Court File and Parties

CITATION: De Kever v. Nemato Corp., 2015 ONSC 1715

DIVISIONAL COURT FILE NO.: 555/14

COURT FILE NO.: CV-14-506329

DATE: 20150319

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: FRANCA DE KEVER Plaintiff

AND: NEMATO CORP., NEMATO COMPOSITES INC., 884906 ONTARIO INC., NEMATO COMPOSITES USA LP, NEMATO CORP LP, GERALD J. LOZINSKI Defendants

BEFORE: LEDERER J.

COUNSEL: Daniel Rohde, for the Plaintiff Joy Casey, for the Defendants

HEARD at Toronto: In Writing

ENDORSEMENT

[1] This is a motion for leave to appeal a decision of Mr. Justice Perell. He refused to strike out the Statement of Claim on the basis that it failed to disclose a cause of action.

[2] On March 19, 2014, the plaintiff was fired from her job. She was told that she was terminated effective two days later, March 21, 2014. She was not, and has not been, provided with termination or severance payments of any kind.

[3] On June 13, 2014, the plaintiff commenced this litigation. The cause of action is wrongful dismissal. The corporate defendants are a group of inter-related companies. In the Statement of Claim, it is alleged that the defendant, Gerald J. Lozinski, is the “...founder, owner and controlling and directing mind of the corporate defendants”.

[4] The plaintiff sues the defendants on the basis that they were her “common employers” and, thus, shared liability, if any, for her termination:

As long as there exists a sufficient degree of relationship between the different legal entities who apparently compete for the role of employer, there is no reason in law or in equity why they ought not all to be regarded as one for the purpose of determining liability for obligations owed to those employees who, in effect, have served all without regard for any precise notion of to whom they were bound in contract. What will constitute a sufficient degree of relationship will depend, in each case, on the details of such relationship, including such factors as individual shareholdings, corporate shareholdings, and interlocking directorships. The essence of that relationship will be the element of common control.

(Downtown Eatery (1993) Ltd. v. Ontario, 2001 8538 (ON CA), 54 O.R. (3d) 161, 200 D.L.R. (4th) 289, 14 B.L.R. (3d) 141, at para. 30, quoting from Sinclair v. Dover Engineering Services Ltd. (1987), 1987 2692 (BC SC), 11 B.C.L.R. (2d) 176 (S.C.), aff’d (1988) 1988 3358 (BC CA), 49 D.L.R. (4th) 297 (B.C.C.A.), at p. 181)

[5] The defendant, Nemato Corp., has been noted in default. The remaining defendants, Nemato Composites Inc., 884906 Ontario Inc., Nemato Composites USA LP, Nemato Corp LP and Gerald J. Lozinski, brought the motion to strike out the Statement of Claim. Mr. Justice Perell found that:

…in Ms. de Kever’s Statement of Claim there is more there than a bald allegation of common employment. It may be bare-boned, but she pleads material facts and a narrative that shows an interconnection and a commonality of operations and commercial purposes upon which evidence from the discovery process may substantiate a common employment plea. It is certainly not plain and obvious that her claim is doomed to failure.

(de Kever v. Nemato Corp., 2014 ONSC 6576, at para. 14)

[6] Of the various defendants, the only one seeking leave to appeal is the personal defendant, Gerald J. Lozinski. It was submitted that “...[w]hile “generally speaking, owners and directors can only be held personally liable for misconduct independent of the corporation, the Courts have not yet considered whether the common-employer doctrine at common law constitutes an exception to the general rule” (Factum of the Responding Party, the Plaintiff, Franca de Kever, at para. 20).

[7] For his part, Mr. Justice Perell acknowledged that the circumstances of Gerald J. Lozinski gave him pause. Initially, he understood the claim as against Gerald J. Lozinski to be deficient. In the end, he concluded that the common employment doctrine could apply to the owners of a group of common employers. This possibility has been left open by the Court of Appeal (de Kever v. Nemato Corp., 2014 ONSC 6576, at para. 15, referring to Downtown Eatery (1993) Ltd. v. Ontario, supra).

[8] “The common law recognizes, that in certain circumstances, a person may be considered to be the employee of more than one company or organization and that two or more entities may be recognized as common employer for the purpose of liability to employees. In order to determine whether entities should be held to be common employers, a court will consider whether the other entities exercised effective control over the employee, whether there was any intention to create an employer/employee relationship, to what extent the other entities were involved in the operation of the business, whether the employee was paid by another entity, and whether the entities held themselves out to clients, customers and employees as a single or integrated operation. The fundamental premise is that complex corporate structure should not be permitted to defeat the legitimate entitlements of employees” (Factum of the Moving Party/Defendant, Gerald J. Lozinski, para. 13, referring to Downtown Eatery (1993) Ltd. v. Ontario, supra; and, Reeves. v. Eddy et al. 2013 ONSC 2311, rvs’d on other grounds 2014 ONCA 91).

[9] It is well understood that, generally, owners, operators and directors cannot be held personally liable for actions taken, in good faith, in the course of carrying out their duties and responsibilities to a corporation. This is one reason why we recognize the legal independence of limited liability corporations. On the other hand, such parties can be liable for actions independent of the corporation or their responsibilities to the corporation. Accordingly, to my mind, the issue is not so much whether this is an exception where the corporate veil may be pierced. Rather, the question is whether the facts pleaded demonstrate an employment relationship, an authority over the employment of the plaintiff or action taken with regard to her termination exercised by Gerald J. Lozinski, independent or outside of his role as an owner, operator or director, such that he may be one of a group of common employers of the plaintiff or independently liable to her for any wrongful dismissal.

[10] In the Statement of Claim, the plaintiff alleges that Gerald J. Lozinski is one of the common employers of the plaintiff. There is little in the pleadings that supports this contention. Gerald J. Lozinski is said to be the owner and controlling mind of the corporate defendants. He founded all of them, oversees their operations, controls their relations with one another and shared premises with one of them (884906 Ontario Inc.) (Statement of Claim, at paras. 3 and 15). Is this enough to find that the Statement of Claim contains allegations of facts that, if proven, would support a finding of employment, by Gerald J. Lozinski, in common with any or all of the corporate defendants?

[11] The test on a motion for leave to appeal is found in rule 62.02(4). There must be either a conflicting decision and it is the opinion of the judge hearing the motion that leave be granted or there must be good reason to doubt the correctness of the order and the proposed appeal involves matters of such importance that, in the opinion of the judge hearing the motion, leave should be granted. In this case, this test should be set up against the standard which directed the determination of Mr. Justice Perell on the original motion. Actions are not to be dismissed as demonstrating no cause of action simply because the proposed proceeding is novel. Before such a motion can succeed, it must be “plain and obvious” that the proposed action cannot.

[12] As I see it, a consideration of whether it is plain and obvious that the action cannot succeed when applied solely to the liability of Gerald J. Lozinski leads to doubt concerning the correctness of the decision that has been made insofar as it affects him. If the decision is correct, it suggests that all operators and directors may be subject to such a lawsuit simply as a result of their position of control and without any allegations of action taken specific to the case at hand. This being so, the matter, in my opinion, is one of such importance that leave to appeal should be granted.

[13] Leave to appeal the order of Mr. Justice Perell is granted, but only insofar as it applies to the defendant, Gerald J. Lozinski.

[14] In considering costs, I acknowledge that, typically, one would expect that costs would follow the event. In this case, I am mindful that, examined at large, the plaintiff has been, and no matter the outcome of the appeal to follow, will remain, largely successful in maintaining her action on the basis of common employment. While ultimately it will be up to a trial judge to decide, the allegations suggest that the plaintiff has been left hanging by a termination that gave her no effective notice and no separation payments of any kind. It seems the business has moved to the United States making it all the more difficult for her to obtain a just result. If this proves to be true, it would be unfair to saddle the plaintiff with costs that arise out of an attempt to find a way around the position she appears to be in. Of course, I could be wrong. Perhaps these things may be otherwise explained. Accordingly, for this motion, I award costs in the amount of $500 in the cause of the action. To be clear, whoever succeeds at the end of the day will be awarded costs of this motion in the amount of $500.

LEDERER J.

Date: 20150319