Housing Construction Project Turned Sour Results In Personal Liability And Dismissal Of Defamation Claim

• Published date: 30 December 2020
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Real Estate and Construction, Criminal Law, Corporate and Company Law, Contracts and Commercial Law, Trials & Appeals & Compensation, Libel & Defamation, Construction & Planning, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Gardiner Roberts LLP
• Author: Mr Stephen Thiele

Although building a house can take much planning and hard work in securing a developer, labour and material, it is meant to be a joyous exercise which ultimately culminates in the creation of living space that is expected to meet a homeowner's dreams and desires. But not all home building projects turn out as planned and some times, like in the recent Alberta case of Zerbin v. Vrbanek, 2020 ABQB 797, they end up in court with allegations being made by both sides to the dispute regarding the failure to complete the project. In Zerbin, a number of issues arose, but for the purposes of this blog only two of the issues determined by the court will discussed in this case of a housing construction project that turned sour. Those issues relate to when can a court impose personal liability against a director or officer of a company and to the application of defences of truth or justification and qualified privilege in a defamation action.

Background to the action

The Zerbins were residential property owners. They wanted to build a dream house, and accordingly engaged a development company operated by the individual defendant, Mr. Vrbanek. While the Zerbins' dream home was being built, they engaged the same company to build a second home on a smaller lot which they owned. The second house was intended to be a gift for their daughter and son-in-law.

However, before both houses were completed, the Zerbins terminated their construction contracts with the company because they had learned from a cabinetry and tile supplier used in the construction project that the development company had been inflating invoices, not paying sub-trades and had taken a kickback from the supplier in the amount of $35,000. The allegation about the kickback in particular triggered a series of events which ultimately led to the Zerbins terminating the development contracts, an action for damages against the development company and Mr. Vrbanek, and a counterclaim in which among other things, the development company sought damages for defamation against the cabinetry and tile supplier and the homeowners in connection with comments made in emails between the supplier and the homeowners.

With respect to the action for damages, the Zerbins contended that the individual owner, director and officer of the development company be held personally liable.

With respect to the defamation claim made by the development company, the supplier and homeowners defended on the grounds that the alleged defamatory...