Executive Summary: Key Legal and Evidentiary Issues

• Validity of a subcontract between Zagros and Cando based on an unsigned quotation and verbal acceptance.

• Whether subcontracting the framing work to Med breached the terms of the agreement.

• Assessment of which party repudiated the contract and the consequences of that breach.

• Determination of the value of work completed by Zagros through Med for damage calculation.

• Evaluation of whether the construction lien was filed within the 60-day limit under the Construction Act.

• Credibility of witnesses, particularly regarding conflicting accounts from Mr. Salimpour and Mr. Mohammadzadeh.

Facts of the Case:

Zagros Homes Development Inc. (“Zagros”) brought a construction lien claim for $10,735 relating to framing work performed on a residential property owned by Ernest Mbenkum and Alliance Lipenja (the “Owners”). The central issue was whether Zagros had a valid subcontract with Cando 1 Construction Inc. (“Cando”), represented by its principal Saeed Salimpour, and whether it was entitled to a lien and breach of contract damages.

In October 2020, Zagros submitted a quote to Cando to perform framing work for $49,000 plus HST. The quote was sent to Mr. Salimpour and indicated payment milestones. Though Cando’s representative asked for a 15% discount, the court found that the contract was accepted orally when the request was denied and work was allowed to proceed.

Because Zagros was committed to another project, it subcontracted the framing work to Med Carpentry Inc. (“Med”), which began work in November 2020. Cando paid Zagros $5,000 early in the project. However, after discovering that Med (not Zagros) was performing the work, Cando terminated its arrangement with Zagros and contracted directly with Med.

Zagros registered a claim for lien on January 22, 2021, and later commenced this action. Cando counterclaimed for a return of its $5,000 payment. The Owners also sought to dismiss the lien, arguing it was untimely.

Key Legal Findings:

1. Existence of a Valid Contract:

   • The court held that a binding subcontract existed between Zagros and Cando based on Zagros’ October 22, 2020 quotation and the parties’ subsequent conduct.

   • Although the quote addressed the “owner,” this was a standard term that did not mislead Cando. The court emphasized the use of objective standards in contract formation.

2. Right to Subcontract:

   • Zagros did not breach the subcontract by hiring Med. There was no clause prohibiting subcontracting, and such practice is common in construction. Cando’s objection, based on pricing and personal motives, was found unreasonable.

3. Breach and Repudiation by Cando:

   • Cando repudiated the subcontract when it unilaterally terminated Zagros and hired Med directly. The court found this conduct unjustified and motivated by personal resentment.

4. Damages:

   • Zagros proved that framing work valued at $15,820 was completed, of which only $5,000 had been paid. The court awarded breach of contract damages of $10,820 to Zagros.

5. Lien Claim Dismissed:

   • The court found insufficient evidence to establish that Zagros supplied services on or after November 23, 2020, which was required to meet the 60-day lien registration period. As a result, the lien was declared expired and vacated.

Costs and Interest (2025 ONSC 1803):

In a follow-up ruling:

• Zagros was awarded $17,596.39 in partial indemnity costs from Cando for its success on the contract claim.

• The Owners were awarded $7,612.76 in substantial indemnity costs, split evenly between Zagros and Cando, due to Zagros’ failure to release them from the action and Cando’s unreasonable conduct.

• Prejudgment interest at 2.5% per annum, starting from December 1, 2020, was awarded on the $10,820 owed to Zagros. The court noted that the default 0.5% pandemic-era rate was unreasonably low.

Conclusion:

While Zagros succeeded in proving the existence of a subcontract and recovering damages, its failure to meet the strict timing requirements under Ontario’s Construction Act led to the dismissal of its lien claim. The decision underscores the importance of clear records for proving supply dates and the potential consequences of informal arrangements in construction disputes.