The Mouse Guarding the Cheese? – part II

Case: The defendants (=def), the heads of an institution, hired the plaintiff (=pl), who works in the field of construction, to be in charge of building three halls in and around their building. His responsibilities included helping decide on a contractor, forging agreements with him, serving as the building inspector, and overseeing payments. Pl recommended a contracting company (=comp), said to be owned/operated by the contractor (=cont), which he praised and reported to have given the best possible offer. Def hired comp, and they began working, receiving several payments for a subtotal of 1,016,000 NIS, but the work they did, which is now on hold, was estimated by an appraiser as being worth only 230,000 NIS. Pl is suing for unpaid fees for his services of 126,000 NIS. Def claim that pl withheld the fact that pl actually had owned comp while he was supposed to be overseeing them. While he had said that he used to own comp and sold it to cont, it has only recently been transferred. Therefore, def are countersuing for the excess payment of 786,000 NIS, which to a great extent, went to pl, along with other damages he caused. Pl responded that he sold comp to cont before the work began and that he had not approved the early payment to comp (pl/def’s contract said that def should wait for pl to instruct them to pay), and since cont now certainly owns comp, def should sue cont if they overpaid.

Ruling: We saw last time that pl was guilty of conflict of interest for supervising his own company. Now we will look into damages from that fact

The main damage is the extra money that def paid comp. Although pl is correct that pl did not tell him it was time to pay, still pl is responsible for the payments. As the person who was in charge of comp’s finances and bank accounts at that time, it is implausible that he did not know of the payment of hundreds of thousands of NIS to his small company (one check he deposited personally). Therefore, he had a responsibility to inform def that they should not be paying, as his job included protecting def’s money, even though it was not expected to come in this form. Actually, in following the bank accounts, we can see that the early influx of money to comp enabled cont to pay pl for the purchase of comp earlier than he otherwise could have. The question is about the appropriate consequence.

Pl’s professional treatment of def, which enabled comp to receive more money than they deserved, is like a paid worker who gives bad advice to a client about his finances (see Shulchan Aruch, Choshen Mishpat 306:6). [Many sources were analyzed to flesh this out, but we will be skipping them.] Therefore, if cont/comp is not willing to complete work until it reaches the value of that which def paid, pl will have to pay the difference. In this regard, the value of the sprinkler system will be evaluated as only 84,000 NIS, not the 400,000 NIS they paid for it.