A Forest of Fees and Rights and Principle Trees – A sad but common tale of small money construction litigation outstripping its own value

There’s nothing particularly new or ground-breaking about the recent Ontario Superior Court Decision in Sierra Excavating v. Olszewski and TD Bank, 2012 ONSC 2271 (CanLII) but it is an interesting little case that highlights the importance of seeing the forest for the trees early in the litigation process.  What forest? The legal costs. What trees? The legal principles at play and the parties’ perceived rights.

The facts are a bit lengthy but not complicated and are, in summary form, as follows:

  • As a result of water intrusion into their basement, the owners of a single family house in Caledon, Ontario hired an excavation contractor to excavate around portions of the foundation of their home and carry out some work to waterproof the foundation and stop the leaks.
  • The contract price was $19,576.13.
  • The contractor carried out the work but leaks persisted.
  • A couple of subsequent attempts by the contractor to repair the leaks failed, the owners refused to pay, and the contractor registered a construction lien and sued for the $14,576.23 claimed to be owing under the contract.
  • The owners had another contractor remove and re-do the work (successfully – the leaks were fixed) and the owners counterclaimed for $40,000 for the higher cost of the second repair.
  • The Judge found largely in favour of the owners, ruling that the contractor had not done what it was hired to do and so was not entitled to a lien (or further payment) and would have to pay the owners $21,466.20 in damages for their cost to have the work re-done and done properly.

What I find important enough about this case to write this little blurb has almost nothing to do with the facts or the Judge’s decision – it has to do with highlighting how easy it can be for litigants to end up in a four-ish year legal battle (capped off with a three-ish day trial) that must have cost tens-ish of thousands of dollars in litigation costs (lawyers and experts) over what was never realistically more than a $20,000-ish fight, regardless of which side won or lost.  That is not, in my opinion, a happy outcome, even for the “victorious” owners.  At the end of the day, I would imagine that most, if not all, of what the owners were awarded will probably be gone in litigation costs and, between paying the Judgment, its own lawyer and expert, and some amount of the owners’ legal costs, the contractor is probably out somewhere north of $40,000 (on a $14,000 claim!).  Would either side have predicted its financial outcome in 2008 when the lawsuit was commenced?  I don’t know for sure but I doubt it.

This case, and countless others like it, exemplifies the need for both prospective Plaintiffs and Defendants in construction litigation to think very hard before they “dig in” for a long fight over what is, in the context of litigation, not a lot of money.  Some people and companies are rich enough to have the privilege of throwing economics out the window in favour of principle – most, however, are not.

From a lawyer’s perspective, this case bolds, underlines, and then highlights the need to have very frank and very clear discussions with our clients about the potential course and costs of litigation – particularly when there are relatively small amounts of money is dispute – so that our clients can make informed decisions about how they want to proceed and how aggressive they want to be in trying to settle their disputes.  Sometimes “small money” litigation will still go the long, expensive distance but at least the end result will then be no surprise to our clients.

On a closing note: I am not being in any way critical of the parties’ lawyers in this case – I don’t know either of them and obviously have no idea about how the litigation proceeded, whether there were attempts at settlement, or as to the overall dynamics of the litigation over its four year course.  To the contrary, my point is that the economics of virtually any “small money” construction litigation has the potential to get away from the parties over time and this case is just yet another example of this all too common problem.