shell for improper

activity.

The two-part Transamerica test has found general application, though it has

sometimes been stated in different terms. For instance, in Arsenault v Arsenault

(1998), 38 RFL (4^th) 175 at para 24, the test was stated in three parts:

1. The individual exercises complete control of finances, policy, and business

practices of the company.

2. That control must have been used by the individual to commit a fraud or wrong

that would unjustly deprive a claimant of his or her rights.

3. The misconduct must be the reason for the third party’s injury or loss.

Page: 86

[532] Antonio JA found that the test is applicable in the family law context, citing the “leading

authority” in Wildman v Wildman (2006), 82 OR (3d) 401 (CA) and commenting as follows at

paras 33, 34 and 36:

Echoing the Transamerica test, the [Wildman] court at para 25 framed the central

question as whether it is possible to disregard the separate legal personality of a

corporation when it is in an individual’s complete control and is being used as a

shield for fraudulent and improper conduct. The court concluded that the answer

is “a resounding ‘Yes’”.

…”[T]he law must be vigilant to ensure that permissible corporate arrangements

do not work an injustice in the realm of family law”: Wildman at paras 41 and 49.

…

Though some authorities have spoken of a relaxed test for veil-lifting in the

family law context, it seems that generally a remedy has been awarded on a pure

version of the test. Perhaps the added factor, if there is one, is the recognition that

obligations imposed by family law are on equal footing with other legal

obligations and deserve fair balancing where interests compete. It is also

appropriate to recognize, as the trial judge did, that “in the family law context, the

creditor spouse cannot choose whether to deal with the corporation the way a

commercial creditor can. The assets of the family unit are tied to the

corporation”…

[533] Justice Antonio reiterated that piercing the corporate veil is by no means automatic,

saying at paras 40 and 59:

Attribution of corporate income to a payor parent is not automatic; it requires

inquiry and balancing against legitimate business requirements. As stated in

[Goett v Goett, 2013 ABCA 216] at para 13:

When the corporate veil is lifted in a commercial context, certain

factors are considered: for example, whether the individual

exercises complete control of finances, policy, and business

practices of the company, whether the control has been used by the

individual to commit a fraud or wrong that would unjustly deprive

a claimant of his or her rights, and whether the misconduct (for

example the transfer [of a corporation previously owned by the

payor for the purpose of avoiding child support obligations]) is the

reason for the loss. These factors are also relevant, although not

applied as stringently, in the family context.

…

At risk of oversimplification, protection of shareholders is the reason for the

corporate veil. It is therefore obvious that the presence of other shareholders is an

important factor to be considered in deciding whether to lift it. It will also be

relevant to consider the nature of the company (for example, family business

versus publicly traded corporation), the reasonable expectations of the

shareholders about how the company will be used by its principals, whether the

shareholders are bona fide purchasers for value, and any other relevant factors.

Page: 87

[534] Nevertheless, while acknowledging that piercing the corporate veil is not the rule, Justice

Antonio held at para 68 that it is not restricted to “exceptional” circumstances:

…the repeated jurisprudential references to lifting the veil in rare and exceptional

cases should be understood as an expectation, not a requirement. The courts

expect that lifting the veil will rarely be justified because they expect corporations

and their directing minds to deal fairly and in accordance with their legal

obligations, and because the necessary balancing of interests means that a remedy

will not automatically flow. But a claimant who asks that a corporate veil be lifted

is not required to establish that his or her case is rare and exceptional.

Circumstances that cause unjust deprivation but are “far from unusual”, as the

court found in Arsenault at para 22, deserve redress. The law should not shelter

wrongdoers because their type of wrongdoing is too commonplace.

[535] In brief written reasons in Zerbin v Vrbanek, 2021 ABCA 317, the Court of Appeal

upheld the trial judge’s decision to pierce the corporate veil and find the appellant Vrbanek

personally liable for overcharging for project management services related to the construction of

two homes for the respondents. The trial judge found that “the facts invoke fraud, deceit or

dishonesty”, rendering Vrbanek personally liable. At para 18, the Court of Appeal referred to the

two factors discussed above:

Although not strenuously argued at the appeal hearing, the appellants in their

factum challenge the trial judge’s decision to piece the corporate veil and find

both DN and Mr. Vrbanek jointly and severally liable for damages. Courts will

pierce the corporate veil only when a corporation has been “completely

dominated and controlled and used as a shield for fraudulent or improper

conduct”: [Elbow River].

[536] In contrast to this two-factor test, Slatter JA articulated a somewhat different approach in

Hall at para 16 (all citations omitted):

The law on when personal liability will attach to corporate actors is not clear. The

case law was surveyed in the concurring reasons in Rocky Mountain Slate at

paras. 75ff. A number of relevant factors have been identified by the courts:

(a) Whether the negligent act was committed while engaged in the business of the

corporation, and whether the negligence of the employee was contemporaneous

with that of the corporation...

(b) Whether the individual was pursuing any personal interest beyond the corporate

interest…

(c) Whether the director or corporate representative owed a separate and distinct

duty of care towards the injured party…

(d) That the conduct was “in the best interests of the company”;

(e) Whether the plaintiff voluntarily dealt with the limited liability corporation, or

had the corporate relationship “imposed” on it…

(f) The expectations of the parties… Was it reasonable for the plaintiff to think that

the individuals involved would be personally responsible for any damage that

resulted? In the area of negligent misrepresentation, this factor takes on a

Page: 88

particular importance: was it reasonable for the plaintiff to rely on the

representation coming from the individual, rather than the corporation? …

(g) Whether the tort was “independent”. The cases sometimes say that the

employee or individual is liable for his or her “independent” torts, implying that

there are some torts which are so closely identified with corporate activity that

they are not fairly categorized as “individual torts” as well…

(h) The case law clearly recognizes the exception in Said v Butt…, specifically

respecting claims of inducing breach of contract, without identifying whether it

is a narrow or wide exception, nor the principles upon which it is based;

(i) The nature of the tort, and particularly whether it was an intentional tort…

(j) Whether the damage was physical or economic… This partly relates to

accessibility to insurance, which is more common for physical damage…

These factors can be seen as being part of a generalized concern about the effect

that individual liability can have on the viability of corporate structures and their

efficacy. While it is undesirable to decide on a case-by-case basis if a corporate

actor is personally liable in tort, a comprehensive and integrated test remains

elusive…

[537] I find it difficult to reconcile the Hall/Rocky Mountain Slate approach with that in the

cases earlier discussed. Even today, Wilson J’s lament in Kosmopoulos holds true: the case law

“follows no consistent principle”. To the extent that it can be said that any unifying theme

emerges, it is that the question of whether to pierce the corporate veil continues to confront the

court with the need to do justice by balancing competing and conflicting principles.

Notwithstanding Slatter JA’s concern expressed above about deciding personal liability on a

case-by-case basis, the determination in each case will be specific to its own context and

circumstances.

[538] The comments of Justice Yamauchi at para 23 of Tirecraft are apt:

When one parses through the various tests and criteria courts have established to

determine whether they will pierce the corporate veil, they all come down to the

“persuasive argument” that Justice Wilson provided us in Kosmopoulos at para.

13, where she said:

13 There is a persuasive argument that “those who have chosen the

benefits of incorporation must bear the corresponding burdens, so

that if the veil is to be lifted at all that should only be done in the

interests of third parties who would otherwise suffer as a result of

that choice”: Gower, supra, at p. 138…

b) Application

[539] The Defendants take the position that there is no basis in this case to justify piercing the

corporate veil. They argue that Tru-Square was not “a mere shell set up to carry out a deliberate

plan to deceive and defraud the Swanbys.” Further, the Defendants contend that Metcalfe acted

in good faith throughout and that the Plaintiffs have not established any dishonest act,

recklessness or wilful blindness on his part to justify piercing the corporate shell.

Page: 89

[540] I accept the Defendants’ argument that Tru-Square was not a mere shell incorporated for

the purpose of carrying out a wrongful act. The evidence is clear that it operated as a successful,

legitimate homebuilding business for some time prior to the events in question. Nevetheless, I

am satisfied that in the circumstances of this case, several of the factors enumerated in Tirecraft

are applicable. Metcalfe treated himself and Tru-Square interchangeably and intermingled the

corporation’s affairs with his own. The Plaintiffs assert that he did not distinguish between Tru-

Square and himself in his dealings with them. In his evidence, Metcalfe admitted that he and his

wife mingled their personal money with Tru-Square’s. I find, therefore, that Metcalfe treated

Tru-Square as his alter ego.

[541] This, of course, is not sufficient by itself. As discussed above, Justice Jones found in

Ceapro that, notwithstanding that the parent corporation had complete control over the

subsidiary, the only wrongful act was the breach of contract by the subsidiary. Since the parties

were all on an equal footing, and it was known to all concerned that the subsidiary was the

contracting entity, lifting the corporate veil was not justified.

[542] To warrant piercing the corporate veil and attaching personal liability to Metcalfe, the

Plaintiffs must show that Metcalfe used his control over Tru-Square to commit a wrong that

would unjustly deprive them of their rights in such a way as to work an injustice.

[543] The Court in Koltai found at para 30 that the failure to complete the renovations properly

was “so extreme as to amount to fraud.” I am not prepared to go that far in this case. However, I

agree with Justice Ross’ conclusion in Spartek that it is not necessary for me to do so. As she

indicated at para 283, the corporate veil may be pierced in cases where there is sufficient

improper or wrongful conduct. Similarly, Justice Yamauchi stated at para 25 of Tirecraft that the

veil may be pierced where there is a “wrongful, unlawful, fraudulent or improper act that causes

third parties to suffer” (emphasis added).

[544] In my view, the combination of the sheer number of construction deficiencies, their

pervasive nature affecting many aspects of the residence, the physical danger posed by some of

these deficiencies, Metcalfe’s ultimate abandonment of the project rises to a level that warrants

looking through the corporate shield. I find that this case is distinguishable from Ceapro and is

more akin to Spartek. In these circumstances, permitting Metcalfe to escape liability by shielding

himself behind Tru-Square would unjustly deprive the Plaintiffs of their rights.

[545] I am bolstered in my decision by two additional factors. In Hall, the Court of Appeal held

at para 23 that the “deciding factor” was that the claim was in respect of personal injury:

The deciding factor in this case, however, is the nature of the damage: personal

injury. A number of the cases where individual liability has been found for

corporate torts concern physical damage or personal injury [citations omitted].

There is clearly a “duty of care” to avoid injuring one’s co-workers, and no

residual policy considerations to exclude liability: Rocky Mountain Slate at paras.

127-8 Anyone who agrees to install a staircase clearly owes a duty of care to

those who are likely to use that staircase. Although the respondent’s tort was not

at all “independent” of the corporation DWS Construction, the modern

corporation was not designed to be a method of providing immunity to corporate

actors for this sort of loss. There are strong public policy reasons to ensure that

physically injured plaintiffs are compensated. Claims for pure economic loss raise

different issues.

Page: 90

[546] In this case, there has been no personal injury. The Plaintiffs, however, cite the Court of

Appeal’s statement in Vargo at para 32:

If the plaintiff establishes at the time of the suit a reasonable likelihood of a defect

causing real and substantial danger to the building’s occupants and the danger is

reasonably likely to occur within the useful life of the building, the time frame

within which the harm is likely to occur may be irrelevant.

[547] I agree with the Plaintiffs that personal liability should attach to Metcalfe in these

circumstances. Arguably, physical damage already has occurred in the sense that the house has

been improperly constructed. Moreover, certain aspects of the defective construction,

particularly the unconnected deck and bonus room staircase, presented as a real and substantial

danger of personal injury at some point.

[548] In Hall, the Court of Appeal also found it significant that the individual defendant could

have, but had not, obtained insurance coverage. The Court stated at para 19:

The competing policy objectives of tort law and corporate law must be reconciled

in context. One important factor is the ready availability of insurance for property

damage and personal injury. One obvious source of personal injury insurance is

the workers’ compensation system itself. However, even if a corporation does not

elect to purchase director’s insurance within the workers’ compensation system,

general commercial liability insurance coverage is widely available for personal

injury and property damage. In assessing whether a corporate representative

should be exposed to personal liability for corporate torts, it must be

acknowledged that the underlying risk can readily be managed and diverted

through the purchase of appropriate insurance. Balanced against this factor is the

reality that mere employees (unlike directors like the respondent) have little

control over corporate decisions to insure. Whether the respondent actually

purchased commercial general liability insurance is not the point; the point is that

such insurance was available to him, and if he did not purchase it he must have

elected to assume the underlying risk himself. He could not, by his decision, seek

to pass the risk of recovery of personal injury damages onto injured claimants like

the appellants.

[549] Metcalfe’s evidence was that he had commercial general liability insurance in his own

name as a sole proprietor. On the evidence before me, I find that he cancelled that insurance as

soon as the windows leaked and a substantial amount of water leaked into the interior of the

residence. As outlined above, a dispute arose between the parties shortly thereafter in the face of

Metcalfe’s refusal to take steps to remediate the problem, culminating in his walking off the job.

As set out in the Agreed Statement of Facts, he also cancelled his WCB coverage at more or less

the same time. The above statement from the Court of Appeal indicates to me that Metcalfe’s

failure to maintain insurance coverage should be visited upon him rather than the Plaintiffs.

[550] Taking all of the foregoing into account, I am of the view that it is appropriate to lift the

corporate veil in this case.

Page: 91

4. Inducing Breach of Contract

[551] The Plaintiffs argue that Metcalfe is personally liable in tort for inducing Tru-Square to

breach its contract with them by walking off the job in the face of identified deficiencies rather

than addressing those deficiencies.

[552] The test for inducing of a breach of contract is set out in Brae Centre Ltd v 1044807

Alberta Ltd, 2008 ABCA 397. Citing Klar, Tort Law, 3d ed. (Toronto: Thomson Canada

Limited, 2003), at pp 610-620, the Court set out the six required elements at para 19:

a) the existence of a contract;

b) the defendant intended to cause a breach of contract;

c) knowledge by the defendant of the contract;

d) the defendant’s conduct induced the breach;

e) damage;

f) lack of justification for the defendant’s conduct.

[553] The application of this tort is more difficult in situations like the one in this case. In

concurring reasons in 698828 Alberta Ltd v Elite Homes (1998) Ltd, 2020 ABCA 154, Slatter

JA referred at paras 115 and 116 to what he called the “corporate variation” of the tort:

This appeal, however, involves the “corporate variation” of the tort where there

are only two parties involved. A has a contract with B. B is a corporation, and B

breaches its contract through the acts, decisions, or inaction of its officers or

management. A then attempts to sue the officers or management of B for inducing

breach of contract, as if they personally were in the position of C in the three-

party tort. ...

The corporate variation of the tort has always been viewed with caution by the

courts. Corporations can only act through their human agents, and any distinction

between a corporation and its officers is prima facie artificial. The knowledge and

intention of one are the knowledge and intention of the other. It does not make

sense to speak of a contracting party inducing itself to breach its own contract. A

modified approach to the corporate variation of the tort is necessary, because

turning a breach of contract by a corporation into personal liability in tort of its

officers undermines the legal concept of the corporation as a separate legal

person.

[554] The tort is said to be inapplicable where the director of the corporation is acting bona

fide in the best interests of the corporation. The Court of Appeal confirmed this at para 23 of

Brae:

Based on one or both of these rationales, there is general agreement in the case

law that a director acting bona fide within the scope of his authority and in the

best interests of the company will not be personally liable in tort for inducing

breach of contract by the company: Said v Butt. Something more must be proven

to establish personal liability.

[555] In applying the six-part test in the case of a “corporate variation”, the courts must take

account of the fact that corporations can act only through their human agents. Fruman JA

explained this in 369413 Alberta Ltd v Pocklington, 2000 ABCA 307 at para 65:

Page: 92

Although justification is a defence to the tort, the burden is fairly placed on the

plaintiff to prove the director was not acting in the best interests of the

corporation, and therefore stepped out from under the protective umbrella of the

director’s corporate duties. If a director wishes the plaintiff to prove more, in my

view, the director must demonstrate that some legitimate interest of the

corporation could have been served by the conduct. This information is well

within the director’s knowledge and a requirement to demonstrate it on a prima

facie basis, rather than to prove it on a balance of probabilities, does not unduly

open the company’s business to third party scrutiny.

[556] The Defendants assert that the Plaintiffs’ Amended Statement of Claim makes no claim

for damages on the basis of Metcalfe inducing a breach of contract by Tru-Square and, in any

event, that no evidence was led that Metcalfe intended to cause the breach.

[557] The Plaintiffs argue that the required intent is established where the consequences of the

inducing party’s actions are reasonably foreseeable or where that party acted recklessly or was

wilfully blind to the likelihood of breach. The Plaintiffs contend that Metcalfe actively induced

the breach by permitting the deficient work to occur or was reckless in his oversight of that work

and ought to have been aware that a breach of the contract was likely to occur. Further, the

Plaintiffs point to Metcalfe’s decision to abandon the project in July 2013.

[558] Clearly in these circumstances, the “corporate variation” of the test for inducing breach of

contract must be applied. Accordingly, as indicated in Brae, “something more” is required

beyond the six elements of the test. Slatter JA discussed this requirement in Elite at paras 127

and 129:

What is needed is some indication that the officers and management of the

corporation, in causing the breach by the corporation B, stepped outside their role

as officers and managers. The corporate variation of the tort is only made out

when the officers and managers do not honestly believe they are acting in the best

interests of the corporation, or they advance some personal interest divorced from

that of the corporation. It is only at that point that the “intention” of B can be split,

so that there is once again a separate intention of B to breach, and an intention of

C to induce the breach.

...

On the other hand, a contracting party could consciously decide to breach the

contract. That is an option open to a contracting party, as long as it is prepared to

pay the damages that result, because specific performance is rarely awarded for

breach of contract. Sometimes a contracting party may conclude that breach is a

less expensive option than performance...

[559] I am not satisfied that the necessary “something more” is made out in this case. There is

no evidence before me to establish that Metcalfe was acting to advance some personal interest

divorced from that of Tru-Square. Indeed, given my finding above that Metcalfe treated himself

and Tru-Square interchangeably, it is not clear to me how such a separate interest could be

established.

[560] Therefore, I reject the Plaintiffs’ claim against Metcalfe for inducing breach of contract.

Page: 93

H. Alberta New Home Warranty Program (“ANHWP”)

[561] Both contracts signed by the parties on August 22, 2011, referred to the ANHWP,

incorporating it by reference. A third “fill-in-the-blank” ANHWP contract for the construction of

the entire residence was signed at the same time.

[562] At the time in question, the ANHWP was not mandatory for new homes. If parties opted

to participate, the Program had three components. It provided “deposit protection”, “builder

performance protection” and a “warranty”. Under the builder performance protection, if a builder

failed to complete construction of a home, the Program would arrange for completion of the

home, up to a total cost of $50,000. Under the warranty, if a builder failed to construct a home to

Code standards, the Program would ensure that defects were repaired or remedied, up to a total

cost of $100,000.

[563] At issue in this action is whether the Program’s dispute resolution process was

mandatory. Under the Homeowner Obligations clauses of the warranty, homeowners were

obligated to give the builder notice of any defects immediately, or not later than one year from

their possession date. The builder was then required to remedy the defect. If a dispute arose,

homeowners were required to provide written notice to the Program. This would engage the

Program’s Conciliation Procedure, which provided that the Program’s decision regarding the

defects would be binding, subject to arbitration that either party could invoke. In that case,

arbitration pursuant to the provisions of the Arbitration Act, RSA 2000, c A-43, would be final

and binding on all parties.

[564] The builder performance protection conditions were similar. Purchasers were obligated to

claim against the Program within certain timeframes. Subject to enumerated limits and

exclusions, the Program would assist the homeowner in remedying the construction issue(s). Any

dispute arising about the builder performance protection would be settled in binding arbitration.

[565] Although the Plaintiffs identified numerous issues with their newly constructed home,

neither party invoked the Program’s Conciliation Procedure. The Defendants contend that the

Plaintiffs should have done so instead of commencing litigation.

[566] I note that the parties did exchange correspondence in July 2013, some two months after

the Plaintiffs discovered that the windows leaked. On July 22, 2013, Metcalfe sent an email to

Ms. Swanby (Exhibit 1-G-15) outlining the ANHWP’s mediation/arbitration processes and

expressing his willingness to go to non-binding mediation if the Swanbys were prepared to

agree. Failing agreement, Metcalfe advised that the “final option” would be for him to trigger the

arbitration process. Metcalfe made no reference in this communication to any intention to effect

repairs to the residence. It does not appear that the Plaintiffs responded to Metcalfe’s suggestion

or that Metcalfe took any follow-up action. According to Ms. Swanby, she approached the

ANHWP, but learned that the Program’s pre-conditions had not been met.

[567] In their Statement of Defence, the Defendants allege that the Plaintiffs are in default of

both the warranty certificate and the builder performance protection, for failing to invoke the

Program’s dispute resolution process once they discovered that the windows leaked. Likewise,

the Defendants suggest that all of the other alleged deficiencies should have been referred to the

ANHWP. Further, the Defendants contend that the Plaintiffs did not exhaust their remedies

under the contract, which itself explicitly required the parties to settle any related disputes

through binding arbitration in accordance with the Program’s arbitration rules.

Page: 94

[568] The Plaintiffs, on the other hand, reject the notion that there were obliged to have

recourse to the ANHWP in lieu of proceeding to litigation. They maintain that the ANHWP was

not the proper vehicle to resolve this dispute as it could not have resolved all the claims

advanced in this action. They point out that the ANHWP’s monetary limits fall well below their

alleged damages. The Plaintiffs also assert that by the time the ANHWP remedies became

available to them under the mandated timeline, the remediation had been completed.

[569] The Plaintiffs also take the position that the ANHWP’s dispute resolution process was

optional. I disagree. The parties’ contract explicitly incorporated the Program with all of its terms

and conditions, notably its mandatory dispute resolution process.

[570] The relevant provisions of the Arbitration Act include:

6. No court may intervene in matters governed by this Act, except for the

following purposes as provided by this Act:

(c) to prevent manifestly unfair or unequal treatment of a party to an

arbitration agreement;

Stay

7(1) If a party to an arbitration agreement commences a proceeding in a court in

respect of a matter in dispute to be submitted to arbitration under the agreement,

the court shall, on the application of another party to the arbitration agreement,

stay the proceeding. [Emphasis added.]

(2) The court may refuse to stay the proceeding in only the following cases:

(d) the application to stay the proceeding was brought with undue

delay;

(5) The court may stay the proceeding with respect to the matters in dispute dealt

with in the arbitration agreement and allow the proceeding to continue with

respect to other matters if it finds that

(a) the agreement deals with only some of the matters in dispute in

respect of which the proceeding was commenced, and

(b) it is reasonable to separate the matters in dispute dealt with in the

agreement from the other matters.

[571] Given their position and my finding that the ANHWP’s arbitration process was

mandatory before litigation could be commenced, I would have expected the Defendants to have

sought a stay of proceedings in accordance with s 7(1) of the Arbitration Act some time ago.

Such a stay would have been mandatory unless the Plaintiffs had been able to bring themselves

within one of the exceptions found in s 6(c). However, no such application has ever been

brought.

[572] While the Defendants appear to place considerable significance on the Plaintiffs’ failure

to seek the assistance of the ANHWP, they fail to identify what consequence should flow from

that failure. The Defendants raise the Plaintiffs’ alleged non-compliance with the ANHWP’s

dispute resolution process, but seek no form of relief.

Page: 95

[573] In oral submissions, Defendants’ counsel conceded that the ANHWP’s dispute resolution

process would have addressed only “some of the peripheral claims for damages”. I agree. Given

the nature of the Plaintiffs’ claims, the aspects covered by the arbitration clause cannot

reasonably be separated from the others. If the parties had arbitrated, they likely would also have

had to litigate. These proceedings would have overlapped, with the “real danger that there

[would] be contrary findings of fact and law.”: New Era Nutrition Inc v Balance Bar Co, 2004

ABCA 280 at para 44. In New Era, the Court of Appeal found, at para 3, that s 6(c) of the

Arbitration Act could be used to refuse to stay proceedings in circumstances where overlapping

matters could not reasonably be separated.

[574] While it is not necessary for me to decide this issue, I am doubtful that the Defendants

would have been successful if they had sought a stay the proceedings at this late date. First, I

believe that the Plaintiffs would have a strong argument that s 6(c) applies in these circumstances

given the breadth of their claim and the total damages sought. There is also the issue of undue

delay. Section 7(2)(d) of the Arbitration Act provides an incentive for parties intending to rely on

a mandatory arbitration agreement to bring such an application in a timely fashion when faced

with court action.

[575] While undue delay is assessed on a case-by-case basis, I am satisfied that this matter

reaches the threshold required under s 7(2)(d). The Plaintiffs and Defendants have been engaged

in this action for over six years. In other cases, less time has been found to constitute undue

delay: Millennial Construction Ltd v 1021120 Alberta Ltd, 2005 ABQB 533 at para 15. Both

parties were aware of a dispute, yet neither engaged the ANHWP’s dispute resolution process.

Considerable time, energy, and financial resources have gone into this litigation. The Plaintiffs

have reasonably relied on the Defendants’ participation. Further, they were led to believe,

through the Defendants’ actions, that there would be no insistence on the arbitration clauses in

the contract: Faith v Quadrant Construction Ltd, 2019 ABQB 151 at para 49. It is now too late

for the Defendants to suggest that litigation is not the appropriate forum for resolution and to

maintain that arbitration was required.

[576] While both parties expressed some willingness to participate in arbitration and/or

mediation, neither party engaged the ANHWP and no mediation or arbitration ever took place.

The parties are equally to blame for this.

[577] For the foregoing reasons, I am of the view that the ANHWP mediation and arbitration

provisions have no application in this instance.

VI. Damages

A. Quantification of Damages

[578] The Plaintiffs, relying on Vermillion, suggest that the most common approach to the

assessment of damages in construction cases is to focus on the contract measure of damages even

in situations involving concurrent liability in both contract and tort.

[579] The Plaintiffs rely on the decision of the Supreme Court in Penvidic Contracting Co v

International Nickel Co of Canada Ltd, [1976] 1 SCR 267, as support for the proposition that

courts are not required to employ mathematical accuracy in determining damages when dealing

with evidence of deficiencies.

Page: 96

[580] In my view, Penvidic stands for a somewhat different principle but, nonetheless, one that

has some application in this case. Penvidic was an action for breach of a contract to lay railway

track and the required sub-ballast on top of the graded track bed. The contractor was forced to

revise its entire method of construction when a required rail connection to be used for the

movement of equipment was not constructed until well after work had commenced on the track

in issue. In response to these unanticipated circumstances, the contractor was forced to employ

alternate and more costly means to fulfill the contractual obligations. The contractor then sought

additional compensation. The trial judge awarded $.25 per ton for extra ballasting, as well as an

amount for additional costs for moving the ballast. The trial judge accepted the evidence of an

experienced railway builder, who described as “reasonable” this method of estimating the

contractor’s additional cost. On appeal to the Court of Appeal, this amount was disallowed.

[581] On a further appeal to the Supreme Court, the trial judge’s damage award relative to this

item was restored. At para 24, Spence J held:

I can see no objection whatsoever to the learned trial judge using the method

suggested by the plaintiff of assessing damages in the form of additional

compensation per ton rather than attempting to reach it by ascertaining items of

expense from records which, by the very nature of the contract, had to be

fragmentary and probably mere estimations. In doing so, he had the testimony of

MacIlroy, an experienced railroad builder, whom the learned trial judge found to

be an honest and a satisfactory witness...

[582] The Supreme Court also referred to its own earlier decision in Wood v Grand Valley

Railway Company (1915), 51 SCR 283, in which Davies J held at p. 289:

It was clearly impossible under the facts of that case to estimate with anything

approaching to mathematical accuracy the damages sustained by the plaintiffs, but

it seems to me to be clearly laid down there by the learned judges that such an

impossibility cannot “relieve the wrongdoer of the necessity of paying damages

for his breach of contract” and that on the other hand the tribunal to estimate them

whether jury or judge must under such circumstances do “the best it can” and its

conclusion will not be set aside even if the amount of the verdict is a matter of

guess work. [emphasis in original]

[583] What I take from the decision in Penvidic is courts are required to do the best they can in

circumstances where the assessment of damages proves to be difficult. In Martin v Goldfarb

(1998), 41 OR (3d) 161 (CA), leave to appeal to SCC refused [1999] 1 SCR x, Finlayson JA

considered Penvidic and other decisions before concluding (at para 75):

Having considered the above cases and others, notably Williamson v Stephenson

(1903), 33 S.C.R. 323 and [Penvidic, citations omitted], I have concluded that it is

a well established principle that where damages in a particular case are by their

inherent nature difficult to assess, the court must do the best it can in the

circumstances. That is not to say, however, that a litigant is relieved of his or her

duty to prove the facts upon which the damages are estimated. The distinction

drawn in the various authorities, as I see it, is that where the assessment is

difficult because of the nature of the damage proved, the difficulty of assessment

is no ground for refusing substantial damages even to the point of resorting to

Page: 97

guess work. However, where the absence of evidence makes it impossible to

assess damages, the litigant is entitled to nominal damages at best.

[584] Similarly, in Extreme Venture Partners Fund 1 LP v Varma, 2021 ONCA 853, the

Court held at para 53:

The jurisprudence recognizes that trial judges are not held to a standard of

perfection in making damage awards. Appellate courts will not interfere with

reasonable damage awards where they have an evidentiary basis, as damages

cannot always be calculated with mathematical precision. Sometimes the trial

judge must do the best they can in the circumstances...

[585] Renke J reached a similar conclusion in Mitchell v Pytel, 2021 ABQB 403, in which he

noted at para 386 that “difficulty in assessing damages does not relieve the court from doing the

‘best it can’”.

[586] Finally, I would refer to the decision of Wittmann ACJ (as he then was) in Viper

Concrete 2000 Inc v Agon Developments Ltd, 2009 ABQB 91, in which he held at para 53,

citing Penvidic and other authorities including S.M Waddams in The Law of Damages, looseleaf

(Toronto: Canada Law Book, 2008): “The onus is on the plaintiff to prove its damages on a

reasonable preponderance of credible evidence (See: 100 Main Street East Ltd. v W.B. Sullivan

Construction Ltd. (1978), 20 O.R. (2d) 401 (C.A.) at p. 422). The damages need not, however be

proven with mathematical accuracy”.

[587] The Plaintiffs ask me to accept the methodology employed by Juniper in this instance and

to accept his explanation that he and his work crew were involved in multiple activities at the

same time. As such, the investigation, including any necessary destruction, and repair work on

any given item was not carried out on a straight-line basis with remediation proceeding

sequentially on an item-by-item basis. Rather, the practical realities of the situation involved

moving from one item to another as time and circumstances permitted. In the result, the invoices

submitted to the Plaintiffs were based on non-itemized time sheets.

[588] Under the unique circumstances of this case, I am prepared to accept that Juniper’s

methodology was reasonable. I acknowledge that this methodology would render difficult, if not

impossible, the task of attempting to extricate the cost of work relative to damage for which the

Defendants were not responsible. However, I am satisfied that this is only a hypothetical problem

in these particular circumstances, save for one relatively minor exception discussed below. I find

that all the applicable invoices relate to remediation work for which the Defendants are

responsible. The one exception relates to remediation work associated with damages caused by a

fluid leak from the refrigerator. As more fully explained later in these Reasons, I am satisfied

that the Defendants are not responsible for any of the damage related to the refrigerator leak.

Juniper’s invoices contain sufficient detail to allow me to deduct the amounts billed for this

work.

[589] I am also satisfied that Juniper employed a system that ensured that time records for work

or improvements or to other, unrelated projects for the Swanbys, were kept separate and apart

from the time records and invoicing processes associated with the remediation of this particular

residence.

[590] The Plaintiffs maintain that “the appropriate measure of damages in contract is the cost of

performance, including consequential expenses resulting from the breach of contract, in addition

Page: 98

to punitive and general, non-pecuniary damages and pre-judgment interest”: Plaintiff’s Brief,

para 227.

[591] The Plaintiffs’ damage calculations focus on breach of contract and, as such, on the cost

of performance. This calculates the amount paid under the contract and the cost to remediate and

complete the work. According to the Plaintiffs, this approach will account for the amounts

claimed by the Defendants in their counterclaim as owing to them under the contract.

[592] The Defendants, on the other hand, have filed a counter claim for what they allege to be

unpaid invoices owed by the Plaintiffs. Likewise, they dispute other amounts included by the

Plaintiffs, including aggravated and punitive damages, as well as the amount claimed for

remediation work and consequential damages.

[593] The remediation work, including the destruction of the as-built construction on an as-

required basis, was undertaken by Juniper and his company, TGC. According to Juniper, six of

his employees were involved in the remediation process on a daily basis. Juniper’s November

2015 report, Exhibit 1-F-35, sets out the work that he performed on the Swanby residence. His

various invoices for this work are found at the back of this report. These costs are broken down

in terms of demolition costs and rebuild costs, as well as costs relating to labour, material, and

rentals.

[594] The attached invoices do not include all the TGC invoices submitted to the Plaintiffs,

specifically invoices that were not part of the original scope of work in the parties’ contract,

TGC invoices associated with extras or add-ons requested by the Plaintiffs, or work undertaken

at the Plaintiffs’ East Carstairs home and shop, are not included in Juniper’s written report

[595] Photographs depicting the as-built, demolished state, and remediated state are found

throughout his report and in various other exhibits.

[596] The Plaintiffs seek damages in the sum of $427,941.61, calculated on the following basis:

a) Contract price to Lock-Up, plus;

b) Extras and Upgrades; plus;

c) Amounts Paid to Third Parties, less;

d) Amounts paid to Tru-Square; less

e) Amounts Paid to TGC for remediation work, less;

f) Consequential costs – includes costs paid to consultants and double utility

payments on two houses, plus;

g) Aggravated Damages, plus;

h) Punitive Damages.

[597] I am satisfied that the Plaintiffs proposed approach to the calculation of damages is

appropriate and fully accounts for the Defendants’ challenge to some of the amounts claimed, as

well as the Defendants’ Counterclaim.

1. Contract Price to Lock Up

[598] There is no dispute regarding the lock-up cost of constructing the residence. This amount

was set out in Exhibit 1-C-5, $692,485.50. In accordance with the terms of the Lock-Up contract,

Tru-Square issued four invoices reflecting the four “draws” contemplated by the agreement. The

final “draw” Invoice 137 remains unpaid.

Page: 99

Invoice #

Amount

$110,000.00

Exhibit #

1-C-7

Invoice 106 (September 30, 2011)

Invoice 112 (February 5, 2012)

Invoice 117 (June 16, 2012)

Invoice 137 (September 27, 2013)

Total Billed

$350,575.00

$130,000.00

$ 86,619.35

$677,194.35

$590,575.00

$ 86,619.35

I-C-9

I-C-10

I-C-17

Total Paid

Total Unpaid

2. Extras and Upgrades

[599] Both parties rely on Re Chittick and Taylor (1954), 12 WWR (NS) 653, as setting out the

principles relating to the determination of whether work performed constitutes an “extra”. At p

654-655, Egbert J set out four “rules” that apply in such circumstances:

Rule 1. An item specifically provided for in the contract is not an “extra.”

Rule 2. When the plaintiff supplied material of a better quality than the minimum

quality necessary for the fulfillment of the contract, without any instructions,

express or implied, from the defendant to do so, he is not entitled to charge the

extra costs as an “extra.”

Rule 3. When the plaintiff did work or supplied materials not called for by the

contract (plans or specifications) without instructions, express or implied, from

the defendant, or the consent of the defendant, he is not entitled to charge this

addition work or materials as an “extra.”

Rule 4. When the plaintiff did work or supplied materials not called for by the

contract on the instructions, express or implied, of the defendant, he is entitled to

charge for additional work or materials as an “extra.”

What amounted to instructions from the defendant is dependent on the

circumstances relating to each item. If the defendant, without giving definite

instructions, knew the plaintiff was doing extra work or supplying extra materials

and stood by and approved of what was being done and encouraged the plaintiff

to do it, that, in my opinion, amounts to an implied instruction to the plaintiff, and

the defendant is liable.

[600] Tru-Square issued a series of invoices (#111, #118, #124, #125, #129, #133, #136 and

#135) relating to extra work provided in conjunction with the Lock-Up contract. These invoices

total $91,134.92, of which $34,678.28 remains outstanding. According to the Plaintiffs, all of

these amounts, a total of $107,751.11, including GST, were part of the lock-up contract and, as

such, not properly characterized as “extras.” According to the Plaintiffs, the total contract price

Page: 100

consists of the Lock-Up contract value, plus the six disputed invoices noted above, a total of

$1,124,939.25, including GST.

Invoice #

Amount

Exhibit #

1-C-8

Invoice 111 (February 12, 2012)

Invoice 118 (September 1, 2012)

Invoice 124 (January 4, 2013)

Invoice 125 (January 5, 2013)

Invoice 129 (June 18, 2013)

Invoice 133 (August 20, 2013)

Invoice 136 (September 27, 2013)

Invoice 135 (September 29, 2013)

Total Billed

$ 16,632.55

$ 39,824.09

$ 10,472.70

$ 2,287.95

$ 18,246.57

$ 19,541.97

745.28

I-C-11

I-C-12

I-C-13

I-C-14

I-C-15

I-C-16

I-C-18

$

$324,702.64

$432,453.75

$ 69,217.29

$363,236.46

Total Paid (#111,#118,#124,#125)

Total Unpaid

[601] The Plaintiffs concede that Invoice #135 covering millwork, flooring and stone should be

added to the amount owing to the Defendants. Invoice #135 is dated September 27, 2013, and

consists entirely of payments made by Tru-Square to third parties, including C&S Fine Furniture

Ltd (Carm’s company); Rock Tops Inc; Lawrence Masonry; Creative Interiors; and Dominion

North. It also includes Tru-Square’s 5% or 10% markup, a total of $15,327.50. The total invoice

is for $324,702.64. This invoice was never paid.

[602] The Plaintiffs also concede that Invoice #118 includes “extras” that should be added to

the amount owing to the Defendants.

[603] However, the Plaintiffs dispute five of the items invoiced by the Defendants as “extras.”

For the reasons that follow, I find that some of the disputed items were either requested or

approved by the Plaintiffs and, as such, are properly included as “extras.”

[604] First, the Plaintiffs refer to Invoice #111, and a charge of $16,632.55 for alleged upgrades

to windows and doors. The Plaintiffs maintain that windows and doors were part of the contract

and that Metcalfe never explained this particular invoice or sought their agreement to an

additional cost. Moreover, the Plaintiffs maintain that Metcalfe provided no explanation or

justification for this “extra” during his testimony at trial. In the result, the Plaintiffs say that the

Defendants are not entitled to pass on these additional costs by way of “extra.” Invoice #111 was

paid by the Plaintiffs on April 11, 2012.

Page: 101

[605] The Defendants advance a number of arguments challenging the Plaintiffs’ assertions

regarding these alleged “extras.” First, the Defendants point to the fact that the Plaintiffs

promptly paid Invoice #111 without question or objection. The invoice, Exhibit 1-I-8, clearly

stated: “UPGRADE WINDOW/DOOR PACKAGE (LUX) Original quoted price 46,531 New

price 62,371.52”. The original contract, Exhibit 1-C-5, had called for “Windows from Lux – to

have triple pane – low-e (recommended).”

[606] The Defendants also point to the fact that Carm prepared a budget in May 2012, Exhibit

1-I-21, that incorporated a list of “extras or upgrades” prepared by Metcalfe and dated May 19,

2012, Exhibit 1-I-31. In cross-examination, Ms. Swanby acknowledged that she did not bring

any concerns to either Metcalfe or Carm relative to this list. It is noteworthy that the list includes

the window upgrade package. Metcalfe’s evidence was that he was asked by either Ms. Swanby

or Carm to complete this list of estimated extras and upgrades for budgeting purposes.

[607] I accept Metcalfe’s evidence that, upon request, he produced the May 19, 2012, list of

extras and upgrades. Given that Ms. Swanby was aware of the list and raised no concern with

either Metcalfe or Carm regarding these additional expenditures, combined with the prompt

payment of this invoice without question, I am satisfied that the Plaintiffs approved this

expenditure. The request to produce this list, as well as the Plaintiffs’ silence in circumstances

that called out for comment on their part if they disputed any listed upgrade, support my finding

that the Plaintiffs are liable for the cost of this extra. In my view, it is too late for the Plaintiffs to

now suggest that they did not approve this additional cost.

[608] Second, the Plaintiffs dispute a charge of $2,048.28 as set out in Invoice #125, Exhibit 1-

C-13, stated to relate to plywood installed for the subfloor in tiled areas, plywood to frame

bathtub surrounds, and the cost to install a temporary two-piece bathroom for the subtrades. The

Plaintiffs maintain that these items are part of the original contract and that there was never any

agreement to add either of these items as “extras”. Invoice #125 was paid by the Plaintiffs.

[609] The Defendants resist the characterization of the items set forth in this invoice as

“extras”. As such, they say that this was interior work that was specifically excluded from the

contract.

[610] Unlike the window upgrade, there is no evidence before me that this particular

expenditure was the subject of any discussion between the parties. I find that the items set forth

in this invoice are not properly characterized as “extras”. In my view, the lock-up contract

obligated the Defendants to build to the point where the drywall had been completed. In my

view, the framing of bathtub surrounds, the installation of sub-flooring to support eventual tile

installations and framing within the shower and sauna units were all part of the lock-up contract.

The Plaintiffs are, accordingly, liable for $228 of this invoice related to a stairway at the garage

entrance, but no more. Given that this invoice was paid, the Plaintiffs are entitled to a credit of

$2,059.95

[611] Third, the Plaintiffs also dispute the cost of removing the temporary two-piece bathroom

set out in Invoice #136, Exhibit 1-C-16. According to the Plaintiffs, the Defendants did not

discuss or obtain their approval for this additional cost. Invoice #136 was never paid by the

Plaintiffs.

[612] Invoice #136 is in the amount of $745.28 and involved the removal of a temporary two-

piece bathroom. While it seems clear that Tru-Square paid the sub-contractor, there is

Page: 102

insufficient evidence before me to make a finding that the Plaintiffs approved this particular

item, either expressly or impliedly. Rather, the only evidence before me is that the Plaintiffs did

not approve this item. Under the circumstances, I accept the Plaintiffs’ contention that this was

an unapproved “extra” the costs of which the Defendants are not entitled to pass on to the

Plaintiffs.

[613] Fourth, the Plaintiff disputes the $17,025.95 amount billed for plumbing upgrades and

extras, as well as for the replacement cost of a window broken by one of the subtrades. These

items are set forth in Invoice #129, Exhibit 1-C-14. The Plaintiffs maintain that these items are

covered by the original contract and were not approved as “extras”. Invoice #129 was never paid

by the Plaintiffs.

[614] There are two separate invoices that are dated June 18, 2013, and identified as “Invoice

129”. One is in the amount of $1,630.38, while the second is in the amount of $18,246.57. The

second invoice of this same date includes an item not present in the first invoice, specifically, the

sum of $15,824.95 for plumbing extras and upgrades. I am satisfied that the proper amount of

this invoice is $18,246.57.

[615] The amount of $390.24 is attributed to the cost of replacing the broken window. The

Plaintiffs challenge their responsibility to cover the cost of a window broken by one of the

Defendants’ subtrades. Likewise, they challenge what they describe as unexplained and

unspecified plumbing extras and upgrades.

[616] The Defendants seek to support the validity of this invoice on the basis that the Swanbys

never denied that this work was necessary or that it was completed. In my view, this is flawed

logic on the part of the Defendants. Whether the work was necessary and/or completed does not

address the real question as to whether the work and materials were covered by the original

contract and, if not, whether these items were added with the express or implied approval of the

Plaintiffs.

[617] I am satisfied that the replacement of the broken window was not included in the contract

that existed between the parties. I find that the Plaintiffs never agreed, either expressly or by

necessary implication, to cover the replacement cost of the window damaged on site by one of

the Defendants’ subtrades. In my view, the statement on the invoice that “Shawn was in charge”

at the time the window was broken does not assist the Defendants’ position in this regard.

[618] The matter of plumbing upgrades and extras raises different considerations. Prior to the

parties signing the contracts for the construction of the residence, Metcalfe provided the

Plaintiffs with a breakdown of the cost of constructing the entire residence beyond the lock-up

stage: Exhibit 1-C-20. Ms. Swanby believed that the itemized break-down set out in this

document represented the basis upon which Metcalfe determined the cost to complete the

residence, virtually the same cost set out in the second contract signed on August 22, 2011:

Exhibit 1-C-6. This included amounts of $3,000, $3500, and $5000 for a steam shower, shower

door(s) and plumbing upgrades, respectively. These were items for which Tru-Square was not

responsible as part of the Lock-Up contract. In her evidence, Ms. Swanby testified that she did

not know what the amount for plumbing upgrades entailed as Metcalfe never provided her with

any information as to what would be included as basic plumbing covered by the contract and

what would be considered an upgrade. Likewise, despite repeated requests, Metcalfe failed to

provide Ms. Swanby or Carm with a list of available allowances for the various interior finishing

elements of the residence.

Page: 103

[619] As previously discussed, Metcalfe prepared a document dated May 19, 2012, in which he

listed a breakdown of the construction costs associated with the Lock-up Contract, as well as a

list of extras and or upgrades again relating to the Lock-Up Contract: Exhibit 1-I-31. The May

2012, budget prepared by Carm, Exhibit 1-I-21, included a list of actual and anticipated upgrades

based on the May 19, 2012, Metcalfe document, including the sum of $20,725 for “plumbing

upgrades above original fixture list”. Again, as previously discussed, Ms. Swanby conceded

during cross-examination that these documents were presented to her at some point and she

failed to raise any concerns with Metcalfe regarding any of the items on the list.

[620] Generally speaking, the onus is on the contractor to ensure that the customer either

requested or approved the “extra”. In this instance, I find that the Plaintiffs were aware from the

outset of their discussions with Metcalfe that the base price set out in the initial quote, Exhibit 1-

C-2, as well as in the Lock-Up contract, I-C-5, covered basic fixtures only. Both documents

contemplated that customer preferences would be accommodated as “extras”. As of May 19,

2012, the Plaintiffs were also aware from Metcalfe’s list of extras and upgrades that he estimated

a cost of $20,725 for plumbing fixture upgrades. This same number was carried forward into

Carm’s May 21, 2012, detailed budget prepared for the Plaintiffs. Given this knowledge, I am

satisfied that the Plaintiffs were well aware that their selection of plumbing fixtures over and

above basic fixtures would result in an “extra” for which they would be financially responsible.

[621] For the foregoing reasons, I find that the plumbing extras of $15,824.95, is properly

characterized as an “extra” for which the Plaintiffs are responsible. However, the replacement of

the broken window, $390.24, is not “extras” for which the Defendants can seek compensation

from the Plaintiffs. The other items on the invoice totaling $1,162.50 are properly characterized

as “extras” for which the Plaintiffs are responsible.

[622] Finally, the Plaintiffs refer to Invoice #133. Exhibit 1-C-15, that lists a charge of $16,274

for “Electrical as per detail supplied by Eagle Electric”. An explanatory note states that Tru-

Square has “paid some of extras so check (sic) needs to be made out to Tru-Square Homes.” In

his direct examination, Metcalfe testified that everything listed on this invoice related to “extras”

that were not part of the original contract.

[623] There is no dispute that Tru-Square never paid Eagle Electric the $10,500 then owing at

the time Dueck walked off the job prior to completion of the electrical work. Dueck testified that

he left the job site on account of the non-payment of his account. Metcalfe’s evidence on this

point was that he intends to pay Eagle Electric once he receives payment from the Plaintiffs. This

amount is, accordingly, included in his counterclaim. Metcalfe described these extras as light

fixtures but provided no details in his trial evidence.

[624] Of this amount, the Plaintiffs say that $10,000 was never paid by Tru-Square or by them.

The Plaintiffs maintain that this contractor has never made a claim for this unpaid work.

According to the Plaintiffs, the remaining $3,400 covers work that was never actually done.

Accordingly, the Plaintiffs contend that these amounts are not owing to the Defendants and are

not recoverable as “extras.” Invoice #133 was never paid by the Plaintiffs.

[625] Counsel have not directed me to any evidence that demonstrates that the Plaintiffs ever

approved any of these electrical “extras”. The Plaintiffs take the position that they did not. The

evidence of Dueck and his invoice, Exhibit 7, certainly suggest that all of this work was

completed. As noted above, Metcalfe was clear that at all of the amounts covered in Invoice

#133 involved “extras”.

Page: 104

[626] In my view, it was incumbent upon Metcalfe and Tru-Square to lead some evidence to

show that the Plaintiffs either requested these “extras” or that they approved them. In the

absence, of such evidence I am not prepared to find that these are “extras” for which the

Defendants are entitled to be compensated, even assuming that Eagle Electric continues to have a

viable claim against the Defendants for this unpaid work. I would simply add that the $710 item

for the rough in of the vacu-flow is not disputed by the Plaintiffs as constituting an extra.

[627] Finally, the Plaintiffs say that Tru-Square was credited a sum of $2,560 for work on the

front deck that was never actually performed by the concrete subcontractor. The Plaintiffs

maintain that this amount was never credited to them and, as such, should be deducted from the

counterclaim.

[628] Exhibit 4 is an invoice dated September 12, 2011, issued by Kutney Concrete

Foundations to Tru-Square Construction (sic). The invoice includes a charge of $18,563 for

labour supplied to crib and place the foundation of the residence as per the plan and previous

quote. The invoice also includes a credit for $2,560, described as “front deck credit”. Tru-

Square’s May 2, 2012, invoice to the Plaintiffs, Exhibit 1-C-9, covers the second draw of the

parties’ contract and includes the cost of pouring the basement floor.

[629] The Defendants say that there is no evidence that any of the work that was to have been

undertaken by Kutney was not completed. Unfortunately, Metcalfe was never cross-examined as

to why this credit was issued. I agree with the Defendants that it would not be appropriate in

such circumstances to simply assume that this was work that was required under the terms of the

contract. There is simply no evidence that this was essential concrete work that formed part of

the parties’ fixed-price contract.

[630] If Tru-Square was able to fulfill its’ obligations under that contract at a cost that was

somewhat less than it may have anticipated, this does not result in a credit to the home owners.

The converse is also true in that if the cost of the foundation, for example, had greatly exceeded

what Tru-Square had anticipated, this so-called additional cost could not have been passed on to

the home owners as an “extra”. In a fixed price contract situation, the contractor bears both the

“benefit” and the “burden” of shifting costs.

[631] In this instance, Kutney would appear to have completed the concrete work at a cost to

Tru-Square that was less than the bid amount. The identification of a credit on Kutney’s invoice

suggests that Tru-Square had already paid the full amount specified in the bid and was now

receiving a credit for work that was not required. In the context of a fixed price contract, this

scenario results in some “gain” to the general contractor, but does not lead to a credit back to the

homeowners.

[632] I would summarize my findings relative to the various contested upgrades and extras set

out in Invoice #111, #118, #124, #125, #129, #133 and #136 as follows:

Invoice

#111

$16,632.55 to be added as an “extra” to the contract price;

Invoice

#118

$39,824.09 to be added as an “extra” to the contract price;

Page: 105

Invoice

#125

$228.00

to be added as an “extra” to the contract price;

Invoice

#136

No items to be added as an “extra” to the contract

price;

Invoice

#129

$16,987.45 to be added as an “extra” to the contract price;

Invoice

#133

$710.00

to be added as an “extra” to the contract price.

TOTAL

$74,382.09

[633] Taking all these amounts that have been determined to be “extras”, I would add

$74,382.09 to the total contract price (contract price plus Invoice #135) for a total contract value

of $1,091,570.23.

3. Amount Paid to Tru-Square

[634] As set out at paragraph 246 of the Agreed Statement of Facts, Exhibit 2, the parties agree

that the Plaintiffs paid a total of $659,792.29 to Tru-Square, leaving an outstanding balance

owing to Tru-Square of $431,777.94 by the Plaintiffs.

4. Amounts Paid to TGC for Remediation Work

[635] The Plaintiff say that they paid a total of $1,431,892.41 to obtain what they had

contracted for with the Defendants. Of this amount, as indicated above, they paid a total of

$659,792.29 to the Defendants and the remaining $772,100.20 that was paid for remediation

work and completion costs. According to the Plaintiffs, this amount breaks down as follows:

Demolition work by TGC

$84,543.21

$606,816.56

$25,338.70

$4,693.50

$6,516.22

$31,316.81

$5,139.86

$3,615.62

$3,835.76

Remediation work by TGC

TGC work completed after Nov/15

C & S Fine Furniture Ltd

Tile Subcontractor and replacement

Replace improperly installed windows

Replace Exterior Stone

Plumbing Material for SubTrade

Burst waterline replacement flooring

Page: 106

Burst waterline – remove line

$133.88

Moving costs – fridge (waterline burst)

$150.00

Total

$772,100.12

[636] The first three items in the above list were apparently paid to TGC – a total of

$716,698.47. However, as set out below, Juniper gave evidence that TGC submitted a total of 19

invoices totalling $769,543.24 to the Plaintiffs, all of which were paid. The difference between

these two amounts - $52,844.77 – has never been explained. In view of the fact that the Plaintiffs

written submissions clearly state that they are seeking $772,100.12, of which $716,698.47 was

paid to TGC, this is the amount that I will factor into the assessment of damages.

[637] The remediation work to address the various construction deficiencies was carried out by

TGC, a general contracting firm run by Mike Juniper. In addition to the remediation work carried

out relative to this residence, TGC also did work for the Plaintiffs in relation to their other home

and a shed located on the same property as the Tru-Square built home. I accept the evidence of

both Juniper and Ms. Swanby that TGC’s work on the shed and the Plaintiffs’ other home was

billed separately from the remediation work on the Tru-Square built home.

[638] TGC submitted a series of invoices to the Plaintiffs for the labour, materials, and rentals

that were used in the remediation process. A total of 19 invoices relating to this project were

submitted and paid by the Plaintiffs. The invoices have a common format in that they include

charges for site management; consulting; skilled labour billed out at an hourly rate; general

labour billed out at an hourly rate; materials; and tool rentals. A number of the invoices have

supporting time sheets of the TGC workers involved in this remediation project, though these

time sheets were not included in the invoices sent to the Plaintiffs.

Invoice#

4

Date

Sub-Total

$25,467.43

GST

Total

Exhibit#

19/08/13

04/11/13

21/01/14

08/08/14

08/22/14

10/01/14

10/23/14

11/18/14

12/17/14

01/12/15

02/01/15

02/20/15

03/19/15

04/06/15

$1,273.37

$26,740.80 1-F-4

$3,053.06 1–F–7

$2,063.25 1-F-8

10

$3,053.06

$2,063.25

14

26

$18,350.96

$19,834.16

$9,402.65

$917.55

$19,268.51 1-F-12

$20,825.87 1-F-13

$9,872.79 1-F-14

$16,726.50 1-F-15

$24,113.18 1-F-18

$28,653.10 1-F-19

$27,351.10 1-F-21

$46,887.80 1-F-22

$15,673.56 1-F-23

$78,050.12 1-F-24*

$40,286.68 1-F-26

28

$991.71

32

$470.14

34

$15,930.00

$22,964.93

$27,288.66

$26,048.67

$44,655.04

$14,927.19

$796.50

37

$1,148.25

$1,364.44

$1,302.43

$2,232.76

$746.37

42

43

45

47

48

52

$38,368.26

$1,918.42

Page: 107

Invoice#

Date

Sub-Total

$51,759.60

GST

Total

Exhibit#

53

54

04/28/15

05/13/15

06/10/15

07/01/15

07/24/15

08/26/15

09/27/15

10/28/15

03/04/16

$2,587.98

$3,052.51

$1,951.66

$2,998.43

$1,873.70

$4,115.27

$1,054.39

$682.17

$54,347.58 1-F-27

$64,102.71 1-F-28

$40,984.94 1-F-29

$62,967.02 1-F-30

$39,347.63 1-F-31

$86,420.80 1-F-32

$22,142.13 1-F-33

$14,325.41 1-F-34

$25,338.70 1-F-37

$769,543.24

$61,050.20

$30,033.28

$59,968.59

$37,473.93

$82,305.53

$21,087.74

$13,643.24

$24,132.10

56

58

61

65

66

72

79

$1,206.60

TOTAL

*The TGC invoice dated March 19, 2015, in the amount of $78,050.12 consists of

the following items:

a) TGC labour [$2,952.50], materials [$6,657.61], electrical services [$3,112.73], and

plumbing [$5,746.13] – TOTAL: $18,468.97;

b) Infinity Plumbing and Heating Ltd - $5,223.75 [including GST of $248.75];

c) Rock-It Concrete Ltd - $2,104.20 [including GST of $100.20];

d) Rock-It Concrete Ltd - $567 [including GST of $27];

e) BTB Drywall Ltd - $16,748.76 [including GST of $797.56];

f) JMV Inc [labour] - $2,829.75 [including GST of $134.75];

g) Liberty Roofing Inc - $57,555 plus GST of $2877.75 – Total: $60,432.75.

1732964 Alberta Ltd

Invoice#

10

9

11

13

Date

Sub-Total

$1600.00

$1125.00

$1800.00

GST

Total

Exhibit #

1-F-16

28/10/14

12/12/14

$80.00

$56.25

$90.00

$1680.00

$1181.25

$1890.00

Ken Nordenfelt Contracting

Invoice# Date

Sub-Total

$3240.00

$2565.00

$2880.00

GST

Total

Exhibit #

1-F-16

$162.00

$128.00

$144.00

$3402.00

$3633.00*

$2693.00

$3024.00

*Includes $231.00 for galvanized nails

Rock-It Concrete Ltd

Invoice#

Date

Sub-Total

GST

Total

Exhibit #

931

25/11/14

$3480.00

$174.00

$3,654.00

1-F-16

[639] In several instances, the TGC engaged sub-contractors to assist with the remediation

work. These costs were passed on and paid directly by the Plaintiffs.

Page: 108

[640] Exhibit 1-F-4 represents two copies of the same invoice and totals $26,740.80. This

invoice was partially paid by the Plaintiffs, though shows an outstanding balance of $2,021.28.

[641] Attached to Juniper’s final report, undated Exhibit 1-F-35, a cost break-down to date is

provided at pages 140-143. In this cost break-down, Juniper refers to the demolition expenses

(Invoices 4, 10, 14, 26, 28, 32, 34, 37, 42, 47, 52, and 53) which total $84,543.21. A second chart

sets out the costs associated with rebuild expenses (Invoices 4, 10, 26, 28, 32, 34, 37, 42, 43, 45,

47, 48, 52, 53, 54, 56, 58, 61, 65, and 72) which total $606,816,56. These two amounts total

$691,359.77.

[642] The cost break-down also refers to the fact that there were several aspects of the house

that were not completed. These incomplete items are listed as including:

a) Carpet not installed in bedrooms and Bonus Room;

b) Final coat of paint in most rooms;

c) Interior doors needed to be sprayed and installed with hardware;

d) A number of electrical and plumbing items needed to be finished (lights, fan, panels,

steam shower etc);

e) Cabinetry not complete;

f) Eaves and Downspouts not complete;

g) Bar counter tops and finals in this area;

h) Final coat of stucco required;

i) Tops on both the front and back pillars not finished;

j) Garage doors not trimmed or water-sealed.

[643] In his report, Juniper estimated that it would cost $50,000-$60,000 to complete these

items. While it is not entirely clear on the evidence before me, it would appear that TGC

completed all this work as part of the remediation process and billed the Plaintiffs accordingly.

[644] The Defendants advance several arguments in support of their contention that it is not

possible to calculate accurately the quantum of damages owing to the Plaintiffs in this instance.

[645] First, the Defendants say that the invoices are not detailed and that there are no reliable

supporting records for the invoices submitted by Juniper to the Plaintiffs. According to the

Defendants, Juniper’s timesheets do not provide a reliable indicator of the time spent on a

particular deficiency by any specific worker. In particular, the Defendants raise concerns with

respect to the fact that the invoices do not permit a determination as to how much was spent on

structural repairs as opposed to building envelope repairs.

[646] The Defendants also say that the timesheets provide no explanation as to why skilled

labour may have been required in some instances and not others and combines labour costs of the

TGC employees and independent sub-contractors. The Defendants also raise concerns with the

fact that Juniper testified that he only had hand-written notes as to what deductions he made

relative to other, unrelated work being performed for the Plaintiffs. The Defendants point out that

not all of the invoices are fully supported by accompanying time sheets.

Page: 109

[647] Second, the Defendants say that it is not possible to associate the budgeted figures with

the invoices that were issued. In this regard, the Defendants say that Juniper had not been

provided with any work program at the time that he prepared the budget for his remediation work

and, further, that he had no recollection of receiving the Remediation Scope document prepared

by Matthews in October 2013.

[648] Third, the Defendants suggest that there is no way to isolate the costs associated with the

damages resulting from a leak in the refrigerator ice-maker line.

[649] Fifth, the Defendants challenge the remediation costs claimed by the Plaintiffs on the

basis that this work was not subject to any competitive process.

[650] Sixth, the Defendants say that there is no evidentiary basis to conclude that Juniper’s total

charges represent a reasonable cost to complete the required remediation work. In this regard, the

Defendants challenge the evidence of Kraychy regarding the reasonableness of these costs.

[651] The Defendants advance one further argument relating to the difficulty of identifying the

costs associated with the removal of all the exterior stone from the residence. The Defendants

raise this concern on the assumption that the removal of the stone was not a remediation cost

properly attributed to the Defendants given that the application of the stone fell outside of the

parties’ contract. As more fully explained earlier in these reasons, I am satisfied that the removal

of the stone was required in this instance to remove the underlying stucco due to extensive

cracking and so that the stone could be re-installed with a proper bonding material.

[652] I do not accept the Defendants’ contention that the only basis upon which to assess the

reasonableness of the Plaintiffs’ remediation expenditures lies in what is alleged to be the

unsubstantiated dollar figures of the TGC invoices. First of all, Juniper gave extensive evidence

during the trial. He was examined in chief for a full day and subject to a further full day of cross-

examination. He provided at least three written quotes to the Plaintiffs as his knowledge and

understanding of the scope of the work evolved through the on-going investigative work. His

January 2014 quote, Exhibit 1-F-9, contains a 23-page overview of the scope of work required to

remediate the residence. It is broken down into categories defined by the type of required

remediation work or affected area of the home. Estimated repair costs were provided for each

category. Of note, the total estimated cost of remediation was $802,597.11, just over $32,000

more than the actual cost of $769,543.24 paid to Juniper by the Plaintiffs. The difference

between the projected cost and the actual cost was approximately 4%.

[653] Juniper’s final report is 143 pages long, including numerous photographs, that show the

as-built condition of the residence, repairs being effected, and the remediated state. Juniper’s

evidence must also be considered together with the trial evidence and expert reports prepared by

Bjornson and Matthews, the two engineers hired by the Plaintiffs, as well as the expert report of

the Defence expert, Mr. Hamman. The extensive collection of photographs that are in evidence,

together with Matthews’ engineered repair details, Exhibit 1-A-7, are all part of the

comprehensive body of evidence that reveals the full extent of the remediation work required to

complete the residence.

[654] I have carefully considered the other arguments advanced by the Defendants challenging

both the adequacy and reliability of the Plaintiffs’ damages claim. In the absence of any authority

suggesting otherwise, I am not prepared to find that the Plaintiffs were under any obligation to

submit this remediation work to any form of competitive process prior to engaging Snyder,

Page: 110

Matthews, Bjornson and Juniper. Likewise, I do not attach any real significance to the fact that

Juniper’s final budget for the remediation does not appear to be closely related to a work

program developed by either Matthews or Bjornson based on their investigative findings and

associated recommendations. As previously indicated, one of the most significant challenges

posed by this project lay in the fact that the investigation of one identified deficiency revealed

other unanticipated deficiencies. This state of affairs significantly undermined the planning part

of the process in so far as the plan was in a seemingly continuous state of evolution.

[655] This is not a situation where the Defendants could legitimately claim that the work of the

remediation team was unfocused, disorganized or lacking coordination. Quite the contrary, based

on the evidence before me, I am satisfied that the key members of the remediation team,

Matthews, Bjornson and Juniper, worked together very effectively under very challenging

circumstances. I would simply add that the importance of planning must always be balanced

against the pressing need that existed in this situation to complete the construction of this

residence.

[656] The Defendants also raise concerns with respect to the adequacy of the time sheets

provided by the various workers involved in the remediation exercise. There is, in my view,

some merit to the Defendants’ suggestion that the various invoices and timesheets do not

perfectly align, and that there are some obvious gaps in the records supporting the invoices.

Ideally, each invoice would have been broken down by work activity and fully supported by time

records that reflected how much time any given worker spent on a specific task. Information

gathered and recorded in this fashion would have provided a clear indication of which work had

been performed by skilled versus unskilled workers and by Juniper’s employees versus

independent contractors.

[657] Unfortunately, this information is not available in this instance. Rather, itemized invoices

are partially supported by time sheets prepared by individual workers, though some of the

invoices are missing some of the supporting time sheets. In the result, some gaps are revealed in

trying to determine with certainty what workers performed work on specific activities over a

specific period of time. Juniper did, however, provide a reasonable explanation for at least some

of these gaps.

[658] The gaps in TGC’s records that support the invoices for the work performed do not cause

me to doubt the overall reliability of this evidence. I found Juniper to be a highly credible

witness who went to great lengths during the course of this nearly two days on the witness stand

to assist the Court and the parties to fully understand the nature and extent of the work that he

undertook in this instance. I am satisfied that he employed a reasonable, albeit imperfect, system

to gather together the required information to substantiate his client billings. Having heard his

evidence and reviewed the extensive materials that he produced in documenting his involvement

in this project, I have confidence in the overall reliability of the billing processes employed in

this instance.

[659] With respect to the damages resulting from the leak in the refrigerator, I accept the

underlying contention that these are not damages attributable to the Defendants. Juniper was the

only witness who addressed the leaking refrigerator, its underlying cause, and the ensuing

damage. He testified that the leak was not related to the water line leading to the appliance.

Rather, the leak was internal to the refrigerator, though he was unable to identify the precise

source of the leak. He also testified that the resulting damage was not covered by the Plaintiffs’

Page: 111

insurance, and that the repairs undertaken to the hardwood flooring, the basement wall in the

room underneath the kitchen, and the replacement of a water-damaged roll of cork flooring that

was being stored in the basement, was included in the invoices he submitted to the Plaintiffs.

[660] Juniper was unaware when the appliance had been installed or who was involved in the

installation process. There is no other evidence on this point, including any evidence regarding

any manufacturer’s warranty that may have been applicable under the circumstances. Given

Juniper’s evidence regarding the nature of the leak, namely that it was internal to the appliance, I

am satisfied that this damage is not properly attributed to the Defendants. There is no evidence

that the Defendants had any role in the installation of the refrigerator, let alone any responsibility

for its internal operation. While it is unfortunate that neither the Plaintiffs’ insurers nor the

appliance manufacturer was willing to cover the cost of repairing the resulting damage, I am

satisfied that this was not a cost for which the Defendants should be held responsible.

[661] Juniper testified that it was necessary to patch the kitchen floor with left-over flooring

material, repair the drywall and repaint in certain areas. I would reduce the Plaintiffs’

remediation claim by $500 to account for the repair to the drywall and the necessary repainting

and would disallow the various items included in TGC’s account in this regard.

[662] I find that the Plaintiffs are entitled to recover total remediation costs of $772,100.12, less

the costs associated with the damages occasioned by the refrigerator leak, $4,119.64, and less

$500 to cover the drywall repair and repainting, for a total remediation cost of $767,480.48.

From this amount, I would deduct the amount the Plaintiffs owe the Defendants under the

construction contract, a total of $431,777.94. In the result, the Defendants are required to pay to

the Plaintiffs the sum of $335,702.54.

B. Consequential Damages

[663] Relying on Vermillion at para 180, and Heintzman on Canadian Building Contracts, 5^th

ed., Carswell, Toronto, at para 9-50, the Plaintiffs say that they are entitled to consequential

damages in the amount of $68,632.12, including the costs of hiring consultants to assist them in

remediating and completing the residence. Specifically, the Plaintiffs claim the following

amounts:

$525

a) Western Form Works (Troy Snyder – leaking

windows

$3,024

b) Optimize Engineering (Dana Bjornson)

$36,456

c) Madden Matthews Engineering

[664] The Plaintiffs also say that they are entitled to be compensated for other consequential

losses occasioned in this instance. The Plaintiffs, citing Chitty on Contracts, Vol 2, at 37-214,

say that they are entitled to consequential losses which would have been in the reasonable

contemplation of the parties if they had thought about the issue. Chitty on Contracts describes

consequential loss in the following terms:

In construction projects, defects in the works will often have a wider impact upon

the employer’s existing operations and production process. Such losses will rarely

be said to arise naturally according to the usual course of things and, accordingly,

consequential losses will usually fall under to (sic) the second limb of Hadley v

Page: 112

Baxendale, that is, damage which, in the reasonable contemplation of both parties

at the time of making the contract would, had they thought about it, have had a

very substantial degree of probability.

[665] This very issue was also addressed in Vermillion. At paras 263-65, the Court included

profession fees incurred by the claimant to investigate and then remediate the defect that was

discovered in that instance. At para 264, the Court held:

I have found that Vermillion acted reasonably in the circumstances in retaining

Williams to conduct an investigation into the cause of the Defect and in

undertaking remedial work as required on the Project. This is particularly so given

the total lack of input from the Defendants from approximately mid-2006 onward.

While Vermillion is a sophisticated entity in the business of providing health

services, it is not sophisticated in the areas of design and construction of facilities

such as the Project. It was entirely reasonable for it to seek the assistance of a

professional firm such as Williams to investigate and address the problems

encountered with the Project.

[666] The Defendants do not seriously challenge the Plaintiffs need for professional assistance

in this instance. While the Defence expert, Hamman, appeared to suggest that some of the

identified construction deficiencies did not require the involvement of professional engineers, his

evidence focused largely on his conclusions that less costly options were available to address

many of the identified deficiencies. In any event, I am satisfied that the Plaintiffs’ prompt

decision to seek the assistance of experts was reasonable under the circumstances. Given

Metcalfe’s unwillingness to offer any assistance, let alone accept any responsibility, for the

leaking windows, it was eminently reasonable, indeed highly prudent, for the Plaintiffs to reach

out for high level guidance and advice. I find that the Plaintiffs’ decision to engage Snyder,

Bjornson and Matthews gave rise to expenses that properly fall under the heading of

consequential damages.

[667] According to the Plaintiffs, Metcalfe was aware that they intended to sell their former

residence in Carstairs. He was also aware that the anticipated completion of the new residence

was June 2012. The Plaintiffs maintain that costs arising from their delayed occupancy of the

new residence on account of remediation work was reasonably foreseeable. They claim a total of

$28,527.24, covering the period of approximately May 2013 until August 2015:

Waste bin rental during demolition/remediation

Burn pit (waste disposal)

$1,281.12

$882.00

Utilities during demolition/remediation

Gas at new residence

$6,704.57

$3,780.13

$3,527.63

$7,681.80

Tax Assessment on new residence (not land)

Equipment rental for demolition/remediation

Replacement door handles (disappeared from site)

$986.95

Page: 113

Lost interest

$3,683.04

[668] With respect to the claim for lost interest, the Plaintiffs made 27 mortgage payments

between April 2013 and July 2013 [sic] at $4,958.20, totaling $133,871.40. The Plaintiffs claim a

total of $3,683.04 in interest for the premature use of these funds that could otherwise have

earned interest or investment proceeds.

[669] The Defendants challenge the characterization of all the above items as consequential

costs in these circumstances. According to the Defendants, these damages were not foreseeable

given the length of time that it took to commence and complete the remediation of the residence.

The Defendants cite no authority for the proposition that there is any recognized connection

between foreseeability and the time that it takes the aggrieved party to address the damage

caused by the other party. In my view, there is no merit to the Defendant’s contention in this

regard.

[670] I would, however, deduct the cost of the replacement door handles. While this is a

relatively minor item, this was not a foreseeable loss and, as such, is not recoverable as

consequential damages.

[671] The Defendants also challenge a portion of Matthews’ November 2, 2015, invoice to the

Plaintiffs, Exhibit 1-H-32, namely an expenditure of $20,215.00 plus GST for 14

repair/remediation sketches produced at the request of Juniper. According to the Defendants,

some of these sketches were not used or completed. No details are provided as to which sketches

were either not used or completed.

[672] During his testimony, Juniper specifically referred to at least 10 of the 14 sketches

provided by Matthews. He explained that he relied on these sketches to effect the repairs and or

remediation recommended by Matthews. In his evidence, Matthews also referred in some detail

to many of these same sketches. In the absence of any particulars as to which sketches were not

used or completed, I am not prepared to accept the Defendants’ submission in this regard. In my

view, the sketches were a reasonable, indeed essential, part of the more complex tasks involved

in the remediation process.

[673] In conclusion, I would award a total of $67,545.29 in consequential damages.

[674] Before turning to consider other potential heads of damages, I find that the Defendants

are liable to the Plaintiffs in the amount of $403,247.83.

C. Non-Pecuinary General Damages

[675] The Plaintiffs seek non-pecuniary general damages of $50,000. Relying on the decision

in Hickey’s Building Supplies Ltd v Sheppard, 2014 NLCA 43, the Plaintiffs say that this

contract was a ‘peace of mind’ contract that was intended to bring about psychological benefit to

them as their dream retirement home and a place to spend time with their then teenaged

daughters. The Plaintiffs maintain that the breach of contract brought about mental distress that

was within the reasonable contemplation of the contracting parties sufficient to justify

compensation. In further support of their claim for damages in this regard, the Plaintiffs point to

the fact that Mr. Swanby’s plan to retire from his overseas job in 2019, once he had paid for the

cost of building the home, had to be postponed such that he now expects to have to work outside

of the country for an additional 10 years.

Page: 114

[676] As the Defendants properly point out, the Plaintiffs did not seek non-pecuniary general

damages in their various pleadings and have made no application to amend their claim. If the

Plaintiffs are permitted to advance their claim for general non-pecuniary damages, the

Defendants say that the Plaintiffs have failed to advance sufficient evidence to justify the

awarding of such damages.

[677] The Defendants maintain that there is no basis to conclude that the Plaintiffs suffered

from anything beyond the normal frustrations of litigants pursuing a claim for breach of contract.

There is no evidence that either of the Plaintiffs suffered any additional distress, or that they

required counselling or other medical intervention. Further the Defendants point out that the

Plaintiffs were experiencing other stresses in their life at the time as well, including the

inordinate delay in the commencement and completion of the remediation work, a matter that

was outside the control of Metcalfe and could not have been anticipated by him at the time the

contract was signed on August 22, 2011.

[678] In Hickey’s, a majority of the Newfoundland and Labrador Court of Appeal upheld the

trial judge’s decision to award $15,000 in general, non-pecuniary damages. In that instance, the

Sheppards contracted with Hickey for the construction of a new home. The builder was aware

that the new home to be constructed had to accommodate Ms. Sheppard’s wheelchair and her

mobility issues and, as such, required level floors. The residence, as constructed, included the

use of transition strip between ceramic tile and hardwood flooring given the difference in

thickness between the two materials.

[679] Writing for the majority, Hoegg JA provided an extensive review of the law relating to

the awarding of general, non-pecuniary damages for mental distress in breach of contract cases.

Starting with the decision of McLachlin CJC and Abella J in Fidler v Sun Life Assurance Co,

2006 SCC 30, Hoegg JA traced the evolution of this head of damages in both the United

Kingdom and Canada.

[680] In Fiddler, the Supreme Court found that mental distress may be an appropriate head of

damage “where such damages were in the reasonable contemplation of the parties at the time the

contract was made”: at para 44. The Court went on to explain at para 45-47:

It does not follow, however, that all mental distress associated with a breach of

contract is compensable. In normal commercial contracts, the likelihood of a

breach of contract causing mental distress is not ordinarily within the reasonable

contemplation of the parties. It is not unusual that a breach of contract will leave

the wronged party feeling frustrated or angry. The law does not award damages

for such incidental frustration. The matter is otherwise, however, when the parties

enter into a contract, an object of which is to secure a particular psychological

benefit...The basic principles of contract damages do not cease to operate merely

because what is promised is an intangible, like mental security.

This conclusion is supported by policy considerations that have led the law to

eschew damages for mental suffering in commercial contracts. As discussed

above, this reluctance rests on two policy considerations – the minimal nature of

the mental suffering and the fact that in commercial matters, mental suffering on

breach is “not in the contemplation of the parties as part of the business risk of the

transaction”: McGregor on Damages, at p. 63. Neither applies to contracts where

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promised mental security or satisfaction is part of the risk for which the parties

contracted.

This does not obviate the requirement that a plaintiff prove his or her loss. The

court must be satisfied that: (1) that an object of the contract was to secure a

psychological benefit that brings mental distress upon breach within the

reasonable contemplation of the parties; and (2) that the degree of mental

suffering caused by the breach was of a degree sufficient to warrant

compensation...

[681] The Court concluded that the “peace of mind” class of cases “should not be viewed as an

exception to the general rule of the non-availability of damages for mental distress in contract

law, but rather as an application of the reasonable contemplation or foreseeability principle that

applies generally to determine the availability of damages for breach of contract”: at para 49.

[682] Subsequently, in Mustapha v Mulligan of Canada Ltd, 2008 SCC 27, McLachlin CJC

considered the awarding of non-pecuniary general damages in the context of a plaintiff who

found a fly in an unopened bottle of drinking water. Chief Justice McLachlin found that the

damages in that instance were too remote to be compensable, explaining (at para 16) that “the

law of tort imposes an obligation to compensate for harm done on the basis of reasonable

foresight, not as insurance”. She went on (at para 17) to explain that “[O]nce a plaintiff

establishes the foreseeability that a mental injury would occur in a person of ordinary fortitude,

by contrast, the defendant must take the plaintiff as it finds him for the purpose of damage”. Of

relevance to the within matter, McLachlin CJC went on to add that in contract law if:

the defendant had actual knowledge of the plaintiff’s particular sensibilities; the

ordinary fortitude requirement need not be applied strictly. If the evidence

demonstrates that the defendant knew that the plaintiff was of less than ordinary

fortitude, the plaintiff’s injury may have been reasonably foreseeable to the

defendant...

[683] I accept the Defendants’ contention that the Plaintiffs have failed to meet either of the

requirements set out in Fidler. First, Metcalfe’s general awareness that the residence was

intended as the Swanby’s retirement residence does not rise to the level that it can be said the

parties reasonably contemplated mental distress flowing to the Plaintiffs beyond normal

frustration and anger upon a breach of the contract to build that residence. Likewise, I am not

persuaded by the fact that Metcalfe was aware that the residence was planned as a family home

for the Swanbys and their children would give rise to mental distress beyond incidental

frustration if there was a breach. I agree with the Defendants that the circumstances in this

instance were not comparable to the circumstances of the disabled plaintiff impacted in Hickey’s.

[684] As regards the second requirement set out in Fidler, I note that the Plaintiffs have not

adduced any evidence from, for example, a mental health professional to substantiate that the

breach of contract in this instance produced a significant impact that involved something more

than “the ordinary annoyances, anxieties and fears” associated with the breach of an agreement:

Mustapha at para 9.

D. Punitive Damages

[685] In their Statement of Claim and Amended Statement of Claim, the Plaintiffs sought both

aggravated damages and punitive damages. While it seems clear that aggravated and punitive

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damages will frequently cover the same conduct, the decided cases make it plain that they serve

different purposes.

[686] McIntyre J provided a helpful explanation of the nature of these two heads of damages in

Vorvis v ICBC, [1989] 1 SCR 1085 at p 1098:

… Punitive damages, as the name would indicate, are designed to punish. In this,

they constitute an exception to the general common law rule the damages are

designed to compensate the injured, not to punish the wrongdoer. Aggravated

damages will frequently cover conduct which could also be the subject of punitive

damages, but the role of aggravated damages remains compensatory. The

distinction is clearly set out in Waddams, The Law of Damages (2^nded. 1983) at

p. 562, para 979, in these words:

An exception exists to the general rule that damages are

compensatory. This is the case of an award made for the purpose,

not of compensating the plaintiff, but of punishing the defendant.

Such awards have been called exemplary, vindicative, penal,

punitive, aggravated and retributory, but the expressions in

common modern use to describe damages going beyond

compensatory are exemplary and punitive damages. “Exemplary”

was preferred by the House of Lords in Cassell & Co. Ltd. v

Broome, but ‘punitive’ has also been used in many Canadian

courts including the Supreme Court of Canada in H.L.Weiss

Forwarding Ltd. v Omnus. The expression ‘aggravated damages’,

though it has sometimes been used interchangeably with punitive

or exemplary damages, has more frequently in recent times been

contrasted with exemplary damages. In this contrasting sense,

aggravated damages describes an award that aims at compensation,

but takes full account of the intangible injuries, such as distress and

humiliation, that may have been caused by the defendants insulting

behaviour. The expressions vindictive, penal and retributory have

dropped out of common use.

[687] The Plaintiffs seek punitive damages in the range of $75,000 to address what they

describe as the high-handed, malicious and reprehensible conduct of the Defendants in this

instance. According to the Plaintiffs, the Defendants’ actions ought to attract the Court’s outrage.

[688] The Plaintiffs cite and rely on the Supreme Court’s decision in Whiten v Pilot Insurance

Co, 2002 SCC 18, as authority for the proposition that punitive damages are generally

appropriate where a defendant’s misconduct is high-handed, malicious, arbitrary, or highly

reprehensible. The conduct in question must depart from the ordinary standards of decent

behavior to be recoverable: at paras 94-95. They also rely on a series of other cases, including

Keays v Honda Canada Inc., 2008 SCC 39, Leclair v Leclair, 2019 ABQB 594, Sturrock v

Ancona Petroleum Ltd (1990), 75 Alta LR (2^nd) 216 (QB), and HL Weiss Forwarding Ltd v

Omnus, [1976] 1 SCR 776.

[689] In this instance, the Plaintiffs say that the Defendants concealed known deficiencies,

including breaches of the Code and dangerous work. The Plaintiffs also refer to Metcalfe’s

complete disregard for the careful review of Tru-Square’s scope of work that was required under

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the circumstances. Further, the Plaintiffs refer to Metcalfe’s failure to offer any assistance to

rectify the deficient work while, at the same time, filing a counterclaim for damages that

Metcalfe knew Tru-Square was not entitled to receive. Finally, the Plaintiffs say that Metcalfe

induced a breach of contract on the part of Tru-Square. According to the Plaintiffs, the combined

effect of these factors reveals egregious conduct on the part of the Defendants that warrants an

award of punitive damages.

[690] In support of their claim for punitive damages in their Amended Statement of Claim, the

Plaintiffs cited construction deficiencies, as well as the diversion of payments provided by the

Plaintiffs to the construction of the Metcalfe’s West Highlands residence, a residence that was

under construction at the same time as the Swanby residence. The Plaintiffs further allege that

materials they paid for in relation to the construction of their home were used in the construction

of the West Highlands residence. Based on these allegations, the Plaintiffs claim a beneficial

interest in the West Highlands residence and seek a finding that the remaining proceeds from the

sale of the West Highlands residence are subject to a remedial constructive trust.

[691] While the pleadings filed by the Plaintiffs make a series of allegations relative to the

West Highlands residence, there is simply insufficient evidence to allow me to make any

findings in this regard. My consideration of the Plaintiffs’ claim for punitive damages does not,

accordingly, take this unproven allegation into account.

[692] The Defendants, on the other hand, seek to distinguish the within matter from what the

Defendants say are far more serious circumstances in the cases cited by the Plaintiffs. In sum, the

Defendants say that Metcalfe’s conduct falls far short of the type of conduct attracting punitive

damages. The Defendants rely on the decision of Germain J in Field v Krisco, 2004 ABQB 391,

in which the Court declined to award punitive damages.

[693] The Defendants point to the complete absence of evidence that Metcalfe intended to harm

the Swanbys in terms of them suffering any damage or loss. Rather, the Defendants underscore

the fact that the relationship between the parties was generally without difficulty prior to the

discovery of leaking windows on May 23, 2013. Thereafter, the Defendants say that Metcalfe

continued to pay invoices submitted by the various trades in accordance with the parties’ revised

agreement, notwithstanding the breakdown in the relationship. Metcalfe also provided a credit at

the time of the final accounting when it was clear that his involvement in the project was over.

[694] The Defendants also say that there is no evidence that Metcalfe ever lied to the Swanbys,

notwithstanding Ms. Swanby’s unconfirmed allegation that McEwen told her that he had been

asked by Metcalfe to conceal deficiencies in the framing of the residence.

[695] Finally, the Defendants contend that the fact that the Plaintiffs refused to consider making

use of the mediation services of the ANHWP should disentitle them to aggravated damages.

There is no evidence that the Plaintiffs made any real effort to avail themselves of any relief that

may have been available through that program.

[696] The Supreme Court’s decision in Whiten involved a jury decision in a case where the

plaintiff’s insurance company refused to pay a claim under a fire insurance policy. The insurance

company forced an eight-week trial based on an allegation of arson notwithstanding the fact that

the insurance company’s own expert acknowledged that there was no evidence whatsoever of

arson. The jury awarded compensatory damages and punitive damages of $1 million. A majority

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of the Ontario Court of Appeal reduced the punitive damages award to $100,000. On a further

appeal to the Supreme Court, the jury award was restored.

[697] Binnie J, for the majority, provided a comprehensive summary of the principles

applicable to the awarding of punitive damages at para 94:

To this end, not only should the pleadings of punitive damages be more rigorous

in the future than in the past (see para.87 above), but it would be helpful if the

trial judge’s charge to the jury included words to convey an understanding of the

following points, even at the risk of some repetition for emphasis. (1) Punitive

damages are very much the exception rather than the rule, (2) imposed only if

there has been high-handed, malicious, arbitrary or highly reprehensible

misconduct that departs to a marked degree from ordinary standards of decent

behaviour. (3) Where they are awarded, punitive damages should be assessed in

an amount reasonably proportionate to such factors as the harm caused, the degree

of the misconduct, the relative vulnerability of the plaintiff and any advantage or

profit gained by the defendant, (4) having regard to any other fines or penalties

suffered by the defendant for the misconduct in question. (5) Punitive damages

are generally given only where the misconduct would otherwise be unpunished or

where other penalties are or are likely to be inadequate to achieve the objectives

of retribution, deterrence and denunciation. (6) Their purpose is not to

compensate the plaintiff, but (7) to give a defendant his or her just desert

(retribution), to deter the defendant and others from similar misconduct in the

future (deterrence), and to mark the community’s collective condemnation

(denunciation) of what has happened. (8) Punitive damages are awarded only

where compensatory damages, which to some extent are punitive, are insufficient

to accomplish these objectives, and (9) they are given in an amount that is no

greater than necessary to rationally accomplish their purpose. (10) While

normally the state would be the recipient of any fine or penalty for misconduct,

the plaintiff will keep punitive damages as a “windfall” in addition to

compensatory damages. (11) Judges and juries in our system have usually found

that moderate awards of punitive damages, which inevitably carry a stigma in the

broader community, are generally sufficient.

[698] The Supreme Court confirmed its decision in Whiten in Keays. At para 62 of Keays,

Bastarache J, for the majority, noted that Whiten had settled the question of whether or not

punitive damages require an actionable wrong. He stated:

In Vorvis, McIntyre J., for the majority, held that punitive damages are

recoverable provided the defendant’s conduct said to give rise to the claim is itself

“an actionable wrong”. This position stood until 2002 when my colleague Binnie

J., writing for the majority, dealt comprehensively with the issue of punitive

damages in the context of the Whiten case. He specified that an “actionable

wrong” within the Vorvis rule does not require an independent tort and that a

breach of the contractual duty of good faith can qualify as an independent wrong.

Binnie J. concluded, at para. 82 that “[a]n independent actional wrong is required,

but it can be found in breach of a distinct and separate contractual provision or

other duty such as a fiduciary obligation.”

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[699] In Hill v Church of Scientology of Toronto, [1995] 2 SCR 1130, the Supreme Court

discussed the type of conduct required to support an award of punitive damages. At p 1208, the

Court held:

Punitive damages may be awarded in situations where the defendant’s misconduct

is so malicious, oppressive and high-handed that it offends the court’s sense of

decency. Punitive damages bear no relation to what the plaintiff should receive by

way of compensation. Their aim is not to compensate the plaintiff, but rather to

punish the defendant. It is the means by which the jury or judge expresses its

outrage at the egregious conduct of the defendant. They are in the nature of a fine

which is meant to act as a deterrent to the defendant and to others from acting in

this manner. It is important to emphasize that punitive damages should only be

awarded in those circumstances where the combined award of general and

aggravated damages would be insufficient to achieve the goal of punishment and

deterrence.

[700] The decision of Mason J in Herman v Graves, 1998 ABQB 471, also provides a

comprehensive and helpful review of the law regarding the awarding of punitive or exemplary

damages. At para 44, he explained that:

Punishment is the primary purpose of an award of exemplary, or punitive,

damages. Deterrence is also a purpose. An award of punitive damages follows

when the conduct of the defendant is so egregious that the damages that should be

awarded go beyond mere compensation of the plaintiff. Whether exemplary

damages should be awarded is focused on the defendant. Such an award serves to

deter not only the defendant but also others from committing such acts.

[701] The Plaintiffs point to five factors which they say support the awarding of punitive

damages in this instance:

a) Breaching the contractual obligation to act in good faith;

b) Concealing or attempting to cover up misconduct;

c) Benefiting from fraudulent acts;

d) Awareness that their conduct was wrong; and

e) Inducing a breach of contract.

[702] In terms of the appropriate quantum of damages under this head of damages, the

Plaintiffs point to the awarding of $20,000 in punitive damages in Walker; $25,000 in Sturrock;

$10,000 in Weiss; and $70,000 in LeClair, as informing the appropriate measure of punitive

damages in this instance.

[703] I am not persuaded that this is a proper case for awarding punitive damages. While I am

dismayed by what I would characterize as Metcalfe’s casual and careless conduct in discharging

his important responsibilities to the Plaintiffs in the construction of their retirement home, I am

not persuaded that this conduct rises to the level described in the various cases referenced above.

[704] The decision in Whiten makes it clear that punitive damages should only be awarded in

exceptional cases where it is necessary to punish the offending behavior. The descriptors used in

Whiten include “high-handed”, “malicious”, and “arbitrary or highly reprehensible conduct”.

The decision in Hill includes similar language, but also “oppressive” and “offends the court’s

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sense of decency.” Given that punitive damages focus on deterrence, as opposed to

compensation, I take Whiten to signal the need for judicial restraint.

[705] The Plaintiffs’ allegations with respect to Metcalfe’s conduct are serious. I share the view

that his frequent absences from the job site rendered him an ineffective supervisor of a large

project involving multiple sub-contractors. It seems clear that he was not engaged in the overall

coordination and oversight of the construction anywhere near to the extent dictated by the

circumstances. I further find that his refusal to offer any form of assistance, or to accept any

responsibility for the leaking windows, reflects very poorly on his professionalism. On a human

level, it demonstrated a somewhat shocking lack of compassion for the plight of his clients. His

stubborn refusal to come to the aid of the Plaintiffs when the completion of their home was

within sight is hardly a high-water mark at the end of a long career in custom home building.

[706] I accept the Plaintiffs contention that Metcalfe concealed some known deficiencies.

Specifically, I accept Ms. Swanby’s evidence regarding her conversation with McEwen in which

the framer reported that Metcalfe had told him not to tell the Plaintiffs about the framing of the

residence being off. Earlier in these reasons, I also made findings regarding Metcalfe’s

knowledge of other deficiencies that he failed to address or bring to the attention of the Plaintiffs.

I refer specifically to the following:

a) Metcalfe’s awareness that McEwen used non-pressure treated lumber next to the

foundation. Metcalfe was aware that this was a Code violation, yet failed to address

the matter or bring the issue to the attention of the Plaintiffs;

b) Metcalfe’s awareness that the sheathing in the main floor bedroom did not extend to

the floor and, as such, represented a Code violation. Metcalfe failed to direct McEwen

to correct the issue or bring the issue to the attention of the Plaintiffs;

c) Metcalfe’s awareness that he observed some sagging of the header beam for the rear

entry-level doors. Metcalfe failed to determine the cause of the deflection or to

correct the situation. He also failed to bring the issue to the attention of the Plaintiffs;

d) Metcalfe’s awareness that the deck drainage system was inadequate. He failed to

disclose the scope of this issue with the Plaintiffs other than through his subsequent

disclaimer of responsibility for a drainage system that was 100% effective;

e) Metcalfe’s awareness of a soil erosion issue at the rear of the residence that he

believed was responsible for at least one of the deck piles being less than 4 feet deep.

I do not accept his evidence that he brought to Ms. Swanby’s attention the need to

construct a retaining wall to address this soil erosion issue;

f) Metcalfe’s awareness that the soffits leaked. Metcalfe failed to determine the cause of

the problem or to address the issues. He also failed to bring the matter to the attention

of the Plaintiffs.

[707] I do not accept the Plaintiffs’ contention that Metcalfe in any way concealed any

problems relating to the foundation. As McEwen stated in his evidence, the fact that a two-to-

three-foot section of the exterior wall overhung the foundation by two inches was “very

obvious”. On the evidence, the Plaintiffs asked questions about this situation and received

assurances from Metcalfe, and possibly McEwen, that this situation could be addressed during

the balance of the construction process.

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[708] I am very suspicious that Metcalfe was also aware of, but concealed from the Plaintiffs,

the leaking windows. However, I am not satisfied that this was the case and, as such, I am not

prepared to make such a finding in these circumstances.

[709] I am, however, satisfied that Metcalfe was largely unaware of most, if not all, of the other

deficiencies that were ultimately revealed through the work of Bjornson, Matthews and Juniper.

As a result of his frequent absences and his overall distracted state, I find that Metcalfe was

simply not engaged in the details of the project other than on a somewhat selective basis. While

the evidence points to the fact that he was personally involved in a number of specific tasks

during the project, it seems clear that he placed significant reliance on his trades to complete

their work without the benefit of his oversight. He also relied on Carm, inappropriately in my

view, to help fill the leadership vacuum that he created.

[710] It is important to distinguish between concealment and a lack of awareness. Metcalfe

should, of course, have been aware of many of the deficiencies that were ultimately revealed.

However, I am satisfied that he was not. His lack of awareness in circumstances in which he

clearly should have been aware obviously has legal consequences. However, lack of awareness

cannot be equated with concealment in these circumstances.

[711] While I am very troubled by Metcalfe’s request to McEwen not to inform the Plaintiffs

about the framing issues, I find that this comment, as well as the other instances referred to

above that do involve concealment, must be viewed in context. As previously indicated, I find

that Metcalfe was distracted, even disinterested in this construction project. He was at the end of

a long career in housebuilding and initially turned down the job. While none of this undermines

my other findings regarding breach of contract and negligence, it informs my characterization of

Metcalfe’s conduct.

[712] The Plaintiffs also contend that Metcalfe induced Tru-Square’s breach of contract and

that this is a factor to be considered in determining whether to award punitive damages. As

outlined earlier in these reasons, relying on the decision of Slatter JA in Elite Homes, I do not

believe that this allegation has been established in these circumstances

[713] Finally, the Plaintiffs rely on the fact that the Defendants’ decision to pursue a Counter

Claim in this instance, allegedly with full knowledge that there was no legitimate basis for this

claim. In my view, there is no merit to this argument. Indeed, the damage calculation set out

earlier in these reasons reveals my acceptance of the Defendants’ contention that they are owed a

substantial sum of money by the Plaintiffs under the terms of the contract.

[714] What seems clear to me from this most unfortunate situation is that Metcalfe really did

not want to undertake this project given his forthcoming planned retirement. He took on the

construction of the Swanby residence with some reluctance and in the seriously mistaken belief

that he could manage the project from a distance while he pursued his other planned activities.

He did not provide proper supervision to the trades that were involved in the construction

project. As a consequence, he was largely unaware of the quality of the work that was

undertaken by the trades in circumstances that clearly called for his active involvement and

oversight. He was, after all, the general contractor, a role that required him to ensure that all

those involved under his supervision met the standards expected of a custom homebuilder.

[715] Overall, I strongly disapprove of Metcalfe’s overall execution of his role as the general

contractor of this construction project. However reluctant he may have been to take on this role,

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once he accepted the work, he had a duty to ensure that it was carried out in a competent fashion

and in accordance with the standards associated with a custom homebuilder. He clearly failed to

meet this standard.

[716] I accept the Defendants’ contention that Metcalfe never intended to harm the Plaintiffs. In

these circumstances, I am not prepared to find any malice or bad motive in any of the many

shortcomings that are fairly attributed to him.

[717] For the foregoing reasons, I decline to award punitive damages in this case. In my view,

the conduct of the Defendants, particularly Metcalfe, does not rise to the level of behavior that

warrants an award of punitive damages.

E. Aggravated Damages

[718] In their pleadings, the Plaintiffs also advance a claim for aggravated damages. At para 36

of their Amended Statement of Claim, they state:

The conduct of the Defendants as described in the Statement of Claim has caused

the Plaintiffs to suffer emotional upset and mental distress. It has interfered with

their family life and work and recreational activities, and diminished their quality

of life. The Plaintiffs have incurred financial losses and increased costs as a result

of the breach of contract. The Plaintiffs are entitled to aggravated damages.

[719] In Elkow v Sana, 2020 ABCA 350, the Court of Appeal addressed the matter of

aggravated damages in the context of an action brought for defamation. At para 16, the Court,

citing Hill v Church of Scientology of Toronto, [1995] 2 SCR 1130, confirmed that “[G]eneral

damages and aggravated damages are compensatory, and are intended to address the harm

suffered by the plaintiff. Punitive damages are designed to punish the defendants and deter

defamatory conduct.” The Court elaborated (at para 30) as follows:

Aggravated damages are a second category of compensatory damages. The award

of general damages is intended to compensate the plaintiff for the injury to her

reputation, and for other injuries she suffered. Aggravated damages, in order to be

justified, must represent some greater injury to the plaintiff, not captured by the

award of general damages. They are justified “where the defendants conduct has

been particularly high-handed or oppressive, thereby increasing the plaintiff’s

humiliation and anxiety arising from the libelous statement”, or

Where the defendant is guilty of insulting or oppressive conduct

which increases the mental distress – – the humiliation,

indignation, anxiety, grief, fear and the like – – suffered by the

plaintiff as a result of being defamed, the plaintiff may be entitled

to what has come to be known as “aggravated damages”.

Hill at para 188, quoting Walker v CFTO Ltd. (1987), 1987 CanLII 126 (ON

CA), 59 OR (2d) 104 at p 111 (CA), emphasis added.

[720] Similarly, in Vorvis, McIntyre J emphasized that “[A]ggravated damages are

compensatory in nature and may only be awarded for that purpose”: at p 1086.

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[721] The Plaintiffs provided no oral or written submissions dealing with the applicability of

aggravated damages in this instance. Rather, the thrust of their submissions focused on punitive

damages.

[722] In my view, this is not a situation where it would be appropriate to award aggravated

damages to the Plaintiffs.

F. Contributory Negligence

[723] If the Defendants are found liable for any damages resulting from the leaking windows,

they maintain that a significant portion of the damages must be allocated to the Plaintiffs.

According to the Defendants, the Plaintiffs failed to heed the caution provided to them by

Metcalfe and McEwen, either directly or indirectly through Carm, their designer. According to

the Defendants, the validity of this caution was confirmed by Bjornson, Juniper, McEwen and

Lawrence.

[724] The Defendants plead and rely on the Contributory Negligence Act, RSA 2000, c C-27,

which directs apportionment of liability for damage or loss caused by two or more persons.

Section 1(1) of the Act provides as follows:

When by fault of 2 or more persons damage is caused to one or more of them, the

liability to make good the damage or loss is in proportion to the degree in which

each person was at fault but if, having regard to all the circumstances of the case,

it is not possible to establish different degrees of fault, the liability shall be

apportioned equally.

[725] The Plaintiffs, on the other hand, maintain that Metcalfe and Tru-Square are entirely

responsible for the defective installation of the windows and liable for all remediation costs

associated with this aspect of the project.

[726] The Defendants maintain that the recessed windows were not contemplated in the

contract and came about because of a change proposed by Carm and subsequently approved by

the Plaintiffs. Further in his Invoice #118 (C-11), Metcalfe confirmed his earlier caution that any

warranty with respect to the windows was voided. The Defendants say that Metcalfe and Tru-

Square cannot be found liable for the leaking windows or for any of the resulting damage

sustained, including the significant costs associated with the demolition work and the installation

of new windows. They point out that Carm, who was hired by the Swanbys, designed the

recessed window openings.

[727] The Defendants rely on Intrawest Corp v Hart, 2002 BCSC 234, at para 47, wherein

Melnick J, quoting Glanville Williams, states as follows:

Cases where one party has been found “contributorily negligent” for the breach of

contract of another are rare. That it is an available defence, however, was

suggested by Glanville Williams in his 1951 text, Joint Torts and Contributory

Negligence, at p 214:

Usually the defendant in an action for damages for breach of

contract cannot successfully set up the plaintiff’s contributory

negligence, for the reason that the plaintiff is usually entitled to

assume that the defendant will act carefully in carrying out his

undertaking. Culpable carelessness is not usually to be ascribed to

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the plaintiff merely because he has omitted to take precautions

against breach. Thus, it seems that a railway passenger (at least in

the absence of a warning notice) is entitled to assume that the

carriage door has a secure fastening, on that assumption to lean

against it.

But there are cases where the plaintiff may be part author of his

own damage, and where in consequence the defendant ought to be

relieved of responsibility in whole or in part. If a passenger in a

railway carriage knows that the door is defective and yet leans

upon it and falls out, it is difficult to see why the defence of

contributory negligence should not be available, and this whether

the action be framed in contract or tort. So also if, although he does

not know it to be defective, he leans very heavily upon it.

[728] In Linden, Canadian Tort Law, 7^thed, Butterworths, the author deals with the operation

of apportionment legislation, namely the various provincial contributory negligence statutes. At

p 474, he states:

Apportionment will be employed when the fault of two persons combine to cause

a loss, that is, when there is concurrent negligence of two individuals. There is no

apportionment between a negligent and a non-negligent cause. The Canadian

practice is to look at the “causative conduct in terms of relative or comparative

blameworthiness or culpability”. It has recently been repeated that the job of the

court in apportioning damages is to “assess the respective blameworthiness”, not

the “extent to which the loss may be said to have been caused by the conduct of

each.”

[729] The referenced passages contained in this extract from Linden are from the Supreme

Court’s decision in Athey v Leonati, [1996] 3 SCR 458.

[730] In this instance, the Defendant rely on the Plaintiffs’ decision to proceed with the

recessed windows notwithstanding the caution that Ms. Swanby is alleged to have received from

Metcalfe and McEwen and, indirectly, via Carm. I have serious reservations as to whether such

conduct, even if established, would be sufficient to establish the degree of fault, causative

conduct or culpable carelessness required to attribute some portion of the responsibility for the

resulting damage to the Plaintiffs. I would note that the Court in Hart found contributory

negligence on the part of the plaintiffs based on non-disclosure of a prior expert report

commissioned by the plaintiffs and, more generally, the non-disclosure of the extent of the ice

damming problem impacting the condominium. In other words, the court found some degree of

fault on the part of the plaintiffs that justified imposing on them some degree of blameworthiness

for the losses sustained.

[731] It is, however, unnecessary for me to decide this issue in view of my earlier findings

regarding the timeliness and effect of Metcalfe’s purported disclaimer of responsibility after he

installed the recessed windows.

[732] In the result, I find that the Defendants have failed to establish that the Plaintiffs were

contributorily negligent for the damages sustained as a result of the leaking windows.

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G. Mitigation of Damages

[733] The Defendants maintain that the Plaintiffs failed to mitigate their damages in this

instance by not making a claim through the ANHWP, not proceeding with the remediation work

in a timely fashion, not obtaining competitive quotes for the remediation work, and not requiring

a detailed plan from Juniper for the execution of the detailed scope of work recommended by

Matthews and Bjornson. According to the Defendants, the Plaintiffs had the funding to proceed

promptly with the remediation work given that they did not pay Tru Square the balance of the

budgeted amount for the construction of the residence.

[734] The Plaintiffs maintain, contrary to the assertions of the Defendant, that the steps they

took to mitigate their damages by addressing the issues with the initial exterior stone-cladding

were appropriate under all of the circumstance. They rely on Winnipeg Condominium Corp No

36 v Bird Construction Co, [1955] 1 SCR 85, as well as the decision of Master Prowse in the

instant matter wherein he denied summary dismissal of the personal claims against Metcalfe:

Swanby v Tru-Square Homes Ltd, 2016 ABQB 731.

[735] The Plaintiffs acknowledge that they were required to take reasonable steps to mitigate

the losses caused by the actions of the Defendants. They also acknowledge that they have the

burden of establishing that they acted reasonably in the expenditure of funds to effect

remediation in this instance.

[736] The issue of mitigation was addressed in Vermillion. Citing British Westinghouse

Electric & Manufacturing Co v Underground Electric Railways Co of London, [1912] AC 673

(HL), the Court held at para 184:

In that case, Viscount Haldane held that the fundamental basis of damage

assessment, being compensation for pecuniary loss naturally flowing from the

breach, is qualified by the second basis, whereby the plaintiff is required to take

all reasonable steps to mitigate the loss consequential on the breach. Waddams

[The Law of Damages] further states at 15.290:

Often the plaintiff incurs expenses in attempting to mitigate loss. If

the mitigation is successful and a larger loss is avoided by

expenditure of a lesser sum, the plaintiff is entitled to recover the

lesser sum. The plaintiff will in such a case have reduced the loss

(to the amount of the lesser sum) but will not have avoided all loss.

It follows that if the plaintiff incurs expense in a reasonable but

unsuccessful attempt to mitigate, the defendant will be liable for

the expense even though, in the result, liability is greater than it

would have been if the plaintiff had done nothing...[citations

omitted].

[737] Vermillion also refers to the Court of Appeal’s decision in Nu-West Homes Ltd v

Thunderbird Petroleum Ltd, [1975] 59 DLR (3d) 292 (SC App Div), in which Moir JA

addressed the required conduct of an aggrieved party in seeking to mitigate its’ loss. He stated, at

p 308:

In my view, one should be careful not to weigh in too fine a set of balances the

conduct of the aggrieved party. The wrongdoer is entitled to expect the aggrieved

party to act reasonably. He is not entitled to have him act perfectly. In my view

Page: 126

the proper test to be applied is that set out by Lord McMillan in Banco de

Portugal v Waterlow & Sons Ltd, [1932] AC 452 at p 506, where he states:

Where the sufferer from a breach of contract finds himself in

consequence of that breach placed in a position of embarrassment a

measure which he may be driven to adopt in order to extricate

himself ought not to be weighed in nice scales at the incidence of

the party whose breach of contract has occasion to difficulty. It is

often easy after an emergency has passed to criticize the steps

which have been taken to meet it, but such criticism does not come

well from those who have themselves created the emergency. The

law is satisfied if the party placed in a difficult situation by reason

of the breach of a duty owed to him has acted reasonably in the

adoption of remedial measures, and he will not be held disentitled

to recover the cost of such measures merely because the party in

breach can suggest that other measures less burdensome to him

might have been taken.

[738] Vermillion, citing the decision of Laskin CJC in Michaels v Red Deer College, [1976] 2

SCR 324, confirms that a wrongdoer bears the onus of establishing that the aggrieved party has

not taken reasonable steps to mitigate damages. In Michaels, Chief Justice Laskin explained the

so-called “duty to mitigate” in the following terms at p 330-31:

… The parameters of loss are governed by legal principle. The primary ruling in

breach of contract cases, that a wronged plaintiff is entitled to be put in as good a

position as he would have been in if there had been proper performance by the

defendant, is subject to the qualification that the defendant cannot be called upon

to pay for avoidable losses which would result in an increase in the quantum of

damages payable to the plaintiff. The reference in the case law to a “duty” to

mitigate should be understood in this sense.

In short, a wronged plaintiff is entitled to recover damages for the losses he has

suffered but the extent of those losses may depend on whether he is taken

reasonable steps to avoid their unreasonable accumulation.

[739] The Plaintiffs maintain that they acted reasonably in their response to the leaking

windows and in the ensuing investigation and ultimate remediation of the construction

deficiencies that were revealed. Further, they say that they should not be disentitled to their

reasonable costs on the basis of the Defendants’ assertion that less costly means may have been

available.

[740] I am satisfied that the Plaintiffs acted reasonably in quickly retaining Snyder to

investigate the cause of the leaking windows as a first step in addressing the underlying problem.

Likewise, I find that retaining Juniper and then a building envelope engineer, Bjornson, were

necessary steps in the Plaintiffs’ investigation of the scope of the construction deficiencies that

would need to be addressed. Bjornson, in turn, recommended that the Swanbys hire a structural

engineer to further investigate deficiencies that she identified during the course of her review.

This led to the hiring of Matthews, one of four names provided to the Swanbys. Given the

Defendants’ refusal to address the leaking windows and, indeed, their abandonment of the

project, I find that the Plaintiffs required professional guidance and advice in conducting the

Page: 127

required examination of the construction of their home. As such, I accept the Plaintiffs’

contention that Bjornson and Matthews were critical to the overall investigative and remediation

requirements relative to the Swanby’s home.

[741] The Defendants elected not to retain an expert with the necessary qualifications to

challenge or contest any of the expert opinions offered by the Plaintiffs’ engineers, Bjornson and

Matthews. Whether this was a decision taken for tactical or other reasons is unclear. Regardless,

it left the evidence of Bjornson and Matthews largely unchallenged. Given Hamman’s lack of

qualifications even remotely approximating those of either Bjornson or Matthews, he was not in

a position to be able to attack any of their opinion evidence falling within their respective areas

of expertise.

[742] The Defendants do not question the need for the Plaintiffs to engage a contractor to assist

the consulting engineers with the investigation of construction deficiencies and then to effect the

recommended remediation required under the circumstances. Rather, they question the Plaintiffs’

failure to initiate a competitive process before hiring the various experts and Juniper. They also

question Juniper’s work method, notably his alleged failure to develop and follow a

comprehensive work plan based on the recommendations of Bjornson and Matthews.

[743] The Defendants’ expressions of concern relating to the Plaintiffs’ “process” in terms of

citing the absence of a competitive process and a comprehensive work plan seem to be somewhat

at odds with their other concerns relating to the Plaintiffs’ alleged delay in completing the

investigative and remediation processes. It seems clear that both additional steps would have

required additional time and would doubtless have delayed the entire process.

[744] As previously indicated, I find no merit in the Defendants’ assertion that some form of

competitive process was required before the Plaintiffs proceeded with the remediation work. In

terms of the work plan, I am satisfied that a careful review of the various price quotes that

Juniper provided to the Plaintiffs include an evolving understanding of the scope of the work

required to correct the various construction deficiencies. These written quotes are dated August

8, 2013, Exhibit 1-F-3; October 22, 2013 (Proposed Remediation Scope), Exhibit 1-F-6; January

21, 2014, Exhibit 1-F-9; March 23, 2015 (Progress Report), Exhibit 1-F-25. In my view, these

documents provide a clear picture of Juniper’s proposed scope of work relative to this property.

[745] In raising a concern relative to the alleged lack of a formal work plan, the Defendants fail

to articulate any underlying basis for such a concern. As such, the Defendants fail to identify

how the absence of such a work plan impacts the reasonableness of the Plaintiffs’ conduct as

regards mitigation of damages. In the absence of some evidence that the conduct or execution of

Juniper’s work was adversely impacted by the absence of a formal work plan, I am not prepared

to attach much weight to this submission on the part of the Defendants. I would simply add that

the reasonableness and necessity of the various steps taken by Juniper during the remediation

process were not successfully challenged during cross-examination.

[746] In any event, I accept that the Plaintiffs acted reasonably in retaining Juniper and TGC to

undertake this work. Juniper had significant related construction experience, including

experience in remediation work. Further, both Bjornson and Matthews supported his

involvement in the project. Both engineers provided Juniper with direction and guidance

throughout the investigative and repair processes.

Page: 128

[747] In reaching my conclusions in this regard, I take into consideration the evidence of

Kraychy regarding the prevailing circumstances in the construction industry at the time. Kraychy

described the required remediation work as “messy” and that the industry was very busy at the

time these events were unfolding. He went so far as to suggest that he would have not bid on this

work given the ready availability of easier work on new construction projects.

[748] There is no dispute that the Plaintiffs were scheduled to take possession of their home in

May or June of 2013. In fact, they took possession in August 2015, a delay of approximately 27

months.

[749] The Defendants allege that the Plaintiffs did not pursue the remediation process in a

timely fashion, suggesting that the failure to pay Tru-Square’s outstanding invoices would have

left the Swanbys with the available resources to execute any required remediation process at an

earlier date. Of note, the Defendants offer no timeline that they suggest would have been

reasonable, save for Hamman’s “schedule” that contemplated the completion of the remediation

work over the span of 3-4 months.

[750] The Plaintiffs strongly resist this contention, suggesting that the scope of the remediation

work was a shifting target, continuing to expand as they worked their way through the

investigative stage of the process. New issues were continually emerging that required attention.

Further, the Plaintiffs suggest that the time expended was eminently reasonable given the scope

and magnitude of the task that confronted them. As regards the Hamman “schedule”, the

Plaintiffs say that it lacks any air of reality in a real-world setting. I agree.

[751] I am satisfied that Hamman never produced an actual work “schedule”. Rather he

estimated the number of hours that would be required to complete the remediation work. He

acknowledged that this was an estimate of man-hours only and did not account for how those

hours would need to be scheduled over real time. In my view, Hamman’s notional “schedule” is

of very limited, if any, assistance in addressing the issue of timeliness. First, the “schedule” does

not account for the impact of weather conditions, notably Alberta’s typical winter temperatures.

Likewise, it does not account for the time requirements associated with obtaining permits and

scheduling building inspections. Further, the sequencing of tasks would not have been a straight-

line exercise in that some tasks would have required the completion of other tasks before they

could proceed. Further, this “schedule” did not account for the time requirements associated with

the investigation of suspected construction deficiencies, notably through dismantling and testing

otherwise completed building components.

[752] I accept the Plaintiffs’ explanation that the remediation exercise was a complex process

that involved the destruction of existing “finished” construction, the examination and assessment

of identified deficiencies, the acquisition of replacement items, and the actual reconstruction of

the affected component. The impact of weather, the need to schedule tradespeople, inspectors,

and site visits by the Defendants, as well as the requirement to sequence the work in an orderly

fashion, all took time. Likewise, the Swanbys faced cash-flow issues as a result of the need to

hire and pay experts and lawyers, finance remediation work, and cover the costs of maintaining

two homes over an extended period of time.

[753] I also accept Juniper’s evidence that this was not the only project that they were working

on at the time. TGC’s work on this project had to be juggled with work on another large custom

build home in Linden, as well as remediation work on two flooded homes in High River. TGC

was also involved in remediating foundation damage to the Swanby’s other home in Carstairs.

Page: 129

[754] While 27 months may appear at first blush to be an inordinate amount of time, I am

satisfied that the Plaintiffs pursued this process aggressively from the outset. As previously

discussed, Ms. Swanby discovered that the windows were leaking on May 23, 2013. Snyder

visited the site to conduct an investigation shortly thereafter on May 29, 2013. Juniper and TGC

were hired in July or August 2013. Bjornson was retained and made her first visit to the site on

July 10, 2013, at which time she conducted flood testing on some of the leaking windows.

Matthews made his first visit to the residence in September 2013.

[755] All of the key members of the Plaintiffs’ response team were in place by September

2013, some 4 months after the discovery of the leaking windows. Actual remediation work

commenced in July or August 2014. In my view, the Plaintiffs acted promptly, even swiftly,

once they became aware of the leaking windows. The remaining portion of the approximately 27

months until the Plaintiffs took possession of the home was simply the time required to complete

a complex, multi-stage process involving multiple participants.

[756] Having carefully considered all of the surrounding circumstances, I find that the

Defendants have failed to convince me that the Plaintiffs did not prosecute this remediation plan

in a timely fashion.

H. Improvement

[757] The Defendants maintain that some amount should be deduced from any damages

awarded to the Plaintiffs on account of the principle of improvement. The Defendants advance

several arguments in this regard. First, it is alleged that the evidence of Juniper, the person

responsible for the remediation work, lacked detail to determine the difference between what Tru

Square had been hired to build, and the house that was ultimately completed by Juniper.

[758] The Defendants specifically point to the fact that the kitchen floor designed by Matthews

(and built by Juniper) represents a significant improvement over the floor that was contracted to

be built by Tru-Square.

[759] Further, according to the Defendants, Juniper gave evidence that it was cheaper to install

Hardie Board as opposed to redoing the stucco that had been removed from the exterior of the

residence. The Defendants maintain that this has not been proven due to the lack of detail in

Juniper’s invoices. Further, the Defendants point to the fact that Hamman testified that Hardie

board is generally 30% more expensive than stucco.

[760] Finally, the Defendants suggest that the reframing of the window and door opening

represented an improvement over the original recessed opening.

[761] I am not persuaded that there is any merit to the Defendants’ arguments relating to

improvements alleged to have been made to the residence ultimately completed by Juniper, as

opposed to the residence the Defendants were hired to build. First, I reject the Defendants’

contention that they were unable to determine whether there were differences between the home

contracted for and the home ultimately delivered to the Plaintiffs. Through the litigation process,

culminating in a 29-day trial, the Defendants had ample opportunity through document

production, questioning, the exchange and review of numerous expert reports, site inspections,

and the examination of the Plaintiffs’ witnesses produced at trial, to fully ascertain the state of

the residence as ultimately remediated. Furthermore, I do not accept the suggestion that the

evidence of Juniper lacked the level of detail required to permit the Defendants to complete this

assessment.

Page: 130

[762] The Defendants’ suggestions that the kitchen floor and the reframing of the window and

door openings somehow resulted in an overall improvement are lacking in specifics. As regards

the kitchen floor, I am satisfied that the remediated kitchen floor was “improved” only in the

sense that the construction deficiencies were addressed. As discussed earlier in these reasons, the

Defendants failed to install the robust floor system set out in the Innographic design drawings to

accommodate the extra load requirements of the kitchen design. In my view, correcting this

construction deficiency to give the Plaintiffs what they had contracted for from the outset, did

not result in any “improvement”.

[763] With respect to the use of Hardie Board instead of stucco, there was conflicting evidence

as between Juniper and Hamman. I prefer the evidence of Juniper that, in this instance, it was

cheaper to install the Hardie Board than to reapply the stucco to the exterior of the residence.

[764] Finally, as regards the alleged “improvement” with the reframing of the window and door

openings to a flush mounting, as opposed to a recessed mounting, the Defendants did not lead

any evidence that one form of installation represents an “improvement” over the other.

[765] To conclude, I am not persuaded that any deduction should be made to the damage award

otherwise applicable on account of “improvement”.

VII. Counterclaim

[766] The Defendants’ Counterclaim is based on the unpaid invoices they submitted to the

Plaintiffs relative to the construction of the residence, including the fourth and final contract

payments, invoices relating to “extras” and upgrades, and invoices paid to third parties on behalf

of the Plaintiffs. A number of these invoices also include a series of credits from the Defendants

to the Plaintiffs.

[767] I am satisfied that the entirety of the Defendants’ counterclaim has been considered and

addressed in my earlier damage calculation.

VIII.

Conclusion

[768] For the foregoing reasons, I find the Defendant Tru-Square Homes Ltd. breached the

contract with the Plaintiffs dated August 22, 2011, and as varied in the fall of 2011, and again in

May 2012. I also find the Defendants jointly and severally liable in tort for breach of the duty of

care owed to the Plaintiffs in the construction of the Plaintiffs’ residence.

[769] The Plaintiffs are entitled to damages in the sum of $403,247.83.

IX. Costs

[770] The Plaintiffs are entitled to their costs, including the recovery of disbursements for

expert fees in accordance with Rule 10.41(2)(e), and a second counsel fee in accordance with

11(2) and (4) of Schedule C of the Rules of Court. If the parties are unable to reach an agreement

as to the quantum of costs, they may appear before the Review Officer to seek a ruling on the

Plaintiffs’ Bill of Costs.

Page: 131

X. Pre-Judgment Interest

[771] The Plaintiffs seek pre-judgment interest on the damages awarded in this instance from

the date of the causes of action. According to the Plaintiffs, the cause of action arose on

September 30, 2011, the date of the first invoice submitted by the Defendants upon completion

of the foundation.

[772] In my view, the Plaintiffs are entitled to pre-judgment interest from the date that Ms.

Swanby discovered, and brought to Metcalfe’s attention, the leaking windows. This date was

May 23, 2013.

Heard on April 8-18, 2019, and continued April 23-25, 2019, May 8-17, 2019, October 15-18,

2019, and November 27-28, 2019.

Dated at the City of Calgary, Alberta this 18^thday of March, 2022.

M. David Gates

J.C.Q.B.A.

Appearances:

C. Babiuk & B. Frenken

for the Plaintiffs (Defendants by Counterclaim)

M. Keyes & K. Lavery

For the Defendants (Plaintiffs by Counterclaim)