COURT FILE NO.: 342/09 and 344/09

DATE: 20091002

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

B E T W E E N:

1642279 ONTARIO INC., FRANK LISTA and THE PLASTIC SURGERY CLINIC INC.

Plaintiffs

• and -

SCE CONSTRUCTION MANAGEMENT INC., TEEPLE ARCHITECTS INC., STEPHEN TEEPLE, ROSS GILMORE, BERNARD JIN, BAUEN DISTRIBUTION INC. and DANIEL THOMPSON, TROW ASSOCIATES INC. and COMPOSITES GUREA, S.A.

Defendants

Simon Schneiderman, for the Plaintiffs

David A. Taub, for Ross Gilmore

Megan Marrie, for Stephen Teeple and Bernard Jin

HEARD at Toronto: October 2, 2009

JANET WILSON J.: (Orally)

The Motion

1The defendants, Ross Gilmore, Bernard Jin and Stephen Teeple, bring this application for leave to appeal from the decision of Perkins J. dated July 15, 2009. He refused their request to strike the claims against them in their motion for summary judgment.

2These defendants rely on rule 62.02(4)(b) of the Rules of Civil Procedure. They assert that there is good reason to doubt the correctness of the decision made. Further, they argue that the case raises matters of importance concerning the personal liabilities of directors and employees, justifying the matter being heard before a full panel of the Divisional Court.

Background Facts

3The background facts in this litigation and the issue before the Court are outlined in paragraphs 1 to 4 of the reasons of the motions judge as follows:

[1] The plaintiffs are a plastic surgeon and his two corporations, one of which (TPSCI) operated his plastic surgery clinic and the other of which (1642279) owned the land on which the clinic itself was built. The defendant Gilmore is the principal of the corporate defendant, SCE, which was the contractor engaged to build the clinic. The defendants Teeple and Jim are architects who were employed by or acting for the corporate defendant TAI, which was engaged to provide design, drawing, budgeting and construction supervision services before and during construction of the clinic. Teeple is also the principal of TAI.

[2] A contract was entered into on July 12, 2001 between TPSCI and TAI for design, drawing, budgeting and construction supervision services for the building of the clinic. Neither the surgeon nor Teeple nor Jin was a party.

[3] The construction contract for the clinic was entered into on October 24, 2005 between 1642279 and SCE. Neither the surgeon nor Gilmore was a party.

[4] In the action, the three plaintiffs have sued Gilmore, Teeple and Jin personally. Those three defendants have moved for summary judgment dismissing the action as against them, saying that they are not liable in contract because they were not parties to the contracts in issue; further, they are not liable in tort because at all times they were employees, officers or directors of corporate defendants, were not acting in their personal capacity and did not become personally liable by reason of their actions.

4The defendants argue that the motions judge failed to apply the correct test in this summary judgment motion. The conclusions of the motions judge which are critized by the defendants are as follows:

[12] The statement of claim and the evidence filed by the plaintiffs on these two motions are pretty thin on facts that would establish personal liability of the three individual defendants. In their affidavits in support of their motions, Teeple and Gilmore (Jin did not file an affidavit) recite the contractual history of the dealings between them and the plaintiffs but give very few facts as to any of the circumstances before, during and after the construction. The actual course of events that might make them liable will of course be explored on discovery, though I accept the defendants’ contention that the plaintiffs have a burden of proof of facts to allow them to get as far as discoveries, once the defendants move for summary judgment. I find that there is, just barely, some factual basis for a claim that could, if proved at trial, result in one or more of them being found personally liable. This is an action where, in any event, both Teeple and Gilmore, as principal officers and directors of their corporations and, I would add, principal actors in this dispute, will necessarily be examined for discovery and be present for all of the trial. Jin too was a principal actor in the events and will be needed at trial for his knowledge of the facts and expertise. This is hardly a situation of abusive inconvenience. Nor is it a case where the trial would be simplified or materially shortened if these defendants were taken out of the action now.

(Emphasis added)

Analysis

5The purpose of a Rule 20 summary judgment motion is to preclude matters proceeding to trial if there is no genuine issue for trial. Rule 20.01(3) upon which the defendants rely provides as follows:

A defendant may, after delivering a statement of defence, move with supporting affidavit material or other evidence for summary judgment dismissing all or part of the claim in the statement of claim.

6The case law is clear. Principles apply to assess whether a summary judgment motion should be granted. These principles are:

(i) The moving party who seeks dismissal of an action has the initial burden of showing that there is no genuine issue of material fact requiring a trial for resolution. Once the moving party has satisfied this burden, the responding party has an evidentiary burden to establish its claim as being one with a “real chance of success”.

(ii) In order to discharge that evidentiary burden when it is applicable, the party responding to a motion for summary judgment must adduce coherent evidence based on an organized set of facts to show that there is a real issue to be tried on admissible evidence. The responding party must “lead trump or risk losing”.

(iii) A party is not entitled to sit back and rely on the possibility that more favourable facts may develop at trial. A party is required to put its best foot forward

See Guarantee Co. of North America v. Gordon Capital Corporation, 1999 664 (SCC), [1999] 3 S.C.R. 423 at paras. 27 and 31; 1061590 Ontario Limited v. Ontario Jockey Club et al. (1995), 1995 1686 (ON CA), 21 O.R. (3d) 547 (C.A.) at para. 36; Aguione v. Galion Solid Waste Material Inc. (1988), 1998 954 (ON CA), 38 O.R. (3d) 161 (C.A.) at paras. 30-35.

Conclusions

7For the Court to grant leave to appeal on the basis that “there is good reason to doubt the correctness of the order” the Court is not determining whether the decision is right or wrong, but simply whether there is reason to doubt the correctness of the decision.

8I conclude there is reason to doubt the correctness of the decision by the motions judge. It appears that the legal test applied and factors considered by the motions judge in this case are novel, and not in accordance with established case law. The test is not whether there is “just barely some factual basis” for a chance of success at trial which may be fleshed out during discovery. The long established test is whether there is a genuine issue for trial. Counsel for the plaintiffs argue that even if the legal test applied by the motions judge is incorrect, the result is correct. The difficulty with this submission, is that there is no analysis as to the basis of personal liability constituting a genuine issue for trial reflected in the reasons for the motions judge, nor in the motion record before the court.

9Based upon the plaintiffs’ submissions to me today, any time an architect or contractor is retained by a client when the contract is clearly with the corporation, personal liability may routinely engage by alleging proximity and reliance. It appears that this approach ignores established case law limiting personal liability for officers and employees to rare or unusual fact-specific situations, when the contract in question is clearly with a corporation. See ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 1995 1301 (ON CA), 26 O.R. (3d) 481 (C.A.) at paragraph 25:

[25] The decided cases in which employees and officers of companies have been found personally liable for actions ostensibly carried out under a corporate name are fact-specific. In the absence of findings of fraud, deceit, dishonesty or want of authority on the part of employees or officers, they are also rare. Those cases in which the corporate veil has been pierced usually involve transactions where the use of the corporate structure was a sham from the outset or was an afterthought to a deal which had gone sour. There is also a considerable body of case law wherein injured parties to actions for breach of contact have attempted to extend liability to the principals of the company by pleading that the principals were privy to the tort of inducing breach of contact between the company and the plaintiff: see Ontario Store Fixtures Inc. v. Mmmuffins Inc. (1989), 1989 4229 (ON SC), 70 O.R. (2d) 42 (H.C.) and the cases referred to therein. Additionally there have been attempts by injured parties to attach liability to the principals of failed businesses through insolvency litigation. In every case, however, the facts giving rise to personal liability were specifically pleaded. Absent allegations which fit within the categories described above, officers or employees of limited companies are protected from personal liability unless it can be shown that their actions are themselves tortious or exhibit a separate identity or interest from that of company so as to make the act or conduct complained of their own.

(Emphasis added)

10The scope of liability for directors and employees of corporations when there appears to be at best a tenuous basis for personal liability involves issues of public importance beyond the parties to this dispute.

11For these reasons, the motion for leave to appeal is granted.

COSTS

12At the conclusion of the motion I heard submissions as to costs. Costs for this motion for leave to appeal are payable by the respondents/plaintiffs to counsel for the applicant/defendant Ross Gilmore in the amount of $2000.00, and to counsel for the applicants/defendants Stephen Teeple and Bernard Jin in the amount of $2,000.00 (for a total of $4,000.00, payable forthwith).

JANET WILSON J.

Date of Reasons for Judgment: October 2, 2009

Date of Release: October 20, 2009

COURT FILE NO.: 342/09 and 344/09

DATE: 20091002

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

B E T W E E N:

1642279 ONTARIO INC., FRANK LISTA and THE PLASTIC SURGERY CLINIC INC.

Plaintiffs

• and -

SCE CONSTRUCTION MANAGEMENT INC., TEEPLE ARCHITECTS INC., STEPHEN TEEPLE, ROSS GILMORE, BERNARD JIN, BAUEN DISTRIBUTION INC. and DANIEL THOMPSON, TROW ASSOCIATES INC. and COMPOSITES GUREA, S.A.

Defendants