Court File and Parties

COURT FILE NO.: CV-15-534454 DATE: 20160624 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: David Gardner on behalf of the International Association of Insulators Local 95, Javer Aleman, Allan Beattie, James Bryson, Len Cusack, Ryan Ellerby, Jose Esposito, James Ford, Andrew Fonduk, Brandon Gage, Ryan Herby, Philip James, Singhat Khan, Ian Leigh, Sean MacIntyre, Phil Macneil, Robert McMillen, Rumyan Mishev, Evan Mooy, Terry Prior, Michael Reilly, James Sharp, Christopher Shaw, James Sherwin, Andrew Simone, Cody Smith, Thomas Walsh and Robert Watson, Plaintiffs

AND:

John Vella and Dual-Temp Insulation Incorporated, Defendants

BEFORE: Carole J. Brown, J.

COUNSEL: Demetrios Yiokaris, for the Plaintiffs No one appearing for the defendants

HEARD: June 23, 2016

Endorsement

[ 1 ] The plaintiff moves for an order granting default judgment against John Vella, a director of Dual-Temp Insulation Incorporated ("Dual-Temp"), and for a declaration that the defendant, John Vella ("Vella"), is in breach of the trust provisions of the Construction Lien Act ("CLA").

[ 2 ] The plaintiff seeks $196,836.89 in unpaid wages, vacation pay, trust fund contributions, remittances and any other amounts owing pursuant to the applicable collective agreement against Vella. The plaintiffs plead that Vella is personally liable for the unpaid wages as a director of Dual-Temp under section 131 of the Ontario Business Corporations Act and under sections 7 to 13 of the Construction Lien Act.

[ 3 ] Vella and Dual-Temp have been noted in default under rule 19.01 and, as such, the defendants are deemed to admit the truth of all allegations of fact made in the statement of claim.

[ 4 ] The plaintiff submits that, even without the deemed admission, the evidentiary basis for the claim is sufficient to grant the order. The evidence indicates that numerous orders of this Court as against Dual-Temp for the unpaid wages have been issued, and, as well, the unpaid wages were proven before the Ontario Labour Relations Board ("OLRB"). Further, most of the amounts claimed are based upon the amounts indicated in the Monthly Employer Contribution Reports, which reports were prepared by Dual-Temp in the ordinary course of business.

[ 5 ] Dual-Temp is a necessary party to the action, although no additional award is necessary against Dual-Temp given the referenced court orders.

[ 6 ] The plaintiffs are Local 95 and its related trust funds and certain members of the union who were employed by Dual-Temp. The plaintiff, Local 95 is a trade union that represents employees who work in the construction and maintenance industry in Ontario, including as insulators. The trust funds hold amounts that are paid as compensation for union members but which are held by trustees for the benefit of the union members. These funds include, among other things, amounts contributed for pensions, health benefits and training benefits.

[ 7 ] The union is the collective bargaining agent for the individual plaintiffs. As confirmed in the OLRB decisions, referenced herein, the union is the appropriate entity to which the aforementioned unpaid wages are to be paid for the benefit of the individual members and the trust funds.

[ 8 ] The defendant, Dual-Temp, is a company incorporated pursuant to the laws of Ontario, carrying on business in Ontario.

[ 9 ] Pursuant to the 12 OLRB decisions issued from April 2013 through July 2015, in evidence in this motion, Dual-Temp hired union members to perform work and the plaintiffs did so in various months from April 2013 to July 2015. Dual-Temp failed to pay the unpaid wages and benefits owing. The total amount of the unpaid wages and benefits ordered to be paid pursuant to those 12 OLRB decisions was $196,836.89.

[ 10 ] Dual-Temp failed to pay the unpaid wages. As a result, the union filed various grievances resulting in the OLRB orders, which were converted into court orders and writs were filed. Despite best efforts, execution against Dual-Temp remains unsatisfied as regards the OLRB orders and court orders.

[ 11 ] A notice of action was issued on August 14, 2015, and the statement of claim filed on September 11, 2015. The plaintiffs unsuccessfully attempted to serve the defendants at their last known address, and the statement of claim was finally served upon Dual-Temp and Vella on February 8, 2016. From January to April of 2016, counsel for the Union had communications with Vella, who refused to provide his last known address or e-mail address, indicated that he would make a settlement offer, but did not do so and was warned on April 5, that if he did not serve and file a statement of defence by April 22, he would be noted in default and default judgment would be sought. He did not provide a statement of defence and, accordingly, was noted in default on April 25, 2016.

The Law

[ 12 ] Pursuant to section 19.01 (1), where a defendant is noted in default, the defendant is deemed to admit the truth of all allegations of fact made in the statement of claim and shall not deliver a statement of defence or take any other step in the action, other than a motion to set aside the noting in default, except with leave of the court.

[ 13 ] In this case, Vella and Dual-Temp failed to deliver a statement of defence, were noted in default, and are deemed to admit the truth of the allegations of fact in the statement of claim. These allegations establish that Vella is personally liable for the amounts that Dual-Temp owes the plaintiffs, but has failed to pay. The evidence, including the corporate profile report for Dual-Temp confirms that Vella has been the sole director, officer and president of Dual-Temp since the company was incorporated on August 28, 2010. Thus, he has been a director during the entire time in which the debts that are the subject of this action arose.

[ 14 ] Unpaid contributions to union benefit funds are "debts… for services performed for the corporation" within the meaning of section 131 of the OBCA, as are out-of-pocket expenses incurred as a result of the performance of one's employment: International Union of Bricklayers and Allied Craftsmen, Local 2 v. Fazzini, para 18; Proulx v. Sahelian Goldfields Inc., [2001] OJ No 3728, para 20.

[ 15 ] The amount of the "debt" found owing is below the stipulated cap of six-month wages per employee set forth in the OBCA, section 131. The amount found to be owing regards 27 individual plaintiffs and the six-month wages cap per employee is approximately $27,500 to $52,500.

[ 16 ] The personal liability of Vella under the Construction Lien Act is set forth in sections 8 and 13 of the Act. As Vella is also noted in default, he has admitted the facts pled in the statement of claim which establish his personal liability under the trust provisions of the CLA. Individual traders are, pursuant to section 8(1)(b), "persons who supplied services" as part of "improvements" for which the contractor Dual-Temp was paid. The amounts paid to Dual-Temp constitute a "trust fund for the benefit of [the individual plaintiffs]" section 8(2) deems the contractor, in this case, Dual-Temp, to be a trustee, and requires that the contractor not "appropriate or convert any part of the fund to its own use… until all… persons who supply services are paid". Section 13 provides that every "director or officer and "any person… who has effective control of the corporation or its relevant activities" is liable for breach of trust if he or she assents to, or acquiesces in, conduct that he or she knows or reasonably ought to know amounts to breach of trust by the corporation". Vella is therefore liable to repay all amounts still owing to the plaintiffs under the CLA and as a result of the deemed truth of the allegations in the statement of claim.

[ 17 ] Based on all of the foregoing, this court grants an order for default judgment in favour of the plaintiffs as against the defendant, John Vella a.k.a. John Iglesias Valette in the amount of $196,836.89; a declaration that the defendant, John Vella is in breach of the trust provisions of the Construction Lien Act, RSO 1990, c C 30, as amended, and is liable to the plaintiffs to the extent of its claim herein in the sum of $196,836.89, which constitutes a debt arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity. This court also grants an order for prejudgment interest in the amount of $1,682.89 and costs of this action and motion in the amount of $11,864.82 on a partial indemnity basis.

Carole J. Brown, J. Date: June 24, 2016