Litigants Overlook Legal Basics and Pay the Penalty
By: Anna Esposito (Construction Law Letter - March/April 2012)
Moon Development Corp. v. Pirooz
This case serves as a reminder that litigants should never overlook the basics.
A contract was entered into on March 9, 2008, between Moon Development Corporation, a division of Moon Construction Building Services c/o Patrick Alan Moon and the Owners c/o Paolo at Trasolini Chetner Construction and Development for the forming and framing of residential premises owned by Robert Parvis Pirooz. Another contract, called a “subcontract”, dated March 18, 2008, for the same work (but including a number of additional requirements) was issued by Trasolini Chetner Construction and Development to Moon Corporation. Another copy of this subcontract, dated April 8, 2008, with a minor modification, was also signed.
After Moon Corporation completed some of the work, Trasolini terminated the contract, citing unprofessional behaviour, lack of cooperation, disruption of other trades and disregard for safety requirements. Moon Corporation then issued an invoice in the amount of $18,515 for extra work, filed a builder’s lien for $75,600 plus interest, and sent an invoice directly to the owner, Mr. Pirooz, for $75,600.
The lien was filed by Patrick Alan Moon carrying on business as Moon Corporation, and an action was commenced in the same name. The defendants applied to dismiss the claim and have the lien removed. The defendants agreed, for the purposes of the application, that the foundation work in the amount of $24,150 was completed. Judgment was given in favour of Moon Corporation in that amount, and the lien was ordered discharged. The action, and a counterclaim in which the Defendants sought to recover the increased cost of completing Moon Corporation’s scope of work, continued.
During the course of the action, new Civil Rules of Court came into effect on July 1, 2010, and a notice of civil claim was filed under the new Rules (to replace the old writ of summons and statement of claim). The Plaintiff’s name remained the same on the notice of civil claim. During the course of the trial, without leave of the Court, an amended notice of civil claim was filed in which the Plaintiff was identified as Moon Development Corporation, a division of Moon Construction Building Services c/o Patrick Alan Moon carrying on business as Moon Development Corporation. Mr. Moon apparently agreed to be named personally as a Plaintiff along with his corporation in response to the Defendants’ threat to bring an application for security for costs if the Plaintiff was only Moon Corporation.
At trial, Justice Truscott was faced with three main issues:
1) Was Mr. Moon ever the Plaintiff in his personal capacity, or was the only Plaintiff/Claimant Moon Corporation?;
2) Did Moon Corporation breach the contract, or was the termination wrongful?
3) If Moon Corp. breached the contract, what are the damages to which the Defendants are entitled?
Mr. Moon was never a Plaintiff in his personal capacity. The Court held that Moon Corp. was the only proper Plaintiff. The Court reasoned that Moon Corporation was an incorporated limited liability company and, as such, it was the legal entity responsible at law. Moon Corporation was the only party to the three contracts, not Mr. Moon personally. Justice Truscott refused to allow Mr. Moon to be added as a Plaintiff because he was satisfied that Mr. Moon never understood the significance of his decision.
The Court also rejected the Defendants’ request for security for costs because it was “far too late” in the action for such an application to be brought.
Plaintiff breached the contract; calculation of damages. The Court held that the breach was on the part of Moon Corporation because, among other things, it failed to comply with the minimum safety requirements set out in the contract.
The Defendants claimed damages for extra costs incurred to hire another contractor, Topside, to complete the work at a higher cost. The Court confirmed that the Defendants would be entitled to these damages at law if they were reasonable. The Court had difficulty accepting the higher costs since Topside charged less per hour than Moon Corporation for the same work. Nor was there sufficient evidence that the extra costs were incurred to remedy deficiencies in Moon Corporation’s work. The Court also found that certain portions of the work done by Topside constituted new work (for example, an installed metal beam that was alleged to have not been completed or secured to the building). Therefore, the Court dismissed the claim for extra amounts as being unreasonable. The Court also dismissed the Defendants’ claim for clean-up costs because of a lack of supporting evidence.
The Court only awarded the Defendants nominal damages of $1,000 for breach of contract.
The “basics” highlighted by this case are
a) Only a party to a contract is liable. Liability of a corporation cannot be replaced with personal liability after the fact; and
b) Entitlement to damages at law will not result in an award if a party fails to discharge its obligation to prove the reasonableness and quantum of the damages suffered.
British Columbia Supreme Court
June 15, 2011