7120761 Canada Inc. v. AGA Global Investments Inc., 2023 ONCA 286

COURT OF APPEAL FOR ONTARIO

DATE: 20230425 DOCKET: C69483

Doherty, Zarnett and Sossin JJ.A.

Parties and Counsel

BETWEEN

7120761 Canada Inc., doing business as Safe and Sound Real Estate Investment Group (SASREIG), 8795436 Canada Inc., Daniel St-Jean and Laurel R. Simmons Plaintiffs (Respondents/Appellants by cross-appeal)

and

AGA Global Investments Inc. and Alli Vaidya Defendants (Appellants/Respondents by cross-appeal)

Counsel: Paul Fauteux, for the Plaintiffs (Respondents/Appellants by cross-appeal) Peter Smiley, for the Defendants (Appellants/Respondents by cross-appeal)

Heard and released orally: April 21, 2023

On appeal from the judgment of Justice M.J. Donohue of the Superior Court of Justice, dated April 19, 2021.

Reasons for Decision

[1] The cross-appeal raises one issue – did the trial judge err in declining to pierce the corporate veil, so as to render the personal defendant liable for the breaches of contract committed by his one-man corporation?

[2] Lifting the corporate veil to impose liability on the individual in control of a corporation is the exception. Context is also important. We are concerned in this case with an agreement made in a purely commercial setting by parties with an ongoing relationship. The plaintiffs (appellants by cross-appeal) clearly appreciated that the agreements were with the corporation and not the individual controlling the corporation.

[3] The trial judge identified the test to be used when determining whether to pierce the corporate veil. She said, at paras. 240-41:

[240] I do not consider that the uncooperative behaviour of Mr. Vaidya on behalf of AGA rises to the level of fraud nor does it yield a result ‘too flagrantly opposed to justice’ as set in the Parkland decision.

[241] There is no evidence that the corporation here was used as a shell for improper activity. As discussed in Yaiguaje v. Chevron Corporation, 2018 ONCA 472, ‘corporate separateness is the rule’ unless it is abused to the point that the corporation is not a truly separate corporation and is being used to facilitate fraudulent or improper conduct.

[4] In our view, it was open to the trial judge to find that the breaches of contract that occurred when the corporate defendant failed to cooperate in selling the properties did not rise to the level of “improper conduct”, even though characterized by the trial judge as “unreasonable” and “capricious”. Were it otherwise, it would seem that virtually every breach of contract by a one-person company could give rise to personal liability.

[5] The cross-appeal is dismissed.

[6] Costs to the respondent on the cross-appeal in the amount of $5,000, inclusive of taxes and disbursements.

“Doherty J.A.”

“B. Zarnett J.A.”

“L. Sossin J.A.”