By / Matthew T Potomak and Liam M Robertson, Kuhn LLP
In the recent case of Shen v West Continent Development Inc. (BC0844848), 2022 BCSC 462, a dispute arose between homeowners and their contractor in relation to the construction of a new home. In this case, “uplifted” costs were awarded against the contractor as a result of improper conduct during the litigation process.
The Facts
In 2010, the homeowners and contractor entered into an agreement whereby the contractor would construct a new home on the homeowners’ property in exchange for payment.
In addition, the homeowners provided the contractor with a Power of Attorney, which allowed the contractor to remove funds from the homeowners’ chequing account to pay subcontractors.
In 2011, the relationship soured over disagreements about to the price and design of the home. The homeowners subsequently barred the contractor from attending their property and retained the services of another contractor to complete the project.
The homeowners commenced an action against the contractor on March 7, 2012, for breach of contract, fraud, breach of fiduciary duties, and negligence. The contractor denied these claims and commenced a counterclaim alleging that the homeowners owed money under the construction agreement.
In 2020, after conclusion of a 41-day trial, the Court found the homeowners largely successful.
Part of the homeowners’ success resulted from the contractor’s improper use of the Power of Attorney, which had been used to remove funds from the homeowners’ bank account. In this regard the Court noted as follows:
[the contractor] was largely unable to produce any kind of record of the uses to which the [homeowners’] money was being put. On numerous occasions, [the contractor] was given time during breaks in the trial of this matter to go home to look for the documentation he claimed he had. I do not find [the contractor’s] explanation for failure to produce invoices—that he had them and would produce them but could not find them—to be believable, and draw an adverse inference from his failure to produce them. I found [the contractors] handwritten summaries of payments made to be self-serving.
The Court also noted that the contractor’s use of the Power of Attorney required the contractor to act in the homeowners’ best interests and render accounts. The Court found that the contractor had breached his fiduciary obligations to the homeowners by being unable to account for and explain why the funds had been removed.
The homeowners subsequently brought an application seeking an uplifted cost award against the contractor.
The Issue
In order for a Court to award uplifted costs, the award of “regular” costs must be grossly inadequate or unjust as a result of unusual circumstances. An uplifted cost award is meant to indemnify the successful party where there are unusual circumstances (i.e., misconduct, incivility, actions commenced in bad faith, rudeness, or misbehaviour).
The Decision
The Court found that the contractor had made the litigation process far more complicated and prolonged then it needed to be. This included the contractor engaging in the following:
a. giving self-serving and unreliable evidence in relation to construction expenditures;
b. calling numerous witnesses whose evidence was not useful for the purpose of resolving the issues;
c. engaging in prolonged cross-examination of the parties and their witnesses;
d. pursuing a frivolous counterclaim forcing the homeowners to incur further legal costs; and
e. presenting evidence that was unnecessarily lengthy, uninformative, and irrelevant.
The Court awarded the homeowners uplifted costs after determining that the contractor had made the litigation process far more complex and prolonged than it otherwise should have been.
Lessons Learned
- A couple lessons learned are as follows Conduct both prior to and during the litigation process are factors that the court may consider in determining how costs will be awarded. Involving a Lawyer early to provide advice with respect to a contractor’s course of action could prevent against an adverse cost award; and
- Commencing claims or counterclaims that are not properly founded could backfire in the form of an adverse cost award. ■
This article was written by Liam M. Robertson and Matthew T. Potomak, who are lawyers that practise in construction law with the law firm of Kuhn LLP. This article is only intended as a guide and cannot cover every situation. It is important to get legal advice for specific situations. If you have any questions or comments about this case or other construction law matters, please contact us at 604.864.8877 (Abbotsford) or 604.684.8668 (Vancouver).
