I. The Issue

[1] Are Mary Lou Elaine Cook (“Cook”), Sergio Di Risio (“Di Risio”), and/or Paul Bujara (“Bujara”) personally liable? That is the issue to be decided.

II. The Events Leading up to the Uncontested Trial

[2] In November 2018, a Statement of Claim was issued, with Muralis Architectural Products Ltd. (“Muralis”) as the Plaintiff and Envelope Inc. (“Envelope”), Cook, Di Risio, and Bujara as the Defendants. Under the simplified procedure provided by Rule 76 of the Rules of Civil Procedure, Muralis claimed, among other things, payment of the sum of $49,205.06, plus prejudgment interest at the rate of 24% per annum, plus post-judgment interest in accordance with section 129 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, plus costs.

[3] In its Claim, Muralis alleged these key facts:

i. Cook was an officer of Envelope and had effective control of its activities;

ii. Di Risio and Bujara also had effective control of Envelope;

iii. Envelope purchased from Muralis swisspearl panel system materials for a construction job at a cottage located in Haliburton;

iv. the total price was $75,987.07, and Envelope paid a deposit of $38,000.00;

v. the payment terms included 30 days for payment following delivery and, thereafter, interest at 24% per annum;

vi. Envelope failed to pay the balance owing on three invoices issued to it by Muralis, the total principal balance being $49,205.06; and

vii. by virtue of sections 8 and 13 of the Construction Act, R.S.O. 1990, c. C.30, as amended, the three individual Defendants are personally liable for Envelope’s indebtedness.

[4] Despite proper service on all Defendants, none responded in any way to the Claim. On February 15, 2019, default Judgment was signed by the Registrar as against Envelope - $63,604.28, plus $1431.80 for costs, and 3% post-judgment interest.

[5] Cook, Di Risio, and Bujara were all noted in default, and an uncontested trial was ordered by Regional Senior Justice Ricchetti.

III. The Uncontested Trial

[6] A one-day uncontested trial was held, virtually, on November 22, 2021. Because of some funds that Muralis received by way of garnishment, the principal balance owing to Muralis as of November 22nd was $44,105.58.

[7] The evidence at trial included the following:

i. an affidavit in the name of Jeffery Albert Ross (exhibit 5), the owner of the cottage in Haliburton, who confirmed that he paid to Envelope the sum of $180,187.00 for its work on the project;

ii. the testimony of Gregory Bryson (“Bryson”), former employee of Muralis, through whom exhibits 1-4 and 6-16 were entered; and

iii. the testimony of Matthew Dalzell (“Dalzell”), President of Muralis, through whom exhibits 17-19 were entered.

[8] The following is a brief summary of the exhibit evidence:

exhibit 1 – April 21, 2017 email correspondence with attached drawings for the cottage project;

exhibit 2 – May 15, 2017 email correspondence from Bujara to Bryson and from Bryson to Vince Pollock (“Pollock”) of Muralis and to others at Envelope;

exhibit 3 – May 26, 2017 email correspondence from Pollock to Bryson and to others at Envelope, with attached quotation from Muralis addressed to Bujara at Envelope;

exhibit 4 – June 14, 2017 email correspondence from Bujara to Bryson, Di Risio, and Pollock, requesting a new quotation for additional materials required for the garage at the cottage property;

exhibit 5 – the affidavit of the cottage owner, referred to above;

exhibit 6 – the new quotation prepared by Pollock, in the amount of $75,987.07 plus tax, addressed to Bujara at Envelope, sent by email on July 4, 2017 from Pollock to Bujara, Bryson, and Di Risio;

exhibit 7 – July 10, 2017 email correspondence from Bryson to Di Risio, Bujara, and Pollock, with attachments, confirming the colour choice for the materials to be supplied by Muralis;

exhibit 8 – purchase order issued by Muralis to Envelope, to the attention of Di Risio, confirmed by an email from Di Risio to Bryson dated July 13, 2017;

exhibit 9 – deposit cheque from Envelope dated August 11, 2017, in the amount of $38,000.00, signed by Cook, with an address for Envelope on the cheque that is, according to Bryson, the home of Cook and Di Risio in Oakville, Ontario;

exhibit 10 – July 13, 2017 email correspondence from Bujara to Bryson, Pollock and Di Risio, with attachments, whereby Bujara signed the quotation and the cut-list provided by Muralis to Envelope as being correct;

exhibit 11 – October 25, 2017 email correspondence from Bryson to Di Risio and Bujara, with attachments, stating that the materials were ready to be picked-up;

exhibit 12 – Muralis invoice 5033842, for $47,865.39, and payment terms of net 30 days, dated October 18, 2017, addressed to Di Risio at Envelope;

exhibit 13 – October 3 and 13, 2017 emails from Bryson to Pollock and Bujara and from Bujara to Bryson and Di Risio, regarding Envelope requiring additional tooling items for the project;

exhibit 14 – Muralis invoice 5033859, for $424.37, and payment terms of net 30 days, dated November 29, 2017, addressed to Di Risio at Envelope, for tooling items;

exhibit 15 – January 16 and 25, 2018 emails from Bryson to Pollock, and from Pollock to Di Risio, and from Di Risio to Pollock, regarding Envelope requiring additional screws for the project;

exhibit 16 – Muralis invoice 5033877, for $915.30, and payment terms of net 30 days, dated March 6, 2018, addressed to Di Risio at Envelope, for screws;

exhibit 17 – Corporation Profile Report for Envelope, dated October 19, 2018, showing Cook as the sole director;

exhibit 18 – Muralis’ “Customer Aged Detail Statement” for Envelope, showing $49,205.06 owing as of October 19, 2018; and

exhibit 19 - Dalzell’s email to Di Risio and Bujara dated August 1, 2018, making enquiries about Envelope’s outstanding indebtedness to Muralis, which correspondence, according to Dalzell, was ignored.

[9] The evidence at trial confirms that Envelope never complained about the materials supplied by or the invoices rendered by Muralis. The evidence also confirms that Envelope was fully paid by the cottage owner. Muralis and Envelope had done business together many times before this project.

IV. The Law

[10] Envelope was a subcontractor on the cottage project. In terms of its duties as a trustee, set out below are subsections 8(1) and (2) of the Construction Act.

8 (1) All amounts,

(a) owing to a contractor or subcontractor, whether or not due or payable; or

(b) received by a contractor or subcontractor,

on account of the contract or subcontract price of an improvement constitute a trust fund for the benefit of the subcontractors and other persons who have supplied services or materials to the improvement who are owed amounts by the contractor or subcontractor. R.S.O. 1990, c. C.30, s. 8 (1); 2017, c. 24, s. 66.

(2) The contractor or subcontractor is the trustee of the trust fund created by subsection (1) and the contractor or subcontractor shall not appropriate or convert any part of the fund to the contractor’s or subcontractor’s own use or to any use inconsistent with the trust until all subcontractors and other persons who supply services or materials to the improvement are paid all amounts related to the improvement owed to them by the contractor or subcontractor. R.S.O. 1990, c. C.30, s. 8 (2); 2017, c. 24, s. 66.

[11] Regarding the personal liability of the three individual Defendants, reproduced below is section 13, subsections (1) through (4), of the Construction Act.

13 (1) In addition to the persons who are otherwise liable in an action for breach of trust under this Part,

(a) every director or officer of a corporation; and

(b) any person, including an employee or agent of the corporation, who has effective control of a corporation or its relevant activities,

who assents to, or acquiesces in, conduct that he or she knows or reasonably ought to know amounts to breach of trust by the corporation is liable for the breach of trust. R.S.O. 1990, c. C.30, s. 13 (1).

Effective control of corporation

(2) The question of whether a person has effective control of a corporation or its relevant activities is one of fact and in determining this the court may disregard the form of any transaction and the separate corporate existence of any participant. R.S.O. 1990, c. C.30, s. 13 (2).

Joint and several liability

(3) Where more than one person is found liable or has admitted liability for a particular breach of trust under this Part, those persons are jointly and severally liable. R.S.O. 1990, c. C.30, s. 13 (3).

Contribution

(4) A person who is found liable, or who has admitted liability, for a particular breach of a trust under this Part is entitled to recover contribution from any other person also liable for the breach in such amount as will result in equal contribution by all parties liable for the breach unless the court considers such apportionment would not be fair and, in that case, the court may direct such contribution or indemnity as the court considers appropriate in the circumstances. R.S.O. 1990, c. C.30, s. 13 (4).

[12] In support of its position regarding Envelope as a trustee, Muralis relies upon the decision of Justice Molloy of the Ontario Court (General Division) in St. Mary’s Cement Corp. v. Construc Ltd., 1997 CanLII 12114. That case stands for the proposition that Muralis must show (i) that Envelope received money on account of its contract(s) for the cottage project and that (ii) Muralis supplied materials on that project and was not paid. The onus then shifts to Envelope to show that its payments of trust funds complied with the legislation.

[13] In support of its position regarding the personal liability of the three individual Defendants, Muralis relies upon paragraphs 40 and 41 of the decision of Justice Wilkins of the Ontario Superior Court of Justice in Baltimore Aircoil of Canada Inc. v. ESD Industries Inc., 2002 CanLII 49492, set out below.

[40] Section 13, in my view, is not a restatement of the common law but rather the creation of a separate and independent statutory scheme for the imposition of liability on certain persons. Breach of trust referred to in s. 13(1) is the breach of trust on the part of the corporation. In order to vest that liability upon officers, directors or persons with effective control, the common law is such that it is necessary to demonstrate that those persons are constructive trustees. Under the statutory provisions of s. 13, however, it is unnecessary to make that level [page303] of proof and it is sufficient to demonstrate that persons are within the defined group, and that their conduct falls within the conduct contemplated. The legislature does not require constructive trusteeship to impose liability. The bare statutory statement that certain persons may be held liable for the conduct of others is sufficient.

[41] With respect to s. 13(3), it is not essential for the imposition of joint and several liability that those persons must be trustees. More than one person can readily be found liable for breach of trust under the Act. An owner, a contractor, or a sub-contractor, can either be a corporation or an individual or a collection of individuals. A corporation in breach of its trust responsibilities under s. 8 would constitute such a person found liable under s. 13(3). A director, an officer, or a person in effective control found liable under s. 13(1) would also constitute a person found liable under subsection (3). If both the company and its director were found liable, then there would be more than one person found liable and both the company and its director would be jointly and severally liable to the plaintiff. The fact that the corporation was found liable by reason of breach of trust under s. 8 and a director was found liable by reason of the breaches of conduct contemplated by s. 13, would be irrelevant as to why they were jointly and severally liable. Joint and several liability would arise as a consequence of the straightforward operation of s. 13(3) of the Act. Put in simple terms, the legislature, having declared that such persons are jointly and severally liable ends the matter.

[14] Counsel for Muralis also took this Court to other decisions factually similar to ours, where persons like these three individual Defendants were found personally liable – Sunview Doors Ltd. v. Academy Doors & Windows Ltd., 2010 ONCA 198 and Cogemar SRL. Marble & Granite v. Stone Top Factory Inc., 2003 CanLII 49327 (ON SC), included.

V. The Law as Applied to Our Case

[15] Through a stellar presentation of the case by Ms. Sandhu, conducting an uncontested trial the proper way by presenting thorough evidence and legal authorities to support her client’s position, Muralis has proven its case as against Cook, Di Risio, and Bujara.

[16] Those three individual Defendants are jointly and severally liable to pay to Muralis the principal sum of $44,105.58, plus prejudgment interest at the contractual rate of 24% per annum, amounting to $42,410.35 as of November 22, 2021 plus $29.00 per day from then until the date of these Reasons for Judgment, plus costs on a partial indemnity basis in the total amount of $12,098.67.

[17] The draft Judgment filed shall issue. The Court Registrar may sign it on my behalf.

[18] On costs, the $12,098.67 is more than fair, reasonable, just, and proportionate. I reviewed in detail the Bill of Costs filed.

[19] As per St. Mary’s, supra, there is no question, and I so find, that (i) Envelope was fully paid by the cottage owner, and that (ii) Envelope received materials from Muralis, and that (iii) Envelope, for no good reason, has refused or failed to pay Muralis for those materials. Further, Envelope has failed to demonstrate that it complied with its trustee obligations under the terms of the Construction Act.

[20] On personal liability, Cook falls directly within clause (a) of subsection 13(1), and Di Risio and Bujara fall within clause (b) therein of the Construction Act. Cook was the sole director of Envelope, and she wrote the deposit cheque, and she lived with Di Risio. Di Risio was intimately involved in the acceptance by Envelope of Muralis’ purchase order and in the three invoices that give rise to Muralis’ Claim. Bujara was intimately involved all along, and he signed the quotation and cut-list issued by Muralis as being correct.

[21] Effective control of a corporation is a finding of fact dependent on all of the evidence adduced, as per subsection 13(2) of the Construction Act, and more than one individual may be found personally liable for a breach of trust – subsection 13(3) of the Construction Act.

[22] I find as facts that (i) all of Cook, Di Risio, and Bujara had effective control of Envelope, and (ii) all of them knew or ought to have known that Envelope was in breach of its trustee obligations, and (iii) all of them assented to or acquiesced in that conduct. No wonder they have failed to reply in any meaningful way to Muralis’ enquiries about the outstanding indebtedness. They simply chose to take the money from the cottage owner and ignore their responsibilities to their supplier.

[23] They chose wrong, with respect.

[24] Judgment granted in favour of Muralis.

“C.J. Conlan”

Conlan J.

Released: November 25, 2021

COURT FILE NO.: CV-18-00004849

DATE: 2021 11 25

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Muralis Architectural Products Ltd.

Plaintiff

– and –

Envelope Inc., Mary Lou Elaine Cook, Sergio Di Risio, and Paul Bujara

Defendants

REASONS FOR JUDGMENT after uncontested trial

Conlan J.

Released: November 25, 2021

Muralis Architectural Products Inc. v. Envelope Inc., 2021 ONSC 7793

Case Summary

I. The Issue

II. The Events Leading up to the Uncontested Trial

III. The Uncontested Trial

IV. The Law

V. The Law as Applied to Our Case

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 7

Legislation 2