Court File and Parties

CITATION: De Morales v. Lafontaine-Rish Medical Group Ltd., 2010 ONCA 59

DATE: 20100126

DOCKET: C50732

COURT OF APPEAL FOR ONTARIO

Simmons, Cronk and LaForme JJ.A.

BETWEEN:

Susana Martinez De Morales

Plaintiff/Respondent

and

Lafontaine-Rish Medical Group Ltd., Alvin James Anderson, Canderm Pharma Inc., Bioform Medical Inc. and Lafontaine Jeunesse Corporation

Defendants/Appellants

Counsel: Robert Zigler, for the appellant Bois P. Wilson and François Sauvageau, for the respondent

Heard and released orally: January 8, 2010

On appeal from the order of Justice J.A. Thorburn of the Superior Court of Justice, dated June 19, 2009.

ENDORSEMENT

[1] The main issue before the motion judge was whether there was a genuine issue for trial concerning whether Lafontaine-Rish Medical Group Ltd. (“LRMG”) and Lafontaine Jeunesse Corporation (“LJC”) are privies and whether the doctrine of issue estoppel should therefore apply to prohibit LJC from re-litigating issues that were dealt with in the respondent's action against LRMG. In our view, the motion judge made no error in concluding, in effect, that there was no genuine issue for trial.

[2] As was noted by the motion judge, there was no dispute concerning various shared characteristics of the companies. They carried on the same cosmetic surgery business (not at the same time), at the same location and used the same key employees. LJC began its operations just after LRMG ceased carrying on the cosmetic surgery business. They had the same telephone number and website information.

[3] Most importantly, Arthur Froom was a director, principal shareholder and the controlling mind of both companies and had exclusive authority for litigation management of both companies. Before the motion judge, counsel for Mr. Froom conceded that Mr. Froom knew that LJC, and not LRMG, was likely the proper party defendant to the respondent's action as it was originally framed.

[4] Considered in this context, we see no air of reality to the suggestion that there was a genuine issue for trial concerning whether LRMG and LJC were privies of one another.

[5] Further, given that Mr. Froom was the directing mind of both companies, it is apparent that LJC knew that the respondent had sued the wrong party, in claiming against LRMG.

[6] As of the date of the respondent’s summary judgment motion against LJC, it had already been finally determined that because LRMG made a deliberate choice not to defend the respondent's action it was barred from setting aside the respondent's default judgment. Because LRMG and LJC are privies, we can see no genuine issue concerning whether LJC too is bound by that choice.

[7] Nor do we accept LRMG’s argument that the motion judge erred by failing to conclude that the principle of cause of action estoppel gives rise to a genuine issue regarding whether it is open to the respondent to sue LJC in this case. Even assuming that cause of action estoppel was a live issue before the motion judge, which is far from clear on the record before us, it is our view that it does not give rise to a genuine issue for trial for several reasons.

[8] First, the only evidence to which LRMG can point in support of its argument that the respondent knew or ought to have known, prior to obtaining default judgment against LRMG, that it sued the wrong corporate defendant, is a letter dated November 29, 2007 from the respondent’s family physician to the respondent’s counsel indicating that the respondent had attended the “Lafontaine Jeunesse Clinic” on January 18, 2007. On any reasonable reading, this brief reference cannot be said to fix the respondent’s counsel with actual knowledge that two separate Lafontaine corporations existed.

[9] Second, although Mr. Froom, the principal shareholder and controlling mind of LRMG and LJC, knew from the outset that the respondent had sued the wrong company, he did nothing for about six months after service of the original statement of claim to inform the respondent of this error. Indeed, on the contrary, LRMG delivered a Notice of Intent to Defend without any accompanying disclosure of the existence and involvement of LJC.

[10] Third, the record establishes that none of the publically available information regarding the cosmetic surgery clinic could have alerted the respondent, on reasonable inquiry, to the existence of two separate corporations.

[11] Finally, the eventual joinder of LJC to the action was brought about by a consent pleadings amendment. Thus, LJC not only failed to resist the amendment adding it as a party to the action – on the ground of cause of action estoppel or otherwise – it facilitated that very amendment.

[12] In these circumstances, LRMG cannot rely on the invocation of cause of action estoppel to defeat the respondent’s summary judgment motion.

[13] The appeal is therefore dismissed.

[14] The costs of the appeal will be to the respondent on a partial indemnity basis, fixed in the amount of $7,500.00, including disbursements and GST.

“Janet Simmons J.A.”

“E.A. Cronk J.A.”

“H. S. LaForme J.A.”