COURT OF APPEAL FOR ONTARIO
DATE: 20000309
DOCKET: C32920
McMURTRY C.J.O., ABELLA AND FELDMAN JJ.A.
B E T W E E N :
DAVID WALTERS Milton M. Chambers
for the appellant
Plaintiff
(Appellant)
and
THE ROYAL BANK OF CANADA Ms. Hilary Clarke and Ms. E. Hall
for the respondent
Defendant
(Respondent)
Heard: March 7, 2000
On appeal from the judgment of Wright J. dated September 7, 1999
BY THE COURT:
[1] The appellant appeals from the judgment of Wright J. which
struck out his Statement of Claim as disclosing no reasonable
cause of action.
[2] For the purposes of the argument, the appellant submitted a
proposed Amended Statement of Claim in order to deal with the
concerns raised by the respondent. In light of the fact that the
argument before the court was framed in terms of the potential
availability of a cause of action for the appellant, it is
appropriate to address the proposed Amended Statement of Claim
for the purposes of the appeal.
[3] The appellant was the principal shareholder (through a
numbered company), and directing mind of his corporation, Walters
Jewellers Limited. He was also a guarantor of the operating
facility provided by the respondent bank to the corporation, and
to the knowledge of the respondent, a significant creditor of the
corporation in the amount of $2.5 million.
[4] The essence of the claim against the bank is that it made a
negligent misrepresentation to the appellant in all of his
capacities in August, 1992. The bank told the appellant that it
intended to continue to provide the corporation with operating
funds in 1993 and that the appellant could expect to operate the
corporation as he had in the past, when by that time the bank had
already made a decision that it intended to terminate the line of
credit after the 1992 Christmas jewellery sales season.
[5] The appellant alleges that he suffered damage in his
personal capacity as a result of relying on that
misrepresentation to his detriment as both a guarantor and
creditor of the company, including damage to his reputation as a
businessman.
[6] The appellant pleads in his Amended Claim that as a result
of the misrepresentation, he advanced a further $400,000 of his
own funds to the corporation. It is conceded that this
allegation is a proper personal claim of the appellant. However,
the balance of the pleading as framed alleges that as a result of
the misrepresentation, the appellant took steps as the directing
mind of the corporation which he would not have taken in that
capacity had he known the true intentions of the bank, resulting
in loss.
[7] We agree that the appellant cannot assert as a personal
cause of action, the claims of the corporation for its losses.
Nor can he, as shareholder of the corporation, claim those losses
that he suffered indirectly as a result of the losses of the
corporation: Rogers v. Bank of Montreal, 1985 CanLII 150 (BC SC), [1985] 5 W.W.R. 193 at
195, 222 and 225 (B.C.S.C.) aff’d, 1986 CanLII 847 (BC CA), [1987] 2 W.W.R. 364 at 365
(B.C.C.A.); Bank of Montreal v. Wyatt, [1999] O.J. 1676 [Q.L.] at
paragraphs 31 and 39 (Gen.Div.); Carnegie v. Rasmussen Starr
Ruddy (1994), 1994 CanLII 7283 (ON SC), 19 O.R. (3d) 272 at 280 (Gen. Div.). Nor can he
assert as a cause of action, any alleged losses as guarantor,
although he may raise the alleged negligent misrepresentation as
a defence to an action against him by the bank on his guarantee:
Hoskin v. Price Waterhouse Ltd. et al (1982), 1982 CanLII 2068 (ON SC), 37 OR. (2d) 464 at
467 (H.C.J.)
[8] The appellant is, however, entitled to allege any loss he
suffered in his personal capacity as a result of any
misrepresentation that may have been made to him by the bank. He
must plead the representation, the actions he took in his
personal capacity in reliance on such misrepresentation and any
loss he suffered in his personal capacity, for example, as
creditor of the corporation. As the Divisional Court recognized
in Hoskin at p. 467, claims for damage to reputation and credit
are potentially proper personal claims, if they are pleaded
correctly as such.
[9] The appellant is entitled to bring an action properly
pleaded to assert personal claims based on misrepresentations
made to him by the respondent. However, as framed, the claim
must be struck out as the largest portion of it appears to assert
claims on behalf of the corporation.
[10] As there may be an issue with respect to the limitation
period, the pleading is struck out but with leave to amend in
accordance with these reasons.
[11] The appeal is therefore dismissed but leave to amend is
granted. In the circumstances, costs here and below shall be in
the cause of the action.
Released: March 9, 2000 “R. Roy McMurtry CJO”
“R.S. Abella J.A.”
“K. Feldman J.A.”
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