Court File and Parties

COURT FILE NO.: CV-19-00626769

DATE: 20201112

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Sabina koscianska, mary dheju, piotr pawlowski, patricia ross, noel prasad, katrina yiannakakos and joseph prasad, Plaintiffs

AND:

lipson shirtmakers inc. and luxury men’s apparel group ltd., Defendants

BEFORE: Davies J.

COUNSEL: Jean-Alexandre De Bousquet, for the Plaintiffs

Elliot Birnboim, for the Defendants

HEARD at Toronto (by video): November 4, 2020

REASONS FOR DECISIONS

A. Overview

[1] The plaintiffs all worked for Lipson Shirtmakers Inc. in Toronto until they were each terminated without cause in May, June or July 2019. On September 4, 2019, the plaintiffs jointly issued a statement of claim in which they seek damages for wrongful dismissal. In the statement of claim, the plaintiffs alleged that Lipson and Luxury Men’s Apparel Group Ltd. are common employers or related employers at common law and under the Employment Standards Act, 2000, S.O. 2000, c. 41, and, therefore, jointly liable for any damages owing to them.

[2] The defendants bring this motion to strike the common employer claim against Luxury Men’s Apparel under rule 21.01(1)(b) of Rules of Civil Procedure, R.R.O. 1990, Reg. 194 on the basis that it does not disclose a reasonable cause of action. The defendants also seek to strike certain allegations in the statement of claim under rule 25.11 because they are scandalous. Finally, the defendants bring a motion under rule 5.05 for an order requiring each plaintiff to advance their claim on an individual basis.

[3] For the reasons that follow, I find that the common employer claim has been adequately pleaded and should not be struck. I also find that the claims that the defendant argues are scandalous are relevant to the common employer claim and, therefore, cannot be scandalous. Finally, I find that the plaintiffs’ claims involve common factual and legal issues that should be tried together. Any potential prejudice to the defendants can be cured by means other than ordering multiple proceedings. The defendants’ motions are, therefore, dismissed.

B. Motion to strike

[4] For the purpose of the motion to strike, I must take the facts as pleaded in the statement of claim to be true and I must read the pleadings generously. The plaintiffs’ common employer claim should only be struck under rule 21.01(1)(b) if it is plain and obvious that it has no reasonable prospect of success: see Paton Estate v. Ontario Lottery and Gaming Corporation, 2016 ONCA 458 at para. 12; Wellington v. Ontario, 2011 ONCA 274, Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959 at p. 978 - 980. Rule 21.01(1)(b) is not designed to prevent a party from advancing a claim that might not succeed or is even unlikely to succeed. It is only meant to dispose of claims that are doomed to fail: see Atlantic Lottery Corp. v. Babstock, 2020 SCC 19 at para. 19, R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42 at para. 21.

[5] The plaintiffs claim that Lipson and Luxury Men’s Apparel are common employers. The plaintiffs say that Lipson is a subsidiary of Luxury Men’s Apparel and the same directors and shareholders controlled both companies. The plaintiffs also claim that Luxury Men’s Apparel controlled the work done by Lipson and made employment decisions for Lipson.

[6] An individual can be employed by more than one company in a related group of companies for the purpose of a wrongful dismissal claim: see Gray v. Standard Trustco Ltd., 1994 7472 (ON SC). Whether a terminated individual was employed by more than one related company is highly fact specific. The Court will consider several factors when assessing a common employer claim, including the degree of integration in the operations of the companies; Downtown Eatery (1993) Ltd. v. Ontario, 2001 8538 (ON C.A.) at para. 32. Financial integration, even significant financial integration, will generally not be enough to satisfy the common employer test; Sproule v. Tony Graham Lexus Toyota, 2016 ONSC 2220 at para. 21. The focus of the analysis is on how the related companies operate: Did the companies function as a single, integrated unit in terms of their business operations? Did the employee(s) perform services for both companies? Did both companies exercise control over the employee or the employee’s terms of employment? Is there evidence of an intention to create an employer/employee relationship with both companies? All of these factors will be relevant to the ultimate decision of whether the plaintiffs were employed by both Lipson and Luxury Men’s Apparel at the time of their termination; see Sinclair v. Dover Engineering Service Ltd., 1988 3358 (BC CA) at paras. 12 – 28, Downtown Eatery (1993) Ltd. v. Ontario, 2001 8538 (ON CA) at para. 30 – 40.

[7] In Reeves v. Eddy, 2013 ONSC 2311 at para. 8, the Court held that whether the common employer doctrine applies “depends on whether there is a sufficient degree of relationship between the two entitles.” This is a contextual determination that turns on the nature of the relationship between the companies and whether there is an element of common control. The Court can, therefore, also consider whether the related companies have common or overlapping shareholders and directors.

[8] The question for me to decide is not whether Luxury Men’s Apparel will likely be found to be a common employer. That is the decision for trial. The issue is whether the facts pleaded by the plaintiffs are sufficient to support their claim that Luxury Men’s Apparel is a common employer. I find that they have.

[9] The plaintiffs’ pleadings must contain a concise statement of the facts on which they rely, but not the evidence they will adduce to prove those facts; rule 25.06(1). Here, the plaintiffs allege the following facts in relation to their common employer claim:

• Lipson is a subsidiary of Luxury Men’s Apparel;
• Lipson is primarily controlled by officers and directors of Luxury Men’s Apparel;
• One of the officers of Luxury Men’s Apparel exercised complete control over Lipson and its finances;
• Lipson and Luxury Men’s Apparel share an accounts payable department;
• The officers and shareholders of Luxury Men’s Apparel make employment decisions for Lipson;
• Luxury Men’s Apparel directed the work done by Lipson employees, including manufacturing and marketing work; and
• Lipson and Luxury Men’s Apparel have, in various ways, conducted their businesses and organized their finances to frustrate the plaintiffs’ wrongful dismissal claims.

[10] The plaintiffs do not just allege a financial relationship between the two companies. They claim that the directorship and operations of the two companies are integrated. They claim that one of the directors of Luxury Men’s Apparel exercises complete control over Lipson, which would necessarily imply control of Lipson’s employees. They claim that Luxury Men’s Apparel made manufacturing, marketing and employment decisions for Lipson. If these facts are true, a court could find that both Lipson Shirts and Luxury Men’s Apparel employed the plaintiffs as common employers for the purpose of their wrongful dismissal claims. The motion to strike under rule 21.01(1)(b) is, therefore, dismissed.

[11] In addition to challenging the common employer claim, the defendants argue that the plaintiffs’ specific allegations about Lipson and Luxury Men’s Apparel taking steps and acting together to divert funds away from Lipson or deplete Lipson’s assets to frustrate the plaintiffs’ wrongful dismissal claims are scandalous and should be struck under rule 25.11.

[12] Pleadings cannot be scandalous if they are relevant; see Quizno’s Canada Restaurant Corp. v. Kileel Developments Ltd., 2008 ONCA 644 at para. 14. I find that the allegations that Lipson and Luxury Men’s Apparel organized their business and financial affairs to frustrate the plaintiffs’ wrongful dismissal claims are relevant to the issue of whether Luxury Men’s Apparel is a common employer. The degree to which the two companies integrate and coordinate their operations is relevant to the common employer claim. If the two companies have acted and continue to act together to frustrate the plaintiffs’ claim, that tends to support the plaintiffs’ position that the two companies are highly integrated at the operations level and controlled by a common directorship. These allegations are, therefore, relevant to the common employer claim. They are scandalous and should not be struck. The defendants’ motion under r. 25.11 is dismissed.

C. Motion for relief from joinder

[13] Rule 5.02(1) says that two or more plaintiffs can join their claims into a single proceeding if (a) their claims arise out of the same transaction or occurrence, or (b) their claims raise a common question of law or fact, or (c) joinder will promote the convenient administration of justice. Rule 5.05 says that I can order separate hearings if it appears that joinder may unduly complicate or delay the hearing or cause undue prejudice to a party. In deciding whether to grant relief from the joinder of the claims, I must consider what is fair and just in the circumstances of this case, considering the consequences of a joint trial or separate trials for each plaintiff; see 3414493 Canada Inc. v. 505896 Ontario Ltd., 2007 43895 at para. 95.

[14] The defendants argue that it is inappropriate for the plaintiffs to advance their claims in a single pleading because the claims do not raise any common legal or factual issues. The defendants also argue that permitting the seven claims to proceed together will unduly complicate the matter by adding to the expense and length of the proceeding, and will cause them significant prejudice. I do not agree.

[15] Here, the plaintiffs all held different positions with Lipson, worked for different periods of time and earned different incomes. They each claim different amounts in damages. To the extent that they are entitled to pay in lieu of notice, the reasonable notice period for each plaintiff will have to be calculated separately. However, all of the plaintiffs raise the issue of whether Luxury Men’s Apparel is a common employer. If the claims are severed, it is likely that the same or very similar evidence will be adduced in relation to the common employer issue in each case. It will be more convenient for the witnesses to be discovered and testify once in relation to the common employer claim than seven times. It will also be more efficient for the court to hear that evidence and rule on that issue once. Joinder will also reduce the risk of inconsistent rulings on the common employer issue. These factors all militate in favour of a joint trial. To the extent that there are differences between the plaintiffs’ claims, I am satisfied that the trial judge and jury will be able to fairly consider and adjudicate each claim separately.

[16] I appreciate that proceeding with all seven claims jointly will affect the nature and the scope of discovery available to the defendant in relation to each claim. To the extent that defendants would be prejudiced by the time limits on examination for discovery in the rule 31.05.1, the parties can agree to extend the time or the defendants can seek an order for additional time to correct the prejudice.

[17] I also recognize that if the claims were not joined, one of the plaintiffs’ claims would now fall within the jurisdiction of the Small Claims Court and some would have proceeded under the simplified procedure under rule 76. In my view, that is not a sufficient basis to order relief from joinder in relation to seven cases that all raise the same legal issue. Section 138 of the Courts of Justice Act, R.S.O. 1990, c. C.43 states that, as far as possible, multiplicity of proceedings should be avoided. Section 107 of the Courts of Justice Act gives the court authority to consolidate proceedings that are pending in two or more different courts if they have a question of law or fact in common.

[18] One of the plaintiffs is claiming just over $26,000 in damages. At the time the statement of claim was issued in September 2019, the jurisdiction of the Small Claims Court was $25,000. The claim limit for Small Claims Court was increased on January 1, 2020 to $35,000. That plaintiff’s claim now falls within the jurisdiction of the Small Claims Court but when the statement of claim was issued, all the claims fell within the jurisdiction of the Superior Court of Justice.

[19] Three of the seven plaintiffs are seeking more than $100,000 in damages. The others are claiming between $40,000 and $100,000. This is not a case where the plaintiffs are attempting to join several small claims to circumvent the jurisdiction of the Small Claims Court. The fact that one plaintiff now falls under the Small Claims Court jurisdiction is not a reason to sever the claims. It is in the interests of justice to avoid multiple proceedings in this case and, as a result, it is appropriate to keep the one claim that could now be tried in the Small Claims Court together with the other claims.

[20] The claims for less than $100,000 would proceed under the simplified proceedings if the claims were brought individually. However, the benefit that would come from the summary process in some cases is offset by the inefficiency of having multiple proceedings dealing with the same legal issue. To the extent that the joinder of the claims creates additional steps in the litigation that will be reflected in any costs award at the end of the proceedings, if the defendants are successful.

[21] I am not satisfied that the defendants will be significantly prejudiced as a result of the joinder. In fact, I am satisfied that requiring the plaintiffs to advance their claims individually, including litigating the common employer issue separately, would be more costly, inconvenient and inefficient than a joint trial.

[22] The motion to sever the claims is, therefore, dismissed without prejudice to the defendants’ ability to bring a further motion to sever on fresh materials if the circumstances change or there is other evidence that joinder is unworkable or unduly prejudicial; Buhlman v. Peoples Ministries Inc., 2009 26918 (ON SC) at para. 21.

D. Conclusion

[23] The motion to strike and the motion to sever the claims are both dismissed.

[24] I encourage the parties to reach an agreement on the issue of costs. In the event they cannot reach an agreement, the plaintiffs may serve and file written submissions on costs of no more than five (5) pages double-spaced together with their costs outline and any supporting authority on or before November 23, 2020. The defendants may serve and file written responding submissions on costs of no more than five (5) pages double-spaced with supporting authorities on or before December 4, 2020. These submissions must be filed with the Court and delivered electronically to my assistant. In the event that I do not receive any written cost submissions by December 8, 2020, I will deem the issue of costs to have been settled.

Davies J.

Date: November 12, 2020