Court File and Parties

COURT FILE NO.: CV-16-3825-00 DATE: 2019 06 12 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

THOMAS HAGGAN, Plaintiff

– and –

MAD DASH TRANSPORT LTD., KASTRIOT ADEMAJ and LEO BURNACCIONI, Defendants

Counsel: Margaret Louie, for the Plaintiff John Gray, for the Defendant

HEARD: February 19, 2019

REASONS FOR DECISION

Overview

[1] This is a motion pursuant to r. 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The individual defendants, Kastriot Ademaj and Leo Burnaccioni, seek to dismiss the claim against them personally on the basis that it discloses no reasonable cause of action. The plaintiff moves under r. 26 of the Rules of Civil Procedure to amend his statement of claim to include claims against the said defendants for intentional infliction of emotional distress in their personal capacity.

Review of the Pleadings

[2] The plaintiff, Thomas Haggan, commenced an action in the Superior Court of Justice in June 2018 seeking damages against the defendants, jointly and severely, for breach of contract, unjust enrichment and intentional infliction of emotional distress. These claims arise from an alleged breach of his employment contract with the corporate defendant Mad Dash Transport Ltd. (“Mad Dash”) for work as a commission-based sales agent. Haggan has also sought damages for past and future commission income and punitive and aggravated damages as a result of the alleged breach.

[3] According to the statement of claim, the defendant Mad Dash is a corporation carrying on business as a light truck transport company with same-day rush courier and transportation services to small businesses. It is alleged that the defendants Ademaj and Burnaccioni are officers, directors and shareholders of Mad Dash. It is also alleged that Ademaj is the vice president of Mad Dash and Burnaccioni is a co-founding partner and chief operating officer of Mad Dash.

[4] The statement of claim alleges that in or about October 2012, Haggan entered into a contract with Mad Dash to work as a commission-based sales agent. In or around March 2014, Dario Sguigna sold his interest in Mad Dash to Burnaccioni, who then sold an interest in the business to Ademaj. Haggan alleges that after this transaction, Burnaccioni and Ademaj attempted to renegotiate the terms and conditions of his contract with Mad Dash, which he refused to do. Haggan further claims that on or about December 22, 2014, the defendants unilaterally cut his commission income in half in breach of the contract. Haggan alleges that on or about February 27, 2015, the defendants arbitrarily terminated the contract and refused to pay him outstanding commissions. On or about March 18, 2015, the defendants purported to terminate Haggan’s employment with Mad Dash with cause.

[5] Haggan has claimed that the defendants breached the contract with him by failing to pay him the agreed-upon commission income and have been unjustly enriched by doing so. He also claimed that the acts of the defendants were high-handed, callous, deliberate and indifferent to the financial and psychological consequences to him, warranting an award of punitive damages. Due to the breach of contract, bad faith and negligent acts of the defendants, Haggan seeks aggravated damages for his emotional suffering, mental distress, humiliation and loss of enjoyment of life.

[6] The defendants filed a detailed 56-paragraph statement of defence to the statement of claim on October 31, 2018. Six months later, Ademaj and Burnaccioni brought this motion.

[7] Haggan seeks leave to amend the statement of claim to add the following paragraphs:

18. The Plaintiff pleads that by unilaterally repudiating the contract and failing to pay the agreed upon commission income, the conduct of the Defendants, Kastriot Ademaj and Leo Burnaccioni, was flagrant or outrageous,
19. The Plaintiff pleads that the Defendants, Kastriot Ademaj and Leo Burnaccioni, engaged in conduct intended to cause the Plaintiff profound emotional and financial distress,
20. The Plaintiff pleads that as a result of the actions of the Defendants, Kastriot Ademaj and Leo Burnaccioni, the Plaintiff has suffered psychological injuries, including but not limited to, emotional suffering, mental distress, humiliation, and loss of enjoyment of life.

[8] Haggan’s position is that the proposed amendments disclose a cause of action against Ademaj and Burnaccioni separate and apart from the claim against Mad Dash.

[9] As is proper, the only material filed in support of the motion was a copy of the pleadings. I have not considered any other evidence.

[10] For the reasons that follow, the defendants’ motion to strike the claim against Ademaj and Burnaccioni is granted and leave to amend the statement of claim is denied.

Position of the Parties

[11] The position of Ademaj and Burnaccioni is that as officers and directors of Mad Dash, they are protected from liability for acts carried out under a corporate name. Their position is that there is no basis on the facts pleaded to pierce the corporate veil and attach liability to them personally for an alleged breach of contract between Haggan and Mad Dash.

[12] The position of Haggan is two-fold. First, he submits that the court ought to grant leave to amend the statement of claim to plead the fundamental elements of the tort of intentional infliction of emotional distress as against the individual defendants Ademaj and Burnaccioni, which discloses a cause of action against them personally. Secondly, he pleads that the relief sought ought to have been advanced as a summary judgment motion in order for evidence to be introduced to determine if the corporate veil should be pierced to attach liability to Ademaj and Burnaccioni personally.

Analysis

Does Filing a Statement of Defence Preclude the use of r. 21.01(1)(b)?

[13] While Haggan did not advance the argument that the appropriate time to bring a motion under r. 21.01(1)(b) is prior to filing a statement of defence, I will address it in these reasons, given the decision in Brozmanova v. Tarshis, 2018 ONCA 523, 81 C.C.L.I. (5th) 1.

[14] In Brozmanova, at paras. 10-12, the court found that the Rules of Civil Procedure set out two procedural ways by which a party can seek to dispose of a proceeding on a contested basis. One is using an evidence-based approach that includes a summary judgment motion pursuant to r. 20.04. The second procedural device is a law-based approach which asks the court to determine a question of law that may end all or a part of a proceeding. One such device is r. 21.01(1)(b), where the court is asked to determine if there is a reasonable cause of action.

[15] Rule 21.01(1)(b) focuses on the legal sufficiency of a pleading. The rule enables a defendant, prior to defending, to move to strike out a claim on the basis that it is plain and obvious, even if the facts as pleaded can be proven at trial, that the plaintiff’s statement of claim discloses no reasonable cause of action: Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, at pp. 978-9, 980. In Brozmanova, at para. 26, the court found that when a defence is filed, it usually signals that the plaintiff has advanced a legally-sufficient claim that the defendant intends to defend on the basis set out in the defence.

[16] The statement of defence filed by the defendants denied, in detail, Haggan’s allegation that Ademaj and Burnaccioni breached a contract between Mad Dash and Haggan. The defendants deny that they were unjustly enriched; that Haggan was treated in an unfair, high-handed, callous or indifferent manner; or that they acted in bad faith.

[17] In Arsenijevich v. Ontario (Provincial Police), 2019 ONCA 150, on a motion to strike under r. 21.01(1)(b), a statement of defence had been filed by the defendants prior to bringing the motion to strike. The court found that where a statement of claim is facially deficient and largely incomprehensible, filing a defence is not fatal to the defendants’ motion under r. 21.01(1)(b): at para. 7. The court also found that it was evident from the contents of the defence that the defendants took issue with the legal sufficiency of the claim.

[18] In paragraph 50 of the statement of defence, the defendants plead that there is no basis in fact or law upon which to hold Ademaj and Burnaccioni jointly or severally liable for any alleged breach of contract between Mad Dash and Haggan. It is pleaded that at all times, they acted within the scope of their duties as employees of Mad Dash. As such, Ademaj and Burnaccioni, despite having filed a defence, did call into question the legal sufficiency of the pleading.

[19] Accordingly, while a statement of defence has been filed, I find that it is not fatal to the defendants moving under r. 21.01(1)(b), as they raised an issue of the legal sufficiency of the claim against Ademaj and Burnaccioni personally in that pleading. This differs from the facts in Brozmanova, where the court found that the defendants, in their statement of defence, failed to raise any issue about the legal sufficiency of the pleading. Furthermore, the statement of defence was also filed on behalf of Mad Dash, who is not disputing the sufficiency of the pleading on this motion.

Should the Claim against the Individual Defendants be struck as Disclosing No Reasonable Cause of Action?

[20] The principles governing motions to strike pleadings are not in dispute. As set out in Knight v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 17, unless there is no reasonable prospect of success, a claim will not be struck. In Knight, at para. 19, the court noted that the power to strike is essential to effective and fair litigation. It ensures that those claims that have some chance of success go on to trial. The court cautioned, however, that the motion to strike is a tool to be used with care, as the law is not static and the court should err on the side of permitting a novel but arguable claim to proceed to trial: at para. 21. It is incumbent on the plaintiff to plead the facts upon which it relies in making a claim: at para. 22.

[21] The allegations in the statement of claim pertaining to Ademaj and Burnaccioni are that they are officers and shareholders of Mad Dash and that they attempted to renegotiate the terms and conditions of Haggan’s contract with Mad Dash. That is the only portion of the pleading naming Ademaj and Burnaccioni personally. The balance of the pleading references either Mad Dash or the “defendants”, such as pleading that the defendants breached the contract with Haggan and were unjustly enriched by failing to pay Haggan commission income owing to him. The pleading further alleges that the acts of the defendants were high-handed and callous and warrant an award of punitive and aggravated damages.

[22] The issue in dispute is whether Ademaj and Burnaccioni, as officers, shareholders and employees, can be liable for the actions of Mad Dash, the corporation. The plaintiff is seeking to pierce the corporate veil and attach liability for a corporation’s actions to its officers, directors or directing minds.

[23] In Yaiguaje v. Chevron Corporation, 2018 ONCA 472, 141 O.R. (3d) 1, leave to appeal to SCC refused, 2019 CarswellOnt 5162 (SCC), the court revisited the principles surrounding piercing the corporate veil. The court reaffirmed, at para. 65, the principles in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (C.J. (Gen Div.), at p. 433, aff’d on appeal, 1997 CarswellOnt 3496 (C.A.), where Sharpe J. found that there are only three circumstances where the court will pierce a corporate veil:

1. When the court is construing a statute, contract or other document;
2. When the court is satisfied that a company is a “mere façade” concealing the true facts; and
3. When it can be established that the company is an authorized agent of its controllers or its members, corporate or human.

[24] The court found that an independent, just and equitable ground for piecing the corporate veil has been repeatedly rejected by the court in favour of the approach taken in Transamerica: at para. 67. That approach is consistent with the principle reflected in various business statues in Canada on the rule of corporate separateness: at para. 70. As in Shoppers Drug Mart Inc. v. 6470360 Canada Inc., 2014 ONCA 85, 372 D.L.R. (4th) 90, leave to appeal to SCC refused, 2014 CarswellOnt 8632 (SCC), it is where the corporate form is being abused such that it is not a truly separate corporation and is being used to facilitate fraudulent or improper conduct that the law recognizes an exception to the rule.

[25] The plaintiff in this case moves under the second circumstance enunciated by the Court of Appeal in Yaiguaje. A corporation will be a mere façade if it is completely dominated and controlled by the defendants, and if it was incorporated for a fraudulent or improper purpose or used by the defendants as a shell for improper activity: Yaiguaje, at para. 66; and Transamerica, at p. 433.

[26] There are no allegations or factual underpinnings in the pleadings that support either of those requirements. There is no indication that the corporation was and is a mere puppet of the defendants. Nor is there an allegation in the statement of claim that Mad Dash was being used to facilitate illegal, fraudulent or improper conduct. As pleaded by Haggan, its business purpose was to provide same-day rush courier services to small businesses. As there is no allegation that Mad Dash was being used as a shield for fraudulent or improper conduct, there is no basis to pierce the corporate veil.

[27] When dealing with claims against officers or directors of a corporation, the case law is clear that absent an allegation of fraud, deceit or dishonesty, courts have rarely found that directing minds or principals are liable for the actions of corporations. In Montreal Trust Co. of Canada v. SoctiaMcLeod Inc. (1995), 26 O.R. (3d) 481 (C.A.), at pp. 490-491, the Court of Appeal found:

The decided cases in which employees and officers of companies have been found personally liable for actions ostensibly carried out under a corporate name, are fact-specific. In the absence of findings of fraud, deceit, dishonesty or want of authority on the party of employees or officers, they are also rare…. In every case, however, the facts giving rise to personal liability were specifically pleaded. Absent allegations which fit within the categories described above, officers or employees of limited companies are protected from personal liability unless it can be shown that their actions are themselves tortious or exhibit a separate identity or interest from that of the company so as to make the act or conduct complained of their own.

[28] The plaintiff has plead causes of action for breach of contract, unjust enrichment and punitive and aggravated damages, all flowing from the termination of Haggan’s employment with Mad Dash and the nature or how that termination occurred. There is no allegation of any tortious conduct on the part of Ademaj or Burnaccioni that is separate from Mad Dash. There is no allegation that Ademaj or Burnaccioni acted outside the scope of their authority to pursue an interest separate from Mad Dash. The pleading is clear that their actions were inextricably intertwined with Mad Dash.

[29] Throughout the statement of claim, references are made to “the defendants,” which includes the corporate and individual defendants. In Twelve Gates Capital Group v. Mizrahi Development Group, 2018 ONSC 7656, at para. 25, Nishikawa J. found that a plaintiff cannot avoid having their pleadings struck by making allegations against “the defendants” generally. She referred to 460635 Ontario Limited Ltd. v. 1002953 Ontario Inc. (1999), 127 O.A.C. 48 (C.A.), at paras. 7-8, where the Court of Appeal held that “properly pleaded” as it relates to personal liability of corporate directors, officers, and employees must be read as “specifically pleaded”. That is, a separate claim must be stated against the individual in his/her personal capacity.

[30] Haggan’s pleading refers to “the defendants” as plural throughout the pleading. There is no allegation that either Ademaj or Burnaccioni entered into a contract with Haggan personally. The pleading does not allege that Ademaj or Burnaccioni benefited personally from the plaintiff’s work or were personally unjustly enriched by failing to pay him commission. The allegations are vague and non-specific against them personally. There is only one paragraph where there is specific reference to Ademaj and Burnaccioni attempting to renegotiate the terms of Haggan’s contract with Mad Dash. The balance of the claims against the individual defendants are the same as the claims against the corporate defendant. There is, in fact, no distinction, as the pleading refers to Mad Dash or “the defendants”. Absent a separate or differentiated claim against Ademaj or Burnaccioni, there is no reasonable cause of action against them personally as officers, shareholders and employees of Mad Dash.

[31] In TSCC Corporation Number 2123 v. Times Group Principals, 2018 ONSC 4799, at para. 68, Allen J. found that a plaintiff cannot establish liability of directors or officers by simply converting a straightforward action against a corporation for breach of contract and breach of fiduciary duty arising out of that contract into a personal action against the officers or directors of the corporation.

[32] In this case, based on a plain reading of the statement of claim, it is evident that the plaintiff is attempting to convert a straightforward action against Mad Dash for breach of contract and unjust enrichment arising from that breach into a personal action against the officers of the corporation.

[33] As in Normart Management Ltd. v. West Hill Redevelopment Co. (1998), 37 O.R. (3d) 97 (C.A.), at para. 18, in Haggan’s pleading, there is no factual underpinning to support an allegation that the individual defendants were at any time acting outside of their capacity as directors or officers of Mad Dash, of which they were the directing minds. Liability does not attach to the individual defendants merely by virtue of the possibility that they stood to gain from the termination of Haggan’s employment as a result of their financial positions with Mad Dash. There is no allegation that the individual defendants benefitted personally by terminating Haggan’s contract and not paying him commission income. If they did benefit, it was in their capacity as directors and officers of Mad Dash.

[34] A corporation is an inanimate legal entity. It can only operate through the actions of its directors, officers and employees. They take steps on behalf of the corporation by entering into negotiations, signing and terminating contracts. The corporation’s legal actions can only be assessed through the conduct of its officers, directors and employees. In order to find those individuals personally liable for actions taken on behalf of the corporation, there must be some activity that takes them out of their role as directing minds of the corporation: Normart, at para. 18.

[35] In his pleading, Haggan does not plead any actions on the part of Ademaj or Burnaccioni that are independent of the actions they took on behalf of Mad Dash in negotiating the terms of Haggan’s employment with Mad Dash and the termination of his contract. According to the statement of claim, Haggan entered into a contract with Mad Dash and not the individual defendants personally. It is that contract and its breach that is the foundation of Haggan’s claim for damages. The claims against the individual defendants are based on their actions as directing minds of Mad Dash in entering and then terminating the agreement. There is no separate and distinct act pleaded on the part of either Ademaj or Burnaccioni giving rise to a cause of action against them personally.

Should Leave be Granted to the Plaintiff to Amend the Statement of Claim?

[36] Haggan seeks leave to amend the statement of claim to add claims of intentional infliction of emotional distress against Ademaj and Burnaccioni personally. The proposed amendment states that their conduct was flagrant or outrageous in unilaterally terminating the contract with Haggan. He also seeks to add a claim that they engaged in actions intended to cause Haggan emotional and financial distress, and that as a result of their actions, they caused Haggan psychological injuries.

[37] Rule 26.01 of the Rules of Civil Procedure presumptively requires the court to permit the amendment of a pleading, absent prejudice that is not compensable by costs or an adjournment. However, as stated by the Court of Appeal in 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co., 2017 ONCA 42, 135 O.R. (3d) 694, at para. 25, the court must allow the amendment unless the pleading discloses no reasonable cause of action.

[38] In this case, no additional facts are pleaded in support of the proposed amendment. The allegation that the individual defendants caused intentional infliction of emotional distress is a bald allegation unsupported by any facts pleaded against the individual defendants other than as directors/officers of Mad Dash. The proposed amendment is nothing more than an attempt to window dress an already deficient claim against the individual defendants. Again, it is an attempt by Haggan to convert an action against the corporate defendant for damages flowing from breach of contract, unjust enrichment and aggravated and punitive damages into a claim against the directing minds personally. Absent any facts pleaded to support a separate cause of action against the individual defendants personally, such an amendment, even if permitted, would still not provide a reasonable cause of action. As such, there is no basis upon which to grant leave to amend the statement of claim.

Should the Issue Proceed by way of a Summary Judgment Motion?

[39] Haggan’s position is that evidence is required by way of a summary judgment motion to determine if the corporate veil should be pierced. I do not agree. Rule 21.01(1)(b) is the means by which claims can be summarily dismissed for failing to disclose a cause of action. This was the rule by which the court made similar findings in TSSC, Twelve Gates and Normart. I do not require any evidence to be satisfied that the statement of claim discloses no cause of action against Ademaj and Burnaccioni.

Conclusion

[40] The claim against Ademaj and Burnaccioni is dismissed without leave to amend.

Costs

[41] The defendants were successful in striking the claim against Ademaj and Burnaccioni. Haggan was not successful in his motion to amend his statement of claim. The defendants are therefore entitled to their costs.

[42] If the parties cannot agree on costs, they may file written submissions on that issue. The defendants shall file their written submissions, to a maximum of two pages, double-spaced, and their Bill of Costs by July 3, 2019. The plaintiff shall file his reply submissions, to a maximum of two pages, double-spaced, by July 10, 2019. One of the issues the parties should address in their submissions is the timing of the defendants’ motion under r. 21.01(1)(b) and whether or not there was a delay in bringing this motion that should be considered when I consider costs.

Released: June 12, 2019 L. Shaw J.