SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-12-466087

DATE: 20130419

RE: John Reeves, Plaintiff (Respondent)

AND:

Warren Eddy, Conversion Internet Marketing Services, Conversion Marketing Communication Inc. and KYP Canada Inc., Defendants (Moving Parties)

BEFORE: Lederman J.

COUNSEL:
David E. Greenwood, for the Plaintiff (Respondent)

Lauren Posloski, for the Defendants (Moving Parties)

HEARD: April 16, 2013

ENDORSEMENT

[1] In this action, the plaintiff claims $700,000.00 in damages for breach of contract, wrongful dismissal, misrepresentation, quantum meruit and unjust enrichment. The plaintiff does not distinguish between the defendants with respect to his damages claim.

[2] The defendants move to strike portions of the plaintiff’s Fresh as Amended Statement of Claim (the “Claim”) on the basis that they disclose no reasonable cause of action. Specifically, they submit that:

a. the Claim fails to plead material facts necessary to support any of the causes of action asserted against the individual defendant, Warren Eddy (“Eddy”);

b. the Claim fails to adequately plead that the defendant, Conversion Marketing Communication Inc. (“Conversion”) and the defendant, KYP Canada Inc. (“KYP”) were common employers of the plaintiff; and

c. the Claim fails to disclose any reasonable cause of action for unjust enrichment as against the corporate defendants.

Personal Liability of Eddy

[3] It is well settled law that owners and management of a corporation can only be held personally liable for tortious conduct or for misconduct independent from that of the corporation. To plead personal liability against an officer or director:

“…it is not enough to say that there is independent misconduct, [the plaintiff] must actually plead material facts that show independent misconduct. The pleading must address specifically the cause of action asserted against the personal defendant and why he or she is being sued separately from the corporation.”

(EnerWorks Inc. v. Glenbarra Energy Solutions Inc., 2012 ONSC 414 at para. 90)

[4] Although paragraph 17 of the Claim refers to Eddy making a commitment to pay the plaintiff a salary of $250,000.00 retroactive to the date that the plaintiff started with KYP, this is insufficient to demonstrate that Eddy is personally liable for the alleged employment contract instead of the corporate defendants. Moreover, the statements made by Eddy as to his commitment or promise to pay do not establish any contractual terms or breach of contract independent of the contractual breach asserted against the corporate defendants. The claim is deficient in pleading that Eddy’s statements and conduct are distinct from their being the statements or conduct or acts of the corporate defendants.

[5] The plaintiff refers to paragraph 15 of the Claim which states that he was told by Mr. Geralde that his wages could not be paid at that time because there were no funds available in the corporations and submits that one should infer that the commitment made by Eddy as alleged in paragraph 17 was understood to be a personal responsibility rather than that of the corporations. Such an inference, however, is not clear because in paragraph 15 of the Claim, the plaintiff states that he “was assured that the business’ cash position was improving with the acquisition of new clients and as money came in he would be paid the amounts owing” by the corporate defendants.

[6] The Claim as it stands does not reasonably support any of the causes of action asserted as against Eddy personally as being independent from the causes of action that the plaintiff is asserting as against the corporate defendants. For that reason, the claims against Eddy must be struck and the action dismissed as against him.

Common Employer

[7] The defendants submit that the Claim fails to plead the necessary grounds upon which Conversion and KYP may be treated as common employers. In particular, counsel for the defendants submits that the Claim does not establish that Conversion and KYP were related through a corporate structure of such complexity that limiting the plaintiff’s claim to a single entity would be unfair; and/or that Conversion and KYP were engaged in highly integrated and effectively seamless business enterprise.

[8] In Downtown Eatery (1993) Ltd. v. Ontario, 2001 8538 (ON CA), 2001 CarswellOnt 1680 (Ont. C.A.), the Ontario Court of Appeal at para. 30 pointed out that whether the common employer doctrine applies depends on whether there is a sufficient degree of relationship between the two entities. It is a contextual determination and is very case specific. It turns “on the details of such relationship, including such factors as individual share holdings, corporate share holdings, and interlocking directorships. The essence of that relationship will be the element of common control”.

[9] In this case, the Claim asserts various factors to demonstrate a common employer situation including that (1) Eddy instructed clients of KYP to make payments to Conversion rather than KYP; (2) KYP employees received their wages from Conversion; (3) Eddy treated KYP as a “brand name” within the Conversion business (para. 24).

[10] Sufficient facts are pleaded to assert that the two corporations operated as integrated businesses in relation to its clients and employees. Accordingly, there is no basis to strike out the allegation that Conversion and KYP be treated as common employers.

Unjust Enrichment

[11] The defendants submit that the Claim for unjust enrichment fails to plead any tangible benefit gain by any of the defendants as a result of the plaintiff’s alleged deprivation.

[12] In Peel (Regional Municipality) v. Ontario, 1992 21 (SCC), [1992] 3 SCR 762, the Supreme Court of Canada stated at para. 45 that the restoration of a benefit retained without juristic reason lies at the heart of the doctrine of unjust enrichment. The Court stated:

“The word “restitution” implies that something has been given to someone which must be returned or the value of which must be restored by the recipient. The word “enrichment” similarly connotes a tangible benefit. It follows that without a benefit which has “enriched” the defendant and which can be restored to the donor in specie or by money, no recovery lies for unjust enrichment”.

[13] With respect to Conversion and KYP, the plaintiff pleads at para. 22(d) of the Claim that they received “the benefit of goods and services (the business expenses)” which were paid for by the plaintiff on behalf of KYP. The pleading fails to show how payment of business expenses led to or resulted in a tangible benefit as described by the Supreme Court of Canada.

[14] Accordingly, the claim for unjust enrichment should be struck out.

Conclusion

[15] An Order is to go in accordance with these Reasons. Based on this decision, I am hopeful that counsel will be able to resolve the question of costs. If they are unable to do so, they may make written submissions within 30 days.

Lederman J.

Date: April 19, 2013