Court Information

Ontario Court of Justice

Date: 2019-10-30

Court File No.: 2860 999 18 0432 00

Parties

Between:

Ontario (Ministry of Labour)

— AND —

Proformance Group Insurance Solutions Inc.

Judicial Officer and Counsel

Before: Justice of the Peace Kevin J.A. Hunter

Heard on: May 28, 2019

Reasons for Judgment released on: October 30, 2019

Counsel:

• H. Turner, for the Crown
• M. Gobin, for the Defendant

Judgment

Charge

[1] Proformance Group Insurance Solutions Inc. (Proformance) stands charged that on November 20, 2016, the corporate defendant failed to comply with an Order to Pay (Order), contrary to s. 132 of Employment Standards Act, 2000, S.O. 2000, c. 41.

[2] The charging section reads:

132 A person who contravenes this Act or the regulations or fails to comply with an order, direction or other requirement under this Act or the regulations is guilty of an offence…(penalty provisions omitted)

[3] Proformance pleaded not guilty and a trial occurred before me on May 28, 2019. The Crown's case was presented through a statement of agreed facts.

Agreed Facts

[4] Proformance is currently an active Ontario corporation, and was so at the time of the charge. In mid-2016, a former employee filed an Employment Standards complaint against the corporation for unpaid wages. On October 3, 2016, an Employment Standards officer properly issued Proformance an Order directing the defendant to pay $4,867.72 to cover the employee's wages. As of November 20, 2016, Proformance had not complied with the Order, resulting in the charge before the court. The defendant neither appealed nor sought a judicial review of the Order.

[5] On these agreed facts, I find that the Crown has established a prima facie case against Proformance for failing to comply with the Order. This, however, does not end the matter.

Evidence of Tammy Norn – Director of Proformance

[6] For the defence, I heard credible and uncontested testimony from the director of Proformance, Tammy Norn. Ms. Norn testified that Proformance, an independent insurance adjusting firm, was profitable until approximately 2012. It was then that legislative changes affected the corporation's economic viability. When Proformance realized a net loss in 2013, Ms. Norn began personally investing in the corporation.

[7] Ultimately, Proformance notified its employees that the business would close. On April 1, 2016, on behalf of the corporation, Ms. Norn personally paid wages owed to the last two employees. These employees were not the pursuers of the Employment Standards complaint.

[8] On May 27, 2016, all remaining corporate assets were sold and four days later, Proformance ceased operations. At the close of business, the corporation was in debt to Ms. Norn for just under $350,000.

[9] Following her involvement with Proformance, Ms. Norn found part-time employment in the insurance industry and eventually obtained full-time employment with a government agency.

[10] In the fall of 2016, Ms. Norn became aware of an Employment Standards complaint, alleging that Proformance had not paid severance to a former employee. Ms. Norn contacted the investigating Employment Standards officer to discuss the matter. I did not hear the result of this conversation, but shortly thereafter, on October 3, 2016, the Order was issued to Proformance.

[11] The defendant did not appeal the Order because, to do so, the full amount of the Order had to be paid into trust, pending the appeal. Proformance did not have the money to satisfy this requirement. Ms. Norn sent a letter to the Ministry of Finance advising that Proformance didn't have the money to initiate an appeal and requested, unsuccessfully, that the Order be withdrawn. Ms. Norn was not aware of any other options to have the Order reviewed.

[12] Ms. Norn testified that Proformance did not comply with the Order for two reasons. First, the Order was issued after operations had ceased in May of 2016, at which time the Order was not a known liability. Second, Proformance had no assets to satisfy the terms of the Order.

The Defence

[13] It is the defendant's position that because Proformance lacked financial resources, compliance with the Order was impossible. Counsel for Proformance submitted that I should consider "impossibility" as either part of a due diligence analysis or as a distinct defence. I will reconcile this dichotomy before engaging in any further analysis.

[14] Whereas, the defence of "impossibility of performance" is well recognized in the law of contract, it is my view that for strict liability, regulatory matters, of which this is one, the concept of impossibility is properly considered within the due diligence defence.

[15] A defendant claiming due diligence seeks to avoid liability by demonstrating, on a balance of probabilities, that it took all reasonable precautions to avoid committing the offence. Whether the defendant claims that it was unable to avoid committing the offence because compliance was too difficult, impractical, or even impossible, the test remains the same. The defendant must demonstrate that it took all reasonable steps to avoid committing the offence but could not, for whatever reason.

[16] Proformance concedes that no reasonable steps were taken to comply with the Order. Instead, the defence argues that due diligence is still available because the corporation was impecunious. The corporation was in debt for nearly $350,000, had no assets, and expected no further income. The argument continues that it was impossible to comply with the Order because Proformance lacked the resources to do so.

[17] In support of this position, the defence relies on the Ontario Court of Appeal's decision in Regina v. Consolidated Maybrun Mines Limited et al. For the Court, Laskin J.A. wrote:

The appellants faced charges of non-compliance with the Director's order. To mount a due diligence defence they were bound to accept the validity of the order and show that they attempted to comply with it. They might have established due diligence if, for example, they demonstrated reasonable, though unsuccessful efforts to comply, or an inability to comply because of weather conditions or lack of resources. But they cannot show due diligence by claiming that the order is unreasonable and then refusing to comply with it. That amounts to another form of collateral attack under the guise of due diligence.

[18] In my view, in order to establish a lack of resources, a defendant must do more than make a claim of debt or lack of assets. The defendant must establish that reasonable, though unsuccessful, efforts were made to obtain funding before the corporation can successfully claim that it lacked the financial resources to avoid committing the offence. I find support for this position from the decision of Grayker Corp. v. Ontario where L.K. Ferrier J. stated at para. 16:

Impecuniosity is something more than having no assets. The plaintiff must establish that it and its shareholders cannot sell assets, borrow or otherwise raise the funds to post the security. That is, as held in Kurzela v. 526442 Ontario Ltd., the claimant must show that money may not be available to it from its shareholders and associates.

[19] I heard no evidence that the corporation sought to acquire financial resources from any source, including its director. While Ms. Norn is certainly under no obligation to indemnify the company, she had previously loaned money to the corporation and even paid the wages of the last two employees. I heard no evidence of any attempts by the defendant to revisit this arrangement or to pursue any form of external financial support in order to attempt to comply with the Order.

[20] The defendant submitted that I can take judicial notice that efforts to obtain financing would have been fruitless, since Proformance was not a credit-worthy entity. While the court can take judicial notice of notorious facts that cannot reasonably be doubted, in my view, the lending practices of financial institutions or other private entities do not fall within this category. Some evidence is required to support this submission.

[21] Regarding due diligence, Proformance finds itself similarly situated to the defendant in Maybrun Mines, where Laskin J.A. wrote:

The appellants did not say to the Director "we tried our best to comply with the order." Instead they said: "we choose to ignore your order." Such a response hardly speaks of due diligence.

[22] Proformance essentially ignored the direction of the Order and took no reasonable steps to avoid failing to comply with it. As a result, I find that Proformance has not met its onus, on a balance of probabilities, in establishing that the corporation was duly diligent in attempting to avoid failing to comply with the Order. Consequently, I find that the prosecution has proven the charge beyond a reasonable doubt, and I find Proformance guilty of the offence.

Released: October 30, 2019

Signed: Justice of the Peace Kevin J.A. Hunter