Legal Blog:

Property Owner Successfully Sues Contractor and Principal

MacNamara v. 2087850 Ontario Ltd. 2017 Ont SCJ, 2018 Ont CA

The owner terminated the contractor while the residential project was in progress and after the owner had paid $6 million to the contractor. The owner then brought an action against the contractor for overcharges on a cost plus contract. The judge held that the contractor had double billed HST, claimed bills from subcontractors there were inaccurate and sometimes non-existent, and had failed to pass on discounts received from subcontractors. The judge granted judgment against the contractor’s principal holding that the principal, being the sole shareholder, officer, director, and signing authority, completely dominated the corporation and, in addition, used the contractor as an instrument of fraud, knowing full well that the invoices were fraudulent. The judge also dismissed the counterclaim for further unpaid invoices that the contractor claimed noting that the contractor did not provide backup documentation and gave no evidence that it paid the amount that it claimed.

The Court of Appeal dismissed the appeal of the principal and the contractor in its entirety. The owner had used a construction person to analyse the invoices and check them with the subcontractors. The contractor had complained that this person was put forward as an expert witness without complying with the formalities necessary to use an expert witness. The Court agreed with the motions judge that this person was not tendered as an expert witness; rather, his testimony amounted to evidence gathering and arithmetic. It was solely used to establish facts.

Resulting Trust Presumption

Gastle v. Gastle 2017 Ont SCJ

Testator bequeathed his assets to his 2 sons equally. One was the estate trustee. He was also a joint owner with the testator of 5 bank accounts worth $85,000. The other son released the estate trustee, not knowing of the 5 bank accounts. When he did find out about them, he sued for his share of the $85,000. The judge held that the release did not estop him from doing so. The estate trustee had certified that the interim statement described all realisable assets of the estate and the release stated that it was given in consideration of the completion of the administration and distribution of the estate in accordance with the interim distribution statement. The existence of the bank accounts was not disclosed in that statement. The judge further held that the estate trustee did not meet his onus to demonstrate that, when made the testator made him a joint owner of the accounts, the testator intended to gift the bank accounts to him on his death. He did not meet the onus because he was unable to corroborate his own evidence in accordance with section 13 of the Evidence Act. The court decided that the trustee had held the bank accounts by way of a resulting trust for the estate.

Deposit Forfeiture

Benedetto v. 2453912 Ontario Inc. 2018 Ont SCJ

A purchaser signed an agreement noting that he was signing in trust for a corporation to be incorporated and without any personal liability. The purchaser paid a $100,000 deposit. The purchaser then decided he did not wish to complete the transaction and requested the return of his deposit. The vendor declined. The purchaser sued and the court held for the vendor. Although the clause in the agreement and section 21(4) of the Business Corporations Act allow an individual to enter into a pre-incorporation contract without being personally liable, a deposit is not a pre-incorporation contract. It stands on its own as an ancient invention of the law designed to motivate contracting parties to carry through with their bargains, something that binds the contract and guarantees its performance. The purchaser would not have been liable for damages exceeding the deposit, but did lose the deposit.

Partial Summary Judgment: Action By Subcontractor

1526806 Ontario Inc. v. EllisDon Corporation 2018 Ont SCJ

General contractor backcharged a subcontractor for work that general performed, which sub ought to have performed. Sub commenced an action, not just for breach of contract, but also for negligent and fraudulent misrepresentation, punitive damages, and aggravated damages. General brought a motion for partial summary judgment to dismiss all claims other than the breach of contract claim. Sub’s claim for misrepresentation relied on the allegation that general informed sub that general would make up for the backcharges by giving sub two more projects and did not. The judge dismissed the fraudulent and negligent misrepresentation claims because there was no evidence of loss; the sub ultimately commenced its action for breach of contract and lost nothing as a result of the alleged misrepresentation. The judge dismissed the claim for aggravated damages. Aggravated damages compensate an individual for intangible injuries (i.e. those in addition to financial loss). A corporation cannot be injured in its feelings, only in its pocketbook. The judge allowed the claim for punitive damages to continue because the validity of the backcharges was at the heart of the breach of contract claim; whether there was a fraudulent scheme, which might support punitive damages, regarding the backcharges would have to be assessed by the trial judge. The motions judge did not want to have inconsistent findings.

All The Wrong Moves

Occasionally, we review a case and decide that one of the parties could star in his or her own movie, entitled “All the Wrong Moves.” Such was the case for the applicant in Scicluna v. Solstice Two Limited 2018 ONCA 176, a decision of the Ontario Court of Appeal.

Tears

Purchaser agreed to purchase a condominium unit for $372,000 and had paid a deposit of $294,000 by the time the transaction was ultimately to be completed in May 2011. Unfortunately, purchaser lost her job and was unable to pay the remaining $78,000 to complete the purchase.

The agreement provided, as usual, that if purchaser breached the agreement, vendor would retain the deposit as liquidated damages.

Lost Profit & Overhead

DCM Erectors Inc. v. Guarantee Co. of North America 2018 Ont SCJ (MC)

Master was dealing with a refusals motion. The plaintiff was making a clam for lost profit and overhead and the defendant wanted production of documents and information as to how it calculated overhead and profit and the specifics that made up that calculation. The Master held that the plaintiff did not have to answer the questions because the contract on which the claim was made included an agreed percentage for overhead and the plaintiff was merely extending that amount over the additional weeks of the contract according to the formula set out in Ellis-Don Ltd. v. Toronto Parking Authority 1978 Ont HCJ. This decision has to be limited to its own very specific facts (i.e. an existing set percentage) and, even with them, taken with a large grain of salt.

Procedural Fairness: Deciding to order interim spousal support without any notice that the issue was going to be adjudicated held to be an error of law

Zargar v. Zarrabian 2018 Ont SCJ (Div Ct)

Husband brought motion for the sale of the matrimonial home. Wife responded but brought no cross-motion seeking spousal support. Motion judge ordered sale of matrimonial home and, on his own initiative without any argument from the parties or even knowledge that there was an issue, ordered interim spousal support. The Divisional Court set aside the spousal support order noting that parties should not have to guess, speculate, or intuitively understand the issues to be decided on a motion. The court may not make an order for spousal support on its “own initiative.” To do so results in a lack of procedural fairness.

Lawyer’s Duty of Care: Court confirms that opposing counsel do not, generally, owe a duty of care to the opposing party

368230 Ontario Limited v. Feintuch Law 2018 Ont SCJ

Plaintiff mortgagee complained that the information he received from his lawyer as to the details of a mortgage transaction were incorrect and caused him to lend money that was no longer recoverable in whole. Plaintiff sued his own lawyer and the mortgagor’s lawyer, who had supplied the information. The judge struck the statement of claim against the mortgagor’s lawyer as disclosing no cause of action. A lawyer rarely has a duty of care to another party’s lawyer, particularly, as in this case, when the other party has its own lawyer and has never communicated directly with the opposite party’s lawyer.

Settlement – Penalty Clause

Haas v. Viscardi 2018 Ont SCJ

Plaintiff claimed $200,000 in damages, but settled for $30,000 payable in 3 equal instalments on 3 separate dates. The minutes of settlement stated that if the defendant failed to make any one of the payments, then the defendant would be liable for liquidated damages of $60,000 (in effect, regardless of the number of payments that had previously been made). The defendant made the first $10,000 payment and then defaulted. The plaintiff sued for $60,000. The judge held that the amount to be paid was not a penalty; it was slightly less than one-third of the original $200,000 claim. The judge further held that the liquidated damages clause was not unconscionable; there was no inequality of bargaining power and the terms of the agreement did not have a high degree of unfairness. Finally, the judge declined to give relief from the forfeiture under section 98 of the Courts of Justice Act because, the payment was not a penalty and, even if it were, it was not extravagant or unconscionable for reasons already given. The judge granted judgment for $60,000.

Illegal Distraint Damages

On occasion, a case comes along that is filled with so many legal concepts that it is very difficult to distil them in the space allotted to us. One such case is 2105582 Ontario Ltd. (Performance Plus Golf Academy) v. 375445 Ontario Limited (Hydeway Golf Club), 2017 ONCA 980.

Fore

Landlord golf club leased to tenant, without a formal lease, land adjacent to the golf course for the use as a driving range. Tenant invested approximately $200,000 to construct the driving range and purchase the necessary equipment. The driving range went into operation around September 2006, but, one year later, tenant fell into arrears. Landlord terminated the lease as of December 6, 2007.