COURT OF APPEAL FOR ONTARIO

DATE: 20001101

DOCKET: C31399

RE: VIBRON LIMITED (Plaintiff/Respondent) v. ARNOLD TRACEY

and KANATHERM LIMITED (Defentants/Appellants)

BEFORE: MORDEN, CHARRON AND SHARPE JJ.A.

COUNSEL: Michael E. Royce,

for the appellants

Lawrence J. Burns,

for the respondent

HEARD: October 26, 2000

On appeal from the judgment of Madam Justice Wailan Low dated December 24, 1998

E N D O R S E M E N T

[1] It is not disputed that the corporate appellant breached the trust provisions of the Construction Lien Act. The question on this appeal is whether the trial judge erred in finding that Mr. Tracey, the sole director and shareholder of the corporation, was also liable pursuant to s. 13(1) of the Act. The provision reads as follows:

13.-(1) In addition to the persons who are otherwise liable in an action for breach of trust under this Part,

(a) every director or officer of a corporation; and

(b) any person, including an employee or agent of the corporation, who has effective control of a corporation or its relevant activities,

who assents to, or acquiesces in, conduct that he or she knows or reasonably ought to know amounts to breach of trust by the corporation is liable for the breach of trust.

[2] There is no issue that Mr. Tracey had effective control of the corporation and that he assented to the conduct that constituted the breach of trust in this case. In fact, it was his conduct alone that constituted the breach of trust. The sole issue is whether he had the requisite knowledge under s. 13(1) of the Act. The trial judge referred to this provision and held that Mr. Tracy was personally liable pursuant to its terms without elaborating on the evidence in support of this finding.

[3] We see no reason to interfere with this result. We are satisfied that the evidence clearly supported a finding that the appellant Mr. Tracey reasonably ought to have known that the disbursements in question amounted to a breach of trust within the meaning of s. 13. The failure of the trial judge to elaborate on her finding of liability under s. 13 may, in part, be explained by the position taken by the appellant’s trial counsel in his opening at trial. In describing his clients’ position, he stated that “the moneys were in fact held in trust” but that they were properly disbursed.

[4] With respect to the appeal and the cross-appeal relating to interest, the decision of the trial judge was made within the scope of her discretion. We are not persuaded that there is any proper ground upon which we can interfere with that exercise of discretion.

[5] The appeal is dismissed with costs and the cross-appeal is dismissed without costs.

(signed) “J. W. Morden

(signed) “Louise Charron J.A.”

(signed) “Robert J. Sharpe J.A.”