Spoke v. Delinia Ltd., 2016 ONSC 1923

CITATION: Spoke v. Delinia Ltd., 2016 ONSC 1923 DIVISIONAL COURT FILE NO.: 418/15 DATE: 2016-03-18

SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT

RE: FREDERICK SPOKE, Plaintiff/Respondent AND: DELINIA LTD. and ROBERT OFFENBACHER, Defendants/Appellants

BEFORE: Thorburn J.

COUNSEL: Eric Laxton, for the Plaintiff/Respondent Damon Stoddard, for the Defendants/Appellants

HEARD at Toronto: March 10, 2016

ENDORSEMENT

OVERVIEW

[1] The Appellant, Robert Offenbacher, is the owner and manager of Delinia Ltd.

[2] The Appellant engaged in a series of discussions with the Respondent and his spouse. The Respondent’s spouse looked at the Delinia Ltd. website to review previous projects completed by Delinia Ltd.

[3] A Scope of Work was provided by the Appellant, Robert Offenbacher, which contains no mention of Delinia Ltd. and is simply signed “Robert”.

[4] Thereafter, in November of 2012, the parties entered into an oral agreement to do renovations on the Respondent’s home. The discussion was between the Appellant and the Respondent’s spouse.

[5] Payments in the amount of $61,771 were made by the Respondent to Delinia Ltd. to complete the project. In April 2013, the Appellant advised the Respondent that the project was complete. The Respondent therefore asked for copies of the building permits, inspection reports and licensing information.

[6] The Appellant refused to provide same. The trial judge found that,

It is reasonable for [the Respondent] to request that this work be completed and they get the final inspection reports. [The Appellant] did not. He refused to do it. [The Respondent] asked him to do it repeatedly. [The Appellant] absolutely refused to do it for reasons that escape me.

[7] Because the Appellant refused to do so, the Respondent arranged an inspection himself. The City Inspector determined that the Building Permit could not be closed until remediation work was done to bring the Project up to the standard set out in the Building Code.

[8] The Respondent therefore engaged a structural engineer and a contractor to complete the remediation work and have a permit issued.

[9] The Respondent commenced a claim to seek reimbursement of those expenses at trial.

[10] Deputy Judge Clemenhagen granted the Respondent, Frederic Spoke, judgment in the amount of $24,040.64 (to pay the amounts owing for remedial work), costs in the amount of $5,500, and disbursements in the amount of $653.15 jointly and severally against the Appellant and Delinia Ltd.

[11] The Appellant concedes that the trial judge “had ample evidence before him to find a breach of contract by Delinia Ltd., including evidence from two of the Respondent’s trial witnesses that Delinia’s work had not been finally inspected by the City inspector, and evidence from the Respondent’s trial witnesses that Delinia Ltd.’s work required remediation.”

[12] The Appellant seeks to introduce new evidence that he claims is important to the determination of the issue under appeal.

[13] There is no appeal of the Judgment against the Appellant’s company, Delinia Ltd. However, the Appellant appeals the judgment against him personally as he takes the position that judgment should have been rendered only against his company, Delinia Ltd.

STANDARD OF REVIEW AND JURISDICTION

[14] Ontario Regulation 626/00 enacted pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43, provides that a single judge of the Divisional Court has jurisdiction to hear appeals from a decision of the Small Claims Court for the payment of money in excess of $2,500.

[15] A decision of a Deputy Judge of the Small Claims Court will be interfered with only if the Court made an error of law, applied the wrong principles of law, or misapprehended the evidence. (Zeitoun v. Economical Insurance Group 2008 20996 (ON SCDC), [2008] CarswellOnt 2576 (Ont. Div. Ct), aff’d (2009) 2009 ONCA 415, 96 O.R. (3d) 639).

[16] The standard of review on questions of fact is palpable and overriding error. (Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235.) A palpable and overriding error is one that affects the conclusion or was an obvious deficiency in the trial judge’s finding of fact that affects the outcome of trial. (Van de Perre v. Edwards, 2001 SCC 60, [2001] 2 S.C.R. 1014 at para. 15).

THE ISSUES

[17] The issues on this appeal are as follows:

a. Should the Appellants be permitted to file fresh evidence on this appeal? and

b. Did the trial judge make a palpable and overriding error of fact in concluding that judgment should issue against the Appellant, Robert Offenbacher, as well as Delinia Ltd.?

THE DECISION REGARDING THE ISSUE UNDER APPEAL

[18] Deputy Judge Clemenhagen held that,

With regard to who this judgment should go against, the only evidence I have is Exhibit number 1. Exhibit number 1 doesn’t mention Delinia Limited, although the defendant insists that it is his company and I take him at his word that that is his company and they did the work. It’s signed, “Regards Robert.” The only Robert here is the defendant who would have signed this so, therefore, in order to suggest that this is a contract entered into only by a limited company, it has to be clear to all concerned that there is going to be a limit of liability and that there is going to be some sort of corporate entity involved. There is absolutely no mention of any corporate entity in any of the documents before me relating to this contract and therefore the judgment will go against both parties.

[19] The Deputy Judge also referred to an earlier contract dated October 31, 2012 that purports to be a contract and does not refer to the corporate name as well as an email signed from Robert@Delinia.ca and notes that “it does not indicate that it is a corporate document”.

[20] The trial judge awarded judgment against both the corporation and the Appellant.

ANALYSIS OF THE ISSUES AND CONCLUSION

Fresh Evidence on Appeal

[21] The Divisional Court has jurisdiction to admit fresh evidence when conducting an appeal pursuant to section 134(4)(b) of the Courts of Justice Act which provides that:

Unless otherwise provided, a court to which an appeal is taken may, in a proper case…receive further evidence by affidavit transcript or oral examination, oral examination before the court or in such other manner as the court directs…to enable the court to determine the appeal.

[22] The legal test for the admission of fresh evidence on Appeal is set out in R. v. Palmer (1979), 1979 8 (SCC), [1980] 1 S.C.R. 759 as follows:

i. the evidence could not through due diligence have been adduced at trial;

ii. the evidence is relevant in that it bears on a decisive or potentially decisive issue;

iii. the evidence is credible; and

iv. the evidence if believed and taken with the other evidence, could be expected to affect the result.

[23] This test has been applied in civil cases. (Dew Point Insulation Systems Inc. v. JV Mechanical Ltd., [2009] O.J. No. 5446 (Ont. S.C.))

[24] The evidence sought to be introduced on this Appeal includes cheques written by the Respondent to Delinia Ltd., emails to and from the Respondent and Delinia Ltd., and information that the Respondent had reviewed the Delinia Ltd. website to see projects “the company has been involved in.”

[25] The Appellant submits that this fresh evidence addresses the important issue of whether the Agreement was with him personally or his company, Delinia Ltd., and could affect the decision to find the Appellant personally liable as the trial judge found that “there is absolutely no mention of any corporate entity in any of the documents before me”.

[26] There is no dispute that the evidence sought to be introduced is relevant, credible and could affect the outcome. The only issue is whether the evidence “could not through due diligence have been adduced at trial.”

[27] In assessing the due diligence factor, the court may consider the fact that the person seeking to adduce new evidence was self-represented at trial. (Toronto Dominion Bank v. Hylton, 2012 ONCA 614).

[28] Although he had legal advice in preparing the Claim and selecting the documents to be attached to his Defence in the Small Claims Court, the Appellant represented himself at trial. Counsel engaged by the Appellant should have attached the relevant and material documents to the Defence, but did not. The Appellant could have sought leave to introduce them at trial. However, it seems that the Appellant made some effort to make further statements at trial but was told to simply answer the question.

[29] Given that the Appellant represented himself at trial, in the interests of justice and bearing in mind that it is credible evidence that could affect the outcome, I permit the introduction of this evidence on appeal. As such, I will consider it in determining whether or not the decision of the Deputy Judge should be varied.

Did the trial judge make a palpable and overriding error of fact in concluding that judgment should issue against the Appellant as well as Delinia Ltd.?

[30] A palpable and overriding error is one that gives rise to the reasonable belief that the trial judge must have forgotten, ignored or misconceived evidence such that it affected his conclusion. (Van de Perre v. Edwards, 2001 SCC 60, [2001] 2 S.C.R. 1014 at para. 15)

[31] The courts recognize that a corporation is a separate and distinct legal entity from its shareholders. Piercing the corporate veil is an exception to this rule. Whether it is appropriate to pierce the corporate veil depends on the facts of each case.

[32] When contracting on behalf of a corporation, it must be clear that it is being done on behalf of the corporation and not in a personal capacity. (Corkum v. Lohnes (1981), 1981 2694 (NS CA), 43 N.S.R. (2d) 477 (S.C. (A.D.)), at para. 14; Victor (Canada) Ltd. v. Farbetter Addressing and Mailing Ltd. (1978), 3 B.L.R. 312 (Ont. H.C.); and Kobes Nurseries Inc. v. Convery, 2010 ONSC 6499, 77 B.L.R. (4th) 287 2010, aff’d, 2011 ONCA 662, 98 B.L.R. (4th) 234.)

[33] Section 10 of the Business Corporations Act, RSO 1990 c. B. 16 provides that,

… 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 all documents sent to the Director under this Act.

[34] In Bridge City Electric (1981) Ltd. v. Robertson, 1986 3201 (SK QB), [1986] S.J. No. 396 (Sask. Q.B.) per Kindred J.:

… the onus is on the individual who contracts with the plaintiff to make it known to the plaintiff that he is acting for a corporate principal. In Corkum v. Lohnes, (1981) 43 N.S.R. (2d) and 1981 2694 (NS CA), 81 A.P.R. 477, Cooper J.A., in delivering the judgment of the Appeal Division of the Nova Scotia Supreme Court, stated at p. 486:

If a person incorporates his business, as was done by the appellant in 1977 he must make it clear to those with whom he is negotiating contracts that he is doing so on behalf of his company and not in his personal capacity. If he fails not only to do so but also enters into a contract, as here, signing only in his personal capacity he should not thereafter when sued be allowed to hide behind the corporate veil so called. We should not countenance such an effort.

[35] In this case, the Respondent claimed money owing for remedial work because the terms of the Agreement set out in the Scope of Work were not completed, the Appellant refused to call the Building Inspector or provide them with Building Permits. The Respondent also claimed that, “The Defendant [Appellant] therefore has breached its contract by improperly or negligently performing its work on the Project” which work had to be remediated to ensure it met Building Code requirements.

[36] The Appellant concedes there was an oral agreement, and that it was he who met to discuss the terms with the Respondent’s spouse. He also concedes that, “the Deputy Judge had ample evidence before him to find …that Delinia Ltd.’s work required remediation.” His only defence is that Delinia Ltd. not Delinia Ltd.’s owner and manager, Robert Offenbacher, is legally responsible for the harm.

[37] The Deputy Judge knew that, “Delinia Ltd. is his [the Appellant’s] company and I take him at his word that that is his company.” He went on however, to note that where a defendant contends that only the corporation not the individual with whom a party has been dealing is legally responsible for a breach of contract, “it has to be clear to all concerned that there is going to be a limit of liability and that there is going to be some sort of corporate entity involved.”

[38] Although it is clear that the Respondent knew of the existence of Delinia Ltd. the Deputy Judge found that the Appellant did not make clear to the Respondent that the only entity it was dealing with was Delinia Ltd. and this was a limited liability corporation.

[39] The new evidence includes a few emails to and from Robert@Delinia.ca, cheques made payable by the Respondent to Delinia Ltd., a structural drawing prepared by a third party for Delinia Ltd., and a note that the Respondent’s wife had viewed the Delinia Ltd. website before entering into the Agreement.

[40] However, there is also evidence of an oral agreement between the Appellant and the Respondent, a comprehensive document entitled Scope of Work signed by “Robert” without any mention of Delinia Ltd., and the Respondent’s wife’s testified that, “we met Mr. Offenbacher” and “we discussed the repairs that had to be done…I more or less kind of trusted Mr. Offenbacher for carrying out the work.”

[41] The Deputy Judge accepted that Delinia Ltd. was the Appellant’s company, and he was aware that there was some documentation that referred to Delinia, although he did not have all of the documentation that referenced Delinia Ltd. before him.

[42] The Deputy Judge correctly noted that it was incumbent upon the Appellant to make it clear to the Respondent throughout the course of the contract that he was only acting on behalf of Delinia Ltd. and not in his personal capacity. He concluded that the Appellant did not make it sufficiently clear.

[43] I do not find that, even with the introduction of fresh evidence, the Deputy Judge’s conclusion represents a palpable and overriding error. While the new documents show that the Respondent was aware of the existence of Delinia Ltd. and was asked to make some cheques payable to Delinia Ltd., it was incumbent on the Appellant to make it clear to the Respondent that the only entity it was dealing with was the limited liability corporation and the evidence is insufficient to establish that he did.

[44] For these reasons, the Appeal is dismissed with party and party costs payable to the Respondent.

Thorburn J.

Date: March 18, 2016