Liora Fine Arts Inc. v. Malcolm Holdings Inc. et al
CITATION: Liora Fine Arts Inc. v. Malcolm Holdings Inc. et al 2016 ONSC 8103
COURT FILE NO.: 1219-16
DATE: 2016/12/28
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Liora Fine Arts Inc.
Plaintiff
– and –
Malcolm Holdings Inc., Andrew Malcolm, Natville Electric Inc., Metro Plus Inc., and Nathanieal Maurice Peart
Defendants
Harvey Consky, for the Plaintiff
Lianne J. Armstrong, for Natville Electric Inc., and Nathanieal Maurice Peart, Defendants
HEARD: November 21, 2016
REASONS FOR DECISION
JUSTICE J.C. GEORGE:
NATURE OF CLAIM AND MOTIONS
[1] The plaintiff Liora Fine Arts Inc. (Liora) owns property municipally known as 753 Dundas St., London Ontario. The defendant Malcolm Holdings Inc. (Malcolm) is a corporation carrying on the business of demolition and excavation. The defendants Natville Electric Inc. (Natville) and Metro Plus (Metro) are corporations carrying on business as general contractors. Nathanieal Maurice Peart (Nathanieal) is a director and officer of Natville and Metro. He is the son of owner Morris Peart (Morris).
[2] Liora contracted with Metro to add a storey to its existing building, and to construct an additional building with a basement. Metro assigned the contract to Natville, assuring Liora all the original terms and conditions would be honoured. Natville retained Malcom to conduct the necessary excavations.
[3] This action arises from what Liora alleges was an improper excavation which impacted the structural integrity of the building.
[4] There are two motions before me.
[5] Liora’s motion seeks to substitute the defendant name “Nathaniel Maurice Peart” with “Morris Peart”, as well as leave to amend the Statement of Claim. Nathanieal brings a motion for summary judgment dismissing all claims against him personally.
MOTION TO ADD MORRIS PEART AS DEFENDANT AND AMEND CLAIM
Applicable Rules
[6] Rule 5.04(2)(3) of the Rules of Civil Procedure provides that:
(2) At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
(3) No person shall be added as a plaintiff or applicant unless the person’s consent is filed.
[7] Rule 26.01 provides that:
On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
[8] Liora relies on the affidavit of its President and owner Noah Guterman. In response I have affidavits from each of Nathanieal and Morris.
Misnomer / Name Correction
[9] These are the grounds on the motion to substitute names:
-It was always Liora’s intention to commence this action against the person with whom it had contracted, that being “Morris Peart” (Morris). Morris is not the same person as Nathanieal Maurice Peart (Nathanieal), but is who it believed was the owner and controlling mind of the defendants Natville and Metro.
-When Liora conducted a corporate search before commencing the claim, it revealed “Nathanieal Maurice Peart” to be the President of the company.
-Given the similarity between the names Maurice and Morris, it believed this to be the same person, and that Maurice was simply Morris’ proper legal name.
-The Statement of Claim therefore reflected, as the only personally named defendant, Nathanieal Maurice Peart.
-Nathanieal was served with the claim on March 17, 2011.
-While Natville filed a Statement of Defence, Counterclaim and Crossclaim, Metro and Nathanieal were noted in default on March 12, 2012.
-In September 2015 the noting of default was set aside with Natville and Nathanieal subsequently filing an amended Statement of Defence, Counterclaim, and Crossclaim.
-Liora did not realize until June 2016, upon being served with Natville and Nathanieal’s motion record, that Morris and Nathanieal Maurice were different people.
Statement of Claim Amendments
[10] Respecting the request to amend the Statement of Claim, Liora characterizes it, in part, as the provision of additional facts and a clarification of the damages initially sought. Respecting any new causes of action, it submits these are based on information only learned in June 2016 when it discovered the name issue.
[11] These are the amendments sought:
-An increase of minimum damages from $2,103,632 to $3,238,068.23.
-Damages for deceit and abuse of process.
-The inclusion of this language into para. 23 of the claim – “[Morris] Peart used his son’s name on the Verification of Lien Form when his son had no knowledge of the lien or events surrounding the lien. Peart did so in order to avoid personal liability. Peart also relied on a fraudulently altered contract in order to be able to exaggerate the lien. As such, Peart is personally liable to the Plaintiff pursuant to section 35 of the Construction Lien Act. On June 13, 2013, this lien was reduced from $480,600.74 to $174,852.”
-That Morris be held personally liable, as he “used his son’s name on the verification of lien when he knew that his son had no knowledge of the facts giving rise to the lien, and that he relied on a false contract while registering the lien in order to exaggerate the lien.”
-The inclusion of this language in para. 29.1 of the claim – “The Plaintiff also claims that in addition to a loss of rental income, the future market value of the property will be affected as a result of the delays in completing the project. The Plaintiff states that when the property was completed he was required to rent the rooms at a certain rate pursuant to an agreement with the City of London Affordable Housing Division Initiative. These rates were based on the expected completion time for the project. When the property was finally completed the Plaintiff was required to rent the property at the agreed rates, despite these being below market rates. Therefore the Plaintiff is continuing to suffer a loss of revenue and therefore the future market value of the property will be significantly affected as the property generates a smaller return on investment due to the lower rental rates. The full extent of the plaintiff’s damages is unknown at this point.”
-Amend para. 30 of the Statement of Claim altering the particulars of its losses and expenses.
Analysis of Misnomer / Name Correction
[12] Mr. Guterman claims that, not only did he mistake Morris for his son, but that he was misled by Morris in this respect.
[13] Morris deposes that, while his son Nathanieal is an officer and director of Natville, at all material times it was his company. He owns it, and it was he who communicated with Liora on this project.
[14] He vehemently denies any suggestion he misled the plaintiff. He says he was not aware the plaintiff thought his son was him until reading Mr. Guterman’s affidavit. Until then he assumed the reason his son was named was because he was noted to be an officer and director of Natville.
[15] Morris deposes this at paras. 6 and 7 of his affidavit:
It is surprising to me that Noah Guterman claims that he mistook me for my son and shocking that he goes farther to state that I have actively misled him. I attended with my son at an Examination for Discovery on January 21, 2015. The Plaintiff’s counsel, Harvey Consky, was present. At that time, I advised Mr. Consky that my son was present as he was a party to the action and I was there on behalf of Natville. Attached hereto and marked as Exhibit “A” is a true copy of the front of the transcript of Andrew Malcolm and it clearly indicates that I was present with my son.
Further, we had a settlement meeting on September 24, 2015. At the settlement meeting, my counsel, Lianne Armstrong, introduced my son and me to Harvey Consky and Noah Guterman. During introductions, she stated that I was present on behalf of Natville and my son was the named party. She further stated during the settlement meeting that although my son was a party, he had no involvement in the project. I specifically recall Ms. Armstrong stating at the settlement meeting that although he was named in the action, my son had never even been to the project site.
[16] He provides some clarity to the scheduled examination of January 21, 2015. While he and his son attended and met with Mr. Consky, the examination did not proceed as defendant counsel was not present. He says this was Mr. Consky’s call and that he and his son were both “ready and willing to be examined”.
[17] Several other examples are cited which, according to Morris, show that the plaintiff knew, or ought to have known, that Nathanieal Maurice and Morris were not the same person.
[18] The Court of Appeal, in Lloyd v. Clark, 2008 ONCA 343 sets out the test for misnomer. The court writes:
Where there is a coincidence between the plaintiff’s intention to name a party and the intended party’s knowledge that it was the intended defendant, an amendment may be made despite the passage of the limitation period to correct the misdescription or misnomer.
[19] Liora submits that, for two reasons, the name substitution should be permitted. First, Morris was personally served with the Statement of Claim, at which point it should have been apparent to him he was the intended defendant. Second, apart from the fact he was served and had, to that point, been the representative interacting with Liora (including signing the contract), he knew his son was not Natville’s controlling mind.
[20] It relies on this passage from Skribans v. Nowek et al., which quotes Hockin J. in Ormerod v. Ferner et al.:
Despite the passage of the limitation period a plaintiff can correct a misdescription or misnomer (whether misnamed as a named defendant or under a pseudonym) provided that the plaintiff intended to name that party as a defendant and that party knew that it was the intended defendant or reasonably would have understood that the “litigating finger pointed at them”.
See Skribans v. Nowek et al., 2012 ONSC 532, and Ormerod v. Ferner et al., 2009 ONCA 697, 97 O.R. (3d) 321.
[21] The defendants point to the chronology of events including not just the scheduled examinations, but the September 24, 2015 settlement meeting to which both Nathaniel and Morris attended. This places the focus squarely on Morris’ knowledge. In other words, did he know he was the intended defendant or should he have reasonably understood that the “litigating finger” was being pointed at him?
[22] Respecting the first part of the test set out in Skribans and Ormerod, I find Liora intended to name Morris as a defendant. However I reject the notion that Nathanieal, Morris, any other representative of Metro or Natville, or defendant counsel, intentionally attempted to mislead Liora.
[23] The question remains, did Morris know, or would he have reasonably understood, that he was personally a target of this litigation? Put another way, was it unreasonable for Morris to believe Liora would point the litigation finger at his son?
[24] The answer is no. This is considerably different from the facts in Ormerod, where, in a negligence action, the wrong doctor was named. The court, in allowing the amendment and name substitution, wrote:
I include Dr. Ferner and his insurer or counsel retained on the defence of this action as “relevant persons” or persons who would be the “recipient of the document” at some point before the physicians defence was delivered. These are persons who knew whether a mistake had been made; in particular, whether the right or wrong name was taken from the Strathroy hospital record of June 25, 2001. They were the persons who would have known whether there was “another entity” to borrow from Lord Devlin in Davies. The only conclusion that may reasonably be made from Dr. Ferner’s Statement of Defence, at para. 11, is that his insurer or his solicitors knew that the “litigating finger” was pointed at the physician who saw the plaintiff at the hospital on this date at the hour set out on the note and that that was not Dr. Ferner. It should have been clear that the naming of Dr. Ferner was a mistake….Equally, it must have been the case that Dr. Ferner knew that it was Dr. Graham who saw Mr. Ormerod or that this fact was discoverable easily and quickly. My view, for these reasons, is that the “litigating finger” pointed to Dr. Graham and that she would have known this, Dr. Ferner did know it and likewise, their representatives in this litigation knew it.
[25] The doctrine of misnomer requires that, in this case Morris, be able to “easily ascertain” that he was the intended defendant. I am not to retrospectively assess whether he could or should have speculated as to why he wasn’t in fact named. It was reasonable to believe, and supported by the nature of this case, that Nathanieal be named as he was an officer and director of Natville. Liora initially pleaded that Nathanieal is “vicariously” liable for Natville’s conduct as “its President and controlling mind”. No specifics beyond this were pleaded, and as such, Morris was entitled to strictly rely on this vague and general representation.
[26] I cannot conclude Morris should have easily ascertained Liora’s intention was to name him.
[27] In the event I am mistaken, and should this be a proper case for a misnomer correction, I would have exercised my residual discretion to deny the substitution. I find that in 2010, when Robert Soviak identified Nathanieal Maurice and Morris as distinct individuals, Liora must have then became aware of its mistake which obligated them to promptly fix it. In these circumstances, to allow the substitution at this point would not be fair or just.
[28] This aspect of Liora’s motion is dismissed.
Analysis of Proposed Amendments
[29] Liora submits that the sought after amendments are not a new cause of action. It characterizes this as merely an attempt to plead an alternative claim for relief arising out of the same previously pleaded facts. It writes this at paras. 22 and 23 of its factum:
In the current action, the plaintiff simply seeks to provide further particulars to the damages he suffered as a result of the defendant’s breach of contract and negligence. There is no new cause of action being pled at this time.
In the original Statement of Claim, the plaintiff claimed the amount of damages that were in his knowledge at that time. These damages have continued to increase and the proposed amendments simply seek to add the additional losses.
[30] These amendments are not as simple as Liora suggests. It is more than just a recalculation of damages. It seeks to amend the statement to include a claim against Morris personally for causing Natville to register an improper and exaggerated lien pursuant to section 35 of the Construction Lien Act.
[31] Context is important. On July 12, 2012 Leitch J., on Liora’s motion, reduced the lien finding that it was not timely and was exaggerated. She found in Liora’s favour. The defendants argue, and I agree, that as the amendment sought here is for damages flowing from that exaggerated lien, all of the material facts in support of that cause of action must have been known by Liora in at least June 2012. In other words, not only would it have been abundantly clear that Nathanieal and Morris were two different people, Liora must have fully known and been completely apprised of any facts that would tend to support a claim for damages from an exaggerated lien.
[32] It follows then that this had to have been discovered before July 12, 2012, which means we are outside the limitation period. The proposed claims are statute barred. This aspect of Liora’s motion is also dismissed.
NATHANIEAL PEART MOTION FOR SUMMARY JUDGMENT
Background
[33] Nathanieal seeks summary judgment dismissing all claims against him.
[34] In 2009 Liora retained Metro to act as general contractor for work to be done on its property. As indicated already, the contract was ultimately assigned to Natville, with the excavation work then being subcontracted to Malcolm. Because of deficiencies in the excavation a stop work order was made, with another contractor completing the required work.
[35] Due to Liora’s nonpayment, each of Natville, Malcolm, and the second excavation contractor, registered construction liens. These have been consolidated with this action.
[36] The allegation against Natville is with respect to this subcontracted excavation work. It is said Nathanieal, as Natville’s president, is vicariously liable for Malcolm’s work.
[37] Nathanieal contends he cannot be held vicariously liable for the actions of a corporation and that he was at no time the controlling mind. His father, as owner, was. He says, respecting personal liability, there is no genuine issue requiring a trial. He argues that Liora’s pleadings simply and baldly assert vicarious liability without any factual basis to support it.
[38] Had I granted Liora’s misnomer motion, Morris would have made an identical argument seeking the dismissal of any claim against him personally.
Law Governing Summary Judgment
[39] I am governed by Rule 20.04(2)(2.1) which provides that:
(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.
(2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:
Weighing the evidence.
Evaluating the credibility of a deponent.
Drawing any reasonable inference from the evidence.
[40] The test for summary judgment was altered in 2010. Before then the moving party had to establish there was no genuine issue for trial. The test now is whether there is a genuine issue requiring a trial. The court’s jurisdiction is broader than it was. See Hryniak v. Mauldin, 2014 SCC 7.
[41] The objective now is not to leave all factual conflicts to the trial judge, but to determine whether a motion judge can fairly evaluate the evidence, and, in a more simplified and proportional procedure, properly decide the case or dispose of certain aspects of it.
[42] On our facts there are two issues. First, on the record before me, taking everything at its highest, is there any basis for a finding of personal liability? Second, even if there is, and notwithstanding any conflicts in the evidence, am I able to reach a fair and just determination on the merits? The latter allows me to engage the new fact finding powers. The question is, is this a task I can responsibly undertake at this stage, or do the interests of justice require I leave it to the trial judge?
[43] A corporation has a separate legal identity. It is a legal person with the full capacity and rights of a natural person. While it is distinct from its employees, directors, officers and shareholders, and can on its own enter into contracts, it does need to operate and act through natural persons. What’s important is, while someone needs to execute documents and contracts binding the corporation, this doesn’t necessarily open the door to the agent’s personal liability.
Analysis & Conclusion
[44] I find that, respecting the question of Nathanieal’s personal liability, there is no genuine issue requiring a trial.
[45] Once I denied the amendments, which was to allege deceit and an abuse of process on the part of both Nathanieal and Morris, this became an easy consideration. That now off the table, there is no evidence to suggest either of them executed a contract or otherwise entered into an agreement personally. In all instances, their work was done on behalf of either Metro or Natville.
[46] In the event I was wrong to deny the motion to amend, I would have still concluded, in exercising the enhanced summary judgment powers, that the issues of fraud, deceit, and dishonesty do not require a trial. There is no evidence to support a piercing of the corporate veil. This is abundantly clear upon a review of the chronology set out earlier in these reasons. There was nothing misleading in not pointing out to Liora that Nathanieal and Morris were distinct people, and there is no evidence to suggest either of them did something or took a course that wasn’t on behalf of the corporation. It would not have been open to a trier of fact to conclude that the director and officer (either Nathanieal or Morris) engaged in activity that took them out of their corporate roles.
[47] In any case, all of this would had to have been specifically pleaded, and it was not. Having dismissed Liora’s motion, there are no pleadings, nor any evidence that would suggest independent and personal tortious conduct.
[48] Nathanieal’s motion is granted dismissing all claims against him personally.
SUMMARY & COSTS
[49] In the result, Liora’s motion is dismissed in its entirety. Summary judgment respecting all claims against Nathanieal personally, is granted.
[50] If there is no agreement on costs, I will receive brief written submissions together with a costs outline, from Ms. Armstrong’s office within 25 days and from Mr. Consky’s office 15 days thereafter.
“Justice J. C. George”
Justice J.C. George
Released: December 28, 2016
CITATION: Liora Fine Arts Inc. v. Malcolm Holdings Inc. et al 2016 ONSC 8103
COURT FILE NO.: 1219-16
DATE: 2016/12/28
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Liora Fine Arts Inc.
Plaintiff
– and –
Malcolm Holdings Inc., Andrew Malcolm, Natville Electric Inc., Metro Plus Inc., and Nathanieal Maurice Peart
Defendants
REASONS FOR Decision
Justice J.C. George
Released: December 28, 2016