COURT FILE NO.: 05-CV-303250 PD1

DATE: 20120809

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

MIDLAND SEAFOODS INC. Plaintiff – and – FRED GUTH, carrying on business as BEIGE VALLEY DEVELOPMENTS and SOMERSET HOMES, ENVIRONMENTAL SOLUTIONS INC., BRIAN EMMS, CANADA GROUP REALTY CORPORATION and BEIGE VALLEY DEVELOPMENTS LIMITED Defendants

Edward Lam , for the Plaintiff

W. Ross MacDougall and Megan Swan , for the Defendant, Fred Guth
Diana R. Bloom , for the non-party B. Emms and Environmental Solutions Ontario

HEARD: May 17, 2012

b. p. o’marra j.

reasons for decision

[ 1 ] Fred Guth is one of the Defendants named in a claim arising from an aborted real estate transaction. He applies for summary judgment.

issues

Is Fred Guth liable in his personal capacity?
If he is personally liable, has the Plaintiff pleaded the necessary elements of the claim against him?

[ 2 ] The first issue arises from the omission of one word in the Agreement of purchase and sale. It specified the purchaser to be “Beige Valley Developments” rather than “Beige Valley Developments Limited”. The former does not exist. The latter is a corporation owned by Mr. Guth.

the facts

[ 3 ] In early 2004, Midland Seafoods Inc. (“Midland”) retained Mr. Jack Lains, a brokerage sales representative of Canada Group Realty Corporation, to sell the property. Mr. Lains approached Mr. Guth as Mr. Lains had previously acted on behalf of Beiger Valley to facilitate purchase of another property. Mr. Lains suggested that Mr. Guth submit an offer for the property. Mr. Guth agreed and asked Mr. Lains to draft an Agreement of Purchase and Sale (the “Agreement”) for the listed price of $1.8 million on behalf of Beige Valley.

[ 4 ] The Agreement was submitted to Mr. Lai, the Managing Director of Midland. Mr. Lains recommended the offer to Mr. Lai on the basis that he had worked with Beige Valley in the past. The parties disagree on whether Mr. Lains informed Mr. Lai that Beige Valley was a corporation.

[ 5 ] On May 10, 2004, Mr. Guth and Mr. Lai signed the Agreement. The Agreement listed the buyer as “Beige Valley Developments”. The omission of the word “Limited” describing the buyer as a corporation is significant.

[ 6 ] The Agreement was accompanied by a $50,000 deposit from “Beige Valley Developments Limited”. Mr. Guth submits that his proves that Mr. Lai was aware of Beige Valley’s corporate status. However, Mr. Lai states he never saw this deposit cheque. It was made out to Canada Group Realty Corporation and held by Mr. Lains. Mr. Lains confirmed that, in his practice, he never gives a copy of the deposit cheque to the vendor.

[ 7 ] Shortly after the Agreement was signed, Mr. Guth attended the property for the purpose of conducting a physical inspection. This inspection was done pursuant to Mr. Guth’s right under the Agreement to cancel within 30 days. He was accompanied by Mr. Brian Emms, a Senior Environmental Technologist with Environmental Solutions Inc.

[ 8 ] Mr. Emms prepared a report dated June 21, 2004. He had detected the presence of petroleum hydrocarbon (oil) beneath the building on the property. He advised that further investigation of property would cost $42,000, and potential remediation would cost an estimated $350,000. Mr. Lai was provided with a copy of this report.

[ 9 ] The report was addressed to “Mr. Fred Guth” of “Somerset Homes”. Somerset Homes is an unincorporated business also owned by Mr. Guth. He uses this business name to conduct a residential home construction business. There is no mention of Beige Valley in this report.

[ 10 ] On June 25, 2004, Mr. Guth on behalf of Beige Valley waived the conditions of the agreement. This waiver stated that the buyer was “Beige Valley Developments”. A handwritten note below Mr. Guth’s signature describes the buyer as “Beige Valley Developments”. The author of this handwritten note is unknown. The parties disagree on whether Mr. Guth requested an extension of time to inspect the property prior to the submission of this waiver.

[ 11 ] The Agreement stipulated that, following a waiver of the conditions, the buyer would be required to provide an additional deposit of $100,000. This was provided by Mr. Guth through “Regal Finance Ltd.” There is no mention of Beige Valley on the deposit cheque.

[ 12 ] Following the delivery of the waiver Mr. Emms continued his inspection of the property. He issued a second report to Mr. Guth on August 10, 2004 which stated, “We have major concerns with regard to the legality of the current environmental concerns and liability of your firm taking ownership of this property.” This report was addressed to “Mr. Fred Guth” of “Somerset Homes” and forwarded to Mr. Lai.

[ 13 ] Later that summer Mr. Emms met with Mr. Lai and advised that he had to treat the presence of oil and clean the sump pump on the property. Mr. Lai retained Mr. Emms to do this work on behalf of Midland.

[ 14 ] On October 20, 2004, Mr. Emms advised Mr. Lai that further tests revealed the presence of polychlorinated biphyenyls (“PCBs”). A subsequent report was provided on November 24, 2004, describing these findings. Mr. Emms provided this report to Mr. Guth without Mr. Lai’s consent.

[ 15 ] Mr. Guth and Mr. Lai scheduled a meeting for December 15, 2004 to discuss the latest report from Mr. Emms. The parties disagree as to whether Mr. Lai refused to contribute to a solution for the remediation of the property.

[ 16 ] On December 21, 2004, Mr. Guth sent Mr. Lai a letter indicting that, in light of the presence of PCBs and other contaminants on the property, he was unable to proceed with his application for rezoning and site plan approval. As such, he requested a return of the deposits and reimbursement of costs associated with this project in exchange for a confidentiality agreement. The letter was written on “Somerset Homes” letterhead with no mention of Beige Valley.

[ 17 ] Mr. Lai replied by letter on January 5, 2005. He indicated that Midland was prepared to proceed to closing. The letter is addressed to “Somerset Homes/Beige Valley Developments”. Mr. Lai submits that this reflected his confusion at the time with respect to the actual entity he was dealing with.

[ 18 ] On April 8, 2005, counsel for Midland submitted draft documentation for the closing of the property to the solicitors for Beige Valley Developments. The draft documentation specified Beige Valley Developments as the purchaser. Of note is a signature line left blank for an officer of Beige Valley Developments who has “authority to bind the corporation ” [Emphasis added]

[ 19 ] On April 25, 2005, counsel for Midland sent another letter to counsel for Beige Valley Developments requesting completion of the documents previously submitted on April 8, 2005.

[ 20 ] In reply, on April 27, 2005, counsel for Beige Valley sent a letter indicating that the terms of the agreement had been breached by the vendor. The present use of the lands, namely industrial, could not be lawfully continued in light of the contaminants present on the property. As such, Beige Valley was unable to complete the closing. The letter specifics that the purchaser was “Beige Valley Developments Limited”. Mr. Lai deposes that this was the first time that Beige Valley was identified as a corporation to Midland.

[ 21 ] Subsequently, Midland sold the property to another purchaser for $1,450,000. This was $350,000 less than the purchase price contained in the agreement with Beige Valley.

[ 22 ] Mr. Guth submits that Mr. Lains informed Mr. Lai before the Agreement was signed that Beige Valley was a corporation. Mr. Lai denies this. Mr. Lains says he told Mr. Lai he knew Beige Valley well. He did not say he told Mr. Lai Beige Valley was a corporation.

[ 23 ] Mr. Guth signed the Agreement. There is no evidence he represented himself to Mr. Lai as an agent of a corporation prior to the letter from Mr. Guth’s lawyer on April 27, 2005.

Mr. Lains as Agent for Both Midland and Beige Valley

[ 24 ] The Applicant submits that Midland should be deemed to know Beige Valley was a corporation because its agent knew.

[ 25 ] There is no evidence Mr. Lains was expressly authorized to accept notice on Midland’s behalf.

[ 26 ] Knowledge that Beige Valley was a corporation was not necessary for the execution of Mr. Lains’ duty to facilitate the transaction.

Summary Judgment

[ 27 ] The court shall grant summary judgment if it is satisfied there is no genuine issue requiring a trial. The “full appreciation” test applies to this analysis.

Rule 20.04.

Combined Air Mechanical Services Inc. v. Fleich 2011 ONCE 764.

[ 28 ] Based on the number of significant factual disputes it is not possible for this court to have a full appreciation necessary to resolve the issue of Mr. Guth’s personal liability.

[ 29 ] This is not an appropriate case to order that oral evidence be presented. Although the number of witnesses would be small Mr. Guth’s personal liability is linked to other issues (i.e., liability of Beige Valley Developments Ltd.)

Rule 20(2.2).

[ 30 ] Since the application will be allowed only in part there will be a trial of certain other aspects of the claim. That evidence should be assessed in the context of a trial.

Sufficiency of Pleadings

[ 31 ] The claims are as follows:

breach of contract
inducing breach of contract
breach of duty
misrepresentation
unlawful interference with economic relations

[ 32 ] The Applicant focused his submission on two of these claims, namely intentional interference with contractual relations and inducing breach of contract.

(i) Intentional Interference with Contractual Relations

[ 33 ] The essential elements of this tort are as follows:

(a) Wrongful interference by the defendant with the actions of a third party in which the plaintiff has an economic interest.

(b) An intention by the defendant to cause loss to the plaintiff.

Correia v. Canac Kitchens (2008), 2008 ONCA 506 , 91 O.R. (3d) 353 (Ont. C.A.) at para. 99 and 100 .

(c) The plaintiff must suffer loss and there must he a causal connection between the unlawful means and the loss suffered.

Alleslev-Krofchah v. Valcom Ltd. , 2010 ONCA 557 .

[ 34 ] To qualify as “unlawful means” or “wrongful interference” the defendant’s actions must satisfy the following criteria:

(a) defendant’s action must be directed at a third party

(b) as a result of the defendant’s actions the third party caused harm to the plaintiff

(d) the defendant’s actions are not actionable directly by the plaintiff

[ 35 ] The third party alleged in this case is Beige Valley Developments Ltd. The Plaintiff would have to prove that Mr. Guth committed a tort against his own company and that the company could sue him for.

[ 36 ] There is no evidence that Mr. Guth took any action against Beige Valley that could be actionable by Beige Valley.

(ii) Inducing Breach of Contract

[ 37 ] The essential elements of this tort are the following:

(a) The defendant had knowledge of the contract between the plaintiff and the third party.

(b) the defendant’s conduct was intended to cause the third party to breach the contract

(d) the plaintiff suffered damage as a result of the breach.

[ 38 ] This claim assumes that the Agreement was between Midland and Beige Valley and not Mr. Guth personally. This contradicts Midland’s vigorous attempts to prove Mr. Guth entered the Agreement himself and not on behalf of Beige Valley.

[ 39 ] Mr. Guth is the sole officer of Beige Valley Developments Ltd. There is no evidence that any actions by Mr. Guth were tortuous or exhibited a separate identity or interest from that of the company.

result

[ 40 ] Application grant in part. Claims against Mr. Guth personally for unlawful interference with economic relations and inducing breach of contract are dismissed.

[ 41 ] The personal liability of Mr. Guth for the remaining claims of breach of contract, breach of duty and misrepresentation are reserved for a trial.

[ 42 ] If the parties cannot agree on costs I will consider brief written submissions (no more than 3 pages) based on mixed success to be sent to Judicial Administration with 21 days of the release of these reasons.

B. P. O’Marra J.

Released: August 9, 2012

COURT FILE NO.: 05-CV-303250 PD1
DATE: 20120809

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

REASONS FOR DECISION

B. P. O’Marra J.

Released: August 9, 2012

Midland Seafoods Inc. v. Guth et al., 2012 ONSC 4368

Case Summary