CITATION: Channa v. Cobisa, et al, 2013 ONSC 7399

COURT FILE NO.: 12-56059

DATE: 2013/DEC/02

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Geeta Channa

Plaintiff

• and -

Julian Cobisa, Terry Assang, Michael Gervais, Jean-Claude Martin, Adrian Mihai, Francesco Gualtieri, Axia Property Management Inc., Carleton Condominium Corporation 429, Nancy Houle and Nelligan, O’Brien Payne LLP

Defendants

COUNSEL:

Diane Condo, for the Plaintiff

Anita Dutt, for the Defendants

HEARD: November 7, 2013 (Ottawa)

RULING ON MOTION

Quigley, J.

[1] This is a motion by the Defendants, Julian Cobisa, Terry Assang, Michael Gervais, Jean-Claude Martin, Adrian Mihai, Francesco Gualtieri (hereinafter collectively referred to as “the Board Member Defendants”), Axia Property Management Inc. (“Axia”), and Carleton Condominium Corporation No. 429 (“CCC 429”), for the following relief:

(i) An order to strike paragraphs: 20, 21, 22, 25, 27 and 32 of the Statement of Claim pursuant to rules 25.11(b) and 25.11(c) without leave to amend, on the basis that the issues raised in the said paragraphs have been judicially decided by a judge of the Ontario Superior Court of Justice and/or are an attempt to re-litigate issues that have already been litigated and determined. These paragraphs are scandalous, frivolous or vexatious or are an abuse of the process of the court;

(ii) An order that the balance of the allegations against the Board Member Defendants, specifically paragraphs: 10, 11, 12, 13, 15, 16, 29 and 30, with be struck pursuant to rules 21.01(1)(b) and 25.06 on the basis that they fail to disclose a reasonable cause of action against the Board Member Defendants and fail to plead material facts and elements in support of such causes of action;

(iii) An order extending the time to serve a Statement of Defence to allow the remaining defendants to issue a demand for particulars and until such time as the Plaintiff provides the particulars requested;

(iv) An order for costs of the motion on a substantial indemnity basis, payable in any event of the cause, to Axia, CCC 429 and the Board Member Defendants, fixed and forthwith.

Background

[2] The Plaintiff, Geeta Channa (hereinafter “the Plaintiff”) was at all material times, the owner of a business unit within the CCC 429 building complex, municipally located at: 12-2000, Unit #11, Thurston Drive, Ottawa, Ontario (hereinafter “the unit”).

[3] On November 22, 2012, the Plaintiff issued a Statement of Claim, bearing court file number 12-56059. Attached as Schedule “A”, to this Notice of Motion is a true copy of the Statement of Claim.

[4] The Board Member Defendants were at various times elected Board Members of CCC 429.

[5] In the Statement of Claim, the Plaintiff alleges that the Board Member Defendants, Axia and CCC 429 failed to properly exercise their duties regarding the Plaintiff’s request for installation of the new HVAC system; failed to previously advise the Plaintiff that the main water valve for the entire condominium unit was located in the Plaintiff’s unit; improperly colluded with the other Defendants to register a lien against the unit and to issue a notice of sale under lien of the unit; failed to consent to proceed by way of mediation and improperly authorized the Plaintiff’s satellite installer to place a satellite dish onto the roof of the unit.

[6] On October 3, 2009, the Plaintiff brought an Application to the Ontario Superior Court of Justice, under the court file number 09-46682, wherein CCC 429 was the Respondent.

[7] The Plaintiff sought the following relief:

a) An Order vacating a lien registered by the Corporation;

b) A permanent injunction restraining the Corporation from exercising its power of sale rights;

c) A permanent injunction restraining the Corporation from proceeding in any way pursuant to the Notice of Sale Under Lien;

d) An accounting of monies owed under the lien; and

e) Costs on a substantial indemnity basis plus GST.

[8] On July 30, 2010, CCC 429 brought an application to the Ontario Superior Court of Justice, under the court file number 10-49099, wherein the Plaintiff was the Respondent.

[9] CCC 429 sought the following relief:

i) An order that Ms. Channa pay to the Corporation all costs incurred by the Corporation in relation to:

a) Charges incurred to gain access to Ms. Channa’s unit to turn on the main water supply to the remainder of the building;

b) Charges incurred in relation to unauthorized modifications to the common elements undertaken by Ms. Channa;

ii) ...

iii) Costs on a substantial indemnity basis plus GST.

[10] Applications were heard together on November 10, 2011 before The Honourable Madam Justice Polowin.

[11] The Honourable Madam Justice Polowin rendered Reasons for Judgment on December 14, 2011. Attached as Schedule “B”, to this Notice of Motion, is a true copy of the Reasons for Judgment, dated December 14, 2011.

[12] Justice Polowin made the following rulings:

1. The Lien registered on title to the unit on August 29, 2008 was validly registered. Ms. Channa has paid $604.23 set out therein. However, she is still required to pay the interest and the legal costs of $550. It remains due and owing.

2. The Notice of Sale Under Lien dated September 17, 2009 is invalid. The Corporation is entitled to proceed with the power of sale proceedings pursuant to s. 85 of the Act should Ms. Channa fail to make full payment of the amount set out in (1) above.

3. The Corporation’s claim with respect to all costs including legal costs and any other expenses incurred by the Corporation related to the water shut off in Ms. Channa’s unit and related to the unauthorized alteration or modification of the roof is denied. These claims are statute barred.

4. ....

[13] Justice Polowin further determined all costs incurred by CCC 429 regarding entry into the Plaintiff’s unit to access the water shut off valve and in relation to the unauthorized modification of the roof (satellite issue) were owed by the Plaintiff and could be added to the common expenses for the unit, however CCC 429 was not awarded these costs to due expiry of the limitation period for recovery.

[14] Justice Polowin determined that the lien was valid but the Notice of Sale Under Lien was invalid in its present form. She further held, that if the Plaintiff failed to pay the amount owed, the Notice of Sale Under Lien could be re-issued in the proper form.

[15] It was also determined by Justice Polowin that there was no requirement for Board Member Defendants/CCC 429 to participate in mediation with the Plaintiff, prior to commencing or at any time during, the Application.

[16] The aforementioned Defendants allege that paragraphs 20, 21, 22, 25, 27 and 32 of the Statement of Claim attempt to re-litigate issues that have already been heard and decided by a court of competent jurisdiction. The Defendants further allege that any attempt to re-litigate such issues is scandalous, frivolous or vexatious or otherwise an abuse of the process of the court.

[17] The Plaintiff, in answer to this motion by the Defendants, submits that Rule 21.01(1), under which the Defendants are moving, that the following principles apply - #9(a) to (g)

(a) No evidence is admissible. The motion must be determined on the adequacy of the impugned claim;

(b) The court must accept the facts pleaded in the claim as proven;

(c) The court must read the claim generously making allowances for drafting deficiencies;

(d) The potential for lengthy, complex or novel issues or the potential for a strong and persuasive defence are not factors to be considered at this stage;

(e) It is not the function of the court at this stage to decide whether a claim has merit and will succeed at trial;

(f) Such a motion can only succeed if it is “plain and obvious” that the claim discloses no cause of action; and

(g) If the claim has some chance of success, it should proceed.

[18] The Plaintiff further states that her allegations in the Statement of Claim are sufficient to disclose to the Defendants the nature and particulars of her claim against them.

[19] The Plaintiff further states that if the court was to accept the facts pleaded in the impugned paragraphs as proven, it is not plain and obvious that the Plaintiff has no chance of success. To the contrary, if such facts in fact are proven, the Plaintiff would be successful and therefore the Defendants’ motion must fail under Rule 21.01(1)(b).

[20] The Plaintiff further submits that should the pleading be deficient in any way that she be allowed to amend the Statement of Claim to conform to the Rules of Civil Procedure.

[21] The Defendants are also moving under Rule 25.11 of the Rules of Civil Procedure.

[22] Rule 25.11 of the Rules of Civil Procedure provides that:

25.11 The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,

(b) is scandalous, frivolous or vexatious; or

(c) is an abuse of the process of the court.

[23] The Plaintiff submits that the following legal principles apply to a motion brought under Rule 25.11:

(a) The test under Rule 25.11 is the same or is higher than the test under Rule 21.01(1)(b);

(b) Motions under Rule 25.11 should only be granted in the clearest of cases;

(c) The court must consider whether the pleading offends the rule and is unfair, but also whether it is relevant and necessary;

(d) Cases that are doubtful in fact or in law should not be foreclosed at this stage;

(e) A pleading that raises an issue that can have an effect in the determination of the rights of the parties can be pleaded;

(f) When punitive damages are pleaded, the alleged Defendant’s misconduct, planning, intent and motive are relevant facts to be pleaded.

Akers at al. v. Dearden and Stanton Ltd., 2004 CanLII 27036 (ON SC), paras.3,5,11

Gardner v. the Toronto Police Services Board et al, 2006, CanLII 28101 (ON SC), para. 10; 2007 ONCA 489

Analysis and Decision

[24] This motion deals with two separate and distinct issues:

(i) Have the issues raised in the Plaintiff’s Statement of Claim already been decided by a court of competent jurisdiction, i.e. the decision of Justice Polowin referred to earlier in this decision. If the issues have been tried by her, are the principles of res judicata applicable?

(ii) Has the Plaintiff established that the Board Member Defendants in this case have a personal liability beyond the scope of their duties as directors of Carleton Condominium Corporation 429?

[25] With respect to issue (i), counsel for the Plaintiff submits that the principle of res judicata does not apply in this case. In support of her position, counsel referred the court to a 2013 decision of the Supreme Court of Canada, Penner v Niagara (Regional Police Services Board), 2013 SCC 19.

[26] Penner, supra, involved a civil claim made by the Plaintiff against two officers alleging unlawful arrest and unnecessary use of force. A prior complaint was made by the Plaintiff and adjudicated in an administrative tribunal under the Police Services Act. The officers were exonerated by that tribunal. The Supreme Court of Canada ruled that the Plaintiff’s claim for civil damages could proceed and that the principle of res judicata did not apply.

[27] The aforementioned case is not helpful to this court in the determination of the issues before me. The aforementioned tribunal in Penner, supra, did not have the issues before it nor the remedies available to it that were available to Justice Polowin in the case at bar.

[28] The majority in Penner, supra, at paragraphs 28 and 29, states as follows:

[28] Relitigation of an issue wastes resources, makes it risky for parties to rely on the results of their prior litigation, unfairly exposes parties to additional costs, raises the spectre of inconsistent adjudicative determinations and, where the initial decision maker is in the administrative law field, may undermine the legislature’s intent in setting up the administrative scheme. For these reasons, the law has adopted a number of doctrines to limit relitigation.

[29] The one relevant on this appeal is the doctrine of issue estoppel. It balances judicial finality and economy and other considerations of fairness to the parties. It holds that a party may not relitigate an issue that was finally decided in prior judicial proceedings between the same parties or those who stand in their place. However, even if these elements are present, the court retains discretion to not apply issue estoppel when its application would work an injustice.

[29] The Court in Penner, supra, further stated in paragraph 31 in quoting from its own decision of Danyluk, “The objective is to ensure that the operation of issue estoppel promotes the orderly administration of justice but not at the cost of real injustice in the particular case.”

[30] Therefore, with respect to the issue of estoppel, I find as a fact that the issues before this court are the same issues that were previously litigated before Polowin J or ones that should have been litigated before her and, therefore, conclude that the issue of estoppels should be applied in this case.

[31] I reject submissions by counsel for the Plaintiff that the mere fact that Justice Polowin’s finding that the Defendants’ power of sale was defective somehow gives rise to a new cause of action.

[32] With respect to the second issue before this court of whether the personal Defendants were acting in their personal capacity but only as directors, I find that the Plaintiff has failed to establish that the individual Defendant directors were acting in their personal capacity in any of the actions undertaken by them.

[33] A condominium board is presumed to be operating in good faith and in furtherance of its statutory duties.

York Condominium Corp. No. 382 v. Dvorchik, [1997] O.J. No. 378 (Ont. C.A.) at para. 5.

[34] Pursuant to subsection 37(1) of the Condominium Act, 1998 (the “Act”) directors and officers of corporations have a statutory obligation to carry out their duties (i) honestly and in good faith; and (ii) with the care, diligence and skill that a reasonably prudent person would in the circumstances.

[35] These same statutory duties also apply to directors of other types of corporations in Ontario, further to section 134 of the Ontario Business Corporations Act as well as section 122 of the Canada Business Corporations Act.

[36] It is well established that the directing minds of corporations cannot be held personally liable for the actions of the corporations that they control and direct, unless there is some conduct on the part of those directing minds that is either tortuous in itself, or they exhibit a separate identity of interest from that of the corporation. It is incumbent on the Plaintiff to sufficiently identify the alleged specific tortuous acts or acts that exhibit a separate identity or interest.

Normart Management Limited v. West Hill Redevelopment Co. (1998) 1998 CanLII 2447 (ON CA), 37 OR (3d) 97.

Soil North America Inc. v. D’Elia, 2011 ONSC 5214 at para. 29

[37] As the Ontario Court of Appeal explained in ScotiaMcLeod Inc. v. Peoples Jewellers Ltd., (1996) 1995 CanLII 1301 (ON CA), 26 OR (3d) 481:

Considering that a corporation is an inanimate piece of legal machinery

incapable of thought or action, the court can only determine its legal

liability by assessing the conduct of those who caused the company to

act in the way that it did. This does not mean, however, that if the

actions of the directing minds are found wanting, that personal liability

will flow through the corporation to those who caused it to act as it did.

To hold the directors of Peoples personally liable, there must be some

activity on their part that takes them out of the role of directing minds of

the corporation. In this case, there are no such allegations.

[38] This reasoning was applied by the Alberta Court of Queen’s Bench in the context of a condominium corporation. The presiding Master denied a condominium owner leave to add condominium corporation board members as Defendants. The Plaintiff alleged that the board members knew of the problems, but failed to take any action.

Rushton v. Condominium Plan No. 8820668, [1997] A.J. No. 452.

[39] ..The master noted that a board is not something independent from the condominium corporation. The condominium corporation’s powers and duties are exercised by the board:

.. [t]he board’s acts are not the acts of its members. The board’s acts are the acts

of the condominium corporation…The Board of managers of a condominium

corporation is roughly the equivalent to a board of directors for a corporation.

The identification theory is a concept that the directors merge with the

corporation for the purposes of giving the corporation a directing mind and will.

Paras. 31-32

[40] The Plaintiff argued that if the condominium corporation was held liable for the action, then each unit holder would have to pay an additional levy. The Master noted while that may be, it was not a reason to add the board members as Defendants.

[41] Like in Rushton, there are no allegations that are sufficient to cause the members to shed their identity with the condominium corporation and expose themselves to personal liability. The role of the board was limited to being the directing mind of the condominium corporation. As Master Fundunk stated:

If board members can be personally liable in situations such as this no

one would agree to be a board member….where the board members

have not shed their identity with the condominium corporation there

cannot be a personal liability by them for the condominium corporations

failures, either misfeasance or nonfeasance.

[42] For the aforementioned reasons, I find that the Plaintiff has failed to plead facts which would give rise to any personal liability of the board members. Specifically, the Plaintiff has failed to plead facts that could establish that the members’ acts (i) are themselves tortuous, or (ii) exhibit a separate identity or interest from that of the company so as to make the act or conduct complained of their own.

[43] Therefore, an Order shall go striking paragraphs 20, 21, 22, 25, 27 and 32 of the Plaintiff’s Statement of Claim.

[44] A further Order shall go striking allegations against the Board Member Defendants in paragraphs 10, 11, 12, 13, 15, 16, 29 and 30 of the Plaintiff’s Statement of Claim.

[45] If the parties cannot settle the issue of costs, two typed pages of submissions may be made to me at my Brockville Chambers on or before January 31st, 2014.

MR. JUSTICE MICHAEL J. QUIGLEY

Released: December 2, 2013

CITATION: Channa v. Cobisa, et al, 2013 ONSC 7399

COURT FILE NO.: 12-56059

DATE: December 2, 2013

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Geeta Channa

Plaintiff

• and –

Julian Cobisa, Terry Assang, Michael Gervais, Jean-Claude Martin, Adrian Mihai, Francesco Gualtieri, Axia Property Management Inc., Carleton Condominium Corporation 429, Nancy Houle and Nelligan, O’Brien Payne LLP

Defendants

RULING ON MOTION

Quigley, J.

Released: December 2, 2013