COURT FILE NO.: CV-11-3137-00

DATE: 2015 08 12

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

MALCOLM EVANS and CONSTANCE EVANS

L. Murray Eades, for the Plaintiffs

Plaintiffs

• and -

CANUSA AUTOMOTIVE WAREHOUSING INC., ROBERT BENJAMIN JONES, IVOR PAUL JONES, STEPHEN MALCOLM DRAKE, BARRY MITCHELL, DOUGLAS F. HANNAN, DEREK ARTHUR and 2209334 ONTARIO INC. DBA APD ALL PARTS DELIVERY

John H. McNair, for All Defendants except Derek Arthur

Mana Khami, for the Defendant Derek Arthur

Defendants

HEARD: June 17, 2015

REASONS FOR DECISION

EMERY J

[1] The defendants bring this motion for summary judgment to dismiss the action the plaintiffs Malcolm Evans and Constance Evans have framed in negligence against each of them. The motion evokes first principles of corporate law and the law of negligence as much as it relies upon Rule 20 and the guidance provided by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7 for the determination of motions for summary judgment.

[2] Malcolm Evans is a director and shareholder of Professional Alliances Inc. (“Professional”), which is not a party to this action. Professional commenced a separate action against the same defendants approximately two years before this action was brought. The two actions are based on the same set of facts.

[3] Constance Evans is married to Malcolm Evans and is not a director or shareholder of Professional.

[4] The defendants base this motion on three grounds:

1. the rule in Foss v. Harbottle, which states that a shareholder of a corporation does not have a personal cause of action for a wrong done to the corporation;

2. Canusa Automotive Warehousing Inc. (Canusa) and the other defendants did not owe a duty of care to either plaintiff; and,

3. the plaintiffs seek pure economic damages in circumstances not recognized at law.

[5] For the reasons that follow, the motion for summary judgment is granted and the action is dismissed.

Background

[6] Canusa is a Canadian company located in Dorchester, near London, Ontario. At all material times, Canusa operated as a warehouse distributer of automotive parts to customers throughout Ontario.

[7] In or around September 1999, Canusa entered into a transportation contract with Professional (“the agreement”) for Professional to provide transportation and delivery services to Canusa. The agreement expressly provided in paragraph 6 that the agreement would continue for a period of five years from its commencement date unless renewed in accordance with the provisions of section 7, or unless terminated earlier under the agreement.

[8] Section 7 of the agreement states that:

7. Renewal

Provided however that the parties agree that this Agreement may be extended or renewed following expiry of the Term, upon such terms and conditions as the parties may determine. Providing however that should either party not intend to extend the Agreement, then it shall at least one year prior to the expiry of the Term, have given written notice to the other party to such effect. The terms and conditions of any renewal term shall be negotiated in good faith acting reasonably having regard to the fees payable for similar services to other carriers.

[9] It is common ground that the agreement was not renewed in writing before the five year term expired as Canusa and Professional could not agree on terms and conditions. It is also common ground that neither party gave notice to the other party at least one year prior to the expiry of the five year term that it did not intend to extend the agreement.

[10] Professional used drivers who were independent contractors to provide the transportation of goods from Canusa’s warehouses to its retail and affiliate stores, as well as to its customers. Those drivers operated under month-to-month contracts with Professional to provide their services.

[11] In February 2008, Canusa cancelled various delivery routes that Professional had been servicing, on 30 days’ notice to Professional. Canusa states that it cancelled these routes as the costs for using Professional on these routes were excessive. Additional routes were cancelled in January 2009. Canusa has given evidence that Professional did not object to the cancellation of these routes on either occasion.

[12] By August 2009, Professional had 60 drivers under contract, dedicated to providing services to Canusa. Canusa was essentially Professional’s sole account, as it had no other significant customer.

[13] Canusa cancelled all of Professional’s remaining delivery routes in a letter dated August 7, 2009.

Basis for Liability Claim

[14] Professional commenced its action on October 6, 2009. The Professional action is on the trial list in Brampton and is scheduled to be heard in January or May 2016.

[15] In that action, Professional makes the following claims for damages:

a) Against all defendants, damages in the amount of $1,200,000 for the intentional tortious interference with Professional’s contracts with 60 of its independent contract drivers.

b) As against the defendant Canusa, damages in the amount of $2,000,000 for breach of Professional’s contract to provide transportation services to Canusa.

c) As against Canusa, payment in the amount of $257,000 for an invoice rendered for services for the month of August 2009.

d) As against all defendants, damages in the amount of $5,000,000 for conspiracy to breach the contractual relationship between Professional and Canusa and to terminate Professional’s contractual relationships with each of its independent contract drivers, thereby rendering it impossible for Professional to continue its business operation by offering its integrated distribution network to Canusa’s business competitors and other customers who could use the service.

e) As against all defendants, damages in the amount of $2,500,00 for the wrongful appropriation for the benefit of, and use by, Canusa to the exclusion of Professional, and of Professional’s confidential business information pertaining to its integrated delivery system.

f) As against all defendants, damages in the amount of $350,000 with respect to severance pay which Professional must pay to its support staff whose terminations are precipitated by reason of the defendants having rendered Professional unable to continue its normal business operations.

g) As against the defendant Derek Arthur, damages in the amount of $1,500,000 for breach of trust and, or, breach of confidentiality by transferring his knowledge of the use of the integrated delivery network developed by Professional and assisting the remaining defendants in making, and in carrying out their plan to breach Professional’s contracts with Canusa and Professional’s individual contract drivers, while he was still under contract with Professional in a position of trust and confidence as Supervisor.

h) Punitive damages in the amount of $1,500,000 as against the defendant Derek Arthur.

i) Punitive damages in the amount of $1,000,000 against each of the remaining defendants.

j) As against all defendants, damages in the amount of $150,000 in respect of termination charges on leased equipment, accelerated equipment lease payments and other expenses resulting from the sudden termination of Professional’s contract with Canusa, full details of which are not yet known to Professional.

[16] At the time Canusa terminated the agreement with Professional, the plaintiffs were residing in St. Charles, a suburban city close to Chicago, Illinois. In the summer of 2007, Mr. Evans had left the operation of Professional in the hands of trusted relatives to relocate with Mrs. Evans to the Chicago area. There, they opened and operated BCMT Logistics Inc., a transportation business in the United States that was similar to the business Professional operated in Canada.

[17] Mr. Evans resided in the United States on an L-1A Intra Company Multinational Executives/Manager Work Permit he had been issued by the U.S. government in 2007. That work permit had been extended in 2008 for a three year period through to August of 2010 and was never renewed.

[18] On August 8, 2011, almost two years after Professional commenced its action for breach of contract, Malcolm Evans and Constance Evans commenced this action against the same defendants, alleging that they negligently participated in Canusa’s wrongful termination of the agreement with Professional. In the negligence action, the plaintiffs made the following claims against the defendants:

a) Against the defendants jointly and severally for damages as a result of negligence in the termination without appropriate notice of a contract for transportation between Professional Alliances Inc. (“Professional”) and the defendant Canusa Automotive Warehousing Inc. (Canusa”);

b) Against the defendants jointly and severally for damages as a result of them causing all of Professional’s contract drivers, to terminate without notice their contracts with Professional, and enter new contracts with the defendant 2209334 ONTARIO INC. to provide to Canusa the transportation services which they had been providing through Professional, all of which terminations ended the ability of Professional to carry on its business in Ontario;

c) Against the defendants jointly and severally for damages caused by actions taken by the defendants individually and collectively with the intent of irreparably damaging to destroying Professional, or doing so in spite of their collective knowledge that their actions would so affect Professional;

d) Against the defendants jointly and severally for loss of a business opportunity by the plaintiff Malcolm Evans (“Malcolm”) by reason of having to close down or dispose of, in a distress manner, BCMT LOGISTICS INC., a business corporation in Chicago (“the Chicago business”), owned by Malcolm;

e) Against the defendants jointly and severally for loss of the right to continue residing in the U.S.A. by reason of having to close down or dispose of the Chicago business;

f) Against the defendants jointly and severally for personal distress, inconvenience, and expense incurred by the plaintiffs in having to relocate from Chicago to Canada;

g) Against the defendants jointly and severally the sum of $200,000 (U.S.) for the loss of a deposit paid on a proposed purchase of a new home in Chicago, U.S.A.;

h) By Malcolm personally against the defendants jointly and severally for damages resulting from his loss of employment with the Chicago business and Professional as a result of the destruction of Professional by the actions of the defendants.

[19] The plaintiffs describe how the business that BCMT was running in Chicago was similar to Professional’s business, and that BCMT was “affiliated” with Professional in paragraph 14 of the statement of claim. This description takes on added significance when the evidence about whether the two businesses were a “bi-national” enterprise to support a work permit is considered.

[20] The plaintiffs in this action have joined Canusa and related parties (the “Canusa defendants”) for terminating the agreement with Professional on August 7, 2009. Canusa is also named as a defendant for acting in concert with Derek Arthur, who was until August 7, 2009, the supervisor of Professional’s compliment of drivers at Canusa and had become the operations manager of APD. APD is the business that 2209334 Ontario Inc. has been operating since June 12, 2009 to provide transportation and delivery services to Canusa. The other defendants, Robert Benjamin Jones, Ivor Paul Jones, Stephen Malcolm Drake and Douglas Hannan were named as defendants because they were officers of Canusa who incorporated 2209334 Ontario Inc. to operate APD’s business of providing transportation and delivery services to Canusa after August 2009.

[21] Allegations made by the plaintiffs that the termination of the agreement between Professional and Canusa without proper notice was wrongful go to the heart of the claims the plaintiffs are making in this action. The plaintiffs allege that the defendants’ were negligent for causing or taking part in that wrongful termination, which adversely effected the viability of Professional’s business in Canada. This in turn resulted in Mr. Evan’s inability to show there to be an inter-company foundation between Professional and BCMT to support his application for the renewal of his L-1A work permit to continue residing in the United States. Mr. Evans alleges that without a work permit allowing him to live and work in the United States, he could not continue to operate BCMT, thereby causing the losses claimed by Mrs. Evans and himself.

[22] The affidavit of Stephen Drake, sworn in support of the motion, attached a letter as an exhibit dated July 23, 2012 from Mr. J. Andrew Porter, a Canadian lawyer practicing Canada/US immigration law. This letter was produced by Malcolm Evans for the first time to Canusa and the other defendants on the morning of his examination for discovery on August 29, 2014.

[23] Mr. Porter’s letter explained that the maintenance of an L-1A Intra Company work permit is dependent upon the continuing viability of both the Canada and US business entities. Mr. Porter explained that in his experience, when assessing the criteria necessary to qualify for continuing L-1A authorization, the US CBP/US CIS will consider the continuing viability of the joint business operations of the founding Canadian business entity and that of its US counterpart. A qualifying bi-national organization is defined under the US Immigration and Nationality Act (INA) as one which includes, but is not limited to:

An organization, corporation, company, partnership, association, trust, foundation or fund, and includes a group of persons, whether or not incorporated, permanently or temporarily associated together with joint action on a subject of [sic] subjects.

(INA section 101(a)(28), 8 USC section 1101(c)(28)).

[24] Mr. Porter further opines that while this definition is broad, it is his experience that US authorities will scrutinize the continuing viability of both the Canadian and US business entities in order to determine the continuing eligibility of the L-1A beneficiary. He ends the letter with the following comments:

In August of 2010 when it was time to apply for extension of Mr. Evans’ L-1A work permit, the business of Professional Alliances Inc. had changed drastically. In the absence of personnel under the company’s employ and evidence of its continuing viable operations as a going concern, I advised Mr. Evans that the prospect for an approved L-1A extension under such circumstances was very limited.

It stands to reason that – absent continuing viable business operations through Professional Alliance Inc., the requisite “intercompany” foundation was lacking. As a consequence, the necessary L-1A work permit was not secured by way of a petition for extension in August 2010, subsequent to which Mr. Evans did not have the requisite lawful authorization to work in the US as the president and CEO of BCMT Logistics, Inc.

[25] The only evidence from plaintiffs about knowledge attributable to any of the defendants that Professional’s continuing viability was ostensibly required for Mr. Evans to continue residing in the United States is found in paragraph 18 of his affidavit sworn in response to the motion. Paragraph 18 states as follows:

18. The defendants Canusa, Ivor Jones, Stephen Drake, and the now deceased Robert Jones all knew that in order for me and my family to continue residing in the USA it was necessary that Professional continue as a viable business. They knew this because at a meeting in Canusa’s office in the summer of 2008 they were discussing a proposal suggested by Bob Jones and Steve Drake that they hire my brother Cam and his family directly and pay Professional $15-$20 per driver for the duration of the agreement. I told them that that was something I could not do, as Professional had to continue being viable in order for me to continue residing in the United States and running BCMT. Ivor did not believe that there would be any savings to Canusa by going this route. The matter was dropped.

[26] This evidence is consistent with the affidavit evidence of Mr. Drake at paragraphs 40 and 41, which read as follows:

40. Malcolm testified in his examination that, during the summer of 2008, he met with representatives from Canusa to discuss the possibility of Professional becoming an in-house operation of Canusa. Under that scenario, Malcolm would be paid for the transfer of Professional’s business.

41. Nothing came of this proposal. Malcolm stated that it was during this one conversation that the matter of the visa or work permit was raised in the context of Malcolm bringing some of his family members from Canada to the United States to work for BCMT.

[Footnotes omitted]

[27] There was no evidence before the court that a letter was given, or that Canusa or the other defendants were informed, about the required elements to obtain a work permit based on sustaining an inter-company relationship from the US authorities prior to the production of Mr. Porter’s letter on the morning of August 29, 2014. In fact, there is evidence that neither plaintiff advised any of the defendants that a viable inter-company foundation was necessary to support a work permit. As Mr. Drake deposed in paragraph 42 of his affidavit:

42. I am unaware of any time when Malcolm or Constance Evans provided Canusa, or any of the other Defendants, with any information concerning their legal status in the United States, or provided any particulars with respect to same. Professional’s business with Canusa was not affected in any way by Malcolm’s unrelated business venture in the United States. Neither Canusa nor any of the other Defendants ever promised or undertook to support the Plaintiffs’ immigration status, directly or indirectly. We were never advised by the Plaintiffs that they were relying upon continuation of the transportation arrangements between Professional and Canusa to support their U.S. work permit(s). We would never have agreed that Canusa would continue to use the services of Professional merely to support Malcolm’s desire to pursue his business in the U.S.

[28] Given that Mr. Drake was never cross-examined on his affidavit, I accept the evidence contained in paragraphs 40, 41 and 42 of his affidavit as uncontroverted.

Damages Alleged

[29] Despite the claims made by the plaintiffs in the statement of claim, the affidavit of Malcolm Evans provides evidence only with respect to the following claims:

a) In paragraph 11 and 12, he deposes that he was the sole shareholder of Professional in August 6, 2009. On August 6, 2009, Professional was worth between $2,500,000 and $2,800,000 according to a calculation of value provided Deloitte on April 20, 2012 which was attached to his affidavit. Mr. Evans further deposes that on August 7, 2009 by reason of the negligent termination of the agreement by Canusa, Professional was left with no customer and no drivers and therefore had no value.

b) That in the summer of 2007 Mr. Evans went to Chicago where he commenced a business similar to the business carried on in Ontario by Professional. This business was known as BCMT Logistics Inc. In paragraph 13 and 14 Mr. Evans deposes that in 2008 he took no personal compensation and the company made a net profit close to $20,000. In 2009, Mr. Evans took a salary of $35,000 and the company had a net profit of approximately $78,000. In 2010, up to August, he took a salary of $22,000 and the company had a profit of close to $120,000. He states that he suffered a loss of income from BCMT for the period September to December 2010 and the years 2011 to 2014 that he would not have suffered had the agreement not been negligently terminated but allowed to run its course.

c) In paragraphs 15, 16 and 17 he deposes that he was living in the United States under an approved L-1A Inter-company Transfer Work Permit. In order for him to maintain that work permit, Professional had to remain a viable operating company in Canada. After the alleged negligent termination of the agreement, Professional was no longer a viable operating Canadian company, and could not be a viable company for many months until a new business had been developed for it. As a result of the sudden termination of the agreement between Canusa and Professional, Mr. Evans did not have the supporting base to continue running BCMT in Chicago, and he had no job or viable company to return to in Canada.

d) In paragraph 19 Mr. Evans deposes that he and his wife, Constance Evans were enjoying a “very full lifestyle in Chicago”. They had entered into an agreement to purchase a new home, and had in fact paid approximately $200,000 towards its acquisition by August 7, 2009. He deposes that although the real estate market in the United States had declined significantly in 2008, they intended to continue with the purchase, and had been given 30 days to cure the default in their mortgage/purchase price payments, and were confident they could do so.

[30] At the motion, Mr. Eades crystalized the plaintiffs’ claim as being one for negligence in this action as against the defendants resulting in damages for:

a) Damages for the loss of lifestyle suffered by the plaintiffs as a result of the defendants’ negligence when the contract between Canusa and Professional was terminated. This termination neutralized the viability of Professional as an ongoing business and therefore impacted Mr. Evans eligibility for the renewal of his work permit in the United States. These events led to the loss of the plaintiffs’ right to continue residing in the US;

b) Loss of the plaintiffs’ business opportunity in the United States through the operation of BCMT as a result of the defendants’ negligence; and,

c) Loss of the $200,000 the plaintiffs allegedly paid for the intended purchase of the house they had lived in during their time in the Chicago area.

[31] Constance Evans gave further evidence at her examination for discovery that while the plaintiffs had entered into an agreement to purchase a home in the Chicago area on September 11, 2008 for approximately $755,000, they were unable to arrange financing to pay the balloon payment due on September 15, 2009 in the approximate amount of $624,000 due to the global economic crisis that pervaded the US economy throughout that time period. The plaintiffs also admitted that they were in default on their monthly payment obligations to the builder prior to the notice of termination from on August 7, 2009, and that they had received a notice of default letter from the builder dated September 3, 2009 requiring them to cure the default within 30 days.

[32] After Mr. and Mrs. Evans defaulted on their obligations to the builder and vacated the house, the builder sold the property on December 12, 2009 for $564,000. This new price was approximately $190,000 less than the plaintiffs had agreed to pay, as well as an amount lower than the balloon payment they were obliged to pay in September 2009 had they proceeded to close on the house.

[33] The plaintiffs take the position that the agreement was automatically extended in five year increments in 2004 and 2009 when Canusa did not provide one years’ notice before the expiry of each five year term of its intent not to renew or extend the Term pursuant to section 7 of the agreement. The plaintiffs argue the defendants therefore acted wrongfully for bringing about the termination of the agreement during the extended Term. Alternatively, the plaintiffs claim damages against the defendants for Canusa’s failure to give one year’s notice of its business relationship with Professional. They submit that had Professional received the appropriate notice, Mr. Evans would have had that time to seek another kind of work permit to remain in the United States for the continued operation of BCMT before his L-1A work permit expired.

Analysis

[34] The defendants bring this motion under Rule 20 of the Rules of Civil Procedure for summary judgment on the claims made by Malcolm Evans and Constance Evans as plaintiffs against the several defendants. On a motion for summary judgment, each party is required to put their best foot forward and provide all evidence available to support or to respond to the motion for summary judgment in order to provide the court with the evidence necessary to decide the motion. If the motion requires further facts necessary to decide the motion, the court may utilize the enhanced fact finding powers provided by Rule 20.04(2.1).

[35] The threshold question on a motion for summary judgment is whether the presiding judge can make the necessary findings of fact on the evidence to confidently find there to be no genuine issue requiring a trial. If the court can draw its conclusions on that basis, Rule 20.04(2) requires the court to grant summary judgement accordingly. Rule 20.04(2) reads as follows:

20.04 (2) The court shall grant summary judgment if,

(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or

(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment. O. Reg. 284/01, s. 6; O. Reg. 438/08, s. 13 (2).

[36] I now turn to the arguments made by the defendants as the moving parties with respect to the evidence given on the issues for which summary judgment is requested. In view of the evidence given by each plaintiff at their examination for discovery, the affidavit sworn by Stephen Drake and through the affidavit of Mr. Evans in response to this motion, I am confident I can make the necessary findings of fact on the evidentiary record as a fair process to reach a just determination of those issues on the merits. There was no evidence given by the plaintiffs that there will be any better evidence at trial than I have on the record before me to make that determination.

The Rule in Foss v. Harbottle

[37] The plaintiffs base their claim for damages on the negligence alleged against the defendants for wrongfully causing the termination of Canusa’s contractual relationship with Professional. Throughout these reasons, I have taken care to avoid making any comment or finding that could relate to the adjudication of the Professional action on its merits. That is a claim Professional itself is making in a separate action it has brought against Canusa for the termination of the contractual relationship in August 2009. Mr. Eades concedes on behalf of the plaintiffs, Malcolm Evans and Constance Evans, that this action is not a claim for breach of contract. Rather, in this action the plaintiffs allege negligence against Canusa and others for bringing about the termination of the contractual relationship between the two companies that caused the plaintiffs the damages they claim.

[38] The claims for intentional interference with the contracts between Professional and its drivers, breach of contract and conspiracy to breach the contractual relationship between Professional and Canusa alleged against all defendants are pleaded in the Professional action. The claims made in paragraphs 1 (a), (b) and (c) of the statement of claim in this action simply duplicate those pleaded in the Professional statement of claim.

[39] In my view, this action, based on the same circumstances and termination of the contractual relationship between Professional and Canusa, is precluded by the rule in Foss v. Harbottle. This defence is legal in nature. While Foss v. Harbottle was decided over 170 years ago in England, the courts in Canada have repeatedly adopted the principle that a shareholder cannot bring action for a wrong done to the corporation. The rule in Foss v. Harbottle has been most recently applied by the Court of Appeal in Rea v. Wildeboer, 2015 ONCA 373 (Ont. C.A.). In Rea v. Wildeboer, the court quoted the following statement of the law made by Justice Laskin in Meditrust Healthcare Inc. v. Shoppers Drug Mart (2002), 2002 CanLII 41710 (ON CA), 61 O.R. (3d) 786 (Ont. C.A.):

15. In law, a corporation is a legal entity distinct from its shareholders. It followed from this that shareholders were precluded from bringing their own action in respect of a wrong done to the corporation. Except as modified by the derivative action, the oppression remedy, and winding-up proceedings, this remains a governing principle in Canadian corporate law: see Hercules Management Ltd. v. Ernst & Young, 1997 CanLII 345 (SCC), [1997] 2 S.C.R. 165, at para. 59; Meditrust Healthcare Inc. v. Shoppers Drug Mart (2002), 2002 CanLII 41710 (ON CA), 61 O.R. (3d) 786 (C.A.). As Laskin J.A. put it, in Meditrust, at paras. 12-14:

The rule in Foss v. Harbottle provides simply that a shareholder of a corporation -- even a controlling shareholder or the sole shareholder -- does not have a personal cause of action for a wrong done to the corporation. The rule respects a basic principle of corporate law: a corporation has a legal existence separate from that of its shareholders. See Salomon v. Salomon & Co. (1896), [1897] A.C. 22, 66 L.J. Ch. 35 (U.K. H.L.) A shareholder cannot be sued for the liabilities of the corporation and, equally, a shareholder cannot sue for the losses suffered by the corporation.

The rule in Foss v. Harbottle also avoids multiple lawsuits. Indeed, without the rule, a shareholder would always be able to sue for harm to the corporation because any harm to the corporation indirectly harms the shareholders.

[40] The wrong allegedly suffered by the plaintiff corporation gives way to a claim only the plaintiff corporation can make. Malcolm Evans as the sole shareholder of Professional has no cause of action for the wrong allegedly done to the corporation. Similarly, Malcolm Evans as the shareholder has no cause of action for the loss of value in Professional he has allegedly suffered for those same reasons and on those same principles. In Meditrust, Justice Laskin explained it this way in paragraph 42:

[42] Meditrust also claims that the loss in the value of its shares in its subsidiaries is a direct loss for which it can sue the respondents. This claim, however, runs up against the rule in Foss v. Harbottle and was expressly rejected by this court in Martin v. Goldfarb, where Finlayson J.A. wrote at p. 180 O.R., p. 660 D.L.R.:

Martin's claim was premised on the loss he suffered as an equity holder in his various corporations because the conduct of Axton ruined the corporations and destroyed the value of his equity in the corporations. There is authority of long standing for the proposition that where a wrong is occasioned to a corporation, a shareholder has no claim for damages in respect of that wrong: see Foss v. Harbottle (1843), 2 Hare 461, 67 E.R. 189.

See also Rogers v. Bank of Montreal, 1985 CanLII 150 (BC SC), [1985] 5 W.W.R. 193, 64 B.C.L.R. 63 (S.C.); affd 1986 CanLII 847 (BC CA), [1987] 2 W.W.R. 364, 9 B.C.L.R. (2d) 190 (C.A.). In other words, a shareholder in a company has no independent right of action based on an allegation of diminution in the value of its shares caused by damage to the company. The shareholder does not suffer a direct loss. Its loss merely reflects the loss suffered by the company.

[41] The claim sounding in negligence made by Malcolm Evans as the sole director and shareholder of Professional either for damages arising from the allegedly wrongful termination of the contractual relationship between Canusa and Professional, or the loss of value in Professional arising from that termination has no basis in law.

Duty of Care

[42] The plaintiffs seek to circumvent the rule in Foss v. Harbottle by alleging that the defendants jointly and severally owed a duty of care to each of the plaintiffs not to terminate or cause the termination of the contractual relationship between Canusa and Professional without appropriate notice. The plaintiff Malcolm Evans is estopped from making this claim as the director and shareholder of Professional by the rule in Foss v. Harbottle discussed above. However, as he makes an alternative claim in a personal capacity alleging negligence, and having regard to the nature of the claim made by Constance Evans and the basis pleaded for the relief requested in subparagraphs 1 (d) to (h) in the statement of claim, it must be determined whether Canusa and the other defendants owed a duty of care to one or both of them.

[43] Plaintiffs who bring an action for negligence must establish that the defendants owed a duty of care as the legal basis to make that claim. The modern test to establish whether a duty of care is owed by defendants to a particular plaintiff is the two-part test pronounced by the House of Lords in Anns v. Merton London Borough Council, [1970] A.C. 728. This two-part test has been adopted and continued in Canada in cases such as Kamloops v. Nielsen, 1984 CanLII 21 (SCC), [1984] 2 S.C.R. 2 and Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537. In Cooper, the Supreme Court of Canada described the Anns test in the following terms:

30 In brief compass, we suggest that at this stage in the evolution of the law, both in Canada and abroad, the Anns analysis is best understood as follows. At the first stage of the Anns test, two questions arise: (1) was the harm that occurred the reasonably foreseeable consequence of the defendant's act? and (2) are there reasons, notwithstanding the proximity between the parties established in the first part of this test, that tort liability should not be recognized here? The proximity analysis involved at the first stage of the Anns test focuses on factors arising from the relationship between the plaintiff and the defendant. These factors include questions of policy, in the broad sense of that word. If foreseeability and proximity are established at the first stage, a prima facie duty of care arises. At the second stage of the Anns test, the question still remains whether there are residual policy considerations outside the relationship of the parties that may negative the imposition of a duty of care. It may be, as the Privy Council suggests in Yuen Kun Yeu, that such considerations will not often prevail. However, we think it useful expressly to ask, before imposing a new duty of care, whether despite foreseeability and proximity of relationship, there are other policy reasons why the duty should not be imposed.

Proximity

[44] The first part of the Anns test focuses on the relationship between the plaintiffs and the particular defendant against whom a duty of care is alleged as the dominant feature. This focus is necessary to determine whether there is a sufficient relationship of proximity to bring it within the reasonable contemplation of the defendant that his conduct or carelessness might be likely to cause damage to the plaintiff. If so, a prima facie duty of care arises. The second step of the analysis then requires the court to consider whether there are any policy considerations which negate, or reduce the scope of the duty owed to any class of person. If no prima facie duty is found at the first stage, the inquiry ends there.

The Canusa defendants

[45] The Drake affidavit contains evidence from the examination for discovery of Malcolm Evans and Constance Evans that:

a) BCMT was incorporated by Malcolm Evans in the State of Illinois.

b) BCMT was based out of the Chicago area and began providing transportation and distribution services throughout ten US states in 2008.

c) BCMT did not operate in Canada.

d) BCMT only had three customers.

e) Malcolm Evans was effectively the day-to-day manager of BCMT.

f) Constance Evans was designated as Vice-President, providing basic accounting services for which she received no remuneration for her role.

g) BCMT did not use the services of the individual owner/operator drivers who provided driving services in Canada for Professional.

h) BCMT functioned separately and independently from Professional, and there was no operational integration between those two companies.

i) BCMT and Professional had separate computer systems, separate drivers, different premises, different customers and separate licencing from each other.

j) Canusa was not BCMT’s customer.

k) BCMT did not have any business with Canusa, nor with any of Canusa’s affiliates or associated companies.

[46] The evidence that distinguishes the business of BCMT from that of Professional to establish that they were in fact separate companies operating separate business was given by Constance Evans at her examination for discovery on August 28, 2014. This evidence was repeated in Mr. Drake’s affidavit. From the evidence given by Constance Evans at her examination for discovery, Mr. Drake deposes in his affidavit that it is clear there is “absolutely no connection between Malcolm’s company, BCMT with either Professional or the defendant, Canusa”.

[47] Mr. Drake further deposes that Mr. Evans agreed with the evidence given by Constance Evans at her examination for discovery that Professional and BCMT function separately and independently. There was no operational integration between those two companies, and that they had separate computer systems, separate drivers, different premises, different customers and separate licencing. Mr. Evans also confirmed that Canusa was not BCMT’s customer. He agreed in his examination for discovery that the only common link between Professional and BCMT was that he is a shareholder of both companies.

[48] The plaintiffs only filed the affidavit of Malcolm Evans in response to the motion for summary judgment. Nowhere in that affidavit does Malcolm Evans depose to facts contrary to the facts set out in Mr. Drake’s affidavit that are based on the examinations of discovery of Malcolm Evans and Constance Evans, or that offer a different version of the relationship between BCMT and Professional as one or both of them relate to Canusa.

[49] In the statement of claim, Malcolm Evans and Constance Evans allege that the defendants owed them a duty of care not to harm Professional by terminating the contractual relationship between Professional and Canusa so that Malcolm Evans might continue his eligibility for a work permit, including the renewal of that work permit in August 2010. The plaintiffs provided no evidence on the motion about the prospects for the renewal of that work permit in August 2010 from any U.S. authority.

[50] Malcolm Evans gave further evidence at his examination for discovery that without the work permit, he was required to return to Ontario. Without his involvement at BCMT setting up and managing the logistics for next day delivery to various destinations, he sold the shares of BCMT to one of the owner/operators who employed two or three trucks to provide transportation and delivery services throughout the ten-state area BCMT serviced. Mr. Evans does not recall the last name of the buyer, nor the actual amount he received for those shares.

[51] For the purpose of this motion only, I find on the balance of probabilities that there never existed a “bi-national” operation of related businesses between BCMT in the United States and Professional in Canada to form the “inter-company foundation” discussed in Mr. Porter’s letter.

[52] I find as a fact that the plaintiffs as individuals were not in a relationship of sufficient proximity with Canusa or the other defendants to meet the first part of the Anns test to establish a duty of care owed by any of the defendants to them. I further find as a fact that it was not reasonably foreseeable for Canusa or the other defendants, based on information or knowledge provided directly by the plaintiffs to them or indirectly through circumstances prevailing in or before 2009 that Canusa’s termination of any contractual relationship with Professional was likely to cause either plaintiff harm. Mr. Evans was operating BCMT as a separate company from Professional and none of the defendants had any information or knowledge that Professional’s continued viability would affect any work permit Mr. Evans had obtained from the US authorities to operate BCMT. There is nothing in the evidence that would suggest Canusa or the other defendants knew or ought to have known at the time that Mr. Evans had acquired a work permit or the requirements for the continuation or renewal of that work permit.

[53] I also find there to be no evidence that Constance Evans ever had a US work permit issued to her. I therefore find that the plaintiffs’ claim does not even suggest, let alone depend upon whether Constance Evans was ever eligible for a U.S. work permit. There is no evidence of a connection between Constance Evans and any of the defendants for the required proximity to raise a duty of care to her.

Derek Arthur

[54] The defendant Derek Arthur had separate counsel representing him on the motion. Mr. Arthur is described in the statement of claim as the supervisor of Professional’s Compliment of drivers until August 7, 2009. The plaintiffs allege that, unbeknownst to Professional and themselves, Mr. Arthur had also been the operations manager of the defendant APD since June 12, 2009, therefore holding both positions at the same time for approximately two months.

[55] The plaintiffs allege in the statement of claim that Mr. Arthur terminated his services without notice, and joined Canusa and the newly formed APD to assume all the business Professional would otherwise have received from Canusa.

[56] The plaintiffs also allege that Canusa, in concert with Mr. Arthur, APD and its officers and directors, delivered a letter to all of the drivers under contract with Professional to advise them that Canusa’s business relationship with Professional was terminated, and to extend an offer to those drivers to continue providing their services to Canusa through APD.

[57] There was no contract between Professional and any of its independent drivers produced on the motion. There was no evidence given by the plaintiffs in response to the defendants’ motion to provide substance to the allegations made against Mr. Arthur in the statement of claim.

Foreseeable Harm

[58] I find that it was not reasonably foreseeable for Canusa or the other defendants to know that the loss of the plaintiffs’ lifestyle, business opportunities or the house in the Chicago area would likely occur because of the termination of the contractual relationship between Canusa and Professional. I reach this conclusion because of the evidence given by Mr. Drake in his affidavit based on answers obtained from Malcolm Evans and Constance Evans at their respective examinations for discovery. In particular, Mr. Drake sets out the following evidence given by Malcolm Evans and Constance Evans at discovery at paragraphs 51, 52 and 53 of his affidavit in respect of the house:

51. On her examination, Constance testified as follows regarding the Defendants’ knowledge of these dealings by the Plaintiffs in connection with the Chicago property:

Q. Now, going back to the period immediately after you went to the United States, did you communicate to Canusa or any of the defendants that you’ve sued, or anybody associated with Canusa, your intention to buy this house?

A. I personally did not, no.

Q. No? And, do you know whether your husband communicated that?

A. I do not know.

Q. And, when you signed this agreement in September 2008 to make the list of payments culminating eventually in obtaining title, you didn’t – you didn’t communicate the terms of that agreement to Canusa, did you?

A. I did not, no.

Q. No. Or to any of the individuals associated with Canusa?

A. I had no communication with any of those people. [emphasis added]

Q. Right. And they would have had no reason to know anything about your – the personal business involving the purchase of your house, would they?

A. Not from me. [Footnote omitted]

52. Malcolm confirmed Constance’s view that Canusa and the other Defendants did not know about the house purchase. On his examination for discovery, Malcolm answered as follows:

Q. If Canusa and its representatives know, to the best of your information and belief, [that] you had made this deal to invest $200,000 prior to taking title to a $755,000 house?

A. No. [Footnote omitted]

53. Neither I, nor Canusa or the other Defendants had knowledge of the terms of the purchase and sale of the Plaintiffs’ house. The Plaintiffs have produced no evidence that the failure to complete the purchase and sale was caused by Canusa’s termination of business with Professional.

[59] None of the above evidence was contradicted by evidence given by or on behalf of either plaintiff in response to the motion for summary judgment. Therefore, the harm complained of by the plaintiffs was not reasonably foreseeable by any of the Canusa defendants to establish the necessary proximity to find a duty of care. I would dismiss the action of each plaintiff on this basis alone.

[60] The action against Mr. Arthur must also be dismissed for three reasons. First, there is no evidence given by the plaintiffs on the motion that Mr. Arthur was a key employee of Professional at the time of the alleged wrongdoing.

[61] Second, Professional has made the same claim against Mr. Arthur under paragraph 1(g) of the statement of claim in the previous action. The claim to make against Mr. Arthur, if there is one, is for Professional to make. There is no cause of action as against Mr. Arthur for harm allegedly done to Professional.

[62] Third, there is no evidence that Mr. Arthur had a relationship of sufficient proximity to either plaintiff in this action to raise a duty of care. Mr. Arthur’s legal relationship throughout his employment was with Professional, not Malcolm or Constance Evans.

[63] I also find it significant that paragraph 33 of the statement of claim in this action does not include Mr. Arthur as one of the parties who the plaintiffs allege had knowledge of the connection between the ongoing profitability of Professional and the immigration status of Mr. Evans to continue working in the United States.

Nature of the Damages: Pure Economic Loss

[64] Just as the Supreme Court of Canada made it clear that proximity remains the foundation for the modern law of negligence, proximity also remains the structural element for finding damages for pure economic loss provided that causation is proven between any breach of duty of care owed and those damages.

[65] In Norsk Pacific Steamship Company Limited v. Canadian National Railway Company, 1992 CanLII 105 (SCC), 1992 CarswellNat 168, Justice McLachlin (as she then was) stated at paragraph 49 that:

In summary, it is my view that the authorities suggest that pure economic loss is prima facie recoverable where, in addition to negligence and foreseeable loss, there is sufficient proximity between the negligent act and the loss. Proximity is the controlling concept which avoids the spectre of unlimited liability. Proximity may be established by a variety of factors, depending on the nature of the case. To date, sufficient proximity has been found in the case of negligent misstatements where there is an undertaking and correlative reliance (Hedley Byrne); where there is a duty to warn (Rivtow); and where a statute imposes a responsibility [page1153] on a municipality toward the owners and occupiers of land (Kamloops). But the categories are not closed. As more cases are decided, we can expect further definition on what factors give rise to liability for pure economic loss in particular categories of cases. In determining whether liability should be extended to a new situation, courts will have regard to the factors traditionally relevant to proximity such as the relationship between the parties, physical propinquity, assumed or imposed obligations and close causal connection. And they will insist on sufficient special factors to avoid the imposition of indeterminate and unreasonable liability. The result will be a principled, yet flexible, approach to tort liability for pure economic loss. It will allow recovery where recovery is justified, while excluding indeterminate and inappropriate liability, and it will permit the coherent development of the law in accordance with the approach initiated in England by Hedley Byrne and followed in Canada in Rivtow, Kamloops and Hofstrand.

[66] In Martel Building Ltd. v. R., 2000 SCC 60, the Supreme Court of Canada considered an appeal in a case where judgment had been given for damages resulting from a breach of a duty of care in negotiations that, in the result, caused the loss of an opportunity to negotiate a lease renewal. This was a claim for damages not accompanied by physical injury or property damage and was therefore a claim for pure economic loss. In Martel, the court reviewed the evolution of damages for pure economic loss over time and the foundation for limits to any claim for economic loss based on legal theory and on policy. The court found that the evolving principles could to a large extent be summarized as follows:

1. First, economic interests are viewed as less compelling of protection than bodily security or proprietary interests.

2. Second, an unbridled recognition of economic loss raises the specter of indeterminate liability.

3. Third, economic losses often arise in a commercial context, where they are often an inherent business risk best guarded against by the party on whom they fall through means as insurance.

4. Finally, allowing the recovery of economic loss through tort as being seen to encourage a multiplicity of inappropriate lawsuits: Martel Building Ltd. v. R., at paragraph 37. See also D’Amato v. Badger, 1996 CanLII 166 (SCC), [1996] 2 S.C.R. 1071 (S.C.C.), at paragraph 20 and A.M. Linden, Canadian Tort Law (6^th ed 1997), at pages 405-406.

[67] The cases decided under negligence principles leading to damages for pure economic loss have been identified and separated into categories of cases that give rise to potentially compensable economic loss. In Norsk Pacific Steamship Co., Justice La Forest categorized them as follows:

1. The independent liability of statutory public authorities.

2. Negligent misrepresentation.

3. Negligent performance of a service.

4. Negligent supply of shoddy goods or structures.

5. Relational economic loss.

[68] The claim of the plaintiffs in this case do not fall within any of the first four categories. In regard to the category for relational economic loss, Justice Rothstein in Design Services Ltd., v. R., 2008 SCC 22, also found at 1 S.C.R. 737, explained at paragraph 34 that relational economic loss has always stemmed from injury or property damage to a third party. In the case before this court, nothing in the plaintiffs’ claim relates to an allegation that Canusa or the other defendants caused physical injury or property damage to a third party.

[69] I also conclude on the evidence that the plaintiffs’ claims in this action do not qualify as a novel claim to open up a new basis for the recovery of economic loss. There are no facts to support any finding of a sufficient proximity between the plaintiffs and the defendants to satisfy the first stage of the test in Anns, or to establish a causal connection between the alleged wrongful conduct and the loss claimed. See Mandeville v. Manufacturers Life Insurance Co., 2014 ONCA 417.

[70] On reviewing the principles set out in Norsk, Martel or Mandeville cases regarding a basis for a claim for damages in the form of pure economic loss, there is nothing before this court to support any new basis to claim or award damages for pure economic loss in the nature of a lost opportunity to the plaintiffs for the relinquishment of a work permit having no connection with the contractual relationship between Canusa and Professional in Ontario.

[71] The plaintiffs rely on the decision of the Supreme Court of Canada in Hillis Oil and Sales Limited v. Wynn’s Canada, Ltd., 1986 CanLII 44 (SCC), [1986] 1 S.C.R. 57. That case dealt with an implied notice period arising from the termination of a contractual relationship by one party to an exclusive distributorship arrangement. The Hillis Oil case is not applicable on this motion, and is better left for the court to consider in the Professional action.

[72] In any event, the plaintiff Malcolm Evans had one year left on his L-1A work permit after Professional received Canusa’s letter dated August 7, 2009 to make alternate arrangements to renew his working status in the United States. I find it significant that Mr. Evans deposes in paragraph 28 of his affidavit that:

28. Although as at August 7, 2009 the agreement still had more than 5 years to run, if Professional had been given a year’s notice of the termination of the agreement I believe I would have been able to obtain a different type of work permit in the United States a an investor or entrepreneur.

[73] I conclude from this evidence that the one year notice that Mr. Evan’s laments Canusa did not give to Professional was the very year he had left on his L-1A work permit to obtain a work permit of a different type to remain in the United States. Mr. Evans provided no evidence on the motion as to what steps he took to renew his L-1A permit, or to apply for another permit of a different kind during that year.

[74] Summary judgment shall issue dismissing the action. The defendants may make written submissions if they seek costs of no longer than five pages, not including a bill of costs or costs outline, by August 21, 2015. The plaintiffs may then make written submissions in response subject to the same limits by August 28, 2015. The defendants will then have a right to make any written submissions in reply, if any, by September 8, 2015. All written submissions may be made to my judicial assistant, Sherry McHady, by fax at 905-456-4834 at Judges’ Chambers in Brampton.

EMERY J

Released: August 12, 2015

COURT FILE NO.: CV-11-3137-00

DATE: 2015 08 12

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

MALCOLM EVANS and CONSTANCE EVANS

Plaintiffs

• and -

CANUSA AUTOMOTIVE WAREHOUSING INC., ROBERT BENJAMIN JONES, IVOR PAUL JONES, STEPHEN MALCOLM DRAKE, BARRY MITCHELL, DOUGLAS F. HANNAN, DEREK ARTHUR and 2209334 ONTARIO INC. DBA APD ALL PARTS DELIVERY

Respondent

REASONS FOR DECISION

EMERY J

Released: August 12, 2015