Executive Summary: Key Legal and Evidentiary Issues

• Timely compliance with court-ordered affidavit deadlines and the trial judge’s discretion to exclude a late affidavit served on the eve of trial.
• Effect of moving the building location on whether the original fixed-price 2020 construction quote continued to govern pricing for later excavation and foundation work.
• Characterisation and valuation of “extras” beyond the written 2019 and 2020 agreements, including whether quantum meruit properly applied and at what rates.
• Assessment of conflicting witness evidence about site conditions, work performed, and alleged removal of granular material and topsoil.
• Treatment of the owner’s counterclaim for incomplete septic field work and alleged unauthorized removal of soil and granular material from the property.
• Adequacy of the trial judge’s reasons and appellate review of alleged legal error versus palpable and overriding error in a construction/contract dispute.

Factual background

YME Welding Enterprises Inc. (YME) owned commercial property in Thunder Bay, Ontario, where it planned to build an office and large garage to house its welding business. Through its owners, Tuyet Dao and her spouse, Yvon Brochu, YME retained Chaschuk Enterprises Ltd. (CEL), operated by Colin Chaschuk, to perform excavation and related site preparation work for the project. In October 2019, CEL issued a quote of $103,000 plus HST for extensive site-preparation services at 1706 Rosslyn Road, including supplying and placing sand and gravel, geotextile fabric, a culvert and septic tank, and excavating about 30 inches of soil to form a pad for a future building. YME accepted this quote and paid the agreed price once the work was completed in early November 2019 (the “2019 Agreement”).

The 2020 agreement and the decision to move the building

In August 2020, YME approached CEL again to prepare the foundation for the new building. CEL provided a detailed written quote for foundation excavation, gravel placement, backfilling, septic field relocation, office pad preparation, and trenching for a power line, totalling $48,610 plus HST. After negotiations, Ms. Dao secured a reduced price of $45,000 plus HST, and the revised quote was signed on September 17, 2020 (the “2020 Agreement”). Before CEL began the 2020 work, YME discovered that the planned building location was too close to an adjacent commercial structure. YME decided the building had to be moved 20 feet west. This change meant the 2019 gravel pad had to be extended, and the area to the west involved visibly wetter, poorer soil that required dewatering and additional excavation to reach suitable bearing material. Mr. Chaschuk immediately raised these issues, and Ms. Dao insisted the additional work proceed quickly before winter, accepting that it would be in addition to the 2020 Agreement price. On October 1, 2020, CEL issued Invoice #9607, which included the foundation excavation and gravel amounts under the 2020 Agreement plus $14,630 for the added work tied to the first error. YME did not pay that invoice.

Two major layout errors and resulting additional work

After the westward move (Error #1), YME later discovered in early October 2020 that the building site was also five metres too close to the road (Error #2). A site meeting occurred with Ms. Dao, Mr. Chaschuk, and Donald DeMichele of Syncor Contracting Limited, the building contractor. Of the 360-foot perimeter excavation and backfilling already done, about 200 feet had to be redone and previously backfilled material dug out. CEL considered this a “big error,” requiring significant corrective excavation and backfill. CEL issued a further invoice of $37,144.54 for this second round of corrective work. CEL also completed the front office foundation and the powerline trench, which had to be extended because of the changed location. YME nonetheless failed to pay the invoices for work carried out under the 2020 Agreement and for the substantial extra work resulting from the two site-layout errors.

The 2019 agreement, septic work and soil removal disputes

YME responded with a counterclaim focused on aspects of the earlier 2019 Agreement and alleged removal of materials from the property. It claimed damages for incomplete performance of septic field obligations and contended that CEL had removed additional topsoil and granular material beyond what had been paid for. CEL had previously paid YME roughly $12,000 for the removal of topsoil at a rate of $50 per load, but YME alleged CEL took an additional 350 loads of topsoil without paying and also removed granular material around September 24, 2020. CEL denied improperly taking granular material, and the evidentiary record on these allegations became central to the counterclaim and to YME’s later attempt to introduce a late affidavit from Mr. Brochu to bolster these claims.

The trial process and summary trial format

The construction lien proceeding was directed to proceed by way of summary trial on affidavit evidence. At an October 7, 2022 pre-trial, the court ordered CEL to serve its witness affidavits by December 31, 2022 and YME by March 15, 2023. CEL served its affidavits in December 2022, though YME received them later due to a technological issue. YME did not serve any affidavit until January 18, 2024, well past the deadline and only after a further order. In August 2024, at a trial management conference, YME raised an intention to call three additional witnesses, and the trial judge reserved the admissibility of such evidence to the trial judge. Shortly before the September 4, 2024 trial, YME served an additional affidavit from co-owner Yvon Brochu on August 30, 2024, four days before trial. At trial, the evidence consisted of Ms. Dao’s affidavit for YME and affidavits from Mr. Chaschuk and Mr. DeMichele for CEL, with all affiants cross-examined.

The trial decision on CEL’s claim and YME’s counterclaim

The trial judge accepted CEL’s evidence in preference to Ms. Dao’s where they conflicted, finding her evidence of limited assistance and directly contradicted on the actual state of work when Error #2 was discovered. The judge carefully analysed CEL’s invoices against the 2020 Agreement and the additional work. For Invoice #9607 and the subsequent invoices, he concluded that once the building was moved off the original 2019 pad, CEL was no longer bound by the fixed-price quote. The changed, wetter soil conditions, demonstrated in photographs, justified treating the corrective and additional work as outside the 2020 Agreement. He rejected YME’s “oversimplified” pro-rata linear-foot theory that sought to price the extras at discounted contract rates, holding that it did not reflect the substantially different conditions off the original pad. The trial judge ultimately found that CEL had proven its claim at $72,520 plus HST, i.e., $81,947.60. He disallowed invoice #9859 for alleged “extra backfilling” on the basis there was insufficient evidence that the required backfill materially exceeded the work already priced in the written quote, but otherwise accepted the time-and-materials charges for the corrective work, subject to a $1,400 reduction for geotextile cloth and placement that had been directed by an engineer. This left a net proven claim of $72,520 plus HST.

Disposition of the counterclaim

On the counterclaim, YME obtained a credit of $16,385 for CEL’s failure to supply and install all materials necessary for the septic field under the 2019 Agreement. The court accepted CEL’s explanation for not installing geotextile fabric in one area, as site conditions required a substitute solution and CEL absorbed the additional cost of crushed rock. YME’s broader claim that CEL had taken hundreds of loads of topsoil without paying was rejected because, beyond the approximately $12,000 paid to YME at $50 per load, there was no convincing proof of additional uncompensated loads. Similarly, the allegation that CEL removed granular material from the property on September 24, 2020 was denied by CEL and was not supported by sufficient evidence. The counterclaim was therefore allowed only to the limited extent of the septic-field credit, and the remainder was dismissed.

Net judgment and costs at trial

After setting CEL’s proven claim of $72,520 plus HST ($81,947.60) against YME’s successful counterclaim of $16,385, the trial judge entered net judgment for CEL in the amount of $65,562.60. On costs, he emphasised that YME had acknowledged owing CEL at least $45,000, yet had paid nothing, forcing a full trial that, in his view, was essentially a dispute that could have been resolved in Small Claims Court over a roughly $20,000 difference in quantum. He ordered YME to pay CEL $15,000 in costs at trial, in addition to an earlier costs order of $5,000, for a total of $20,000 in trial-level costs in CEL’s favour, plus prejudgment interest (the specific interest amount was not quantified in the reasons).

Issues on appeal to the Divisional Court

YME appealed to the Divisional Court seeking to set aside the trial judgment and remit the matter for a new trial. It framed four main grounds: first, that the trial judge erred in refusing to admit Mr. Brochu’s late affidavit; second, that he misapplied the legal test for oral contract and wrongly treated the 2020 Agreement as modified or replaced; third, that he failed to identify and apply the correct legal test for quantum meruit and miscalculated the compensation for extras by allowing CEL’s regular rates rather than the discounted 2020 Agreement rates; and fourth, that his reasons were too brief or opaque to permit an effective appeal. The appeal therefore squarely engaged civil-procedure principles on admissibility and trial management, contract law regarding oral variations versus written contracts, the law of quantum meruit in construction “extras” claims, and the standard of appellate review for mixed questions of fact and law.

Standard of review and the treatment of late evidence

The Divisional Court began by setting out the familiar standards of review: correctness for pure questions of law and palpable and overriding error for findings of fact or mixed fact and law, subject to the exception where an incorrect legal principle transforms a mixed issue into one of law. It then turned to the trial judge’s refusal to admit the late Brochu affidavit. YME argued that relevant evidence is presumptively admissible unless excluded under a probative-value versus prejudicial-effect balancing test, and that this test was not properly applied. The Divisional Court rejected that submission. It emphasised that, in a case governed by strict affidavit deadlines for a summary trial, the trial judge was entitled to rely on trial-management powers to exclude affidavits filed more than a year and a half after the court-ordered deadline and only days before trial, particularly when the underlying events dated back four years. The Court held the judge had no obligation to run a separate Landolfi-type balancing where the exclusion was grounded in case-management fairness and efficiency. There was therefore no error of law or palpable and overriding error in refusing to admit the Brochu affidavit.

Oral contract and quantum meruit arguments

On the contract issues, YME contended that the trial judge had implicitly found an oral agreement superseding the 2020 Agreement without applying the proper legal framework for oral contracts. The Divisional Court disagreed with this reading of the reasons. It held that the statement that CEL was “no longer bound by the original quote” once the building moved off the pad did not amount to a finding of a new oral contract; rather, it reflected a factual conclusion that the written fixed-price quote no longer applied to significantly different work under different site conditions. Likewise, YME’s attempt to frame the decision as one grounded in unarticulated quantum meruit principles failed in light of the positions the parties actually took at trial. YME had expressly acknowledged that extras were requested and performed and told the court the real dispute was to identify the additional work and determine a reasonable value for it. Both sides argued quantum-meruit-style factors for valuing the extras, even referencing the same case law on how to set a fair fee where there is no precise contract rate for the extra work. The Divisional Court found that, in any event, the requirements of quantum meruit were satisfied: the 2020 Agreement did not cover the additional corrective excavation and related work, CEL performed it, YME obtained its benefit, and there was no juristic reason for YME to retain that benefit without paying.

Valuation of extras and adequacy of reasons

YME further argued that, even if quantum meruit applied, the trial judge made a palpable and overriding error by valuing the extras at CEL’s regular rates instead of the discounted rates in the 2019 and 2020 contracts. The Divisional Court noted that Mr. Chaschuk’s evidence was that the extras were charged on a time-and-materials basis using CEL’s standard rates, and there had been no sustained challenge to the equipment and material tickets. It was therefore open to the trial judge, on the evidence, to conclude that CEL’s regular rates were reasonable in the circumstances, especially given the more difficult soil conditions and the re-digging caused by YME’s layout errors. On the adequacy-of-reasons ground, YME claimed the reasons did not clearly identify whether liability was based on oral agreement or quantum meruit, thus impeding appellate review. The Divisional Court held that nothing turned on this distinction because YME had effectively conceded the legal basis for paying something for the extras and focused only on quantum. The trial judge explained, with reference to the changed conditions and the inadequacy of YME’s pro-rata approach, why he accepted CEL’s evidence and valuation of the extras. Those explanations were sufficient to permit counsel to mount an appeal and to allow the appellate court to review the reasoning.

Divisional Court result and amount awarded

The Divisional Court dismissed YME Welding Enterprises Inc.’s appeal and left the trial judgment intact. In addition, the Divisional Court ordered YME to pay costs of $5,000 to Chaschuk Enterprises Ltd. in respect of the appeal. This $5,000 is the only new monetary award made by the Divisional Court itself; the substantive damages and trial-level costs (the net judgment of $65,562.60 and $20,000 in trial costs) were determined at first instance and simply upheld on appeal.