COURT FILE NO.: CV-20-82825
DATE: 2020/09/14
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Tanya Bunton, Applicant
AND
FTA Logistics Inc. and Paul Ikenouye, Respondents
BEFORE: Justice Sylvia Corthorn
COUNSEL: Sean Taylor, for the Applicant
No one appearing for the Respondents
HEARD: August 28, 2020 by Zoom
RULING ON APPLICATION
[1] This application is for an order under s. 250(1) of the Business Corporations Act, R.S.O. 1990, c. B.16 (“the Act”) rectifying the records of the respondent corporation (“FTA”) – specifically, removing the applicant’s name from the list of directors of FTA.
[2] The applicant, Ms. Bunton is the stepdaughter of the individual respondent, Paul Ikenouye. Several years ago, Ms. Bunton declined a request from Mr. Ikenouye for permission to add her name to the list of FTA’s directors. Years later, and despite having declined that request, Ms. Bunton learned that her name was added as a director of FTA.
[3] In the latter half of 2019, Ms. Bunton received two letters from the Canada Revenue Agency (“CRA”). In those letters, Ms. Bunton is identified as a director of FTA and someone from whom the CRA is entitled to collect outstanding unpaid source deductions owed by FTA (approximately $11,160). Ms. Bunton understands that the CRA will cease looking to her for payment of FTA’s outstanding deductions if she provides them with a copy of a court order stating that she is not, and was never, a director of FTA.
[4] The respondents filed no materials. They were not represented and did not appear on the return of the application.
Respondents had Notice of the Hearing
[5] Before dealing with the substantive issues, I turn first to the steps taken to provide notice of the application to the respondents and confirm that the applicant was entitled to proceed with the application without the respondents present or represented.
[6] Based on the affidavits of service filed, I am satisfied that the notice of application, application record, applicant’s factum, and applicant’s book of authorities (“the Documents”) were personally served on FTA in accordance with the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Only the notice of application had to be personally served on the respondents: r. 16.01(1), 16.01(3).
[7] In late March 2020, the process server left the Documents with an individual who identified himself as the “controller” of FTA. The Documents were served on FTA at the corporation’s business address. As such, the Documents were served on an individual who “appear[ed] to be in control or management of [FTA’s] place of business”: r. 16.02(1)(c).
[8] I am also satisfied that the individual respondent, Mr. Ikenouye, was personally served with the Documents. The Documents were left with an adult member of the same household in which Mr. Ikenouye is said to reside. In addition, on the day after the Documents were left at the household, copies of them were sent by regular mail to Mr. Ikenouye. I am satisfied that Mr. Ikenouye was served with the notice of application by the requisite alternative to personal service on an individual: r. 16.03(5).
[9] A respondent who has been served with a notice of application is required to “forthwith deliver a notice of appearance”: r. 38.07(1). The respondents did not deliver any notice of appearance. As a result, they were not entitled to receive notice of any step in the application: r. 38.07(2)(a). In addition, unless the court ordered otherwise, the respondents were not entitled to receive any further document in the application: r. 38.07(2)(b)(i).
[10] The originating process indicated that the application would be heard on June 23, 2020. As a result of the suspension of usual court operations due to Covid-19, the applicant was required to file a request for a hearing. On July 28, 2020, Ryan Bell J. made an order for the hearing to proceed on the 21st or 28th of August 2020 and set a timetable for the delivery of materials.
[11] The triage endorsement of Ryan Bell J. was served personally on the respondents on August 7, 2020. The affidavits of service indicate that a covering “email” was served on the respondents at the same time. A copy of that email is not attached to the affidavits of service. I draw an inference and find that in the covering email, the return date selected (August 28, 2020) was identified.
[12] In summary, I find that the respondents, despite their failure to deliver a notice of appearance, were given notice of the return of the application scheduled for August 28, 2020.
[13] The respondents did not attempt to file any material in response to the application. They were not represented on the return of the application. There is no evidence of any attempt by one or the other of the respondents to communicate with counsel for the applicant. I am satisfied that the applicant was entitled to proceed with the application in the absence of the respondents.
The Issues
[14] The issues to be determined on this application are:
Was Ms. Bunton appointed as a director of FTA without her consent?
If so, to what relief is Ms. Bunton entitled?
Issue No. 1: Was Ms. Bunton appointed as a director of FTA without her consent?
[15] In support of her application, Ms. Bunton relies on two affidavits: (a) an affidavit sworn by her on January 31, 2020 (“the Bunton Affidavit”), and (b) an affidavit sworn by James Long on September 2, 2020 (“the Long Affidavit”). Mr. Long is a legal assistant employed by the applicant’s lawyers of record. The Long Affidavit was filed pursuant to an interim endorsement made following the hearing of the application. That endorsement required the applicant to file additional evidence as to when Ms. Bunton’s name first appeared and evidence that Ms. Bunton’s name remains listed as a director in the Corporate Profile for FTA.
[16] Based on the evidence set out in the Bunton Affidavit and the Long Affidavit, I make the following findings of fact:
• Ms. Bunton’s sole involvement with FTA was to provide bookkeeping services for the corporation on an informal basis and for a limited period which ended a number of years ago;
• FTA was incorporated on May 29, 2005;
• As of February 2, 2006, Ms. Bunton was not listed as a director of FTA;
• As of October 31, 2006, Ms. Bunton was not listed as a director of FTA;
• Ms. Bunton was, without her consent, listed as a director of FTA effective November 1, 2006; and
• At no time prior or subsequent to November 1, 2006 did Ms. Bunton consent to having her name included in the list of directors for FTA.
[17] The election and appointment of directors of a corporation is governed by s. 119 of the Act. That section addresses the term of directors whose names appear in the articles of incorporation, as well as the election of directors at a first meeting and at subsequent annual meetings of shareholders: ss. 119(1)-(2), 119(4).
[18] Section 119 also deals with the consent required from an individual elected or appointed as a director. Under s. 119(9), “the election or appointment of a director under this Act is not effective unless the person elected or appointed consents in writing before or within 10 days after the date of the election or appointment.” If, however, the person elected or appointed consents within that ten-day period, then the election or appointment of that individual as a director is valid: s. 119(10).
[19] The record does not include the articles of incorporation for FTA or minutes of any shareholder meetings. There is no evidence to indicate how Ms. Bunton came to be listed as one of the directors of FTA. There must be something more than the mere appearance of an individual’s name in the list of directors as evidence of consent to the appointment or election to that position: Pereira v. R., 2007 TCC 737, [2008] 3 C.T.C. 2154, at para. 13. Consent in writing is required before the appointment of a director becomes effective: Pereira, at paras. 12-13.
[20] At para. 12 of Pereira, Campbell J. identified one of the reasons why an individual’s consent to appointment or election as a director is required: “This presumably relates to the liability issues which directors face in assuming such a role within a corporation and establishes the requirement of personal knowledge by that director of his election or nomination to that role.” A more fitting statement applicable to Ms. Bunton’s predicament could not be found.
[21] In summary, Issue No. 1 is answered in the affirmative with the finding that Ms. Bunton did not consent to her appointment as a director of FTA Logistics Inc.
Issue No. 2: To what relief is Ms. Bunton entitled?
[22] Ms. Bunton requests several forms of relief, including declaratory relief and an order mandating certain action on the part of the respondents.
[23] An individual whose name has been identified, without their consent, as a director of an Ontario corporation may seek relief from the court. Subsection 250(1) of the Act provides that “[w]here the name of a person is alleged to be or have been wrongly entered or retained in … the registers or other records of a corporation … any aggrieved person may apply to the court for an order that the registers or records be rectified.”
[24] Under s. 250(2) of the Act, the court is given discretion to grant relief in the form of an order, including an order requiring that the registers or records of the corporation be rectified and compensating a party who has incurred a loss.
[25] The applicant relies upon the decision of the Court of Appeal for Ontario in Danso-Coffey v. Ontario in support of her submission that this court has the jurisdiction to grant a declaration that the aggrieved person was never a director of the corporation: 2010 ONCA 171, 99 O.R. (3d) 401, rev’g on other grounds 2009 CanLII 4852 (ON SC), [2009] 3 C.T.C. 127, 55 B.L.R. (4th) 145 (Ont. S.C.). Danso-Coffey dealt with a director’s liability for retail sales tax under the Retail Sales Tax Act, R.S.O. 1990, c. R.31 (“RSTA”). In that case, the Minister did not dispute that the request for a declaration fell outside the scope of the RSTA and, as a result, that this court had the inherent jurisdiction, under s. 97 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”), to make the declaration requested (i.e., that Ms. Danso-Coffey was not a director of the corporation): Danso-Coffey, at para. 30.
[26] There is nothing in s. 250 of the Act which specifically gives this court the discretion to grant the form of declaratory relief requested by Ms. Bunton. I am satisfied that this court has the inherent jurisdiction under s. 97 of the CJA to grant relief in that form. Section 97 provides that, “[t]he Court of Appeal and the Superior Court of Justice, exclusive of the Small Claims Court, may make binding declarations of right, whether or not any consequential relief is or could be claimed.”
[27] I am also satisfied that it was appropriate for Ms. Bunton to proceed by way of application as the form of originating process: Rules of Civil Procedure, rr. 14.05(3)(g), 14.05(3)(h).
[28] I find that Ms. Bunton is entitled to a declaration that she was never a director of FTA and an order providing for the rectification of FTA’s registers and records.
[29] In light of the respondents’ failure to respond in any way when served with the Documents and notice of the hearing of the application, I have some doubt, as may Ms. Bunton, that the respondents will comply with the order made. The order therefore includes a deadline by which the rectification of the registers and records must be completed. In the event the respondents do not comply with the order, Ms. Bunton will be in a position to take steps to enforce the order or bring a contempt motion.
[30] I note that, on her lawyer’s advice, the applicant/respondent in Danso-Coffey filed a Notice of Change Form with the relevant provincial ministry, removing her registration as a director of the subject company: at para. 10. Query whether Ms. Bunton may take the same step if she has not already taken it. The filing of such a form might provide Ms. Bunton with some comfort that, at least from the date of filing, going forward she is no longer listed as a director of FTA. I appreciate that for the purpose of the CRA matter, Ms. Bunton requires this order and that her name be removed retrospectively from the list of directors of FTA.
[31] Ms. Bunton requests two other forms of relief which I am not prepared to grant. First, she requests an order that FTA’s registers and records be rectified to provide that Paul Ikenouye has been FTA’s sole director since incorporation. There is no evidence as to whether the names of any other individuals may have been added to and removed from the list of directors between the date of incorporation (May 2005) and the present. It is entirely possible that other individual’s names have, from time to time, appeared in the FTA list of directors. In any event, Ms. Bunton does not require this form of relief in addition to having her name removed from FTA’s registers and records.
[32] Second, Ms. Bunton requests an order that FTA compensate her for “any and all losses that she may incur as a result of having been appointed as [FTA’s] director without her consent”. There is no evidence that Ms. Bunton has incurred any such loss to date. I distinguish such a loss from Ms. Bunton’s request for costs of the application. The request for costs is addressed at the end of this endorsement.
[33] Essentially, Ms. Bunton is seeking indemnification from the respondents in the event that she ultimately suffers a loss as a result of having been listed as a director of FTA without her consent. I am not satisfied that the cases cited by Ms. Bunton support her entitlement to such relief. I therefore adjourn that aspect of the application to allow Ms. Bunton an opportunity to consider whether she requires relief in that form.
[34] I do not wish to see this matter languish. I have therefore set a deadline by which Ms. Bunton is to bring the application back specifically to address that aspect of the relief requested. If Ms. Bunton does not bring the application back within the time specified, then that aspect of the application shall be deemed dismissed without prejudice to Ms. Bunton seeking that or similar relief in a separate proceeding at a later date.
Disposition
[35] In summary, the court orders as follows:
THIS COURT DECLARES that Tanya Bunton was never a director of FTA Logistics Inc.
THIS COURT ORDERS that FTA Logistics Inc. and Paul Ikenouye shall, no later than October 30, 2020,
a) take the steps necessary to rectify the registers and records of FTA Logistics Inc. such that Tanya Bunton’s name is removed from the list of directors, both at present and historically, and
b) provide Tanya Bunton with documentary evidence that her name has been removed from the list of directors.
THIS COURT ORDERS that the documentary evidence referred to in paragraph 2(b) above shall be sent by email to the lawyers of record for Tanya Bunton at the following email address: staylor@bhmlaw.ca.
THIS COURT ORDERS that the application for an order that the respondents compensate Tanya Bunton for any and all losses that she may incur as a result of having been appointed as a director of FTA Logistics Inc. without her consent is adjourned to be brought back, without notice to the respondents, no later than November 20, 2020.
THIS COURT ORDERS that if the application for the order described in paragraph 4 above is not brought back before November 20, 2020, that portion of the application shall be deemed dismissed without costs.
[36] I remain seized of the matter in the event that Ms. Bunton brings the application back to seek the additional relief discussed in paragraph 4 of the order made above.
Costs
[37] Ms. Bunton requests her costs of the application on the partial indemnity scale. She requests $1,785 (rounded figure) for fees, disbursements, and applicable HST.
[38] I have reviewed the bill of costs provided and considered the factors listed in r. 57 of the Rules of Civil Procedure with respect to costs. I am satisfied that the hourly rate claimed by counsel, the docketed time, and the disbursements incurred are all reasonable. I note that the costs claimed of $1,785 do not include a counsel fee for attending on the return of the application – making the amount claimed for fees all the more reasonable.
[39] To the order made above, I add the following paragraph:
- THIS COURT ORDERS that the respondents shall forthwith pay to the applicant her costs of the application to date, on the partial indemnity scale, in the amount of $1,785.00 including fees, disbursements, and HST.
[40] The court recognizes that if Ms. Bunton decides to seek the additional relief related to indemnification from the respondents, she will incur additional costs. Her entitlement to costs in that regard remains to be determined if she brings the balance of the application back before the court.
Madam Justice Sylvia Corthorn
Date: September 14, 2020
COURT FILE NO.: CV-20-82825
DATE: 2020/09/14
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Tanya Bunton, Applicant
AND
FTA Logistics Inc. and Paul Ikenouye, Respondents
BEFORE: Justice Sylvia Corthorn
COUNSEL: Sean Taylor, for the Applicant
No one appearing for the Respondents
HEARD: August 28, 2020 by Zoom
RULING ON APPLICATION
Corthorn J.
Released: September 14, 2020