Alberta Court Of King's Bench Reaffirms Corporate Veil Test In The Construction Context

• Published date: 30 November 2022
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Corporate and Company Law, Contracts and Commercial Law
• Law Firm: Miller Thomson LLP
• Author: D. Bronwhyn Simmons and Usama Rashid

In the 2022 case, Parks v McAvoy, 2022 ABQB 294, the Alberta Court of Queen's Bench (as it then was) evaluated whether a general contracting company's director could be personally liable for damages when that director had performed work on the project in question. The court summarily dismissed the claim against the director in his personal capacity, and in doing so reaffirmed that directors will not, in most cases, be held personally liable for the tortious actions of their corporations.

Background facts

In an unusual turn of events, the contract between the plaintiff homeowner, Larry Parks, and one or both of the defendants, Steve McAvoy and Woodparke Homes Ltd., was an oral one despite having a monetary value of approximately $4,100,000. The contract was for the construction of a residential property. Construction began in 2011 and concluded in 2014. In 2018, defects in the house became apparent, mostly relating to water ingress, which were significant enough that the plaintiff and his family moved out of the house in February of 2019. The house remained vacant afterward and the plaintiff alleged it would have to be demolished due to the severity of the defects. Additionally, the plaintiff alleged that there had been financial wrongdoing by the defendants over the course of construction. Accordingly, the plaintiff sued McAvoy and Woodparke for the return of the original contract price, plus the cost of demolition.

The impetus for this judgment was an application for summary judgment by the plaintiff against both McAvoy and Woodparke, and a counter-application by McAvoy for summary dismissal of the plaintiff's claims against him personally. The claims McAvoy sought to have dismissed were the ones alleging that he had been a party to the contract in his personal capacity, had been negligent, had made fraudulent misrepresentations, and had committed breach of trust.

The court held that it could not grant summary judgment on the claim against Woodparke due to:

• the volume and incompleteness of the evidence before the court;
• contradictory evidence and expert evidence;
• credibility issues;
• insufficient evidence on causation of the defects; and
• the effect summary judgment against the defendants would have on the defences of third parties who had not yet presented evidence.

As such, the claims against Woodparke would have to proceed to trial. The court also noted that due to the number of third parties and the fact that some of the issues between the plaintiff...