SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Ontario Chrysler Jeep Dodge Inc., Plaintiff
– AND –
Desmond Delisle, Defendant
AND RE: Desmond Delisle, Plaintiff by Counterclaim
– AND –
Ontario Chrysler Jeep Dodge Inc., Lian Tang, Bart Martino and Bary Gray, Defendants by Counterclaim
BEFORE: Justice E.M. Morgan
COUNSEL: Ellen Bessner, for the Plaintiff and Defendants by Counterclaim
Arlindo Aragao, for the Defendant and Plaintiff by Counterclaim
HEARD: September 4, 2015
ENDORSEMENT
Introduction
1The Defendant by Counterclaim, Bary Gray (“Gray”), brings this motion under Rules 20.01(1) and 20.09 of the Rules of Civil Procedure to dismiss the Counterclaim against him. His counsel submits that the test in Rule 20.04(2)(a) has been met and that there is no evidence establishing a genuine issue requiring a trial.
2None of the other Defendants by Counterclaim have joined Gray in this motion.
3Gray is the former majority shareholder, president and director of the Plaintiff, Ontario Chrysler Jeep Dodge Inc. (“Ontario Chrysler”). The Defendant, Desmond Delisle (“Delisle”), was the manager of the auto body shop operated by Ontario Chrysler, who was terminated for cause in mid-2011.
4Ontario Chrysler has alleged that Delisle committed sexual assault against another employee, Lian Tang (“Tang”), that he carried on a side business repairing cars for cash from Ontario Chrysler’s premises, and that he vandalized the property of Tang’s spouse and that of another employee, Bart Martino (“Martino”), who provided information about his side business. In his Statement of Defense and Counterclaim, Delisle alleges that he was wrongfully terminated by Ontario Chrysler, and that Gray, Tang, and Martino are personally liable to him for acts done during the course of the investigation of his activities and his termination.
The Pleadings
5It would be an understatement to say that the Statement of Defense and Counterclaim is poorly drafted (not by Delisle’s current counsel, I hasten to say). The first paragraph of the Counterclaim is the prayer for relief. It states: “The plaintiff seeks the following relief as against Ontario Chrysler:”, and then goes on to particularize over a dozen heads of damages against the corporate party. No damages or any form of relief is sought against any other party in the first or any other paragraph of the Counterclaim, including against Gray. Gray (along with the other personal Defendants by Counterclaim) is left altogether out of the relief requested in the pleading.
6After a second paragraph that incorporates by reference the Statement of Defense portion of the pleading, the third paragraph of the Counterclaim is where counsel for Delisle submits the causes of action against Gray are set out. That paragraph provides: “Delisle states and the fact is that, as a result of the actions of the employees and directors of Ontario Chrysler, especially Gray, for whom it is vicariously liable…”. It then goes on to set out a list of nominate torts which Delisle is alleged to have suffered. Given the prelude to this list, however, it is difficult to read this paragraph as setting out claims against Gray in his personal capacity; it rather appears to set out matters which Gray allegedly did to Delisle in his corporate capacity.
7In other words, there is no relief sought and no actual claim against Gray articulated in the Counterclaim, although he is named in the title of proceedings as a Defendant by Counterclaim. What is explicitly said about Gray in this pleading is that he is the agent for whose acts the corporate party, Ontario Chrysler, is vicariously liable. That is an accurate statement, of course, as Gray was the corporate president and a director of Ontario Chrysler. But it does not sustain a Counterclaim against him. At the most, it establishes Gray as a witness, not as a personal Defendant by Counterclaim.
8Counsel for Delisle submits that this is a drafting issue, which presumably could be rectified with an amended pleading. He cites Doe v Metropolitan Toronto Commissioners of Police (1990), 1990 6611 (ON SC), 74 OR (2d) 225, which in turn cites Operation Dismantle Inc. v The Queen, 1985 74 (SCC), [1985] 1 SCR 441, for the proposition that, “the claim must be read as generously as possible, with a view to accommodating any inadequacies in the form of the allegations due to drafting deficiencies.” He contends that the factual allegations sprinkled through the Statement of Defense and Counterclaim add up to a number of causes of action, including defamation, injurious falsehood, intentional interference with economic relations, and a number of other tortious interferences.
9Counsel for Delisle also submits that Gray’s motion is premature as he has not yet been examined for discovery. He contends that any shortfall in evidence supporting Delisle’s claim against Gray is due to the fact that the relevant information lies with Gray himself. Once Gray is discovered, Delisle’s counsel argues, the basis of the claim against him will be readily apparent. It is Delisle’s position that this motion has been engineered for the sole purpose of protecting Gray from the discovery process so that he will not be forced to disclose the evidence that Delisle needs to prove his claim.
10Counsel for Gray, on the other hand, submits that the Counterclaim against Gray must be dismissed, as it does not contain the crucial ingredients necessary to sustain a claim. Citing Abdi Jama v McDonald’s Restaurants of Canada Ltd., [2001] OJ No 1068, at para 10, she argues that, “…as a general proposition…if plaintiffs wish to advance claims against officers or directors of corporations… it is not unreasonable to hold plaintiffs to a fairly high standard regarding the content of their pleading.” Gray’s counsel states that Delisle seeks to make a far-reaching claim of personal liability against Gray, but that he has neither pleaded it properly as a cause of action nor provided sufficient facts to establish the grounds for such a claim.
11From Gray’s perspective, the problems with the Counterclaim are matters of substance, not just of form. Accordingly, this is a summary judgment motion under Rule 20 rather than a pleadings motion under rule 21. His counsel states, in effect, that the reason the pleading lacks a request for damages or other relief against Gray is that there is no real claim against Gray – i.e. the evidentiary record does not disclose a viable claim against Gray any more than the pleading does. She contends that the sole reason for including Gray as a named defendant in the Counterclaim is to give Delisle’s counsel an excuse to examine him.
12Delisle’s counsel does acknowledge that he wants to examine Gray, and states that he has been frustrated in his inability to do so to date. Since Gray has sold his interest in Ontario Chrysler, it was the new owner, Bourk Boyd (“Boyd”), who was examined on behalf of the company. Delisle wanted to question Gray, not Boyd, about the process leading to his termination from Ontario Chrysler, since it was Gray, not Boyd, who was president at the time. Accordingly, Delisle now resists the notion of Gray being let out of the Counterclaim, as this will deprive him of the discovery he wants.
Analysis
13Gray’s counsel argues that if Delisle’s counsel wishes to examine Gray he should move under Rule 31.10 after this motion to examine him as a non-party. She concedes, of course, that Gray was the president and majority shareholder at the material time, and that he may therefore have some knowledge relevant to the events in issue. She submits, however, that the fact that he has relevant knowledge does not alone make him an appropriate Defendant by Counterclaim.
14Counsel for Gray and counsel for Delisle both agree that there is no evidence or allegation that Gray acted for personal financial gain in terminating Delisle. Indeed, as shareholder of Ontario Chrysler, Gray arguably lost money by firing Delisle, who by all accounts ran a profitable auto body department.
15It is Delisle’s position, however that Gray acted out of ego or arrogance, and out of a desire to show that he alone runs Ontario Chrysler. Delisle also contends that Gray generally created an “atmosphere of intimidation” at Ontario Chrysler, although he concedes that Gray was supportive of and friendly with Delisle himself. Furthermore, Delisle alleges that Gray was “showboating” to another employee that he had terminated Delisle, although he also concedes that Gray’s advice to the other employee that he had been terminated was factually true.
16Delisle’s fundamental concern with Gray is stated in his affidavit as a double-barreled allegation. As Delisle puts it: “It is my belief that Mr. Gray intentionally set out on a course of action to defame me and to intentionally interfere with my employment at Ontario Chrysler.”
Defamation and Intentional Interference
17Turning first to the allegation of defamation, I note that no defamatory phrases or words are recited in either Delisle’s affidavit or his pleading. It is unknown what constitutes the defamation, and to whom the supposedly defamatory words were spoken. There is simply no evidence at all of defamation.
18As for the allegation of intentional interference with Delisle’s employment, the record makes it clear that the “interference” was the firing. It is certainly the case that Gray fired Delisle – which may have been for just cause or may have been a wrongful dismissal – but he did it in on behalf of Delisle’s employer, Ontario Chrysler.
19Counsel for Delisle suggests that Gray terminated Delisle unilaterally, and that he should have consulted with his other shareholders and officers. However, he offers no support for the proposition that Gray was obliged to consult with anyone. Gray maintains that he had authority as president of the company to terminate an employee and, indeed, none of the other directors, officers, or shareholders have complained about any supposed lack of authority in this regard. As indicated above, there is nothing to suggest that Gray sought any personal gain by terminating Delisle.
20Delisle’s counsel also suggests that Gray’s after-the-fact gloating about the firing shows that he had his own ego at stake, and that he might have engaged in this course of conduct toward Delisle out of arrogance and to assert his authority over all employees. With respect, however, whether Gray had an arrogant personality with a big ego, or was a modest person who kept his ego in check, is not relevant.
21What the record shows is that Gray acted at all times as president of Ontario Chrysler. I have been shown no authority, and I would be surprised if any exists, for the proposition that an arrogant or egotistical personality is incompatible with the duties of a corporate president. Indeed, some have suggested that C.E.O. hubris and even a “Napoleonic” complex lie at the heart of corporate success: see United States v Microsoft Corp., 253 F. 3d 34, at 110 (D.C. Cir. 2001).
22Delisle seeks to support his allegation about Gray’s desire to satisfy his personal ego by submitting the affidavit of another employee, Todd Broderick (“Broderick”). Broderick related that Gray stopped him in early September 2011 and said: “Your buddy’s been fired eeh.” He also deposed that Gray used a swear word in reaction to learning that Delisle was running a side business for cash out of Ontario Chrysler’s auto body shop. This is presented by Delisle as a supposedly damning illustration of Gray’s arrogant conduct.
23Again, with all due respect, if these kind of offhand comments take the corporate president’s termination of an employee outside of his corporate capacity, then virtually all acts done by any corporate officer are outside of their corporate capacities. Corporations are, after all, only capable of acting through their human agents. The fact that the president of a corporation speaks and acts like a regular person in performing his corporate functions – perhaps even like an inarticulate or rude person – does not, without more, give him a personal interest or expose him to personal liability. He was still acting in a strictly corporate capacity.
24Broderick himself confirmed this in cross-examination:
Q: Is it fair to say that whenever Mr. Gray spoke to you he was speaking to you as the president and owner of the company?
A: Yes.
Q: And when he [Gray] walked around and spoke to people he was speaking as the president of the company, is that fair?
A: Yes.
25Delisle has submitted the supporting affidavit of yet another employee, Segram Narain (“Narain”), who addresses what Delisle’s counsel characterizes as the atmosphere of intimidation created by Gray in the Ontario Chrysler workplace. Narain deposed that he found it intimidating when, as part of the investigation into the sexual assault allegations against Delisle, he was called into Gray’s office for an interview. Narain, too, however, confirmed in cross-examination that whatever Mr. Gray did, he did on behalf of Ontario Chrysler:
Q: So you say ‘following the discussion I was called into Mr. Gray’s office for a meeting’, because Mr. Gray was the president of the company and he was calling you in, right?
A: Yes.
Q: He was calling you as the president and the most senior person of this company?
A: Yeah.
Personal Liability of Corporate Officers
26To hold directors and officers 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”: Montreal Trust v ScotiaMcLeod Inc. (1995), 1995 1301 (ON CA), 26 OR (3d) 481, at 491 (Ont CA). Indeed, “[t]he decided cases in which employees and officers of companies have been found personally liable for actions ostensibly carried out under a corporate name are fact-specific. In the absence of findings of fraud, deceit, dishonesty or want of authority on the part of employees or officers, they are also rare”: Ibid., at para 25.
27As this court observed in Laurier Glass Ltd. v Simplicity Computer Solutions Inc., 2011 ONSC 1510, at para 39, “…officers and employees are not liable simply because they are the human actors for their corporations… 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.”
28The claim by Delisle that Gray induced his wrongful termination by his employer is identical in every respect to his claim that he was wrongfully terminated by his employer. It does not, and cannot, represent a separate cause of action. As noted in Agda Systems International Ltd. v Valcom Ltd., 1999 1527 (ON CA), [1999] OJ No 27, at para 15: “…persons who deal with a limited company and accept the imposition of limited liability will not have available to them both a claim for breach of contract against a company and a claim for tortious conduct against the director with damages assessed on a different basis.”
29As indicated above, Delisle has pleaded that Ontario Chrysler is vicariously liable for Gray’s acts. One can take no issue with that under the circumstances; if Gray was wrong in firing Delisle then Ontario Chrysler was wrong, and if he was justified in doing so then Ontario Chrysler was justified. The Court of Appeal has stated that, “…only exceptional cases that result in flagrant injustice warrant going behind the corporate veil”: Shoppers Drug Mart Inc. v 6470360 Canada Inc., 2014 ONCA 85, at para 43. There is no such exceptional circumstance here.
30Laskin JA set out the type of exceptional scenario one must look for in piercing the corporate veil in 642947 Ontario Ltd. v Fleischer (2001), 2001 8623 (ON CA), 56 OR (3d) 417, at para 68. The facts in the record before me are not of the type he described:
Typically, the corporate veil is pierced when the company is incorporated for an illegal, fraudulent or improper purpose. But it can also be pierced if when incorporated ‘those in control expressly direct a wrongful thing to be done’: Clarkson Co. v Zheilka at p. 578. Sharpe J. set out a useful statement of the guiding principle in Transamerica Life Insurance Co. of Canada v Canada Life Assurance Co. (1996), 1996 7979 (ON SC), 28 OR (3d) 423 at pp. 433-34 (Gen Div), affd [1997] OJ No 3754 (CA): “the courts will disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and being used as a shield for fraudulent or improper conduct.
31There is no evidence whatsoever that Gray was shielding himself behind Ontario Chrysler or using the corporate vehicle for personal gain. He was the majority shareholder but not the sole shareholder, and was president of a full-fledged automobile dealership with numerous employees. This was not a shell company used by Gray as a personal vehicle to perpetrate wrongdoing on others.
Conclusion
32In my view, the lack of cause of action against Gray is not a drafting error that can be amended with re-drafting of the pleading. There simply is no cause of action. The only acts alleged against Gray are acts that he did on behalf of Ontario Chrysler that could lead to vicarious liability, not personal liability.
33As president of the company, Gray had to deal with allegations in the workplace by a female employee that Delisle had sexually assaulted her. He met with Delisle, had him removed from the Ontario Chrysler premises, and then followed up with an investigation that revealed the side business Delisle was carrying on. That revelation, in turn, led to highly coincidental and suspicious acts of vandalism committed against the very co-workers who had complained about Delisle. The investigations may or may not have reached an accurate conclusion, but all of the evidence is that Gray was acting as a responsible corporate executive in having serious matters investigated and dealt with.
34A corporate officer must be able to act on information that indicates that some employees are in need of protection from another employee, or that the problematic employee is conducting a cash business out of the employer’s premises. This is a central part of an officer and director’s managerial responsibilities. In carrying out this responsibility, Gray might have fired Delisle imprudently or prudently, brazenly or diplomatically; but when the company president fires an employee, for no personal gain and without using the corporation for any ulterior purpose, it is the company that must live or die by the president’s actions. They were done on the corporation’s behalf.
35There is no genuine issue for trial with respect to Delisle’s Counterclaim against Gray. The pleading does not properly set out a damages claim or identify a cause of action against him and, most importantly, there is no evidence to support any damages claim or cause of action against him. Gray conducted himself in his corporate capacity at all material times, and if his acts are found to be wrongful then Ontario Chrysler will be vicariously liable for them.
36Under the circumstances, the summary judgment process has provided all of the evidence required to fairly and justly adjudicate the dispute. This case is a prime example of how Rule 20 provides a timely, affordable and proportionate procedure for making the determination that a trial is not required: Hryniak v Mauldin, 2014 SCC 7, [2014] 1 SCR 87, at para 66.
37Delisle’s Counterclaim against Gray is dismissed.
Costs
38Counsel for Gray has submitted a Costs Outline in which she requests $17,963.32 on a partial indemnity basis, inclusive of disbursements and tax. This is somewhat higher than the Costs Outline submitted by counsel for Delisle, which sets out $11, 165.41 on a partial indemnity basis, also inclusive of disbursements and tax.
39The fixing of costs is a discretionary decision under section 131 of the Courts of Justice Act. That discretion is generally to be exercised in accordance with the factors listed in Rule 57.01 of the Rules. These include the principle of indemnity for the successful party (57.01(1)(0.a)) and the expectations of the unsuccessful party (57.01(1)(0.b)). The court is required to consider more generally what is “fair and reasonable” in fixing costs, and in doing so is to endeavor to balance compensation of the successful party with the prevailing policy of access to justice: Boucher v Public Accountants Council (Ontario) (2004), 2004 14579 (ON CA), 71 OR (3d) 291 (Ont CA), at paras 26, 37.
40The two sides are not in agreement over costs, but at the same time they are not that far apart in their costs requests. Having asked for over $11,000 for himself, it should not take Delisle by surprise that his successful opponent would ask for over $17,000. That amount is higher, but not shockingly so.
41I can see nothing unusual or excessive in the Costs Outline submitted by Gray’s counsel. Her firm appears to have used junior lawyers where appropriate in order to economize the costs, and more senior counsel where appropriate in order to put their best foot forward. Under the circumstances, I would not want to quibble with their success. Gray’s counsel’s investment of time and resources has paid dividends in the result of the motion.
42Delisle shall pay Gray costs in the all-inclusive amount of $17,963.32.
Morgan J.
Date: September 8, 2015