Hamilton builder John MacDonald was ordered to pay nearly $290,000 to two customers after what the High Court described as his dishonest conduct in having his building company extract deposits from them for new builds never completed.
Mr MacDonald’s claim to be a victim of circumstances with covid-19 lockdowns causing his building company to fail in 2021 was dismissed by Justice Wilkinson-Smith. His company was trading insolvent for years prior to the pandemic.
Mr MacDonald deviously extracted deposits from these two customers just prior to liquidation, immediately using this money to meet both personal and company debts at a time when his business had been trading whilst insolvent, she ruled.
The High Court was told Mr MacDonald was director and sole shareholder of John S MacDonald Builders Ltd.
In September 2020, his company agreed to build a new home in Cambridge for a Batley Family Trust. Trustees signed a standard-form Registered Master Builders Contract agreeing to pay a $115,000 deposit. This contract states the deposit can be used only to pay costs of their build.
Evidence was given of the trustees being asked to sign three weeks later what was represented as being a duplicate of their earlier contract. What was presented as a duplicate had one critical alteration; their deposit did not have to be held in trust against payment of construction costs.
They later learnt their money had already been siphoned off to meet other company debts and to pay Mr MacDonald’s personal expenses, including renovations at his family home.
Concrete footings for their new home were poured before work stopped with Mr MacDonald putting his company into liquidation.
The Singh family suffered a similar experience. Trustees of their family trust paid a $172,500 deposit in late 2020 for construction of two residential units in Hamilton.
Initial agreement was for a fixed price contract, with no deposit required.
Mr MacDonald then pressed for an increase in price. A compromise was reached; no price increase, provided a $250,000 deposit was paid in advance by instalments.
The Singhs never paid the full $250,000; they paid no further instalments beyond initial payments of $172,500 concerned when there was no sign of construction starting.
As with the Batleys, their deposit was never returned, dissipated in payment of sundry personal and business MacDonald debts.
Justice Wilkinson-Smith ruled Mr MacDonald personally liable to repay the deposits received by his company. The company’s two customers were left as unpaid unsecured creditors. Mr MacDonald had traded recklessly, having his company incur further liabilities at a time when it was insolvent and creditors unpaid. This was a breach of Companies Act director’s duties.
Justice Wilkinson-Smith signalled she intended to order Mr MacDonald pay in full all legal costs incurred by the Batleys and Singhs in bringing their claim to court.
They had a strong claim, she said, not helped by Mr MacDonald fighting to the end and then stating at the last minute that he would not appear in court to defend their claims.
Indemnity costs orders are necessary to disincentivise defendants from prolonging hopeless proceedings until litigation fatigue or increasing costs forces plaintiffs to give up, she said.
The Batleys and the Singhs were invited to file in court full details of litigation costs incurred, with Mr MacDonald given an opportunity to challenge the amounts claimed.
Batley v. MacDonald – High Court (28.04.25)
25.109