Modern Niagara Group Inc. v. Armstrong Thomson Tubman Leasing Ltd., 2009 ONCA 877

CITATION: Modern Niagara Group Inc. v. Armstrong Thomson Tubman Leasing Ltd., 2009 ONCA 877

DATE: 20091211

DOCKET: C49221

COURT OF APPEAL FOR ONTARIO

Cronk, Lang and Juriansz JJ.A.

BETWEEN

Modern Niagara Group Inc.

Plaintiff (Defendant by Counterclaim)/ [Respondent]

and

Armstrong Thomson Tubman Leasing Ltd. and Richard Armstrong

Defendants (Plaintiffs by Counterclaim)/ [Appellants]

Charles M. Gibson, for the appellants

Paull N. Leamen and Jennifer T. Arrigo, for the respondent

Heard: December 4, 2009

On appeal from the judgment of Justice B.J. Manton of the Superior Court of Justice, dated July 8, 2008.

ENDORSEMENT

[1] The appellants challenge the accounting in the sum of $364,266.92 and the punitive damages award in the sum of $50,000 ordered against them by the trial judge.

[2] Among other matters, they assert that on a proper construction of the evidence, no amounts are owed by the appellants to the respondent, that there is no basis in this case for an award of punitive damages and that, on the case as pleaded, the individual appellant cannot be held liable for any debt found to be owing by the corporate appellant to the respondent.

[3] We do not accept these arguments. We conclude that the appeal must be dismissed.

[4] The respondent, a creditor of Omnisales Inc. (“Omnisales”), had received permission to continue an action against the appellants that had been instituted by Omnisales in May 2003 before its bankruptcy in 2004. The action sought an accounting from both of the appellants of monies received and disbursed by them on account of Omnisales, for the repayment of monies owed, for general damages in the alternative and for punitive damages.

[5] The trial judge held that both the corporate and individual appellants had an obligation to provide the respondent with a complete and reliable accounting, an obligation that they failed to discharge. He further held that the appellants made no effort to preserve the documents necessary to provide an accounting, although they were obliged to do so. Both of these critical findings were amply supported by the evidential record, including the testimony of Mr. Armstrong himself and that of the appellants’ accountant, Mr. Lowe. For this reason alone, there is no basis on which to interfere with the trial judge’s findings about the accounting.

[6] Nor are we persuaded that the trial judge erred by awarding punitive damages in this case.

[7] On this record, it was open to the trial judge to hold that the appellants stayed in possession of and continued to conduct Omnisales’ business without authority to do so, particularly after October 30, 2002 when the debt owed to the appellants had been paid in full. This occurred against the backdrop of the appellants charging Omnisales interest at rates that offended s. 347(1) of the Criminal Code. Pursuant to s. 347(2), “interest” includes the aggregate of all charges and expenses and fees. Although there is a dispute as to whether the appellants ever sought to collect the interest charges, the charges were imposed as a condition of the loans advanced. This is sufficient to support the trial judge’s holding on a civil standard that criminal rates of interest were charged. Together with other findings of the trial judge of high-handed conduct, this was more than enough to ground the award of punitive damages.

[8] Finally, the counterclaim advanced by the appellants included claims by Mr. Armstrong in his own interest as a creditor and shareholder of Omnisales. There was also evidence before the trial judge indicating that Mr. Armstrong had received funds in his personal capacity for the credit of Omnisales for which he did not account and in respect of which he failed to maintain proper records.

[9] In addition, Mr. Armstrong is the admitted principal of the corporate appellant. His own conduct was called into question in this litigation and it does not appear to have been denied that he directed the actions of the appellants, at all material times. Nor does it appear to have been argued at trial that Mr. Armstrong was immune from personal liability on the ground that it was not open to the trial judge to pierce the corporate veil of the corporate appellant on the facts of this case.

[10] The appeal is dismissed. The costs of the appeal are awarded to the respondent in the total amount of $23,669.93, inclusive of disbursements and G.S.T.

“E.A. Cronk J.A.”

“S.E. Lang J.A.”

“R.G. Juriansz J.A.”