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.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.