DIVISIONAL COURT FILE NO.: 346/10
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. Wilson, Swinton and Low JJ.
BETWEEN:
THE ESTATE OF MAHEN CHANDARIA, deceased, by his executors and trustees, GEETA CHANDARIA, SARIT CHANDARIA, and SAGAR CHANDARIA
Appellants (Plaintiffs)
– and –
TONY STEWART, 1749038 ONTARIO LTD. and 2130120 ONTARIO LIMITED
Respondents (Defendants)
Kevin D. Sherkin, Robert Gold, for the Appellants
David Conn, for the Respondents
HEARD at Toronto: April 19, 2011
REASONS FOR JUDGMENT
J. Wilson J.
1The trustees of the estate of Mahen Chandaria (“the appellants”) appeal from the decision of Frank, J. dated May 31, 2010. She granted judgment against the defendant 2130120 Ontario Ltd., (“213”) and dismissed the action against Tony Stewart (“Stewart”) and 1749038 Ontario Limited (“174”).
2The appellant seeks judgment against Stewart personally. The claim arises from three contracts with Renoclub for renovations to the home of Mahen Chandaria.
3The sole name that appeared on the invoices and contracts with the appellant was “Renoclub”.
4Renoclub was the business name used by 213 to carry on business. 213 failed to have the numbered company identified on its business invoices and contracts.
5It is not disputed that 213 was in breach of its obligations pursuant to section 10(5) of the Business Corporations Act, R.S.O. 1990, c. B.16 and section 2(6) of the Business Names Act, R.S.O. 1990, c. B.17 (the Acts) because of the failure to properly disclose the corporate name. Section 10(5) of the Business Corporations Act states:
Despite subsection (4), a corporation shall set out its name in legible characters in all contracts, invoices, negotiable instruments and orders for goods or services issued or made by or on behalf of the corporation and in all documents sent to the Directors under this Act.
6The learned trial judge correctly concluded that breaches of these Acts do not automatically give rise to personal liability of the principal of the corporation (see Pennelly Limited v. 449483 Ontario Limited (1986), 20 C. L. R. 145 (Ont. H.C.) at page 153.)
7Truster v. Tri-Lux Fine Homes Ltd (1998), 1998 3497 (ON CA), 39 C.L.R. (2nd) 6 (Ont. C.A.) at paragraph 21 confirms that personal liability of a principal in case of breach of these Acts is not automatic, and may occur “if the circumstances warrant it”:
Returning to the first component, s. 10(5) of the Business Corporations Act does not create automatic personal liability if it is not complied with. It is evident that the trial judge was aware of this. He also recognized a principle arising from the case law that persons wishing to benefit from the protection of the corporate veil should not hold themselves out to the public without qualification. They should identify the name of the company with which they are associated in a reasonable manner or risk being found personally liable if the circumstances warrant it …
…In the last analysis, persons who set up after the fact that they contracted solely on behalf of another bear the onus of establishing that the party with whom they were dealing was aware of the capacity in which they acted…
[emphasis added]
8The appellants argue that in this case the trial judge erred as she reversed the burden of proof, and that the facts and circumstances of this case warrant finding Stewart personally liable.
9We disagree.
10Although the trial judge did not specifically refer to the burden of proof upon Stewart to ensure that the appellant knew he was dealing with a corporation, she relied upon the principles outlined in the Truster decision.
11The evidentiary record confirms that Stewart met the onus of proof that the appellant knew that he was dealing with a corporation, rather than with Stewart in his personal capacity.
12First, it is not disputed that the appellant initially contacted Tina Clayton, who worked at another company called Aya Kitchens, to seek advice about renovations to his home. She advised him that “she was working for another company called Renoclub”.
13Second, it was the evidence of Stewart that he thought “I explained to him [the appellant] pretty clearly that we were a company and not an individual”.
14Third, Mr. Chandaria, through his agent Boyer, entered into three written contracts with 213, the first two of which were signed on behalf of Renoclub by Clayton as “sales representative”. The third contract was signed on behalf of Renoclub by Stewart as “sales representative”.
15This evidence, which is prima facie proof that the appellant knew he was dealing with a corporation, was not disputed. It is apparent from the foregoing that Stewart did not hold himself out to Mr. Chandaria or to his agent Boyer without qualification. While it may not have been clear from the written contracts that Renoclub was an incorporated entity, they indicated that Stewart (and before him, Clayton) were executing the contracts on behalf of Renoclub in the capacity of agent. That alone would negative personal liability as the existence of a principal was disclosed and the language of the contract does not reasonably imply that Stewart was executing the document in a personal capacity.
16The learned trial judge made findings of fact that are supported by the evidence that:
This is not a case in which Mr. Stewart held himself out, at any time or in any way, as personally contracting with Mr. Chandaria. Nor did Mr. Boyer, when acting on behalf of Mr. Chandaria, believe himself to be contracting with Mr. Stewart personally. There is no evidence whatsoever that the fact that the company name did not appear on the Renoclub documents misled Mr. Chandaria in any way or cause him to take steps he would not otherwise have taken.
17The learned trial judge also found:
Had it been the evidence that Mr. Boyer believed himself to be contracting on behalf of Mr. Chandaria with Mr. Stewart personally, Mr. Stewart would not be entitled to the protection from personal liability that he would otherwise attain through a corporate structure. But, there is no evidence that Mr. Boyer believed that Renoclub was, in fact, Mr. Stewart.
18The learned trial judge also made the finding, based upon the evidence, that Stewart was not the alter ego of the company, a circumstance which may warrant a finding of personal liability.
19The evidence confirms that the income and assets of 213 and the individual Stewart were not intermingled. Two signatures were required for signing the cheques of 213. There was no evidence that Stewart was a shareholder of 213. Stewart and Clayton did not sign contracts in their personal capacity, but rather signed the contracts as “sales representative”.
20We are of the view that the learned trial judge correctly concluded that while there was certainly a breach of the Acts, “this evidence does not establish a connection between a breach and Mr. Stewart”. The circumstances did not justify imposing personal liability upon Stewart.
21The appeal with respect to the claim against Stewart is therefore dismissed.
22In argument, counsel for the appellant did not address the appeal with respect to 174. Counsel confirmed that this aspect of the appeal was abandoned.
23At the conclusion of the argument, counsel made submissions with respect to costs. We conclude that a reasonable cost award to be paid by the appellant to the respondents is the amount of $4,100.00 inclusive of HST and disbursements.
J. Wilson, J.
K. Swinton, J.
W. Low, J.
Released: April 28, 2011
CITATION: Chandaria v. Stewart, 2011 ONSC 2486
DIVISIONAL COURT FILE NO.: 346/10
DATE: 20110428
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. Wilson, Swinton and Low JJ.
BETWEEN:
THE ESTATE OF MAHEN CHANDARIA, deceased, by his executors and trustees, GEETA CHANDARIA, SARIT CHANDARIA, and SAGAR CHANDARIA
Appellants (Plaintiffs)
– and –
TONY STEWART, 1749038 ONTARIO LTD. and 2130120 ONTARIO LIMITED
Respondents (Defendants)
REASONS FOR JUDGMENT
J. Wilson J.
Released: April 28, 2011