nan IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2008 SKPC108 Date: May 30, 2008 File: SC #174 of 2007 Location: Saskatoon Between: Dennis Ens and Anne Ens and Pacific Home Products Ltd. Lynne Greenhorn For the Plaintiff Jon Danyliw For the Defendant JUDGMENT D.M. ARNOT, [1] Dennis and Anne Ens wanted to build deck and glass sunroom on the back of their home in Warman, Saskatchewan. They attended trade show in the spring of 2004 and met Mr. Doug Goertzen from Pacific Home Products Ltd. The Defendant corporation is in the business of building decks and sunrooms and has been for 18 years. Mr. Goertzen is the President and owner of the corporation. Pacific Home Products Ltd. has built approximately 400 such sunroom additions to homes. [2] Mr. Goertzen attended the Ens home in early April, 2004. He had discussion to ensure he knew what the Ens’ expected. Mr. Goertzen took the information he received and on April 10, 2004 created detailed quotation which included the provision of four new ten inch by ten feet deep concrete pilings designed as the foundational support for wood deck upon which would sit custom manufactured glass wall sunroom. Mr. Goertzen attended the Ens’ home on May 5, 2004 with an amended quotation. The total cost to the Ens was to be $11,847.53. The Ens accepted the quote and contract was made to supply and install sunroom at the Ens home. The Ens made deposit of 20% which was $2,200.00 paid by cheque. [3] Mr. Ens knew that Pacific Home Products Ltd. would be ordering the material to complete the project after they had received the deposit. The project was to be completed in the summer of 2004. Time was of the essence. Mr. and Mrs. Ens gave the project very high priority as they wanted to complete landscaping of their yard in the late summer of 2004 after the sunroom was completely installed. [4] Mr. Goertzen attended the Ens’ home later in May of 2004, after the contract was made, to take final detailed measurements and drawings to ensure that the glass sunroom structure would be ordered with the most exact specifications. On May 13, 2004 Pacific Home Products Ltd. submitted an application to the Town of Warman for building permit for the construction of the sunroom at the Ens residence, which was approved by the Town of Warman on May 18, 2004. Pacific Home Products Ltd. ordered the sunroom to be manufactured and Pacific Home Products Ltd. was invoiced on May 26, 2004 by the factory, AAA Aluminum Products Ltd. of British Columbia in the amount of $5,529.13. Pacific Home Products Ltd. also incurred shipping costs of approximately $400.00 to have the product shipped to their warehouse in Saskatoon. The sunroom was delivered to Pacific Home Products warehouse prior to July10, 2004. The necessary excavation was arranged for July 10, 2004. [5] On July 10, 2004 Craig’s Excavation attended the Ens residence at the request of Pacific Home Products Ltd. pursuant to subcontract with Pacific Home Products Ltd. Mr. Betky, the construction manager for Pacific Home Products, attended and marked out the locations of the piles. The excavator used bobcat tractor and attempted to drill ten inch diameter hole, ten feet deep as per the original contract. In drilling the first hole it became apparent that the plan for provision of piles would not work. The hole could not be emptied of soil material. The auger came up wet. The hole was filled with water saturated sand and kept falling in on itself such that Mr. Betky determined that the concrete piles could not be created at this job site. [6] There is high water table in the Martensville area which was unbeknownst to Mr. Ens or Mr. Goertzen in May, 2004. Mr. Goertzen believed that he could not drill pilings due to the existing soil conditions. He communicated this to Mr. Ens within two weeks of the failed attempt to create the pile holes. In discussion with Mr. Ens, Mr. Goertzen wished to proceed with the building project and offered to use an alternate method for the building of the foundation for the deck and the sunroom. He suggested that pad and pillar system be utilised. This would require excavation with backhoe tractor to significant depth and then pouring concrete pad and further making concrete pillar to sit on top of the pad and thus become the foundational support for the beams and joists for the wood deck on which the sunroom would sit. Mr. Goertzen advised that he had used this system in other applications and was satisfied it would work in this application. He advised that this would entail an additional cost of approximately $1,500.00. Mr. Ens rejected the concept that he would be required to pay additional costs. He further rejected the solution proffered by Pacific Home Products Ltd. of constructing concrete pad and pillar system. [7] Mr. Ens believed that the pad and pillar method would destroy the integrity of the weeping tile system around the foundation of his house. Two pads and pillars would necessarily have to be installed very close to the foundation of his house. He was especially concerned because of the high water table issue. He believed it could lead to serious foundation drainage problems if the weeping tile system was disturbed. Further, he was concerned about the integrity of special in-floor basement heating system in his home. Mr. Ens believed that 13 foot piles could be drilled as they had been drilled for his garage and an existing pile in the backyard. He believed that other contractors in the Warman area were able to drill 13 foot piles and therefore, make foundation with concrete piles at that depth. find Mr. Ens reasons for rejecting the installation of the concrete pad and pillar system, different foundation type and design, were reasonable in the circumstances. [8] The contract made on May 5, 2004 was clearly frustrated by the unforseen soil conditions which prevented the drilling of ten foot depth pile holes for concrete piles. Neither party could have foreseen this issue. The parties could not come to an agreement as to how to remedy the frustrated contract. [9] Mr. Ens attended the Pacific Home Products show room some time after, probably in early August 2004, and it was alleged that he was abusive to an employee. Mr. Goertzen on behalf of Pacific Home Products Ltd. sent Mr. Ens letter dated August 16, 2004 advising him not to attend the Pacific Home Products Ltd. show room in the future, and further, he suggested that binding mediation process be used by both parties to resolve the outstanding issues between the parties. [10] In response to that letter, Mr. Ens engaged lawyer to act on his behalf as the relationship between he and Pacific Home Products Ltd. received deleterious blow during the visit Mr. Ens paid to the Pacific Home Products Ltd. showroom. The lawyer, acting on Mr. Ens’ instructions, contacted Mr. Goertzen. record of their discussion is contained in letter dated August 30, 2004 from the lawyer to Mr. Ens. The contents of the letter reveal that Mr. Goertzen agreed to use concrete pilings, as requested by Mr. Ens, but that Pacific Home Products would not guarantee their work if those concrete pilings were used. Mr. Goertzen suggested that if Mr. Ens agreed to the pad and pillar method which he was putting forward Pacific Home Products would guarantee their work. Mr. Ens rejected this offer. Mr. Ens felt he could not proceed as the relationship had devolved to such degree that he did not believe he would receive any service or any warranty work if it was required. His rejection and the reasons therefor were never communicated to Pacific Home Products Ltd. [11] Mr. Goertzen was anxious to complete the product as he had in stock the unique custom built sunroom material for application at the Ens job site. However, without formal response from Mr. Ens, Mr. Goertzen and Pacific Home Products Ltd. treated the project as being left in abeyance. [12] There was no agreement between the parties as to how to proceed. The relationship between Mr. Ens and Mr. Goertzen became irreconcilable after August 31, 2004. Pacific Home Products Ltd. did not receive any response or any communication whatsoever from Mr. Ens post August 31, 2004 and was entitled to assume that their obligations concerning the contract were at an end based on the frustration of the contract and the fact that the parties were unable to agree as to any remedy that would be satisfactory to both parties. [13] There was no further contact between the parties until Mr. Ens demanded repayment of his $2,200.00 deposit in letter dated March 27, 2007, period of approximately two years and eight months. [14] Mr. Ens and his wife attended trade show in the spring of 2005 and eventually engaged Mr. Martin Doell of Pyramid Sunrooms. Mr. Doell was engaged to construct foundation, deck and glass sunroom at the Ens home. The structure was completed satisfactorily in October, 2005. Pyramid is competitor of Pacific Home Products Ltd. Pyramid used different method of deck support. They installed an engineered screw pile as an alternate to concrete piles. This is one and three-quarter inch solid steel shaft with an eight inch in diameter auger screw, eight feet long. Mr. Doell constructed the foundation, beams and joists and deck floor. He then took exact measurements and at that point ordered the glass sunroom to be custom made. His method of staging the construction is different than that of Pacific Home Products Ltd. He chooses to order the sunroom after the deck is constructed to ensure the base is stable and all measurements are entirely accurate. The glass sunroom product is made of tempered glass walls. Any settling of the base can result in cracked glass and malfunction of both windows and doors. [15] After August 31, 2004 Mr. Ens had paid the sum of $2,200.00 as deposit which was not returned to him by Pacific Home Products Ltd. Pacific Home Products Ltd. had in stock unique custom made glass sunroom for application at the Ens job site. Pacific Home Products Ltd. was able to mitigate its losses by salvaging approximately $1,000.00 in parts from the Ens sunroom material. [16] The Plaintiffs, Dennis Ens and Anne Ens sued the Defendant, Pacific Home Products Ltd., for the return of the $2,200.00 deposit they gave to the Defendant on May 5, 2004. [17] The Defendant in that claim, Pacific Home Products Ltd., filed a dispute note and became a Plaintiff in the Counterclaim against Dennis Ens and Anne Ens for recovery of the amount of $3,604.13, which they allege represents the losses incurred by Pacific Home Products Ltd. as a result of the frustration of the contract with Dennis Ens and Anne Ens. [18] Pacific Home Products Ltd. led evidence to show that they paid the sum of $5,529.13 to AAA Aluminum Products Ltd. for the custom made sunroom. In addition, they alleged they incurred costs of $400.00 for the shipping of the sunroom product to their warehouse, $80.25 paid by them to the Town of Warman for the building permit application fee, $272.85 paid by them to Craig’s Excavation for the excavation at the Ens job site, and the labour and costs in preparing detailed designs and drawings for both the AAA Aluminum Products Ltd. order and the application for building permit. These costs they estimate at $500.00. Pacific Home Products Ltd. led evidence to show that they mitigated their losses by salvaging $1,000.00 worth of parts from the Ens sunroom material and further they deducted the down payment of $2,200.00 received and kept by them. They then sued by way of Counterclaim against the Ens, Defendants in the Counterclaim for a balance, they believe owing to them, of $3,604.13. [19] The doctrine of frustration operates as an excuse for the non-performance of contractual obligation. The accepted view of this doctrine was described in Davis Contractors Ltd. v. Fareham U.D.C., [1956] nan All E.R. 145 (H.L.). In that case the doctrine of frustration was analyzed. Lord Radcliffe described the test as the “radical change in obligation test” that effectively rewrites the bargain in terms that were previously unintended. He stated at p. 160: So perhaps it would be simpler to say at the outset that frustration occurs whenever the law recognizes that without default of either party contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it thing radically different from that which was undertaken by the contract. Non haec in foedera venie. It was not this that promised to do. ... it is not hardship or inconvenience or material loss itself which calls the principles of frustration into play. There must be as well such change in the significance of the obligation that the thing undertaken would, if performed, be different thing from that contracted for. [20] Another definition was provided by Viscount Simon, L.C. in the case of Cricklewood Property Investment Trust Ltd. v. Leighton’s Investment Trust, Ltd. (1945) A.C. 221, as follows: “... the premature determination of an agreement between parties, lawfully entered into and in course of operation at the time of its premature determination, owing to the occurrence of an intervening event or change of circumstances so fundamental as to be regarded by the law both as striking at the root of the agreement, and as entirely beyond what was contemplated by the parties when they entered into the agreement.” [21] Recently in Canada the Ontario Court of Appeal quoted with approval the definition of frustration of contract given by Lord Radcliffe in Davis Contractors Ltd., (supra) in the case of Capital Quality Homes Colwyn Construction Ltd. (1976) 1975 CanLII 726 (ON CA), 61 D.L.R. (3d) 385, See Evans, J.A. who comments as follows: “The legal effect of the frustration of contract does not depend upon the intention of the parties, or their opinions or even knowledge as to the event that has brought about the frustration, but upon its occurrence in such circumstances as to show it to be inconsistent with the further prosecution of the adventure. On the contrary, it, seems that when the event occurs, the meaning of the contract must be taken to be, not what the parties did intend (for they had neither thought nor intention regarding it) but that which the parties as fair and reasonable men, would presumably have agreed upon if, having such possibility in view, they had made express provision as to their several rights and liabilities in the event of its occurrence: Dahl v. Nelson et al. (1880) 6, App. Cas. 38. The supervening event must be something beyond the control of the parties and must result in significant change in the original obligation assumed by them. The theory of the implied term has been replaced by the more realistic view that the Court imposes upon the parties the just and reasonable solution that the new situation demands.” [22] Most recently the doctrine was considered in KBK No. 138 Ventures Ltd. v. Canada Safeway Limited (2000), 2000 BCCA 295 (CanLII), 185 D.L.R. (4th) 650. In that case the Plaintiff agreed to purchase land from the Defendant. The Plaintiff intended to construct mixed residential and commercial building. After the land purchase contract was entered into, but prior to construction, the municipality amended its zoning bylaws which prevented the proposed building from being constructed as intended. The British Columbia Court of Appeal applied the law of frustration, summarized by Folia v. Trelinski (1997), 14 R.P.R. (3d) (B.C.S.C.). The six-part test may be characterized as follows: In order to find that the contract at issue has been frustrated the following criteria would have to be satisfied. The event in question must have occurred after the formation of the contract and cannot be self-induced. The contract must, as result, be totally different from what the parties had intended. This difference must take into account the distinction between complete fruitlessness and mere inconvenience. The disruption must be permanent, not temporary or transient. The change must totally affect the nature, meaning, purpose, effect and consequence of the contract so far as concerns either or both parties. Finally, the act or event that brought about such radical change must not have been forseeable. [23] The required constituent elements for the application of the doctrine of frustration of contract are distilled in Dicastri on the Law of Vendor Purchaser (2nd Edition) 1976 at page 319 to be: 1. The express words of the contract; 2. Its nature and subject matter; 3. The circumstances surrounding the making of the contract; 4. The circumstances that are said to have brought about the frustration. THE FINDINGS [24] find the contract in this case made on May 05, 2004 called for the provision of ten foot deep, ten inch diameter concrete pilings to be the foundation for the deck upon which would sit glass sunroom. This provision of the contract was fundamental element in the contract. Movement of the foundation or the deck could cause damage to the glass sunroom, the walls, the window openings, and the door openings. The type and design of the foundation was critical to the mutual satisfaction of both parties and the overall success of the installation in both the short and long term. Both parties acted in good faith. [25] The contract was frustrated on July 10, 2004 when it was discovered that the intended foundation could not be constructed due to the high ground water in the town of Warman and specifically on the Ens job site. [26] The frustrating event or circumstance occurred after the formation of the contract. I find as a matter of fact in this case that it was not reasonably forseeable by either party. The change affected the fundamental nature of the contract. The event was permanent and non-transient. The contract as a result would be totally different from what the parties intended. The difference was much more than mere inconvenience. I find that the supervening event was beyond the control of both parties and resulted in a significant change in the original obligation assumed by them. [27] Based on the facts as I find them, and the applicable law, I find the contract was frustrated. [28] further find that there was not sufficient evidence to show that the sum of $96.25 was paid by Pacific Home Products Ltd. to Craig’s Excavation and Landscaping. find that Dennis Ens and Anne Ens are responsible to pay that sum directly to Craig’s Excavation and Landscaping as it was Dennis Ens who made the contract for the removal of miscellaneous items from his lot. [29] The Plaintiff Ens submitted that the Defendant Pacific Home Products Ltd. abandoned the contract. I find that the Plaintiff Ens has failed to prove that claim on a balance of probabilities. [30] The Plaintiff in the counterclaim, Pacific Home Products Ltd. submitted that the Defendant in the counterclaim, Ens repudiated the contract. I find that the Plaintiff in the counterclaim, Pacific Home Products Ltd. failed to prove that claim on a balance of probabilities. [31] With respect to damages find that The Frustrated Contracts Act, Chapter F-22.2, Statutes of Saskatchewan, 1994, applies. Under that Act the Court is given discretion to determine what amount of restitution is appropriate in the circumstances. 5(1) Every party is entitled to restitution of benefits conferred by that party’s performance or part performance under the contract on another party prior to the frustration or avoidance. (2) In determining the value of the benefits conferred, the court shall consider: a) the contract price; and b) any diminished value of performance caused by the failure to complete the contract. 6(1) In determining the value of the expenses lost due to frustration or avoidance, the court shall consider the contract price. (2) The court may apportion the value of expenses lost due to frustration or avoidance: a) equally between the parties; or b) in any manner that the court consider appropriate. (3) In apportioning the value of expenses lost, the court shall consider: a) course of dealing between the parties; b) custom or common understanding in the trade practice relating to insurance and; and c) any other relevant circumstances that suggests that: (i) one of the parties should bear the risk of expenses lost due to frustration of avoidance; or (ii) each party should bear the risk of its own lost expenses. [32] Considering all the facts presented in the case, I find that a just and reasonable resolution demands that the value of the expenses lost due to the frustration of the contract should be borne by the parties in a 65/35 ratio. I find that Pacific Home Products Ltd. should bear 65% of the loss and Dennis Ens and Anne Ens, 35% of the loss. make this finding based on the fact that Pacific Home Products Ltd. is in the business of constructing sunrooms. The Ens’ and Pacific Home Products Ltd. were not on an equal plane because Pacific Home Products Ltd. has more experience in constructing glass sunrooms. The Ens’ relied on the contractors experience to some degree, although not entirely, as Mr. Ens had firmly fixed definite opinions on some of the construction issues. The corporation may be able to further mitigate its losses over the course of time by using more parts salvaged from the material left over in the failed Ens project. Further I find that the corporation will be able to write off this loss over the course of time. [33] find the total loss proven in evidence to Pacific Home Products Ltd. is as follows: a) Sunroom material $5,529.13 b) Shipping costs 400.00 c) Building permit 80.25 d) Excavation costs 272.85 e) Design and drawing labour 500.00 Subtotal $6,782.23 f) Minus mitigation through salvage -1,000.00 TOTAL LOSS $5,782.23 [34] find this loss to be fairly apportioned as follows: 65% to Pacific Home Products Ltd. $3,758.45 35% apportioned to Dennis Ens and Anne Ens $2,023.78 [35] find that the Defendant Pacific Home Products Ltd. is required to pay the sum of $176.22 to the Plaintiff, Ens’ being the balance between the deposit of $2,200.00 received on May 05, 2004 and the apportionment of damages pursuant to the Frustrated Contracts Act, as have assessed it. [36] Therefore I award judgment in favour of the Plaintiff Ens’ against the Defendant Pacific Home Products Ltd. in the amount of $176.22. [37] In the circumstances of this case there will be no order as to costs.
The plaintiffs wanted to build deck and glass sunroom on the back of their home. They attended trade show and met the defendant, whose corporation had been in the business of building decks and sunrooms for 18 years. The plaintiffs contracted with the defendant to build their sunroom. The contract called for the provision of ten-foot deep, ten inch diameter concrete pilings to be the foundation for the deck upon which would sit glass sunroom. This provision was fundamental element in the contract. The type and design of the foundation was critical to the mutual satisfaction of both parties and the overall success of the installation in both the short and long term. The contract was frustrated when it was discovered that the intended foundation could not be constructed due to the high ground water in the town of Warman and specifically on the job site.  The plaintiffs sued the defendant for the return of their $2,200.00 deposit. The defendant filed a dispute note and counterclaimed for a balance they believed was owed to them of $3,604.13. HELD: There will be a judgment in favour of the plaintiffs against the defendant in the amount of $176.22. In the circumstances, there will be no order as to costs. Based on the facts and the applicable law, the contract was frustrated. The frustrating event or circumstance occurred after the formation of the contract. It was not reasonably foreseeable by either party. The change affected the fundamental nature of the contract. The event was permanent and non-transient. The contract as a result would be totally different from what the parties intended. The difference was much more than mere inconvenience. The supervening event was beyond the control of both parties and resulted in a significant change in the original obligation assumed by them. Both parties acted in good faith. The plaintiffs submitted that the defendant abandoned the contract. The court finds that the plaintiff has failed to prove that claim on a balance of probabilities. The defendant, in its counterclaim, submitted that the plaintiffs repudiated the contract. The court finds that the defendant (plaintiff in the counterclaim) failed to prove that claim on a balance of probabilities. Considering all the facts presented in the case, the court finds that a just and reasonable resolution demands that the value of the expenses lost due to the frustration of the contract should be borne by the parties on a 65/35 ratio: the defendant should bear 65% of the loss, and the plaintiffs should bear 35% of the loss. The plaintiffs and the defendant were not on an equal plane. The plaintiffs relied on the contractor's experience to some degree, although not entirely. The defendant corporation may be able to further mitigate its losses over the course of time by using more parts salvaged from the material left over in the failed project. Further, the corporation will be able to write off this loss over the course of time.