CITATION: PerHol Construction Ltd. v. 1698355 Ontario Limited et al., 2017 ONSC 7625
COURT FILE NO.: CV-15-0024
DATE: 2017-12-19
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
PERHOL CONSTRUCTION LTD.
R. Johansen, for the Plaintiff
Plaintiff
- and -
1698355 ONTARIO LIMITED, MELISSA HARRISON, and 2427087 ONTARIO INC.
R. Johns, for the Defendants
Defendants
HEARD: August 28, 2017 and December 4, 2017, at Thunder Bay, Ontario
Mr. Justice F. Bruce Fitzpatrick
Decision On Motion for Summary Judgment
[1] The defendant, Melissa Harrison, moves for summary judgment. She seeks an order that the claim be dismissed against her. The plaintiff, PerHol Construction Ltd. (“PerHol”), resists the motion.
Background
[2] This is a construction lien matter. The plaintiff’s claim is for construction services and materials supplied to a renovation project of a former movie theatre property located at 24 Court Street South in Thunder Bay (the “Project”). The construction contract was not formalized in one document. It was alleged to be an oral contract.
[3] Ms. Harrison moves for judgment on the basis that she was not a party to the construction contract and therefore has no liability to the plaintiff. There is no dispute that the plaintiff did provide construction services to the Project during the months of August, September, October and up to and including November 5, 2014.
[4] Ms. Harrison claims the construction contract was between the plaintiff and the defendant 2427087 Ontario Inc. (“242”). The plaintiff says at all material times the construction contract was between itself and Ms. Harrison exclusively in her personal capacity. In the submission of counsel for the plaintiff, 242 was made a party to the action solely on the basis that it is an owner of the premises to which the plaintiff’s lien attaches, and there is liability that potentially arises under the provisions of the Construction Lien Act R.S.O. 1990 c. C-30. However, the plaintiff was clear in its submission that the oral contract for construction services was between only Perhol and Ms. Harrison.
[5] The principle issue on this summary judgment motion is whether or not Ms. Harrison personally was a party to the construction contract at issue.
The Law
[6] This motion was brought pursuant to Rule 20. Recently, R.S.J. Warkentin in the decision Gravelle (c.o.b. as Codepro Manufacturing) v. Denis Grigoras Law Office, [2017] O.J. No. 2639, summarized the state of the law regarding summary judgment motions following the leading decision of the Supreme Court of Canada in Hyrniak v. Mauldin 2014 SCC 7 as follows:
19 A court must grant summary judgment if it is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence (Rules of Civil Procedure, RRO 1990, Reg 194, r 20.04(2)(a); Hryniak v Mauldin, 2014 SCC 7, at para. 47 [Hryniak]).
20 There is no genuine issue requiring a trial where the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. When the process allows the judge to make the necessary findings of fact, to apply the law to those facts, and it is a proportionate, more expeditious and less expensive means to achieve a just result, summary judgment is the appropriate remedy (Hryniak, at para. 49).
21 In determining whether or not there is no genuine issue requiring a trial, a court shall consider the evidence presented by the parties on the summary judgment motion. A judge may also weigh evidence, evaluate the credibility of a deponent and draw any reasonable inference from the evidence, unless it is in the interest of justice for such powers to be exercised only at trial (Rules of Civil Procedure, r 20.04(2.1); Hryniak, at para. 52).
22 In determining whether to apply Rule 20.04(2.1), the judge should determine whether a full appreciation of the evidence and issues required to make a dispositive finding can be achieved by way of summary judgment, without a trial. The evidence need not be equivalent to that expected at trial, but the judge must be confident that the dispute can be resolved fairly (Hryniak, at paras. 53, 57).
[7] The plaintiff also referred to a series of cases that deal with the provisions of the Ontario Business Corporations Act, R.S.O. 1990 c. B-16 (OBCA) relating to pre-incorporation contracts. In my view, for reasons I will explain later, I did not find these cases applicable given the facts as I find them in this matter. I will discuss the applicability of these cases in the “disposition” section of this judgment.
[8] At the beginning of the hearing I provided counsel with a copy of the decision of MacPherson J. (as he then was) in the case Gilvesy Construction v. Wellington Wood Inc., [1993] O.J. No. 2776 and asked for their comments on the applicability of the law set out in that decision to the facts at issue. The decision was given on a motion for summary judgment in a construction case where the issue was who exactly were parties to the contract. In the decision MacPherson J. stated:
11 I do not accept that the internal intention of the corporate defendants governs the contract. What governs the contract is the objective conduct of both parties to the contract, not the subjective intention of one of them. This principle of contract law was clearly expressed by Ritchie J. in Saint John Tug Boat Co. Ltd. v. Irving Refinery Ltd., 1964 CanLII 88 (SCC), [1964] S.C.R. 614 at 621-2:
The test of whether conduct, unaccompanied by any verbal or written undertaking, can constitute an acceptance of an offer so as to bind the acceptor to the fulfilment of the contract, is made the subject of comment in Anson on Contracts, 21st ed., p. 28, where it is said:
The test of such a contract is an objective and not a subjective one, that is to say, the intention which the law will attribute to a man is always that which his conduct bears when reasonably construed, and not that which was present in his own mind. So if A allows B to work for him under such circumstances that no reasonable man would suppose that B meant to do the work for nothing, A will be liable to pay for it. The doing of the work is the offer; the permission to do it, or the acquiescence in its being done, constitutes the acceptance.
In this connection reference is frequently made to the following statement contained in the judgment of Lord Blackburn in Smith v. Hughes, which I adopt as a proper test under the present circumstances:
If, whatever a man's real intention may be he so conducts himself that a reasonable man would believe that he was consenting to the terms proposed by the other party and that other party upon that belief enters into a contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms.
The Facts
[9] The following facts are not in dispute. I so find them to be the facts in this case
[10] Sometime prior to May 2014, Ms. Harrison came up with a novel business idea, at least for Thunder Bay. She determined to operate a business called Maple Moose Adventures. This business would operate an indoor children’s play park in a leased premises located at 24 Court Street South in Thunder Bay.
[11] 24 Court Street South had previously housed a Paramount movie theatre. However, since approximately 2000, a business catering to children’s events called Wiggles and Giggles had operated in the old theater space. The existing operator of Wiggles and Giggles and the owner of the building agreed it was time for a change.
[12] The space had to be renovated to accommodate the business envisioned by Ms. Harrison. Substantial construction work was required. To accomplish that, Ms. Harrison contacted a representative of the plaintiff.
[13] Ms. Harrison was concerned about her idea being appropriated. To that end, she required the plaintiff to enter in to a Confidentiality Agreement (“the Agreement”). It was fairly comprehensive, consisting of four pages and 13 paragraphs.
[14] The Agreement was clearly styled as being between “MAPLE MOOSE ADVENTURES (a company to be incorporated) (Hereinafter referred to as the “Company”) of the First Part and PerHol Construction Ltd (Hereinafter referred to as the “Service Provider”) of the Second Part.
[15] Among other terms, it contained paragraph 3 that read:
It is further agreed that the Confidential Information will be used solely for the purpose of evaluating a possible transaction between the Company and any of its shareholders, and the Service Provider, and will not directly or indirectly be used by the Service Provider in any manner whatsoever adverse in interest to the interests of the Individual
[16] The Agreement was signed by two parties. Ms. Harrison signed for the “Company” on July 7, 2014 on a line above the words “I have authority to bind the Corporation MELISSA M. A. HARRISON Owner/Operator MAPLE MOOSE ADVENTURES (a company to be incorporated). Mr. Perrier signed for the “Service Provider” on July 9, 2014 on a line above the words “I have authority to bind the Corporation KEN PERRIER Owner/Operator PER HOL CONSTRUCTION LTD.
[17] The defendant 2427087 Ontario Inc. was incorporated on July 18, 2014.
[18] With the Agreement in place, Ms. Harrison corresponded with Mr. Perrier on behalf of the plaintiff to negotiate the terms of the contract.
[19] On July 23, 2014, Ms. Harrison sent an email to an architect, John Stephenson of a local Thunder Bay architects firm, FORM Architecture Engineering. It contained an updated draft kitchen design which was to be forwarded to the plaintiff in order to assist them in preparing a quote for the proposed work on the Project. The plaintiff received this email on or about July 31, 2014.
[20] Among other things, the email stated “Our legal entity and contact is 2427087 Ontario Incorporated o/a Maple Moose Adventures 24 Court Street South Thunder Bay ON P7B 2W3”.
[21] A quote was provided by the plaintiff on August 6, 2014. It was addressed to “Maple Moose Adventures”.
[22] On or about August 12, 2014, Mr. Perrier spoke to Ms. Harrison. During that conversation, Ms. Harrison told Mr. Perrier that the budget as set out in the August 6, 2014 quotation was accepted. This was in spite of the fact the concluding line of the quote read “The above prices are only budgets and PerHol Construction Ltd. is in no way bound to these prices in anyway”.
[23] An oral contract was formed at or about August 12, 2014. The plaintiff was one of the contracting parties. It is disputed between the parties as to whether or not Ms. Harrison or 242, or both, were also parties to this oral contract. It is not disputed that 242 had been incorporated and was in existence as of August 12, 2014,
[24] Construction work commenced on the Project after August 12, 2014.
[25] On August 26, 2014 the plaintiff was copied on correspondence to FORM Architecture Engineering which had originated from Ms. Harrison. It was on letterhead of 242. The letter authorized commencement of the construction work, except for “play structure dismantling and truck loading” which had been completed as of that date. Also, the letter noted that design drawings were to be furnished to the plaintiff in order to obtain fixed cost estimates for the work to be completed.
[26] On August 28, 2014 a letter, on the letterhead of 1698355 Ontario Limited to FORM Architecture Engineering, was copied to the plaintiff. It provided an authorization for 242 to make application to the City of Thunder Bay for necessary permits for leasehold improvements to 20-22-24 Court Street as approved by 16982355 Ontario Limited.
[27] On September 10, 2014 the plaintiff accepted a bank draft drawn on a local credit union in the amount of $10,000.00 as part payment for the construction services and material provided to that date. The reference line on the bank draft was “2427087 Ontario Inc.”
[28] On October 2, 2014, Ms. Harrison sent an email to the plaintiff attaching drawings and dealing with how the work was proceeding. The email was signed “Melissa Harrison Maple Moose Adventures”
[29] A building permit for the project was issued by the City of Thunder Bay on October 9, 2014. The “applicant” was noted to be “Melissa Harrison, Maple Moose Adventures”.
[30] Perhol issued a progress invoice on October 9, 2014. It did not contain a reference to any company or person on the actual invoice issued by PerHol. The invoice was emailed to Ms. Harrison.
[31] Ms. Harrison contacted Mr. Perrier by telephone on November 5, 2014 to advise that PerHol should stop work on the Project. PerHol withdrew its forces from the site as a result.
[32] PerHol issued a progress invoice on December 17, 2014 which was addressed to “Maple Moose Adventures”.
[33] In my view, all of these facts were not contested by the parties. I make these express findings of fact in this matter as noted above.
Disposition
[34] In light of the legal framework concerning motions for summary judgment discussed earlier, and based on the affidavit and transcript material before the Court, and the facts as I have found them based on this material, I am of the view that there is no genuine issue for trial concerning whether or not Ms. Harrison is a party to the construction contract in this action. On the basis of the material filed, I have weighed the evidence, assessed the credibility of both Ms. Harrison and Mr. Perrier, the deponent on behalf of the plaintiff, I draw a number of inferences which I find reasonable. It is not in the interests of justice for these powers to be exercised at a trial, at least in respect of the narrow issue contained in the notice of motion before the Court.
[35] On the basis of these findings of fact, I also find that the defendant, Melissa Harrison, was not a party to the oral construction contract at issue in this matter. I do so for reasons that follow.
[36] The evidence on behalf of the plaintiff was given by Ken Perrier. He is a principal of the plaintiff. He was cross-examined on his affidavit evidence. He steadfastly maintained that the plaintiff was at all times dealing exclusively with Ms. Harrison and not 242. For a variety of reasons, I do not find Mr. Perrier’s evidence credible. Where there is a conflict in the evidence, I prefer the evidence of Ms. Harrison who unequivocally testified that she had not contracted personally with PerHol but rather was acting in a corporate capacity.
[37] I do not believe the evidence of Mr. Perrier and prefer the evidence of Ms. Harrison, first and foremost because the existence of the Confidentiality Agreement that Mr. Perrier entered into on behalf of the plaintiff, with Ms. Harrison on July 9, 2014. Ms. Harrison signed the document “MELISSA M. A. HARRISON Owner/Operator MAPLE MOOSE ADVENTURES (a company to be incorporated)”.
[38] The plaintiff argued that because the Agreement was not expressly adopted by 242, the Agreement has no bearing on the issue before the Court. I disagree.
[39] There are two separate contracts at issue in this matter. They are directed at two very different things. The Agreement was designed to protect an asset of a company to be incorporated. The asset was the concept of an indoor play area business. In paragraph 3 of the Agreement the text makes it clear that the confidential information sought to be protected was going to be evaluated by Perhol for a possible transaction between it and a corporate entity, yet to be incorporated, Maple Moose Adventures.
[40] Contrasted to the Agreement was the construction contract which was directed at obtaining the services and materials necessary to take the concept protected by the Agreement to reality. However, that does not make the contracts interdependent to the extent that enforceability of one affects the enforceability of the other. In my view, the Agreement is a piece of evidence that can be used to objectively assess the intentions of the parties as to who was going to be the actual parties to the construction contract at issue in this litigation.
[41] There is no reason for the plaintiff to enter into a confidentiality agreement except as it related to the Project, and the parties who would actually be engaged in the Project. The only confidential information at issue in that written contract dated July 9, 2014, related to the operator of the Project. The document clearly sets out that a corporate entity and not Ms. Harrison personally will operate the Project. This is a critical piece of evidence as to the state of mind of the respective parties at the time the construction contract was formed.
[42] I do not accept Mr. Perrier’s evidence that the reference to a corporation was only related to the Agreement and nothing more. This statement defies commercial sense. The Agreement was necessary as the business concept that was being developed was novel, at least in the mind of Ms. Harrison, who clearly indicated in the Agreement that the asset would be operated by a company to be incorporated. In the end, it is clear from the Agreement that a corporate asset was being sought to be protected. There would be no reason for Ms. Harrison to require this document unless the plaintiff was going to contract with the corporation whose confidential information was to be protected.
[43] The plaintiff referred and relied on several cases, the most recent of which was the decision of the Ontario Court of Appeal in Southside Property Management (London) Inc. v. Sibold Estate, [2004] O.J. No. 1701. That decision at paragraph 8 set out the settled law that section 21 of the OBCA was designed to overcome the confusing state of the common law pertaining to pre-incorporation contracts and to avoid the need to determine the intention of the parties. The decision also holds that a person who enters in to a contract in the name of a corporation before it comes in to existence “is personally bound by the contract and is entitled to the benefits thereof”.
[44] This case, and the line of earlier cases referred to by the plaintiff such as Szecket v. Huang, 1998 CarswellOnt 4783 (ONCA), and 1394918 Ontario Ltd. v. 1310210 Ontario Inc., 2002 CarswellOnt 8 (ONCA) would all be very relevant if the plaintiff was suing about some benefit derived expressly from the confidentiality agreement. But that is not the case here. The plaintiff’s cause of action against Ms. Harrison is not in any way related to the enforceability of the Agreement. The Agreement is just a piece of evidence; it does not form the basis of the plaintiff’s cause of action. This does not, however, make it irrelevant to the matters at issue on this motion.
[45] In my view, s. 21 of OBCA does not apply to the facts of this case. The construction contract at issue was not a pre-incorporation contract. It was formed between the plaintiff and 242 after 242 was incorporated. The provisions of the Act and the cases relied upon by the plaintiff do not apply.
[46] Counsel for Ms. Harrison characterized the Agreement as a kind of “notice instrument” as it gave a clear indication to PerHol that it was going to be asked to provide service to a company to be incorporated. This is an apt description.
[47] Mr. Perrier was expressly cross-examined on his affidavit evidence on June 6, 2016. He acknowledged at page 34, Q. 26, that the project being dealt with and which was the subject of his obligation of confidence was “the development of a park inside a building”. This answer flies in the face of his assertion at paragraph 4 of his affidavit that “I understood the reference to a future company was specifically related to this Confidentiality Agreement and nothing more.”
[48] His denial of the clear meaning of the Agreement was a commercially absurd assertion. It serves to lessen and eliminate Mr. Perrier’s credibility in my view.
[49] While the operation of law, and the failure of 242 to expressly adopt the Agreement, may have made Ms. Harrison personally liable under it, this fact did not convey a corresponding benefit to PerHol to ignore the obvious intention that the upcoming Project was to be undertaken by a corporation and not Ms. Harrison personally. That is clear from the plain language of the Agreement.
[50] In addition to the Agreement, there were three other examples of notice and indeed confirmation to the plaintiff that it was not dealing with a natural person, but rather a corporation. In my view, this is evidence that objectively leads to a conclusion that Ms. Harrison was not a party to the contract and a preference for her evidence over that given by Mr. Perrier. These aspects of notice and confirmation were as follows.
[51] On July 31, 2014, Mr. Perrier received a copy of an email, which Ms. Harrison had forwarded to the project architect. It stated “our legal entity and contact is 2427087 Ontario Incorporated o/a Maple Moose Adventures 24 Court Street South Thunder Bay, Ontario P7B 2W3”. Mr. Perrier deposes he did not understand the reference. This is a statement that lacks credibility in the face of the clear use of “Maple Moose Adventures” in the Agreement. In my view, as of July 31, 2014, Mr. Perrier was clearly on notice that his company was providing construction services to a corporate entity and not to Ms. Harrison personally.
[52] On August 6, 2014, PerHol produced the construction budget for the project. It was addressed to “Maple Moose Adventures”. If PerHol was dealing with Ms. Harrison personally, one would have expected it to have made that plain and obvious by addressing it to her. At that time, Mr. Perrier was on notice that Ms. Harrison was involved with a company, 242 that was operating as Maple Moose Adventures.
[53] The plaintiff points out that Maple Moose Adventures was never formally registered as a business name of 242. In this matter, I find that this fact does not serve to resurrect Mr. Perrier’s credibility on the point of what kind of entity, personal or corporate, had contracted with his company to perform services. Objectively, the issue is who were the parties to the contract. The Agreement and the ongoing correspondence after the oral construction contract was entered into, make it clear that Mr. Perrier on behalf of PerHol expected to and did contract with a corporate entity. I find that PerHol did not expect to, nor did it, contract with Ms. Harrison.
[54] On August 26, 2014, 242 sent the project architect a letter, on its letterhead (styled 2427087 Ontario Incorporated o/a Maple Moose Adventures). It was copied to Mr. Perrier. The letter was an authorization to proceed with at least four new phases of construction work at 24 Court Street South. In my view, this was further objective evidence that the oral contract was made between Perhol and 242.
[55] I adopt the reasoning of MacPherson J. (as he then was) in Gilvesy Construction, supra which in turn relied on the Supreme Court of Canada decision in Saint John Tug Boat Co. Ltd. v. Irving Refinery Ltd, 1964 CanLII 88 (SCC), [1964] S.C.R. 614. When it comes to parties to a contract, it is not a subjective test, but rather an objective one that guides an assessment of the evidence. That is why I do not accept Mr. Perrier’s repeated assertions he was dealing with Ms. Harrison and not a corporation. The circumstances surrounding the formation of the agreement, including the written documentation and the conduct of the parties, make it clear the parties intended the contract would bind 242 and not Ms. Harrison personally.
[56] In its factum at paragraph 28, PerHol acknowledged that representatives of a corporation do not normally attract liability for acts of the corporation. A court can pierce the corporate veil and impose personal liability on a corporate representative where a court concludes that either the corporation was created for an illegal, fraudulent or improper purpose or the individual exercising complete control over the corporation is using it for fraudulent purposes or as a shield for liability for illegal activity (Miquelanti Ltda. v. FLSmidth & Co., 2011 ONSC 3293 Perell J. at paras. 19 - 21). In my view, there was no evidence on this motion that remotely pointed to fraud or any attempt to misuse a corporate vehicle by Ms. Harrison during the formation of the contract, when its terms were agreed to and during the time PerHol delivered construction services to the Project. None of the circumstances of fraud or malfeasance set out in the paragraphs noted from Miquelanti are present in this matter.
[57] After reviewing the record, I believe the evidence will not get any stronger if the matter proceeds to trial. The issue was straightforward and capable of being resolved on motion based on the evidence filed. There is no genuine issue requiring a trial. This motion was a proportionate, more expeditious and less expensive means to achieve a just result, which in this case, is an order dismissing the PerHol claim against Ms. Harrison.
[58] Accordingly, summary judgment is granted in favour of the defendant, Melissa Harrison. Order to go that the claim in this matter by PerHol Construction Ltd. against Melissa Harrison is dismissed with costs.
Costs
[59] At the close of the hearing counsel for the moving party provided me with a bill of costs. I took it from that bill, that the moving party was only seeking costs on a partial indemnity basis. I agree with this approach. Further, in order to assist the parties in their attempts to settle costs, I make the following comments.
[60] My review of the disbursements claimed, $1,088.25, seemed reasonable and proportionate given that cross-examinations were held and transcripts produced for this motion. I also note that the partial indemnity rate charged by counsel for the defendant, moving party at $250 per hour was fair for counsel of 33 years’ experience. I will not be allowing any clerk time.
[61] In the event the parties cannot agree on costs in light of the foregoing, I need only hear from counsel for the plaintiff in writing as to an appropriate quantum of the fee portion that his client should pay to Ms. Harrison. These comments should not exceed two pages in length. As counsel for the plaintiff did not have a bill of costs prepared at the time of the hearing, it would serve little purpose in attempting to file one now, particularly as this matter was heard on two different days, August 28, 2017 and December 4, 2017.
[62] If I do not have the written cost submissions of the plaintiff by January 19, 2018, the issue of costs will be deemed to have been settled with an order to go that the plaintiff, PerHol Construction Ltd., pay Melissa Harrison partial indemnity costs in an amount (less clerk time) set out in the bill of costs filed on December 4, 2017. The costs shall be payable on or before January 31, 2018.
_______ “original signed by”__________
The Hon. Mr. Justice F. Bruce Fitzpatrick
Released: December 19, 2017
CITATION: PerHol Construction Ltd. v. 1698355 Ontario Limited et al., 2017 ONSC 7625
COURT FILE NO.: CV-15-0024
DATE: 2017-12-19
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
PERHOL CONSTRUCTION LTD.
Plaintiff
- and -
1698355 ONTARIO LIMITED, MELISSA HARRISON, and 2427087 ONTARIO INC.
Defendants
JUDGMENT ON SUMMARY JUDGMENT MOTION
Fitzpatrick J.
Released: December 19, 2017
/sab