Executive Summary: Key Legal and Evidentiary Issues

• Dispute concerned whether an oral agreement existed and, if so, its specific terms for HVAC and electrical work at a cannabis facility.

• Determination required as to whether the $150,000 estimate was a cap for all work or applied only to HVAC services.

• Assessment of the plaintiff’s entitlement to payment for work exceeding the initial $150,000 estimate.

• Evaluation of the credibility of witnesses and sufficiency of backup documentation for invoiced amounts.

• Consideration of counterclaims for damages arising from removal of air conditioning disconnect switches and for alleged deficiencies in the electrical system.

• Calculation and set-off of damages and costs awarded to each party.

Facts of the case

G. Little Electric Ltd., a contractor in the heating, ventilation, and air conditioning business in Penticton that also performs electrical work, was engaged by 1239254 B.C. Ltd. doing business as Pure Fire Company, which operates a licensed recreational cannabis facility in Penticton. The parties discussed an arrangement where the plaintiff would supply labour and materials for the defendant’s new facility, with the first $150,000 worth of work to be exchanged for shares in the defendant company, and any work above that amount to be billed and paid in cash. These discussions were not reduced to writing, and a dispute arose as to whether a binding agreement existed and, if so, on what terms.

The plaintiff claimed the $150,000 estimate applied only to the HVAC work, with electrical work and any additional costs to be billed separately. The defendant asserted that the $150,000 estimate was a cap for both HVAC and electrical work. As the project neared completion, the plaintiff issued its first invoice for $141,000, and subsequent invoices brought the total to $278,973.01. The defendant sent a draft agreement to convert debt to shares, but the plaintiff did not sign it, believing it did not reflect the parties’ agreement. A later draft agreement proposed fewer shares and $100,000 in cash, which the plaintiff reluctantly agreed to, but no final version was provided for signature.

On January 17, 2022, Mr. Yazlovasky, principal of the plaintiff, went to the defendant's premises and removed disconnect switches from all six of the exterior air conditioning units, causing the units to cease providing cooling for three to four hours. The defendant claimed it suffered a loss as a result, forming the basis for its counterclaim. The defendant also counterclaimed for an allegedly under-designed or improperly designed electrical system, which it said resulted in reduced productivity or capacity at the facility.

The plaintiff sought payment of its invoices, which totaled $365,816.13. The defendant maintained that the plaintiff was entitled to $150,000 and sought damages for loss of cannabis product and for the electrical system.

Contractual terms and disputed clauses

The main issue was whether there was a contract, and if so, what its terms were. The court found that the parties had an agreement for the plaintiff to perform HVAC and electrical work on a “time and materials” basis, with reduced or adjusted labour rates and markup on materials. The court accepted that the $150,000 estimate was for the HVAC system only, and that up to $150,000 of labour and materials would be converted to shares, with other amounts over and above to be paid by the defendant.

Counterclaims and additional issues

The defendant’s first counterclaim was for a loss of product arising from the plaintiff’s tampering with the air conditioning units. The second counterclaim was for a loss of productivity from what the defendant argued was an improperly designed electrical system. The court found that the defendant failed to prove that the plaintiff’s trespass caused the loss of any marijuana plants, and that the plaintiff’s electrical work was completed in a good and workmanlike manner and was done to code requirements.

Assessment of evidence and witness credibility

The court found Mr. Yazlovasky’s testimony to be generally clear and consistent with the documents, while Bill Lewis’s evidence was found to be self-serving and lacking in precision and detail. The court preferred the plaintiff’s version of events where the evidence conflicted.

Outcome and damages awarded

The court found in favor of the plaintiff, concluding that the agreement was for HVAC and electrical work on a time and materials basis, with the first $150,000 to be converted into shares and the remainder to be paid in cash. The plaintiff was awarded $293,293.59 after a five percent downward adjustment to the invoices issued up to and including the end of November 2021. On the counterclaim, the court awarded the defendant $2,000 for the cost of acquiring replacement disconnect switches and $20,000 in punitive damages for trespass. The amounts were set off, resulting in a net award to the plaintiff of $271,293.59. The plaintiff was also entitled to pre-judgment interest pursuant to the Court Order Interest Act, effective January 1, 2022, and to costs at Scale B, subject to further submissions if either party wished to address the issue within 21 days.