CITATION: Bent Glass Design Inc. v. Tersigni, 2015 ONSC 6725

COURT FILE NO.: DC-13-259

DATE: 20151030

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

B E T W E E N:

BENT GLASS DESIGN INC.

Richard Payne for the Plaintiff/Respondent

Plaintiff/Appellant

• and -

TIZANO TERSIGNI, a.k.a. TIZIANO

Rob Moubarak for the Defendants/

TERSIGNI, MARIO TERSIGNI and

Appellants

LUIGO CORSO, a.k.a. LUIGI CORSO

Defendants/Appellants

HEARD at Toronto: October 20, 2015

DECISION

D.L. Corbett J.:

1This is an appeal from the trial decision of Deputy Judge De Lucia of the Small Claims Court finding the defendants jointly and severally liable to the plaintiff for $25,000, plus prejudgment and post-judgment interest, plus costs of $5,000, inclusive.

Background Facts

2The plaintiff issued a purchase order for a piece of new equipment for its business for a price of about $77,000. It paid a deposit of just over $25,000 when it placed its order. It never received the equipment, and its money has not been refunded.

3The plaintiff says that it dealt with all three of the defendants at various times in respect to this transaction. It believed that the defendants were agents of a corporation called Corsteel Hydraulics Ltd., which was somehow affiliated with a company called Lindgren Automation.

4When the plaintiff concluded that it was not going to receive the promised equipment or a refund of its deposit, it retained counsel to bring this proceeding. Counsel’s corporate search disclosed that there had once been a company called “Corsteel Hydraulics Ltd.”, but that it had been deregistered in 1995. This company stopped doing business around the time that it was deregistered, or earlier, and no longer exists. A corporate search also disclosed that no company exists in Ontario under the name “Lindgren Automation”.

5On the basis of this information the plaintiff sued the defendants personally, taking the position that the defendants had contracted in their personal capacity. And this was the issue for trial: were the defendants, personally, parties to the transaction with the plaintiff.

6The trial judge found the defendants liable. He concluded that there was deliberate obfuscation of corporate and business identities, and that as a result the defendants personally owed contractual obligations to the plaintiff.

7The defendants raise two general issues on appeal:

(i) they were denied procedural fairness at trial because the Deputy Judge refused to admit some of their documents into evidence due to non-compliance with a production order made previously by another Deputy Judge; and

(ii) the contract was between the plaintiff and a corporation, and they are not liable personally for the corporation’s default.

8For the reasons that follow I do not give effect to either ground of appeal.

The Procedural Issue

9This case started in Superior Court. Affidavits of documents were exchanged before the matter was traversed to the Small Claims Court.

10The case proceeded through the usual steps in Small Claims Court. The parties were represented by different counsel at different times, and the defendants were self-represented in the latter stages of the case. At the settlement conference, the presiding judge ordered the parties to exchange documents prior to the trial, so that both sides would be certain to have notice of the documents to be tendered into evidence. This was not an order that additional documents be produced; it was an order that documents to be tendered at trial be exchanged. Counsel for the plaintiff, who was new to the file, was concerned that there could have been documents exchanged earlier, of which he was unaware. The presiding judge made it clear that documents were to be served in advance of the trial, even if they had been provided to the opposite party at an earlier stage of the proceeding.

11At trial, the defendants tendered documents that had been listed in their affidavit of documents in the Superior Court proceedings and had been used at the settlement conference, but which had not been served in accordance with the order of the presiding judge at the settlement conference.

12The Deputy Judge advised the defendants that he would permit them to rely upon these documents, but that he would adjourn the trial in that event, to give counsel for the plaintiff an opportunity to review the documents and prepare properly for the trial. The Deputy Judge also advised that he would award costs against the defendants for an adjournment, and that these costs would be “substantial” since the plaintiff’s witness had travelled to Toronto from the U.S.A. for the scheduled trial date.

13In light of this information, the defendants decided not to pursue their request to adduce the disputed documents.

14It would have been prudent for the Deputy Judge to have asked counsel for the plaintiff if he was prepared to proceed that day if the documents were admitted into evidence, or if he would be asking for an adjournment. On a careful reading of the documents, in light of the rest of the evidence at trial, they are only of marginal help to the defendants: the one document that really helps their case would not have been sufficient, by itself, to overcome the evidence in the plaintiff’s favour. Mr Payne candidly acknowledged to this court that he had not asked for an adjournment and almost certainly would not have done so if he been asked for his position.

15However, even though the process adopted by the Deputy Judge on this issue was not optimal, it did not result in procedural unfairness that warrants intervention on appeal. The direction from the presiding judge at the settlement conference was clear, and, in the context in which it was made, its import was evident to the defendants. The Small Claims Court does not have an extensive pre-trial discovery process, and rigourous enforcement of documentary disclosure orders is a necessary norm in that court. Procedural orders in the Small Claims Court are entitled to deference, and I am satisfied that the decision was reasonable, given all the circumstances. Further and in any event, as shall be evident from my decision on the second issue in this appeal, I am satisfied that this evidentiary ruling did not have a material effect on the outcome of the trial.

Personal Liability of the Defendants

16The defendants failed to take this case seriously. Whether they may have had a basis for escaping liability is rather beside the point: they failed to conduct themselves as responsible litigants with the result that they are now responsible for this judgment. It may be that they would have done better if they had defended this case diligently. But that is of no moment now; they had their day in court and they failed to present evidence to establish their defence.

17The plaintiff established its dealings with the defendants, and that, on the record, it appeared that there was no corporation with which they were dealing. The named company had ceased to exist many years previously, and this was not a technical issue: it had truly ceased carrying on business. In these circumstances it was reasonable to conclude that the defendants were liable personally.

18In defending the claim, the defendants denied that they were acting in their personal capacity, but never did allege that they were acting on behalf of an existing corporation. It was not until the case was at trial that they sought to adduce evidence that there was a corporation for which they had been acting as agents. The Deputy Judge drew an adverse inference as a result of the defendants’ failure to claim over against the company for which they were purportedly acting, or even to explain in their statement of defence the circumstances they say should lead the court to so conclude. Rather, their pleadings were bald denials.

19The pungent air of mystery only deepened when the defendants explained their version of why they were not responsible for the contract with the plaintiff. They say the contract was with a numbered company, 679137 Ontario Ltd. They produced a registration showing that this company was once registered in Ontario to use the business name “Corsteel Hydraulics”. This registration was effective between 1991 and 1996. Oddly, the corporation “Corsteel Hydraulics Ltd.” existed during this period. No explanation was given as to how the numbered company came to be registered under a business name of another registered corporation.

20The legal name of the numbered company was not on the documents between the plaintiff and the defendant. On the basis of the documents between the parties, there would have been no way for the plaintiff to have known that it was dealing with the numbered company.

21The document at tab 25 of the Exhibit Book shows that the plaintiff’s deposit was credited to a bank account in the name of “Corsteel Hydraulics”. This makes sense: this was the name of the entity to which the plaintiff’s payment was made. The same document shows that the numbered company held this account – information that was not available to the plaintiff at the time of the transaction. This document shows that the money actually went to the numbered company. It does not show where the money went after that. Nor does it explain why the equipment was never delivered or the deposit refunded.

22The defendants produced documents showing that the numbered company suffered financial reversal. There was a “foreclosure” by a secured creditor. Then the company ceased carrying on business. And there was a document showing that someone by the name of “Pollock” was a director of the numbered company. One of the defendants claimed to have been an employee of the numbered company, but not its directing mind. The defendants claimed that neither of the other two defendants had anything to do with the numbered company.

23The Deputy Judge was having none of this. He concluded that the defendants had it in their power to explain what had happened, and had chosen not to do so for years after the events in question. He concluded that the defendants were really the persons in charge, and that the half-hearted and very late attempt to explain was insufficient. He rejected the defendants’ evidence and concluded that the defendants were liable for the contract personally. He found that the evidence of the plaintiff was sufficient to establish that the contract was personal, because there was no corporation for which the defendants were acting as agents. These findings were reasonable on the evidence before the trial judge and I see no basis on which to interfere with his factual findings: there is no palpable and overriding error..

24The defendants argue that the Deputy Judge wrongly pierced the corporate veil, without citing or meeting the stringent legal tests for such a finding. This is not a case about piercing the corporate veil. The Deputy Judge found the defendants liable as parties to the contract, not as agents responsible for the company’s default. This argument fails.

25For these reasons the appeal is dismissed. Costs to the plaintiff from the defendants, jointly and severally, fixed at $7,000 inclusive, including the costs of the prior appearance before this court which resulted in an adjournment.

26I am obliged to both counsel for their capable and thorough arguments.

D.L. Corbett J.