Ricci v. Chippingham Financial Group Ltd., et al, 2017 ONSC 6958
CITATION: Ricci v. Chippingham Financial Group Ltd., et al, 2017 ONSC 6958
COURT FILE NO.: CV-14-508944
DATE: 20171123
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: JULIAN RICCI, Plaintiff
AND:
CHIPPINGHAM FINANCIAL GROUP LTD., CHIPPINGHAM INVESTMENT INTERNATIONAL LTD., CHIPPINGHAM NEW PROVIDENCE COMPANY LTD., GARY NG, SEPOY WONG and CLIFF PERREIRA, Defendants
BEFORE: KOEHNEN J.
COUNSEL: Nikolay Chsherbinin, for the Plaintiff
Kristopher Stone, for the Defendants
HEARD: November 16, 2017
ENDORSEMENT
[1] The defendants appeal from an order of Master Abrams dated July 28, 2017, pursuant to which she ordered the defendants to produce certain audited financial statements and income tax documentation in response to two questions on their examination for discovery.
[2] The parties agree that the test for production is relevance and that relevance is a question of law on which the Master must be correct.
[3] In my view the Master was correct in her decision and the appeal should be dismissed.
[4] Master Abrams found the questions and the documents were relevant to:
(i) Paragraphs 60 and 70 of the statement of claim;
(ii) The claim under s. 81 of the Employment Standards Act, 2000, SO 2000, c. 41 (the “ESA”); and
(iii) The claim under s. 131 of the Ontario Business Corporations Act; R.S.O. 1990, c. B. 16 (the “OBCA”).
[5] The underlying action is one in which the plaintiff seeks damages for wrongful dismissal, plus damages of $350,000 for unpaid wages that he earned before his dismissal. The claim is grounded in breach of contract, oppression and breach of the ESA.
(i) Paragraphs 60 and 70 of the Statement of Claim
[6] Master Abrams held that:
“The questions are relevant to, inter alia, paragraphs 60 and 70 of the statement of claim, s. 81 of the ESA and s. 131 of the OBCA.”
[7] In paragraph 60 of the statement of claim. the plaintiff says he was told that the defendants would bankrupt the corporate defendant before honouring its outstanding obligations to the plaintiff. Paragraph 70 of the statement of claim refers to potential liability under s. 81 of the ESA.
[8] It appears to me that the audited financial statements and income tax documentation are relevant to the plaintiff’s ability to establish that the defendants intended to bankrupt the corporate defendant before it honoured its obligations to him. The defendants did not address this issue in their factum or in oral argument. The appeal should fail for that reason alone.
[9] Instead, the defendants focused on the plaintiff’s explanation that paragraph 60 of the statement of claim and the documents in dispute are relevant to its oppression claim. The defendants somehow suggest that the documentation would not be relevant to paragraph 60 of the statement of claim in the absence of the oppression claim. The defendants submit that Master Abrams did not refer to the oppression claim in her reasons, as a result of which production could not be founded on oppression.
[10] Although the Master’s reference to the documents being “relevant to, inter alia, paragraph 60…” of the statement of claim would, on its face, include reference to other passages of the statement of claim that refer to oppression, the defendants submit that this is not possible. They argue that the words “inter alia” should be interpreted in light of the principle of ejusdem generis. If this is done, say the defendants, the words inter alia can refer only to other “insolvency aspects”, presumably because paragraph 60 refers to a potential insolvency.
[11] I cannot accept this submission. First, the discovery question and the documentation it seeks is relevant to paragraph 60 of the statement of claim quite apart from its relevance to other portions of the statement of claim. Second, applying the principle of ejusdem generis to the Master’s reasons would lead one to read the sentence as meaning that the questions are relevant to paragraphs 60 and 70 of the statement of claim as well as to other paragraphs of the statement of claim. Other paragraphs of the statement of claim that amplify paragraph 60 include paragraphs 54, 59 and 71. The defendants have advanced no argument to demonstrate why the financial information is not relevant to those allegations.
[12] The defendants submit that, Master Abrams erred by finding the questions were relevant to the plaintiff’s claim under s. 81 of the ESA. Section 81 renders directors liable for unpaid wages. The defendants point to s. 81(1) which, they submit, establishes four pre-conditions to director liability, none of which has been met. The defendants submit that the Master could not order answers to questions which go to director liability until the pre-conditions in s. 81(1) were satisfied.
[13] I disagree. Section 81(2) of the ESA provides that proceedings against an employer do not have to be exhausted before proceedings may be commenced to collect wages from directors.
[14] The defendants submit that s. 81(2) only allows an employee to commence proceedings against directors but does not allow employees to advance those proceedings.
[15] I do not accept that interpretation. Section 81(2) reads as follows:
“Despite subsection (1), the employer is primarily responsible for an employee’s wages but proceedings against the employer under this Act do not have to be exhausted before proceedings may be commenced to collect wages from directors under this Part.”
[16] Subsection 81(2) does not limit an employee’s ability to prosecute litigation once it has been commenced. On the contrary, it suggests that the pre-conditions to liability in s. 81(1) do not pose any other restriction on litigation. A party has the absolute right to commence and prosecute litigation. Any limitation on those rights requires clear and specific language. Section 81(2) does not contain any limitation of any right. What it does, is make clear that s. 81(1) is not intended to restrict an employee’s right to litigate.
[17] In my view, the Master made no error in holding that the documents are relevant to a claim under s. 81 of the ESA.
(iii) Section 131 of the OBCA
[18] Master Abrams found the questions relevant to s. 131 of the OBCA on which the plaintiff also bases his claim. Section 131(1) holds directors liable for unpaid wages. Section 131(2) provides that:
“(2) A director is liable under subsection (1) only if,
(a) the corporation is sued in the action against the director and execution against the corporation is returned unsatisfied in whole or in part; or
(b) before or after the action is commenced, the corporation goes into liquidation, is ordered to be wound up or makes an authorized assignment under the Bankruptcy and Insolvency Act (Canada), or a receiving order under that Act is made against it, and, in any such case, the claim for the debt has been proved. 2002, c. 24, Sched. B, s. 27 (1).”
[19] Much like they did with s. 81 of the ESA, the defendants submit that s. 131(2) means that, although an employee might be able to commence an action against a director, it cannot prosecute that action until the corporation goes into liquidation, is ordered to be wound up, makes an assignment in bankruptcy or has a receiving order made against it as set out in s.131(2)(b).
[20] I cannot accept that submission.
[21] The defendants’ submission that an employee can commence an action against directors but not advance it makes even less sense with respect to s. 131 of the OBCA than it did with respect to s. 81 of the ESA.
[22] Section 131(2)(a) requires an employee to sue both the corporation and the director in the same proceeding. It holds a director liable only where an execution against the corporation has been returned unsatisfied in whole or in part.
[23] On the defendants’ argument, the section would require an employee to commence a proceeding against both the corporation and its directors. The employee would be required to prosecute the action against the corporation through to the stage of enforcing execution against it. However, the employee would, immediately after issuing the claim, have to put into abeyance that part of the proceeding that affected the directors and could only advance against the directors when execution against the corporation had been returned unsatisfied.
[24] Apart from the fact that the section does not say this, such an outcome would be grotesquely inefficient. It would duplicate costs by bifurcating documentary production and oral examination. It would lead to endless disputes about whether a question or document was relevant solely to corporate liability (which could be pursued) or to director liability, in which case it could not be pursued. It makes no sense for a court to impose such impractical limitations on litigation unless the statute expressly requires it.
[25] The defendants rely on Gill v. CPNI Inc., 2014 ONSC 5600 in support of its position. Gill is distinguishable. Gill was based on the companion provision contained in the Canada Business Corporations Act, R.S.C., 1985, c. C-44 (the “CBCA”). The CBCA provision does not, however, require the corporation and its directors to be sued in the same proceeding. The CBCA provision simply provides that directors are not liable unless the corporation has been sued for the debt and execution has been returned unsatisfied in whole or in part. In Gill, no judgment had been obtained against the corporation, yet the plaintiff was seeking summary judgment against the directors. Proceeding in that manner would have contravened the temporal limitations contained in the CBCA.
[26] The order of Master Abrams does not, however, contravene any of the limitations of the OBCA. Master Abrams did not grant judgment against the directors. She merely granted an order compelling an answer to a question on an examination for discovery. That is entirely consistent with the OBCA’s requirement that an employee sue both the corporation and the director in the same proceeding.
[27] As a result of the foregoing, I uphold the order of Master Abrams and dismiss the appeal.
[28] The parties have agreed to fix costs at $15,000. The defendants shall therefore pay the plaintiff costs of $15,000 within 30 days of this order.
Date: November 23, 2017
Koehnen J.