During construction, an absence of documentation and reliance on verbal agreements makes it difficult to prove claims of fraud or establish fiduciary responsibility.
Throw in cash payments and promises of in-kind compensation and matters can become even more opaque.
John Duca, through his private holding company, wanted to build a commercial building for his pre-owned luxury sport car dealership. He chose to act as his own general contractor and then hired Giuseppe Villano as his site supervisor and 181419 Ontario Inc., owned by Umberto Mauti, for the required excavations.
Problems began before shovels hit the ground.
As Ivan Merrow, an associate with McCarthy Tétrault LLP, and articling student Steven Marchand write, “Geotechnical reports found that the building’s foundation would need to reach 5.5-6.5 metres below ground level to reach load-bearing soil. Mr. Duca did not review the reports, and the building’s architectural drawings only called for foundations reaching 2.6 metres below ground level.”
Disputes over disposal of the excavated debris were among the several disagreements that arose thereafter, with consequential delays and extra costs that also came under dispute.
Duca made several payments to Mauti but began to fall behind with his invoice payments. Separately, Duca had also agreed to pay Villano’s compensation with a used Ferrari 430 valued at $150,000. Finally, Villano and Mauti both registered liens on the property, resulting in four separate and complex actions among the three parties that included unpaid invoices and lost profits.
Duca made his own series of counterclaims, including fraud, breach of fiduciary duty, overcharging and breach of contract.
Justice M.E. Vallee of the Superior Court of Justice ruled against Duca on almost all the matters before her.
On the matter of fiduciary duty, the justice determined Villano’s discretionary power was very limited.
“The fact that Mr. Villano picked up the invoices and delivered them to Mr. Duca is not a discretionary exercise of power. Mr. Duca decided to pay them.”
Merrow and Marchand described how Duca both watched the excavation process and paid the invoices without dispute, only complaining after litigation had begun.
Furthermore, Justice Vallee did not accept Duca’s argument that he was vulnerable to Villano.
“He had other options. He simply decided not to consult the resources that he had.”
Quantity surveying expert Arif Ghaffur, retained by Villano to provide opinion on the nature and value of his site superintendent’s work, reviewed documents related to the excavation and various mechanical and structural drawings, plus Villano’s separate invoice for miscellaneous work claimed to have been carried out on the worksite.
Ghaffur concluded a reasonable value for Villano’s supervisory services would range from $156,000 to $253,000. Villano’s claim for $150,000 was below Ghaffur’s low-end estimate. He did not feel it to be within his scope of expertise to judge Villano’s work under separate invoice.
“Mr. Duca admitted that $150,000 would be fair compensation for six months of Mr. Villano’s work when he believed the project would take six to eight months to construct,” Justice Vallee wrote. “This can be interpreted as $150,000 for site supervision to complete the project.”
The matter of Villano’s compensation represented by the Ferrari was a distraction.
Justice Vallee accepted Villano’s evidence that Duca agreed to give him a Ferrari 430 worth $150,000 to supervise the project. However, when that particular vehicle was sold elsewhere, Duca substituted a Ferrari 360 Spider worth $75,000 instead and promised $75,000 cash. Villano took possession of the Ferrari 360 but never received the balance owed.
Ultimately, the court ruled Villano must return the Ferrari 360, and ordered Duca’s company to pay $150,000. Separately, Duca was also ordered to pay Mauti $399,990.00 for his claim.
Justice Vallee disallowed Villano’s claim for his additional invoice due to inadequate documentation.
“He (Villano) stated that he wrote some things on paper but threw it out. He ought to have known that if he wished to make a claim for these items, he would need to keep some proof that he did the work.”
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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