Executive Summary: Key Legal and Evidentiary Issues

• Element Restorations Ltd. sued homeowners Michaela and Alvin Arruda for approximately $84,250 in unpaid construction costs and contractual interest arising from a home addition project originally estimated at $35,350.

• An implied contractual term required the plaintiff's project manager to possess sufficient knowledge and skill to accurately estimate construction costs for a straightforward 120 square foot residential addition.

• Faulty estimating methodology — using a cost-per-square-foot basis acknowledged by the plaintiff's own co-owner as inappropriate for small jobs — led to project costs ballooning to nearly twice the original estimate.

• The contractor failed to review or adjust the budget after final plans and drawings were completed, a duty its co-owner admitted was mandatory and not dependent on the client requesting it.

• Delayed and inadequate communication about significant cost overruns deprived budget-conscious, inexperienced homeowners of the opportunity to make informed decisions or exit the contract earlier.

• Post-pandemic supplier price increases cited by the plaintiff were unrelated to the defendants' project and did not credibly explain the cost variance.

The origins of the dispute

In early 2022, married couple Michaela and Alvin Arruda of Campbell River, British Columbia, began exploring the possibility of adding a small room to the back of their home at 316 Serenity Drive. Michaela had recently secured a position as executive director of a local charitable organisation that could not initially offer her office space, prompting the couple to consider a home addition for this purpose. After researching their options, the Arrudas contacted Element Restorations Ltd., a Campbell River construction and renovation company that the evidence at trial indicated was well-run with many successful projects in its past, led by co-owner Dwayne Oke, and in business for nine years. The couple was favourably impressed by one of the firm's project managers, Jon Adamo, who visited their home and provided guidance on the best location for the addition.

The proposal and the contract

In March 2022, Mr. Adamo presented the Arrudas with a written proposal to construct a 120 square foot addition to the rear of their home for a total estimated price of $35,350, exclusive of taxes. The proposal specified that the project would be completed on a cost-plus-20% basis, covering all sub-trades and materials, and noted that the budget was "subject to change as material choices are confirmed" and could be "reviewed and adjusted" once final plans and drawings were complete. The $35,350 figure was based on a rate of $230 per square foot. This was a significant financial commitment for the Arrudas, who arranged a $60,000 secured line of credit to finance the work. Michaela signed the proposal on June 2, 2022, and paid a deposit of $21,250 — roughly 60 percent of the total estimated cost. The contract also contained a clause stipulating that unpaid invoices would bear interest at 2% per month (28.8% per annum).

Construction begins and costs escalate

After approximately six months in Element's queue, a crew arrived at the Arruda home on January 12, 2023, to commence construction. During the waiting period, $3,591.22 of the deposit had already been spent on drawings, engineering plans, and building permits. Critically, the estimated budget was never reviewed or adjusted following completion of the project's final plans — a step that Element's own co-owner, Mr. Oke, later acknowledged in cross-examination was a mandatory duty owed to every client. On February 2, 2023, Mr. Adamo emailed the defendants saying he would provide an updated budget by February 5, 2023. By then, as it turned out, the entire deposit of $21,250 had been spent.

The budget overruns come to light

On February 11, 2023, Mr. Adamo emailed the Arrudas advising that costs had "raised over what we initially anticipated," with the project sitting at approximately $44,000 to date including Element's markup and still more expenses to come. By February 17, 2023, Mr. Adamo provided a more detailed breakdown estimating an additional $12,635 needed to complete the project. When Invoice 2963 — the first invoice ever issued on the job — arrived on February 21, 2023, it totaled $54,682.88 inclusive of GST, with an outstanding balance of $33,472.88 after applying the deposit. Taken together with a subsequent Invoice 2981 and the estimated completion costs, the Court calculated that the total price would have reached $69,184.82 — close to twice the original estimate and more than 80 percent over budget.

The breakdown of the relationship

The Arrudas expressed deep frustration over the lack of communication about escalating costs. In an email dated February 18, 2023, Michaela wrote that the situation was "unsettling" and characterised the project as "a 71% over budget job," noting that Element had never communicated with them about confirming material choices or subcontractor quotes despite the proposal's language contemplating such discussions. She pointedly questioned whether Element felt comfortable charging its 20% markup given the circumstances. Mr. Oke, recognising a serious problem, stepped in directly and offered to waive Element's entire 20% markup on all invoices — effectively completing the project without any fee — quoting a total finishing price of $56,584.92. Mr. Arruda rejected this offer on March 4, 2023, noting that the project would still cost approximately $60,000 even with the markup removed, which he described as "outrageous." A couple of days later the Arrudas notified Element that they were terminating the contract and hired a replacement contractor who completed the job for $9,046.76.

The court's analysis of the implied contractual terms

Justice Baird, following the precedent established in Wolski v. Puckett, 2006 BCSC 977, concluded that the contract contained an implied term requiring Mr. Adamo to possess sufficient knowledge and skill to accurately estimate the cost of the small and rudimentary addition. The Court found Element breached this implied term in three ways: first, by basing the estimate on a cost-per-square-foot metric that Mr. Oke himself confirmed was never the correct metric to use on a small job; second, by failing to review or adjust the budget with the defendants after final plans and drawings were completed; and third, by failing to promptly notify the defendants of the significant cost overruns. The Court further drew on Golder Associates Ltd. v. Mill Creek Developments Ltd., 2004 BCSC 665, emphasising that while an estimate is not a guarantee or warranty at law, it nevertheless has contractual effect — particularly when provided by a professional to inexperienced homeowners financing the work with borrowed funds. Referencing Infinity Construction Inc. v. Skyline Executive Acquisitions Inc., 2020 ONSC 77, the Court underscored that the final cost must fall somewhere in reasonable proximity to the estimated cost, which was clearly not the case here.

The ruling and outcome

The Court found that the combined total of the Arrudas' deposit paid to the plaintiff and the cost they incurred for completion of the work by someone else was slightly less than the $35,500 quoted by Mr. Adamo — demonstrating that they had effectively mitigated their losses. In the end, the plaintiff's action was dismissed, and legal costs on Scale B were awarded in favour of the defendants, Michaela and Alvin Arruda. The defendants' counterclaim, which they had elected not to actively pursue at trial, was also dismissed but without costs. No specific monetary award beyond costs was granted to the defendants, as the Court determined that dismissal of the plaintiff's claim — meaning Element could not recover the approximately $84,250 it had sought — was "the best outcome that the plaintiff is reasonably entitled to expect."