A homeowner’s lawsuit over a baffling basement disaster represents a win for consumers and a cautionary tale for business owners.
Prince Albert, Sask. homeowner Terra Eckert hired G. Raymond Contracting for a unique job: build a basement on an otherwise empty lot, then a house would be moved on top of it.
G. Raymond was not the man for the job, as he’d never built a basement before, but figured it “was not a big deal” (uh-oh). The end result was a comedic disaster: the basement didn’t fit the already-built house it was meant for.
(Red-flag trivia: “G. Raymond” is the Canadian equivalent of “Jon Doe,” an anonymous name that’s pronounceable in both English and French. It’s the generic name you see on any credit card advertised in Canada. Hiring a company that’s essentially called “Jon Doe, Inc.” is probably a bad move).
As you might expect, Eckert sued the builder. The problem was G. Raymond Construction didn’t exist anymore. Knowing they faced a lawsuit, the men running the corporation — builder John Keyuk and director George Raymond — had delisted it from the provincial registry and sold all the assets.
So Eckert went after Keyuk and Raymond personally.
That can be tricky. For a business, one of the great advantages of a corporation is the limited liability. That means unhappy clients can sue the corporation, but your personal assets are still protected. A corporation is an independent legal entity that incurs its own debts or lawsuits.
See: What is a corporation?
Every once in a while, a court will hear a case asking to “pierce the veil” of a corporation and sue individuals behind it, but this happens only in rare circumstances. Past case law establishes a general rule that you can pierce that veil when the corporation was formed for illegal or fraudulent purposes, or when failing to pierce would be “too flagrantly opposed to justice.”
Eckert had a solid case against an essentially defunct corporation with no assets. However, the judge agreed that allowing Keyuk and Raymond to hide behind that dodge would be an injustice. On top of that, they’d made another mistake: thanks to an oversight, the company was temporarily delisted from the corporate registry for a few months in 2012. It was in that short window that they signed the contract for Eckert’s basement, so G. Raymond Construction technically was not a corporation when the deal was born.
In another ballsy move, Keyuk and Raymond tried to file a counterclaim… as a corporation. So really, they were using their corporation as a shield, and the judge wasn’t having it. She awarded Eckert $16,006.92, plus court costs and interest.
So there’s a lesson in here for both consumers and business owners. A corporation isn’t just a shield to defend against lawsuits. In some cases, the people behind the corporation can be held personally responsible.