Executive Summary: Key Legal and Evidentiary Issues

• Dispute arose from an oral cost-plus renovation contract with no estimate, quotation, or price cap.

• Court examined whether the contractor's charges were accurate and non-wasteful despite multiple inconsistent invoices.

• No initial estimate meant the “reasonableness” standard for price variance did not apply.

• Lay opinions from the owners on cost reasonableness were given little weight due to lack of expert qualification.

• Related-party invoices were not excluded where there was no evidence of overcharging.

• The contractor was awarded $67,364.05 plus pre-judgment interest and costs, confirming proper accounting under a cost-plus model.

Background and procedural history

In 2019, Ace Burger Ltd., along with its principals and affiliated company 102072408 Saskatchewan Ltd., engaged G and I Construction Group Inc. to perform renovations on a newly acquired restaurant premises in Saskatoon. The agreement was oral and based on a cost-plus model with a 10% markup. No written estimates, quotations, or price ceilings were established before or during the work. G&I completed the renovations in about two months, employing 18 subcontractors and suppliers.

After the work was completed, G&I issued multiple invoices totaling around $175,000, later revised to reflect negotiated discounts. Ace Burger made partial payments of $75,000 but refused further payment, citing concerns about inconsistencies and insufficient detail in the invoices. G&I sued for the outstanding balance of $83,113.66, and the Court of King’s Bench granted summary judgment in G&I’s favour for $67,364.05. Ace Burger appealed the decision.

Alleged errors and legal arguments on appeal

Ace Burger challenged the judgment primarily on the basis that the Chambers judge had failed to apply the correct legal principles governing cost-plus contracts. Specifically, it argued that G&I had not proven that its charges were reasonable or that its use of labour and materials was not wasteful. It also claimed that the Chambers judge improperly dismissed the defendants’ lay opinion evidence regarding what the renovations should have cost and failed to adequately address potentially inflated charges from a related supplier, Artista Interiors Boutique Ltd.

Court of Appeal’s analysis

The Saskatchewan Court of Appeal upheld the lower court’s decision. The Court agreed with the Chambers judge that many of the principles cited from the Ontario case Infinity Construction v Skyline Executive Acquisitions Inc. were not fully applicable due to the absence of any estimate in the original agreement. Without an estimate, there was no baseline to assess whether the final invoice was within “reasonable bounds.” The Court found that in such open-ended cost-plus agreements, the contractor’s burden is not to show reasonableness but to prove that the costs were incurred for work performed and were accurately recorded.

The Court confirmed that G&I had provided sufficient evidence to meet this standard. The fourth version of the final invoice, which reflected negotiated discounts, was deemed reliable. The Court noted that G&I had exercised reasonable diligence in its dealings with subcontractors and suppliers and had corrected earlier invoicing errors. The criticisms raised by Ace Burger were unsupported by admissible evidence.

On the evidentiary issues, the Court ruled that the affidavits by Ace Burger’s principals expressing opinions on the reasonableness of costs could not be treated as expert evidence. While they were allowed as part of the record, the Chambers judge correctly afforded them little weight. Additionally, the Court found no error in the judge’s implicit acceptance of charges from Artista Interiors, as there was no evidence that the rates charged were above market value.

Outcome

The appeal was dismissed, and the Court awarded judgment in favour of G&I for $67,364.05 plus pre-judgment interest and costs. The decision affirms that in cost-plus construction contracts—especially those lacking written estimates or maximum pricing terms—the focus is on the accuracy and legitimacy of the contractor’s accounts rather than a subjective evaluation of cost reasonableness. It also reinforces the importance of qualified expert evidence when challenging construction expenses in court.