In many situations, operating your business through a corporation will protect the individual(s) from personal liability and using an independent contractor rather than an employee may limit the liability of the company for the actions of the independent contractor. The case discussed below shows that acting through a corporation and using an independent contractor will not always prevent both liability of the business.
In Anne Opfermann v. Anthony Richard Taylor et al. 2014 ONSC 2723, the defendant general contractor company along with the principal of the company and his salesperson were sued by a 92 year old widow. After being approached by the estimator salesperson at the door of her house, the widow signed a Consumer Purchase Contract to fix an obvious crack in the chimney of her house for $2,680. The estimator then said she had a water problem in her basement. After the widow agreed to additional work to deal with the water problem, the estimator then said there was a problem with the storm sewer. And so on. Over the course of 40 days, the widow ended up signing 23 contracts and paid the construction company $159,000 through 30 cheques, many cheques in full payment were given at the time of signing the contract for the work. The estimator had a criminal record which included defrauding customers in similar circumstances and he had a cocaine habit which gave him reason to want to suggest more work to earn more commissions. According to the trial judge, the widow was an ideal victim whose trust was won over by the estimator playing on their shared culture and language. The first set of work – the chimney repair – was found to be a genuine undertaking followed in rapid succession by one work order after another. The estimator was found to have shamelessly and relentlessly taken advantage of her trust and her vulnerability, which amounted to deceit in law. The construction company and the individual owner of the small company were both found to be responsible for the actions of the estimator, despite the fact that he was not an employee. The trial judge held that the owner knew of the criminal conviction and likely knew of the cocaine addiction. The trial judge held that the owner had a duty to intervene that arose when he became aware of the actions of the estimator (as the cheques and many contracts came across his desk) and his failure to intervene perpetuated the estimator's deceit. The trial judge's comments suggest that it was known that without personal liability being imposed, the widow would have had difficulty recovering any award of damages as there had been a bankruptcy. In addition to damages for the money paid for work that was done as a result of deceit ($132,206), the trial judge awarded $25,000 in aggravated damages.
This case shows that the owners of small companies need to turn their minds to whether actions of even independent contractors are suspicious and to proactively investigate any suspicious activity in order to protect their own personal assets.