In a recent home construction dispute, the court considered whether a plaintiff was entitled to sue different parties in separate proceedings after the deal fell through.
The plaintiff was a business corporation located in Regina, Saskatchewan which carries on the business of constructing new homes.
The defendant was a licensed mortgage broker working with the corporate defendant company (together, the “defendants”).
The plaintiff brought an action for damages against the defendants for its losses in relation to four transactions where the defendants were involved in the pre-approval and approval of mortgage financing for prospective purchasers. The plaintiff alleged that it entered into contracts for the construction and sale of four homes in Regina in early 2015. Each of the prospective purchasers used the services of the defendants to seek mortgage financing for their home purchases.
In each of the four contracts, the plaintiff alleged that it relied upon representations by the defendants that the purchasers qualified for a mortgage sufficient to complete the purchase. It therefore undertook construction of the homes.
However, in each of these contracts, the purchasers had not qualified for a mortgage sufficient to complete the sale, and the purchasers could not complete the purchase at the contract price. The purchasers therefore paid less than the contract price and the plaintiff claimed that it suffered a loss in each of these four sales.
The plaintiff claimed that its total losses on the four contracts equalled $943,667.
First, the plaintiff brought an action against one of the prospective purchasers, where it sought damages for breach of contract.
Secondly, in a separate action, the plaintiff claimed against the defendants for negligent, false, or misleading representations made by the defendants about the purchasers’ ability to finance the purchase of the homes constructed by the plaintiff.
The defendants denied that they owed a duty of care to the plaintiff or that they made any representations as alleged; they denied that any statements they made were false or misleading, and they denied that the plaintiff suffered any loss. Finally, in the alternative, they plead that the cause of any losses incurred by the plaintiff were occasioned as a result of its own negligence or exacerbated by its contributory negligence.
Additionally, the defendants brought an application for summary judgment, and alternatively, they sought to strike the action on the basis that it was an abuse of process. The defendants claimed that, as a result of the separate action against the prospective purchaser, the action against them would result in a multiplicity of proceedings which, in turn, constituted an abuse of process. Second, they argued that the existence of the second action created the risk of double recovery. Third, they argued that the allegations of fraud were scandalous, frivolous and vexatious.
The court quickly dismissed the defendants application for summary judgment, finding that the parties were not ready to proceed because they had not delivered their affidavits as required. The court therefore adjourned the application sine die(meaning indefinitely).
With regard to the defendants’ claim of abuse of process, the court first looked at their argument of multiplicity of proceedings. It found that while the two actions were to some extent factually interconnected, one action was grounded in contract while the other was grounded in tort. The court stated that there is ample support in case law to permit a plaintiff to pursue its claim in both contract and in tort; therefore, the plaintiff was entitled to pursue both claims. The court stated:
“On this basis, I conclude there is no basis to find an abuse of process because of a multiplicity of proceedings. While there may be merit to consideration of an order to consolidate proceedings or amalgamate the two actions, in the absence of an application to make such an order, I will not undertake that on my own motion.”
The court also rejected the defendants’ claim that allowing both actions would entitle the plaintiff to double recovery. The court stated that while the plaintiff may pursue both causes of action, it would only be permitted to recover damages until it had received full satisfaction, and no more. There was therefore no abuse of process in this regard.
Finally, the court rejected the defendants argument that the plaintiff’s claim was a frivolous and vexatious. Because it was not obvious that the claim was “devoid of all merit or cannot possibly succeed”, the court dismissed the defendants’ argument of an abuse of process in this regard.
As a result, the defendants’ claims of abuse of process were dismissed.
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