Court File and Parties

Beckett v. Ridgeway Estates Ltd, CITATION: 2019 ONSC 112

Court File No.: SR1652/10, SR1652/10A, SR1652/10B, SR1652/10C, SR1652/10D, SR1652/10E, SR1652/10F, SR1652/10G

Date: 2019-01-07

Superior Court of Justice – Ontario

Re: Muriel L. Beckett and Frederick A. Beckett (1652/10); John Hill and Karen Hill (1652/10A); Peter Gleeson and Susan Gleeson (1652/10B); Richard Elston (1652/10C); Michael Dorschner and Donna Dorschner (1652/10D); Peter O’Brien and Elizabeth O’Brien (1652/10E); Harry Pockett and Noreen Pockett (1652/10F); Terrel Keith Wallace and Janis Lynn Wallace (1652/10G), plaintiffs

And: Ridgeway Estates Ltd and Robert Mills (all actions), defendants

Before: Mr Justice Ramsay

Counsel: Margaret A. Hoy for the plaintiffs Gary H. Enskat for the defendant Robert Mills

Heard: January 4, 2019 at Welland

Endorsement

[1] In eight actions filed on October 22, 2010 under the simplified procedure Rule, the plaintiffs claim for breach of contract and tort in relation to their purchase of a residence with a common recreational complex. The defendants are the developer/vendor. The corporate defendant is bankrupt and the action has been stayed against it. The individual defendant, Robert Mills, moves today for leave to amend the statement of claim to allow him to plead a defence under the Limitation Act, 2002 to the claims for breach of contract. (He has already plead the limitation defence in connection with the breach of privacy.) He also moves for summary judgment. Since he is the only remaining defendant, I shall refer to him as “the defendant.” The actions are scheduled to be tried together in March of this year.

[2] The defendant Robert Mills was the president of the corporate defendant. He was in charge of construction, sales and marketing. His company, Blythwood Group Inc., is a 10% owner of the corporation.

[3] In 2005 and 2006 the plaintiffs entered into agreements with Ridgeway Estates Ltd for the purchase and sale of residences that were to be finished in 2007. The defendant signed the agreements of purchase and sale on behalf of the corporation. The contract contains a clause stating that the written contract constitutes the entire agreement.

[4] The contract was drafted by the vendor. The purchasers were all consumers. They had no expertise in the construction industry but in general they were successful people. All 12 of the plaintiffs who were examined for discovery deposed that they understood their right to consult independent counsel before signing the agreement. Most of them said that they understood the difference between an individual and a corporation.

[5] The contracts provided that a recreational complex would be built by January 1, 2009.

[6] The complex opened on August 1, 2011. Ridgeway Estates Ltd remained owner until 2013 when it turned over ownership of the complex to the Algonquin Club Association, a non-profit corporation. Shabri Property Management then operated the complex on behalf of the Association.

[7] The plaintiffs sue for the following wrongs: a. Failure to build the complex on time; b. In the case of some plaintiffs, failure to admit them to the complex unless they paid monthly dues; c. Misrepresentation in connection with access to a golf course and a view of the golf course; d. In the case of some plaintiffs, deficient workmanship in construction; e. Breach of the plaintiffs’ right to privacy by providing confidential information to the Algonquin Club and posting a list of residents who had not paid their dues in the club house.

Summary judgment

[8] On this motion, the defendant argues that it does not require a trial to decide: a. that he has no personal liability for acts done on behalf of the corporate defendant; b. that no representations were made about a golf course being next door, or a view of the golf course; c. that there is insufficient evidence of deficiencies in construction; and d. that the defendant did not show the agreement of purchase and sale to others, and that if anyone posted the names of the plaintiffs it was the Algonquin Club, not the defendant.

[9] Summary judgment motions must be granted whenever there is no genuine issue requiring a trial. There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87.

[10] Partial summary judgment should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner: Butera v. Chown Cairns LLP, 2017 ONCA 783.

Individual liability

[11] In 642947 Ontario Ltd v. Fleischer, 2001 ONCA 8623, [2001] O.J. No. 4771, Laskin JA said at paragraph 67:

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, [1895-9] All E.R. 33. 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. v. Zhelka, 1967 ONSC 189, [1967] 2 O.R. 565 at p. 578, 64 D.L.R. (2d) 457 (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 SCC 75, [1987] 1 S.C.R. 2 at p. 10, 34 D.L.R. (4th) 208, 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".

[12] One category of the exceptional cases in which the corporate veil is lifted includes the case in which there is some conduct on the part of the directing mind that is either tortious in itself or exhibits a separate identity or interest from that of the corporations such as to make the acts or conduct complained of those of the directing mind: Normart v. Lebovic, 1998 ONCA 2447, [1998] O.J. No. 391 (CA), citing Montreal Trust Co. v. ScotiaMcLeod (1995), 1995 ONCA 1301, 26 OR (3d) 481 (CA). That would not include the tort of inducing the corporation to breach a contract: Said v. Butt, [1920] 3 KB 497. As the Court of Appeal said in Adga Systems International Ltd. v. Valcom Ltd., 1999 ONCA 1527, [1999] O.J. No. 27, paragraph 18, the consistent line of authority in Canada holds simply that, in all events, officers, directors and employees of corporations are responsible for their tortious conduct even though that conduct was directed in a bona fide manner to the best interests of the company, subject to the Said v. Butt exception.

The delay in building the clubhouse

[13] It is not controversial that the written contracts promised in 2005 or 2006, as the case may be, that the recreational complex would be built to the point of being usable by January 1, 2009. The whole project was marketed as an adult lifestyle development. The clubhouse was an important selling point. Ridgeway Estates Ltd told the residents on December 19, 2007 that because a bigger club house than promised would be built and because of “unforeseen market circumstances”, construction would be delayed until spring of 2008. The defendant did not apply for a building permit until 2010. The complex was opened on August 1, 2011.

[14] The breach, then, was intentional. Ridgeway Estates Ltd disregarded its promises and delayed construction of the complex for its own purposes. Whether it would be too flagrantly opposed to justice to allow the presumption in Salomon and Salomon to apply on account of fraud or some other cause, should be left to trial. The record does not contain enough evidence of motives to let me say with confidence that I could decide the question fairly and justly at this point.

The proximity to the golf course and view of the golf course

[15] The proximity of golf courses, including the golf course next door, was used in advertising as a selling point. In 2007 the owners of the golf course sold to a developer named Rinaldi, who in turn sold part of the property to Blythwood Group Inc., the defendant’s company. The entire property was then developed for residential housing.

[16] In three cases the plaintiffs depose that based on what the defendant said to them before they bought their houses, they paid premiums in the $40,000 range for a view of the golf course. One plaintiff ordered a larger garage so that he could buy and store his own golf cart. The defendant in his affidavit contradicts these plaintiffs. I cannot judge the credibility of the witnesses on the written record or on a trial of an issue. The evidence on this issue will be intertwined with the evidence on the delay in building the club house. Deciding both issues will require the court to decide whether to lift the corporate veil. This is not a question for summary judgment, and especially not partial summary judgment.

Deficiencies in construction

[17] Three sets of plaintiffs paid in the neighbourhood of $30,000 each for deficiencies in construction. There is nothing unusual about these deficiencies. They are the sort that routinely spring from the work of incompetent builders. The work was done on behalf of the corporate defendant. There is no foundation for a finding that it would be flagrantly unjust to apply the rule in Salomon. This issue is readily bifurcated. The main action has to do with misrepresentation. The defendant should have summary judgment on the claims for deficiencies in construction.

Breach of term for access to recreational complex

[18] Four sets of plaintiffs take the position that membership in the Algonquin Club was included in the purchase price of their property. They declined to pay monthly dues and were excluded from the club.

[19] Two schedules to the agreement of purchase and sale mentioned the club house specifically. Schedule B of the contract provides:

Price of home includes membership in Ridgeway-by-the-Lake Algonquin Club. Membership includes access to library, fitness centre, billiard room, great room, tennis courts [i] and outside swimming pool. (Value of about $8,000 per home.)

[20] Schedule F of the contract provided that the developer would build and operate the complex, which was to be in use in whole or in part on or before January 1, 2009. The complex would consist of a club house of 7,000 to 8,000 square feet, with a kitchen and assembly hall, a library a billiards room and a fitness room, an outdoor swimming pool and patio and paved and landscaped areas. Schedule F also provided:

“Member” means anyone who is the registered owner of a Lot within a subdivision.

“Membership fees” means such reasonable fees … as are imposed from time to time by the Developer or, following the Turnover Date, by the Association.

[21] Schedule F went on to provide that Ridgeway Estates Ltd would be responsible for the operation of the complex until it transferred the property to the Association, which Ridgeway Estates Ltd would cause to be incorporated.

[22] This claim depends on interpretation of a written contract. There is no contradictory extraneous conduct to consider. Both sets of parties have maintained their positions consistently throughout. This is an appropriate question for partial summary judgment.

[23] On any reasonable reading of the contract itself and a Q. and A. sheet that was provided to the plaintiffs before they bought, it is clear that membership was a right of all residents, but they also had to pay monthly fees, which were specified. I recognize that Schedule B says, “Membership includes access” but I do not consider this to be an ambiguity that must be interpreted against the party that drafted the contract. First, the entire sentence reads “Membership includes access to library, fitness centre, billiard room, great room, [tennis courts] and outside swimming pool.” That could reasonably be interpreted to intend to set out the contents of the complex, as opposed to the grant of access. I choose this interpretation for two reasons:

a. It is consistent with Schedule F, which is the more specific provision as to terms of access to the complex. b. The alternate interpretation has the members paying a one-time fee of $8,000 for a facility that will inevitably incur costs to stay in operation. Someone will have to come up with more money when the $8,000 amounts run out. It would not be reasonable to infer that the vendor intended to cover these costs indefinitely. In fact the contract makes specific provision for the turnover of the operation to a non-profit corporation owned and run by the members.

[24] The defendant should have summary judgment on this claim.

Breach of privacy

[25] Breach of privacy is tortious in itself. The defendant could be personally liable.

[26] Whether the members were right or wrong to decline to pay dues, their complaint is that their privacy was breached when the defendant gave their personal information to the Algonquin Club management. The Algonquin Club is said to have displayed the names of members who had not paid on a board in the club.

[27] The defendant admits that the corporate defendant’s lawyers gave the management company a list of members who had paid their dues. The management company would have needed this to operate the Club. The evidence that the information was posted in the club house is sketchy. It is hearsay from one person who is now deceased and another, Delia Shaw, whose declarations are vague. To put their best foot forward the plaintiffs would have had to file an affidavit from Delia Shaw or explain its absence. In sum, there is no evidence that the defendant had anything to do with the posting.

[28] As to the disclosing of information to the Algonquin Club, it is based on hearsay for the most part obtained from the plaintiff Michael Dorschner. He deposed that he met with David Giufridda, then president of the Algonquin Club, perhaps in 2012. On Giufridda’s computer he saw Schedule F to the agreement of purchase and sale. He may have seen other parts of it, with the names and social insurance number of the purchaser redacted. Given the weakness of this evidence, I am confident that the issue can fairly be decided in the defendant’s favour without a trial and that this issue is not factually intertwined with the main action.

[29] In any event, the defendant’s limitation argument, which has been pleaded on this point, would have been conclusive. The plaintiffs mention the breach of privacy in examinations for discovery as early as 2013 while the statement of claim was not amended to include this claim until December 2017.

Leave to amend the statement of defence

[30] The defendant seeks leave to amend his statement of defence to plead the Limitations Act, 2002 in defence to the claims of breach of contract. I am obliged by Rule 26.01 of the Rules of Civil Procedure to grant leave to amend the pleadings unless prejudice would result that could not be compensated by costs or an adjournment.

[31] The defendant argues that the claim based on the late finishing of the recreational club was discoverable more than two years before the action was instituted. His argument is that the plaintiffs must have discovered the breach of the agreement to finish the Algonquin Club by December 17, 2007, when the developer distributed a bulletin to all residents saying that construction would not begin until spring of 2008. He cannot succeed on this issue. The breach of contract occurred on January 1, 2009 when the complex failed to open.

[32] It was not pressed in oral argument, but I refuse leave to amend the statement of defence to plead the limitation period for the representations about the golf course, because it is not controversial that the golf course was not dug up, and therefore “discoverable,” until late 2008.

Conclusion

[33] Summary judgment is given to the defendant on the claims for a. Breach of privacy; b. Breach of contract by requiring monthly fees for admission to the Algonquin Club; and c. Deficiencies in construction.

[34] All other relief claimed by the defendant is dismissed.

[35] The parties may make written submissions to costs not exceeding three pages in length, to which may be appended a bill of costs and any offers to settle, the plaintiff by January 11 next, the defendant by January 17.

J.A. Ramsay J.

Date: 2019-01-07

[i] Only the Dorschners’ Schedule B mentions tennis courts.