Date of Release: Jan. 30, 1996 NO. S3208 COURTENAY REGISTRY IN THE SUPREME COURT OF BRITISH COLUMBIA BETWEEN: ) ) SIEG KUSSAUER, doing business ) as KUSSAUER CONSTRUCTION ) REASONS FOR JUDGMENT ) PLAINTIFF)OF THE HONOURABLE ) AND: )MADAM JUSTICE SAUNDERS ) GARY MICHAEL DROSKI and DIANE ) BERNICE DROSKI ) ) DEFENDANTS) D.B. Boan Counsel on behalf of the Plaintiff M.D. Holland Counsel on behalf of the Defendants Heard in Courtenay: October 4, 5 and 6, 1995 Heard in Nanaimo: December 20, 1995 1 In the early spring of 1993 Diane and Gary Droski resolved to build a home upon land on Thames Road in the Comox Valley, and so contacted Sieg Kussauer, building contractor. 2 Regrettably the parties resolved to do business without committing the terms of their intended dealings to writing. This suit is the result, with the parties disagreeing on the extent of the intended work by Mr. Kussauer, the terms under which he would work and the price of the work. 3 Mr. Kussauer left the property just before it reached "lock-up" stage, and now sues Mr. and Mrs. Droski on either contract or a quantum meruit basis, claiming approximately $28,400.65. Mr. and Mrs. Droski counterclaim for unjust enrichment, for the costs they occasioned for defective or incomplete work and for damages arising from the deficiencies. THE PLEADINGS 4 Because of the multitudinous positions open to the parties on the evidence, and because the plaintiff carefully tailored his case to the pleadings, it is useful to set out the essence of the parties' positions as they are pleaded. 5 The plaintiff alleged a contract for the construction of the Droski home, asserting $28,400.65 is still owing for work done under the contract. In the alternative he claims in quantum meruit for the same sum. 6 The defendants deny a contract with the plaintiff, and alternatively claim any contract is void for uncertainty. In the further alternative the defendants allege breach of implied terms of a contract that the house was to be completed by mid-August, that it was to be of good quality and that construction would be done with reasonable care and attention. The defendants allege that they paid Mr. Kussauer for work which he did not complete. In their counterclaim they claim damages for unjust enrichment, and defective and incomplete work. The plaintiff, in reply, denies the defendants' allegations. 7 It is significant, in the context of the evidence adduced, that the defendants did not allege a contract for construction of the house to "lock-up" stage. 8 The issues are: 1.was there a valid contract between the plaintiff and defendants for construction of a house? 2.if so, was the contract breached by the defendants, and if so, what are the damages, if any, arising from the breach? 3.if there was a contract for construction of a house, was it breached by the plaintiff, and if so, what are the damages, if any, arising from the breach? 4.if there was no contract for construction of a house, is Mr. Kussauer entitled to damages for work unpaid, on a quantum meruit basis? 5.if there was no contract for construction of a house, are the defendants entitled to compensation for unjust enrichment in work paid for and not performed? 6.if there was no contract for construction of a house, are the defendants entitled to recover damages from the plaintiff for defective work? THE CIRCUMSTANCES 9 The seeds of this dispute lie in the first discussions between Mr. Kussauer and Mr. Droski. By late January 1993, Mr. and Mrs. Droski were seeking a builder to construct a house on their property. They had already selected a design from a book of plans, but it was unsuited to the lot unless built in mirror image. 10 In January or early February 1993, Mr. Droski first met Mr. Kussauer. Mr. Kussauer testified that Mr. Droski said he wanted a price on the house, and told him that he, Mr. Kussauer, would build his house. Mr. Kussauer testified that he gave Mr. Droski an estimate of $270,000 and that Mr. Droski said he did not want to go beyond $235,000. Mr. Kussauer did not think the house, which was large, could be built for that sum. Mr. Kussauer lowered his estimate to $243,000; still the price was not acceptable to Mr. Droski. By Mr. Kussauer's account, Mr. Droski wished construction to start. Mr. Kussauer testified that he expected to build the house for the last estimate and there was, to him, no uncertainty as to price. Mr. Kussauer testified he expected to build the house to completion and had agreed to a $3,000 charge for building the house from reverse plans, that is, plans in which the house is transposed left to right, from the original plans. By Mr. Kussauer's evidence, work started on the house in early March 1993, on that basis. 11 Mr. Droski testified that he never intended one builder to act as general contractor of the house. He testified that although he sought a quotation for the entire house from Mr. Kussauer, he always intended to handle subcontractors himself. Mr. Droski testified that when he showed Mr. Kussauer a book plan of the house and discussed the site, Mr. Kussauer said to order the plans in reverse. He denies the claim for $3,000 extra to compensate for the reverse plans. Mr. Droski testified that he obtained a quotation for the wood from a local building store, and intended to pay for these materials directly, and he testified that he and Mr. Kussauer agreed that Mr. Kussauer would build the house to "lock-up" stage for $20,000 and he, Mr. Droski, would pay for the materials. 12 On this shaky foundation, Mr. Droski advanced $10,000 to Mr. Kussauer and construction started in early March 1993. 13 As construction progressed, Mr. Kussauer encountered difficulties. For example, the transposition of the plans for the house meant that not only was the design transposed, but the writing and numbers also were transposed. This created delay and difficulty. The foundation originally poured was too small in one area. When this error was discovered, walls were poured extending the garage by eight feet, and the basement area beneath the garage between the first wall and the second wall was filled with sand. Of most enduring significance to the defendants were problems identified in the concrete work. One exterior concrete wall is bowed, visible from outside and requiring cosmetic adjustments inside if and when the basement area is finished. The concrete is also honeycombed, and since Mr. Kussauer left the site, it has cracked and leaked moisture. 14 Mr. Kussauer attended the site intermittently. Mr. Droski suggested that Mr. Kussauer charged for time when Mr. Kussauer or his crew were working on another home, not his. To Mr. Droski's concern, Mr. Kussauer purchased wood and materials directly from the building supply store, having it billed to himself. Mr. Droski complained that the materials vastly exceeded the estimates in the project planner that accompanied the plans. With these developments, Mr. Kussauer fell into disagreement with both Mr. and Mrs. Droski. On one occasion Mrs. Droski attended the site, in Mr. Droski's absence, and pointed out an error in location of a window. Mr. Kussauer became angry and directed her to leave the house. 15 Throughout his construction, Mr. Kussauer continued to ask Mr. Droski to sign an estimate confirming he would construct the house for $243,000. Descriptions of these discussions vary. Mr. Kussauer and Mr. Droski agree the estimate was presented to Mr. Droski and Mr. Droski never signed it. 16 On May 5, 1993, Mr. Droski gave Mr. Kussauer a cheque for $50,000, bringing total payments to $60,000. Their testimony on this payment also differed. Mr. Kussauer testified the $50,000 was a payment on account, that he still expected to construct the entire house and that this payment was in response to his demands for funds with which to pay bills that had accrued. Mr. Droski testified he asked Mr. Kussauer whether $50,000 was sufficient funds to take the house to "lock-up", and that Mr. Kussauer affirmed it was. According to Mr. Droski, Mr. Kussauer agreed to complete the house to "lock-up" for this payment only, which, with the earlier payment of $10,000, brought the total paid to $60,000. 17 Construction continued on the house by Mr. Kussauer until July 14, 1993, when Mr. Kussauer walked off the property at noon. He never returned. Mr. Kussauer said he quit the job because Mr. Droski would not advance him more money. Mr. Droski said Mr. Kussauer chose to leave the site. 18 At the time Mr. Kussauer left the site, framing was nearly complete although some back framing and interior framing remained to be done. Sheeting of the roof was not complete. Not all windows were in. Portions of the deck were not covered; detail work and soffitting were not complete. Mr. Kussauer estimated the house was about four days work away from "lock-up" stage. CREDIBILITY 19 Evidence of the parties differed sharply on several issues, including the basis upon which the construction work was commenced, the basis of the $50,000 payment and the quality of work performed. In reaching my conclusions of fact I have been required to assess the reliability of the parties' testimony. In doing so I have borne in mind the words of Mr. Justice O'Halloran in Faryna v. Chorny, [1952] 2 D.L.R. 354 (B.C.C.A.) at 357: ... the real test of the truth of the story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions. WAS THERE A CONTRACT? 20 Mr. Kussauer has alleged a contract for construction of the entire house. Mr. Droski denies this allegation, and alternatively pleads breaches of implied terms. In his testimony Mr. Droski described two contracts, the first being one in which Mr. Kussauer contracted to provide labour for construction to "lock-up" stage for $20,000, the second being an agreement of May 5, 1993, when the parties agreed Mr. Kussauer would complete the house to "lock-up" stage in consideration of the further lump sum payment of $50,000. Neither of these understandings were referred to in the pleadings as an alleged contract. 21 The hallmark of a contract is the mutual intention to form an agreement: Rademaker, MacDougall & Co. v. Number Ten Holdings Ltd. (1983), 47 B.C.L.R. 376 (S.C.); Heilbut, Symons & Co. v. Burkleton, [1913] A.C. 30 (H.L.); Oscar Chess v. Williams, [1957] 1 W.L.R. 370 (C.A.). When the parties do not admit to having the intention to form a contract, the presence of such intent must be established on an objective basis. 22 The contract Mr. Kussauer alleges is contrary to his usual practice as it was never signed. Mr. Kussauer cannot point to a single day on which agreement was reached and asks the court simply to infer an agreement. The alleged contract is inconsistent with Mr. Droski's behaviour in seeking sub-contractors and inconsistent with his expectation that he would be billed directly by the building supply store for his materials. 23 Viewed objectively, I am not satisfied that an intelligent bystander would conclude that the contract alleged by Mr. Kussauer existed. It follows that Mr. Kussauer is not entitled to damages for breach of contract. QUANTUM MERUIT 24 In the alternative Mr. Kussauer claims damages on a quantum meruit basis for work done and not paid, including $3,000 for use of the reverse plan. 25 In his pleadings Mr. Droski alleges he paid Mr. Kussauer for work which was not completed and counterclaims for recovery of such sum. In his testimony Mr. Droski alleges that he first agreed that Mr. Kussauer he would construct the house to "lock-up" stage in exchange for $20,000 for labour, plus materials, and that when he learned Mr. Kussauer was purchasing materials he then agreed with Mr. Kussauer, on May 5, 1993, that Mr. Kussauer would build the house to "lock-up" stage in exchange for the single $50,000 lump sum final payment for labour and materials. The latter agreement, if established, would amount to Mr. Kussauer having been paid already for the work for which he now seeks compensation, and thus would fit within the statement of defence. 26 I am satisfied on a balance of probabilities that Mr. Droski and Mr. Kussauer did agree that Mr. Kussauer would build the house to "lock-up" stage. It is clear that Mr. Kussauer also hoped to continue on the house past that stage, although this hope never became a commitment of Mr. and Mrs. Droski. I am also satisfied that there was no agreement to a $3,000 payment to compensate for delay arising from the reverse building plans. 27 On what basis was Mr. Kussauer to be paid: on a lump sum basis as Mr. Droski testified, or, on a reasonable compensation basis as Mr. Kussauer alleges in his quantum meruit claim? 28 I am satisfied that an intelligent bystander would conclude there was a contract, for a price, to build to "lock-up". I am satisfied on a balance of probabilities that the parties agreed, on May 5, 1993, when Mr. Droski paid Mr. Kussauer without an accounting of labour and materials spent to that point, that the $50,000 payment would see the house to "lock-up". In this I accept the evidence of Mr. Droski. It is consistent with the absence of invoices for materials and labour; it is consistent with the lack of accurate records on the labour spent on the house; it is consistent with the parties' disagreement over the billing method for materials; the amount is consistent with the earlier estimates for the work required up to "lock-up"; and it is consistent with the inclusion of items not related to the Droski house when these invoices were eventually presented. 29 It follows that Mr. Kussauer's work has been paid for as part of the $50,000, and no sum is owing to Mr. Kussauer on a quantum meruit basis. 30 For these reasons, Mr. Kussauer's claim is dismissed. UNJUST ENRICHMENT 31 Mr. Droski alleges he was required to pay money for work he had already paid Mr. Kussauer to perform, particularly completion of the sheeting on the roof and decks, installation of some windows, completion of soffitting, completion of window detailing, some interior framing and completion of chimney areas. 32 I am satisfied that the window work, roofing and soffitting can reasonably be described as bringing the house to "lock-up" stage. The evidence is unclear on the cost to Mr. Droski of this work. Mr. Droski has tendered evidence that he paid $6,000 for repair work and to bring the house to "lock-up" and in his evidence, described the work done. I am not satisfied that all that work was required to bring the house to "lock-up", as that term would reasonably have been understood by Mr. Kussauer. 33 In any case, Mr. Droski is only entitled to recover for unjust enrichment, not damages for breach of contract. Mr. Kussauer testified that about four additional days of work were required before "lock-up" would be reached. In my view, the proper measure of damages is the four days work paid for and not performed. 34 Mr. Kussauer claimed that a normal day on the site included himself and two others, at a combined hourly rate of $60 per hour. On this basis he has been over-compensated for labour in the amount of $1,920. Further, the majority of materials billed to Mr. Droski for bringing the house to "lock-up" should have been paid for by the $50,000 payment. Although the value of such materials is not known to me with precision, I must assess the unjust enrichment as best I can. I find Mr. Droski is entitled to recover $1,600 for materials which were prepaid to Mr. Kussauer as part of the $50,000 payment. DEFICIENCIES 35 The defendants claim damages for deficient work. It is clear that the concrete walls of the basement are bowed. The concrete, extensively honeycombed, is of poor appearance. It has cracked and developed moisture leaks. 36 There is no evidence before me of the diminishment in house value as a result of these deficiencies. Yet I consider I may take notice that such obvious flaws in the concrete work diminish the value of the asset and represent a loss to the defendants. The cause of the loss is work performed by Mr. Kussauer far below a reasonable standard of workmanship. Considering the uncertainty of the quantum of damages, in my view I should err, if err I do, on the low side. I assess damages for defective work at $2,000. CONCLUSION 37 In summary I dismiss the claim. The defendants, plaintiffs by counterclaim, are entitled to damages in the global amount of $5,520, plus interest pursuant to the Court Order Interest Act. "M.E. SAUNDERS, J." January 26, 1996 Vancouver, B.C.