Indexed as:

Ross Steel Fabricators & Contractors v. Loaring Construction

 Co.

Between

Ross Steel Fabricators & Contractors (Division of Ledore

Investments Ltd.), Plaintiff (Respondent)

and

Loaring Construction Company Limited, Defendant (Applicant)

[1986] O.J. No. 1122

Action No. 7531/82

15 C.P.C. (2d) 27

 Supreme Court of Ontario - High Court of Justice

 Toronto Weekly Court

Callaghan A.C.J.H.C.

Heard: October 28, 1986

 Judgment: November 5, 1986

Judgments and orders -- Interest -- Prejudgment interest awarded at plaintiff's borrowing rate of interest -- Equitable interest inappropriate where not claimed -- Courts of Justice Act, S.O. 1984, c. 11, s. 138 -- Judicature Act, R.S.O. 1980, c. 223, s. 36.

The plaintiff was successful in an action on a construction contract and was awarded prejudgment interest under the Judicature Act at 13 per cent. The plaintiff was not awarded equitable interest and later moved for confirmation with a variation of the interest rate awarded.

HELD: The application was allowed. Equitable interest was properly not allowed where no claim for such interest was made in the special endorsement. Prejudgment interest was appropriate but the rate was to be the plaintiff's borrowing rate. This would represent adequate compensation for moneys wrongfully withheld by the defendant.

R.G. Colautti and M. Moscovitch, for the Respondent.

Hugh B. Geddes, Q.C., for the Applicant.

CALLAGHAN A.C.J.H.C. (orally):-- I propose to deal briefly with this matter at this time as I believe the parties would like the verdict on this matter now and I propose to give it to them.

This is an application by the plaintiff for confirmation of the report of the referee herein pursuant to Rule 59.04(4) of the Rules of Civil Procedure.

The application for confirmation is opposed by the defendant on the grounds that the referee erred in failing to calculate the amounts owing by the defendant to the plaintiff in each action under Contract No. 1615 on a net difference unit price basis.

On this application the court has proceeded in the same manner as on an appeal. The submissions which have been very fully made have been based upon the evidence which was before the referee. This court, on an application such as this, has the authority, of which I am cognizant, to confirm the report in whole or in part, or make such order as is just in all the circumstances.

The defendant's position is basically that the work performed by the plaintiff in issue in these proceedings was done in substitution for a portion of the original contract price, and not in addition to the base contract price agreed upon by the parties. To put it another way, the bulletins and variations issued by the owner to the defendant and bid upon by the plaintiff, were, in effect, amendments to the contract between the plaintiff and the defendant, whereby the contract price was revised by the amount of the quote given by the plaintiff in relation to the work set out in the bulletin.

On this appeal the defendant has urged the court to accept the evidence of Schepers on this issue of billing. While the referee accepted the evidence of Mr. Schepers on various matters, it is clear from his reasons for report that he did not adopt Schepers' evidence in relation to the method of calculation of the cost of the work in issue. Schepers' evidence in that regard was clearly hypothetical, and to a large extent, based on the evidence of one Pukay, which evidence the referee by necessary implication rejected in his reasons. In my view it was totally within his jurisdiction to refuse to accept Mr. Schepers' evidence in that regard and I see no reason to interfere with that finding or ruling of the referee.

While the referee did not spell out with precision the reasons for his findings in relation to Contract #1615, it is clear when those findings are read in the light of the evidence he heard that he must have relied on the evidence of Mr. Leo McElhone and Mr. Bruinsma, the latter being an employee of the defendant. Their evidence established certain matters that must have formed the basis for the conclusions reached by the referee. The evidence of Mr. Leo McElhone was accepted by the referee and he testified that each of the changes in the contract represented by the bulletins and variations and the price changes associated therewith, were separately quoted by the plaintiff to the defendant. He stated that breakdowns were given to the defendant showing quantifies and prices. He testified that these bulletins and variations were each quoted by him to Mr. Bruinsma and accepted by Mr. Bruinsma. The referee found that Mr. Bruinsma had the authority to bind the defendant in these proceedings. Mr. McElhone's evidence also established that all the work represented by the bulletins and variations in issue was completed by the plaintiff and at no time before or during the performance of that work was he advised orally or in writing that the prices discussed and apparently accepted by the defendant would not in fact be paid. He testified further that had he been so advised, he would not have done the work, presumably the referee accepted that evidence.

It appears from the record filed in these proceedings, particularly in relation to Tabs 2 through 11, that the bulletins and variations were quoted in writing by the plaintiff and it also appears that in each case the quotation was preceded by an oral quotation from Mr. McElhone to Mr. Bruinsma. It appears further that there were calculations upon which Mr. McElhone based his prices and those calculations disclosed quantity take-offs made and submitted by him to support his prices. In some instances the quotes were on a unit price basis, in others they were based on an estimate of the cost of the variation sought.

In light of that evidence together with the other evidence which was referred to in argument before me I am of the view that the referee quite properly allowed the plaintiff the sum $100,543.63 for the variations to Contract No. 1615. Accordingly in my view, it would not be just to vary the report in this regard as I am satisfied that there is no error when the referees report is read in the light of that evidence.

An order accordingly will issue confirming the report.

The question of interest as awarded by the referee was put in issue in these proceedings. In his reasons for report the referee in effect allowed the plaintiff by way of pre-judgment interest on the sums found owing under the report, thirteen percent. As I read the report, that award was made by the referee pursuant to s. 36 of the Judicature Act now s. 138 of the Courts of Justice Act.

The plaintiff has urged upon me that this is an appropriate case for equitable interest. An extensive memorandum was filed with all the pertinent authorities relevant to that issue. It was a memorandum that had been prepared for the referee. Notwithstanding the forceful argument made in this regard, I am of the view the referee was correct in allowing interest pursuant to s. 36 of the Judicature Act and not allowing equitable interest. I note that no claim was made for equitable interest in the special endorsement. I note further that on the facts, or on the evidence before the referee it was not until March 9, 1982, that a claim for any interest was advanced.

Accordingly I am of the view that the referee was correct in permitting pre-judgment interest pursuant to the aforesaid section. However, I am also of the view that it was an appropriate case for the referee to award interest at the rate of interest equivalent to the borrowing rate of the plaintiff. The plaintiff is entitled to be adequately compensated for the monies that the defendant has held over the past four years while this litigation has been proceeding. To deny the plaintiff interest at his borrowing rate will result in the plaintiff financing the defendants involvement in this project. That, in my view, would be clearly unjust. I refer to Nor-Min's Supplies Limited et al. v. Canadian National Railway 27 O.R. (2d) 390. I believe the comment of Houlden J.A. at 393 and 394 is appropriate to the proceedings before this court. He stated:

While this action has been wending its way through the Courts, the C.N.R. has had the use of the money to which the claimants have been found to be entitled by the trial judgment. We think it is proper in these circumstances to order C.N.R. to pay interest to the claimants. To do otherwise would, in our opinion, be unjust.

He went on to follow the Supreme Court of Canada decision in Prince Albert Pulp and Paper Company v. Foundation of Canada (1977), 1 C.R. 200, and approved a rate of interest equivalent to the borrowing rate of the claimant. I believe that rate of interest applicable in this case. I am advised that evidence was led on that rate before the referee but as he made no finding with reference thereto I am left in the dark as to that rate.

Accordingly I am remitting the matter to the referee to determine the single issue of the plaintiff's interest rate of borrowing as of the dates specified in the referee's report and to allow interest at that rate as the referee has set out in his report.

Accordingly the report is confirmed save and except for the variation which will provide for the plaintiff's pre-judgment interest at the rate of his borrowing at the times set out by the referee in the present report.

The applicant for confirmation will have its costs of this application.

CALLAGHAN A.C.J.H.C.