Court File and Parties
DIVISIONAL COURT FILE NOs.: 529/13
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
JEAN MARGARET JONES
Respondent
(Plaintiff)
– and –
RICHARD NEILSON and LAMBERT HOMES LTD.
Appellants
(Defendants)
Counsel:
P. Mandell Q.C., for the respondent
F. Feldman, for the appellants
HEARD at Toronto: November 20, 2014
Reasons for Judgment
Introduction and Background
1Richard Neilson and Lambert Homes Ltd. appeal from the decision of Deputy Judge Bocci, dated October 24, 2014, wherein she granted judgment against the appellants in the amount of $21,029.98. At the conclusion of the argument of this matter, I dismissed the appeal. I said that I would provide reasons for my decision and I now do so.
2On or about November 7, 2009, the respondent retained the services of the appellants for the replacement of the roof of the solarium at her residence in Toronto. The parties signed a Renovation Agreement at the time. The contract price was $26,718.30, including HST payable pursuant to a schedule of draws. It was agreed that the work would commence on or before mid-January, 2010 and that substantial performance would occur “on or before mid-March 2010”. The contract contained various other terms.
3It appears that there were problems with the contract almost from the beginning. The work did not start in January as stipulated but rather started in April, past the time by which the work was supposed to have been completed. There were problems with both the manner in which the work was carried out and the timeliness of the work. Eventually, on July 4, 2010, the respondent, through her lawyer, gave notice that she was terminating the contract. By that time, the respondent had paid the appellants $21,029.98 of the total contract price and the work had still not been completed.
4The respondent gave evidence regarding the various problems with the work. The respondent also called expert evidence regarding the poor quality of the work that had been done and the fact that it would cost the respondent at least $21,000 to remedy the work. In response, Mr. Neilson gave evidence disputing the allegations of the respondent in most respects.
5The trial judge reviewed all of the evidence and made various findings of fact. In particular, the trial judge concluded that the appellants’ performance under the contract fell below the standard of care expected of them. She found that the appellants were negligent in the design and construction of the roof, that their work was shoddy and that the respondent had received no benefit from the work of the appellants. Indeed, the trial judge referred to the evidence of the expert that the work, that the appellants had done, actually posed a possible danger of the roof collapsing. The trial judge also found that the appellants had proceeded with this work without first ensuring that the required building permit had been obtained. On that point, the respondent said that Mr. Neilson had told her that a building permit was not required. Mr. Neilson disputed that he said that. However, even if he did not so advise the respondent, it does not excuse his undertaking the work without first ensuring that the building permit had been obtained, as the trial judge pointed out.
6The trial judge therefore ordered both appellants to repay to the respondent the amounts that she had paid on the contract.
Issues
7The appellants’ challenges to the trial judge’s decision raise a number of different issues but the main issues are, essentially, two. One is that the appellants dispute the trial judge’s conclusion that the respondent did not receive any benefit from the work. The appellants submit that, while there were deficiencies in the work, those deficiencies were capable of being rectified. The other is that the appellants challenge the trial judge’s conclusion that Mr. Neilson should be personally liable for the amount of the judgment. The appellants contend that the defendant company was the only party to the contract and that the trial judge improperly “pierced the corporate veil” in finding Mr. Neilson personally liable.
Analysis
8On the first point, the appellants are essentially attempting to have me retry the case. The trial judge heard the evidence and made findings based on that evidence. Understandably, the trial judge placed considerable reliance on the evidence of the respondent’s expert whose evidence was, I note, uncontradicted. Her reasons for the conclusions that she reached are founded in the evidence and they are explained. There is no basis for me to interfere with those findings.
Personal Liability
9On the second point, the trial judge concluded that it was not clear that the contract was only between the respondent and the corporate appellant. While the contract names the corporation, at the beginning, as the “Contractor”, at the end of the document, the contract is signed by Mr. Neilson with his personal name underneath the signature line. There is no other indicia of the corporation being the signatory to the contract. For example there is no mention of the corporate name above the signature line, or other indication that Mr. Neilson is signing for the company, for example, by putting “per” before his signature.
10Further, there was evidence before the trial judge from Mr. Neilson that he exercised complete control over the company. Indeed, he agreed that he was the “alter ego” of the company.
11The trial judge made reference to the decision in Wildman v. Wildman (2006), 82 O.R. (3d) 401 (C.A.) where MacPherson J.A. referred to the circumstances in which it is appropriate to go behind the separate corporate identity. At para. 23, MacPherson J.A. said:
In my view, a particularly clear, concise and useful description of the principle and its limits was articulated by Laskin J.A. in 642947 Ontario Ltd. v. Fleischer (2001), 56 O.R. (3d) 417 at paras. 67-68 (“Fleischer”):
To pierce the corporate veil is to disregard the separate legal personality of a corporation, a fundamental principle of corporate law recognized in Salomon v. Salomon & Co., [1897] A.C. 22. Only exceptional cases -- cases where applying the Salomon principle would be “flagrantly” unjust -- warrant going behind the company and imposing personal liability. Thus, in Clarkson Co. Ltd. v. Zhelka et al., [1967] 2 O.R. 565 at 578 (H.C.J.), Thompson J. held that instances in which the corporate veil has been pierced “represent refusals to apply the logic of the Salomon case where it would be flagrantly opposed to justice.” Similarly, Wilson J. observed in Kosmopoulos v. Constitution Insurance Co., [1987] 1 S.C.R. 2 at 10, that the law on when the corporate veil can be pierced “follows no consistent principle. The best that can be said is that the separate entities’ principle is not enforced when it would yield a result too flagrantly opposed to justice, convenience or the interests of the Revenue’: L.C.B. Gower, Modern Company Law (4th ed. 1979) at p. 112.”
Typically, the corporate veil is pierced when the company is incorporated for an illegal, fraudulent or improper purpose. But it can also be pierced if when incorporated “those in control expressly direct a wrongful thing to be done”. Clarkson v. Zhelka at 578. Sharpe J. set out a useful statement of the guiding principle in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1986), 28 O.R. (3d) 423 at 433-34 (Ont. Ct. (Gen. Div.)), aff’d [1997] O.J. No. 3754 (C.A.): “the courts will disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and being used as a shield for fraudulent or improper conduct.”
12In my view, the trial judge was entitled to come to the conclusion that Mr. Neilson could be held personally liable for the monies received. The trial judge’s finding that Mr. Neilson signed the contract in his personal capacity finds support in the document itself, as I have already mentioned.
13It was also open to the trial judge to find that the situation here fell within an exception to the general principle of the separate legal personality of a corporation. The trial judge made findings of improper conduct by Mr. Neilson. Those included, for example, the fact there were logos on the face of the contract, suggesting that the appellant corporation belonged to organizations that it was not, in fact, a member of. They also included the fact that the work had been undertaken without ensuring that the necessary building permit had been obtained. Based on those findings, and considering the evidence as a whole, it was open to the trial judge to conclude that to limit the respondent’s recovery only to the corporate appellant “would yield a result too flagrantly opposed to justice”. The trial judge could equally have concluded that the corporate appellant was dominated and controlled by Mr. Neilson and was being used by him as a shield for improper conduct, especially given her findings that the work done reflected shoddy workmanship and negligent design for which the respondent received no benefit.
Pleadings
14The appellants also complain that some of the trial judge’s findings were based on matters not pleaded in the statement of claim, especially the basis for finding that Mr. Neilson was personally liable. While I accept that the pleading was not as comprehensive as it might have been, the fact that the respondent sought to hold Mr. Neilson personally liable in this case was clear. Consequently, there can be no basis for Mr. Neilson to suggest that he was caught off guard or “ambushed” by that central allegation. Much of what the appellants complain about in this regard is evidence that was used by the trial judge to reach her conclusions. While material facts must be pleaded, the evidence by which those facts are to be proven is not properly pleaded. Further, there must be a fairly wide latitude given in the Small Claims Court as to the requirements of pleadings. Lastly on this point, I note that no objection was taken at trial (or at least none to which counsel could point me) regarding the adequacy of the pleading and that fact, by itself, would be sufficient to dispose of this issue.
Expert Evidence
15The appellants also sought to challenge the respondent’s expert on the basis that he was biased. Again, no such objection was raised at trial regarding the expert. Consequently, it should not be entertained on appeal, especially where that challenge has difficulty finding any foundation in the evidence.
Dispute Resolution Process
16I mention only one other issue. The appellants submit that the trial judge did not consider their position that the respondent failed to follow the process set out in the contract for the resolution of disputes. That process required formal written notice of any alleged defaults and an arbitration of those defaults, if the parties could not resolve them. I do not find that this complaint provides any basis for interfering with the trial judge’s conclusion. For one thing, there was no motion brought to stay the action on the basis that the matters should be arbitrated. For another, it is implicit in the trial judge’s findings that there was, in effect, a fundamental breach of the contract by the appellants. In those circumstances, the appellants are not entitled to rely on the technical requirements for dispute resolution set out in the contract.
Conclusion
17In the end result, the appellants are unable to show that the trial judge committed palpable and overriding errors in any of her findings of fact. The appellants are also unable to show that the trial judge’s finding that Mr. Neilson should be personally liable was, in the circumstances before her, wrong in law.
Costs
18It is for these reasons that the appeal was dismissed. The appellants will pay to the respondent the costs of the appeal which I fix in the requested amount of $1,000 and the costs of the trial in the requested amount of $500, both inclusive of disbursements and HST within thirty days.
NORDHEIMER J.
Date of Release:
CITATION: Jean Jones v. Richard Neilson 2014 ONSC 6795
DIVISIONAL COURT FILE NOs.: 529/13
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
JEAN MARGARET JONES
Respondent
(Plaintiff)
– and –
RICHARD NEILSON and LAMBERT HOMES LTD.
Appellants
(Defendants)
REASONS FOR JUDGMENT
NORDHEIMER J.
Date of Release: