Largess et al. v. Word of Life Church (Ottawa/Hull) et al.

[Indexed as: Largess v. Word of Life Church]

Ontario Reports

Ontario Superior Court of Justice,

Aitken J.

March 21, 2016

130 O.R. (3d) 154 | 2016 ONSC 1440

Case Summary

Civil procedure — Parties — Plaintiffs suing church and W (lead pastor of church and member of its board of directors) for negligent misrepresentation, breach of fiduciary duty, breach of contract and negligence — All claims in statement of claim expressed as being against defendants generally — Motion judge dismissing motion to strike claim against W in his personal capacity — Leave to appeal granted — Granting of leave desirable so that higher court can clarify principles applicable in cases where pleadings imply that there may be facts supporting [page155] claim against employee or director in his personal capacity but do not specifically state those facts — Good reason existing to doubt correctness of decision.

The adult plaintiffs enrolled their children in an educational program run by the defendant church, of which they were parishioners, allegedly on the basis of representations by the defendants that the program met Ontario educational standards and would prepare the children for college and university. When the plaintiffs discovered that the program was not approved and was operating illegally, they sued the church and W, the lead pastor of the church and a member of its board of directors, for negligent misrepresentation, breach of fiduciary duty, breach of contract and negligence. A motion by the defendants to strike the claim against W in his personal capacity was dismissed. The defendants brought a motion for leave to appeal.

Held, the motion should be granted.

The plaintiffs did not set out a separate claim against W in his personal capacity. All claims in the statement of claim were expressed as being against the defendants generally, although the statement of claim implied that there might be facts supporting a claim against W in his personal capacity. It was desirable to grant leave so that a higher court can clarify the principles applicable in cases such as this, where the pleadings imply that there may be facts supporting a claim against an employee or director in his personal capacity but do not specifically state those facts. Moreover, good reason existed to doubt the correctness of the decision.

Cases referred to

460635 Ontario Ltd. v. 1002953 Ontario Inc., [1999] O.J. No. 4071, 127 O.A.C. 48, 1999 CanLII 789, 92 A.C.W.S. (3d) 387 (C.A.), consd

Other cases referred to

Ash v. Lloyd's Corp. (1992), 1992 CanLII 7652 (ON SC), 8 O.R. (3d) 282, [1992] O.J. No. 894 (Gen. Div.); Bell ExpressVu Limited Partnership v. Morgan, 2008 CanLII 63136 (ON SCDC), [2008] O.J. No. 4758, 67 C.P.C. (6th) 263, 171 A.C.W.S. (3d) 426 (Div. Ct.); Brownhall v. Canada (Minister of National Defence) (2006), 2006 CanLII 7505 (ON SC), 80 O.R. (3d) 91, [2006] O.J. No. 672, 146 A.C.W.S. (3d) 10 (S.C.J.); Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 1992 CanLII 7405 (ON SC), 7 O.R. (3d) 542, [1992] O.J. No. 652, 55 O.A.C. 316, 6 C.P.C. (3d) 271, 32 A.C.W.S. (3d) 1026 (Div. Ct.); Judson v. Mitchele (2011), 108 O.R. (3d) 129, [2011] O.J. No. 4914, 2011 ONSC 6004 (S.C.J.); Largess v. Word of Life Church (Ottawa/Hull), [2015] O.J. No. 5984, 2015 ONSC 6612 (S.C.J.); Lussier v. Windsor-Essex Catholic District School Board, [1999] O.J. No. 4303, 128 O.A.C. 98, 47 C.C.E.L. (2d) 256, 92 A.C.W.S. (3d) 602 (Div. Ct.); Normart Management Ltd. v. West Hill Redevelopment Co. (1998), 1998 CanLII 2447 (ON CA), 37 O.R. (3d) 97, [1998] O.J. No. 391, 155 D.L.R. (4th) 627, 113 O.A.C. 375, 41 C.C.L.T. (2d) 282, 17 C.P.C. (4th) 170, 77 A.C.W.S. (3d) 518 (C.A.); ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 1995 CanLII 1301 (ON CA), 26 O.R. (3d) 481, [1995] O.J. No. 3556, 129 D.L.R. (4th) 711, 87 O.A.C. 129, 23 B.L.R. (2d) 165, 9 C.C.L.S. 97, 59 A.C.W.S. (3d) 213 (C.A.); Sutherland v. Via Rail Canada Inc., [2012] O.J. No. 5022, 2012 ONSC 6014 (Div. Ct.)

Statutes referred to

Courts of Justice Act, R.S.O. 1990, c. C. 43, s. 19(1)(b) [as am.]

Education Act, R.S.O. 1990, c. E.2 [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 21.01(1) (b), (3)(d), 62.02(4), (a), (b) [page156]

MOTION for leave to appeal an order dismissing a motion to strike a claim.

Sophie C. Reitano, for plaintiffs.

Sean Van Helden, for defendants.

Endorsement of AITKEN J.: —

Nature of Motion

[1] The defendants seek leave to appeal to the Divisional Court from the order of Sheard J., dated November 16, 2015 [[2015] O.J. No. 5984, 2015 ONSC 6612 (S.C.J.)], wherein she dismissed the defendants' motion to strike the plaintiffs' claim as against Michael Welch in his personal capacity.

[2] The grounds for the defendants' motion are that (1) there are conflicting decisions by courts in Ontario on the matters involved in the proposed appeal and it is desirable that leave to appeal be granted; and (2) there is good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that leave to appeal should be granted (Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 62.02(4)(a) and (b)).

Background Facts

[3] Yvon Largess and Louise Pronovost, and their children, Alexandre and Antoine, were parishioners of the Word of Life Church (the "church"). Alexandre and Antoine were also enrolled in the Dominion christian Academy ("DCA"), an educational program run by the church. The plaintiffs are suing the defendants for negligent misrepresentation, breach of fiduciary duty, breach of contract and negligence for falsely representing to them that the DCA met Ontario's educational standards and would prepare students for entrance to college or university.

[4] Michael Welch is the lead pastor at the church and a director on the church's board of directors. The plaintiffs allege that Mr. Welch was the operating mind of the board, and the other board members simply rubber-stamped his decisions. The plaintiff Yvon Largess was a member of the board of directors from December 8, 2008 to February 14, 2012.

[5] Yvon Largess and Louise Pronovost allege that they enrolled their children in the DCA in September 2007, and paid $495 monthly to the church as tuition fees, on the basis of representations made to them by the defendants that the DCA met Ontario educational standards and would prepare the boys [page157] for college and university. When the plaintiffs learned from the Ministry of Education in February 2011 that the DCA was operating illegally, was not a registered program with the ministry, and was not recognized as either a private school or any form of home-school under the Education Act, R.S.O. 1990, c. E.2, Yvon Largess and Louise Pronovost removed Alexandre and Antoine from the DCA. Not only had Yvon Largess and Louise Pronovost spent money for tuition for several years, with no official school credits to show for the expense, but also their son, Alexandre, had to make up approximately three years of high school before he could qualify for admission to the Canadian Army Reserve.

[6] In the amended statement of claim, the plaintiffs plead that they built a mutual relationship of trust and confidence with the defendants, and specifically with Reverend Michael Welch and his wife, Pastor Linda Welch. They plead that the defendants, and specifically Michael Welch, owed them a fiduciary duty to act in good faith and in the best interests of the church's students, parents and parishioners, and to ensure that the education and services provided by the church to Alexandre and Antoine were in their best interests. The plaintiffs allege that the defendants did not live up to their fiduciary duties and, as a result, the plaintiffs suffered damages.

[7] In their statement of defence, the defendants claim that the church's board of directors was its "directing mind", that Yvon Largess was a voting member of the board of directors, and that he cannot sue himself. The defendants deny that, at any time, the church, or anyone for whom it is responsible at law, stated or represented that the DCA was a private school or a program that was registered with the Ontario Ministry of Education. The defendants deny that they owed any fiduciary duty to the plaintiffs, that they were negligent in any respect, that they entered any contract with the plaintiffs and that the plaintiffs suffered any damages.

[8] On August 21, 2015, Sheard J. denied a motion of the defendants for an order dismissing the plaintiffs' claim as against Michael Welch under rule 21.01(1)(b) and (3)(d) of the Rules of Civil Procedure on the basis that the statement of claim disclosed no reasonable cause of action against him personally and/or was frivolous, vexatious, or otherwise an abuse of process. Sheard J. found that, read generously, the statement of claim included pleadings specific to Michael Welch and that there was a chance that the plaintiffs could succeed as against Michael Welch personally. [page158]

Grounds for Leave to Appeal

[9] Under rule 62.02(4) of the Rules of Civil Procedure, leave to appeal to the Divisional Court from an interlocutory order of a judge, under s. 19(1)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43, shall not be granted unless

(a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or

(b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

Analysis

Is there a conflicting decision?

[10] Conflicting decisions exist where the courts have followed different legal principles in deciding two cases. "An exercise of discretion which has led to a different result because of different circumstances does not meet the requirement for a aeconflicting decision'" (Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 1992 CanLII 7405 (ON SC), 7 O.R. (3d) 542, [1992] O.J. No. 652 (Div. Ct.), at p. 544 O.R.).

[11] The defendants argue that the motion judge erred in failing to follow or consider the binding authorities in Ontario that stand for the proposition that employees and directors of corporations should not be personally sued for actions carried out under a corporate name with two exceptions, described below (ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 1995 CanLII 1301 (ON CA), 26 O.R. (3d) 481, [1995] O.J. No. 3556 (C.A.); Normart Management Ltd. v. West Hill Redevelopment Co. (1998), 1998 CanLII 2447 (ON CA), 37 O.R. (3d) 97, [1998] O.J. No. 391 (C.A.), at p. 102 O.R.; and 460635 Ontario Ltd. v. 1002953 Ontario Inc., [1999] O.J. No. 4071, 1999 CanLII 789 (C.A.)).

[12] Although the motion judge did not specifically refer to this line of cases, it is clear from her reasons that she was alive to the legal principles these cases embody and was following those principles in her analysis. In Normart Management, the Court of Appeal held that employees and directors of corporations cannot be held personally liable for the corporation's actions unless (1) the actions of the employees/directors are themselves tortious; or (2) the actions of the employees/directors exhibit a separate identity or interest from that of the corporation, or employer, so as to make the act or the conduct complained of their own. The motion judge spent considerable time setting out why the pleadings in this case brought the case into one of the [page159] exceptions. More specifically, the plaintiffs were alleging breach of fiduciary duty against their pastor, Michael Welch, in addition to making claims in tort and contract against the church.

[13] The motion judge reviewed the case of Lussier v. Windsor-Essex Catholic District School Board, [1999] O.J. No. 4303, 128 O.A.C. 98 (Div. Ct.) that had been relied on by the defendants as standing for the proposition that the corporate veil should not be pierced. She accepted the principles enunciated in that case but distinguished it factually from the pleadings in the current case.

[14] Thus, in regard to the argument about "piercing the corporate veil", I am not persuaded that there are decisions that conflict in principle from the decision of the motion judge.

[15] The decision of the Ontario Court of Appeal in 460635 Ontario Ltd. sets out the standard in terms of specificity of pleading that is required if a plaintiff sues an officer or director of a corporation in addition to the corporation itself. Labrosse J.A. stated, at para. 8:

In the present case, it is not clear on the face of the statement of claim that Kallinikos was being sued in his personal capacity. The allegations are general in nature: they are against "the defendants" (i.e. 460 and John Kallinikos). The pleadings did not allege any negligence against Kallinikos personally. Where the pleading asserted that the defendants acted tortiously, they did not assert that Kallinikos acted in his personal capacity. No attempt was made in the pleadings to single out Kallinikos' activity as an individual. Pleadings of such a general nature cannot properly serve as the basis for an independent claim against Kallinikos in his personal capacity. In my view, "properly pleaded" as it relates to personal liability of corporate directors, officers and employees must be read as "specifically pleaded", a separate claim must be stated against the individual in his personal capacity.

[16] In this case, the plaintiffs did not set out a separate claim against Michael Welch in his personal capacity. All claims in the statement of claim are expressed as being against the defendants generally. In this regard, the decision of the motion judge is in conflict with the requirements for pleadings articulated in 460635 Ontario Ltd. Paragraph 23 of the statement of claim, dealing specifically with a breach of fiduciary duties, reads: "The Plaintiffs plead and state that the Defendants, and specifically Reverend Michael Welch, owed them a fiduciary duty" (emphasis added). This is not the same as making a specific pleading against Michael Welch. There is nothing specifically pleaded in the statement of claim that relates only to Michael Welch and not both of the defendants collectively. It is arguable that there is no specific pleading that explains why Michael Welch would be liable in his personal capacity. [page160]

[17] In my view, it is desirable for leave to appeal to be granted so that a higher court can clarify how the principles set out in 460635 Ontario Ltd. are to be applied in cases like this one where pleadings imply that there may be facts supporting a claim against an employee and director in his personal capacity, but do not specifically state those facts.

Is there reason to doubt the correctness of the decision?

[18] Leave to appeal should be granted where there is reason to doubt the correctness of the decision and the appeal involves matters of such importance that leave should be granted. The moving party does not have to establish that the decision is wrong or probably wrong (Ash v. Lloyd's Corp. (1992), 1992 CanLII 7652 (ON SC), 8 O.R. (3d) 282, [1992] O.J. No. 894 (Gen. Div.), at p. 284 O.R.). That being said, the test for granting leave to appeal an interlocutory order is an onerous one (Sutherland v. Via Rail Canada Inc., [2012] O.J. No. 5022, 2012 ONSC 6014 (Div. Ct.), at para. 4). The court will not grant leave where the decision sought to be appealed is well reasoned and the correct principles have been applied (Bell ExpressVu Limited Partnership v. Morgan, 2008 CanLII 63136 (ON SCDC), [2008] O.J. No. 4758, 67 C.P.C. (6th) 263 (Div. Ct.), at para. 2). For there to be "good reason to doubt the correctness of the decision", the decision must be open to serious debate that warrants resolution by a higher level of court (Sutherland, at para. 4; Judson v. Mitchele (2011), 108 O.R. (3d) 129, [2011] O.J. No. 4914, 2011 ONSC 6004 (S.C.J.), at para. 15; and Brownhall v. Canada (Ministry of Defence) (2006), 2006 CanLII 7505 (ON SC), 80 O.R. (3d) 91, [2006] O.J. No. 672 (S.C.J.), at para. 30).

[19] In the face of 460635 Ontario Ltd., there is good reason to doubt the correctness of the decision of the motion judge in regard to the level of specificity required in pleadings where plaintiffs are suing employees or directors in their personal capacity. I consider the matter of sufficient importance to warrant granting leave because sloppy pleadings result in numerous interlocutory proceedings in our court that would be unnecessary if the rules regarding proper pleadings were followed more strictly and consistently by counsel. A case such as this can offer valuable guidance to counsel as to what is required in these types of situations.

Disposition

[20] Leave to appeal is granted. Costs are reserved to the panel hearing the appeal.

Motion granted.

End of Document