Court File and Parties

COURT FILE NO.: CV-19-00612105-0000 DATE: 20230119

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

LISA TAYLOR Plaintiff – and – CHAIR SOURCE and RICK MALATESTA Defendants

Counsel: Alexander Boissonneau-Lehner, for the Plaintiff Julia Cecchetto, for the Defendants

HEARD: January 9, 2023

Papageorgiou J.

Endorsement

[1] This is a motion to:

a) Strike out all paragraphs in the Plaintiff Lisa Taylor’s (“Ms. Taylor”) Statement of Claim (the “Claim”) and Reply as they relate to the Defendant and the Moving Party, Rick Malatesta (“Mr. Malatesta”), in their entirety, including the reference to Mr. Malatesta in the title of proceedings and including striking out any reference to the word “Defendants”, without leave to amend;

b) Alternatively, obtain an Order striking out paragraphs 1, 12, 16, 17, 18, 37, 40, 41 and 48 of the Claim and paragraphs 9, 11, 12, 17, 18, 19, 20 and 21 of the Reply as they relate to the Plaintiff’s position that Mr. Malatesta is liable for the alleged wrongful termination of her employment with the defendant Chair Source (“Chair Source”) and the damages allegedly flowing from same without leave to amend.

Grounds for the motion

[2] In his Notice of Motion, Mr. Malatesta relies upon rr. 21.01(1)(a), 21.01(b), 21.01(3)(d) and 25.11 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[3] However, his factum cites and argues only caselaw with respect to r. 21.01(b) and as such I am only deciding this case on the basis of the argument he has made in his factum as well as before me.

The Test on a Rule 21 Motion

[4] Under Rule 21.01(1)(b), a party may move to strike out a pleading on the ground that it does not disclose a cause of action. On such a motion, the following principles apply:

a. All allegations of fact, unless plainly ridiculous or incapable of proof, must be accepted as proven;

b. The defendant, in order to succeed, must show that it is plain and obvious and beyond doubt that the plaintiff could not succeed in the claim;

c. The novelty of the action will not militate against the plaintiff;

d. The Statement of Claim must be read as generously as possible with a view to accommodating any inadequacies in the allegations due to drafting deficiencies. Jacobson v. Skurka, 2015 ONSC 1699, 125 O.R. (3d) 279, at para. 73; Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, at pp. 972-973; Dawson v. Rexcraft Storage and Warehouse Inc. (1998), 164 D.L.R. (4th) 257 (Ont. C.A.), at para. 9.

e. A claim will be found legally insufficient when its allegations “do not give rise to a recognized cause of action or it fails to plead the necessary elements of an otherwise recognized cause of action…[A] plaintiff must, at minimum, plead the basic elements of a recognized cause of action pursuant to which an entitlement to damages is claimed. Vague allegations that make it impossible for [the defendant] to reply should be struck”: Aristocrat Restaurants Ltd. v. Ontario, 2003 CarswellOnt 5574, at paras. 18-19.

[5] Leave to amend will only be denied in the clearest of cases when it is plain and obvious that no tenable cause of action is possible on the facts as alleged and there is no reason to suppose that the party could improve his or her case by any amendment: Mitchell v. Lewis, 2016 ONCA 903, 134 O.R. (3d) 524, at para. 21; Conway v. Law Society of Upper Canada, 2016 ONCA 72, 395 D.L.R. (4th) 100, at para. 16; Adelaide Capital Corp. v. The Toronto-Dominion Bank, 2007 ONCA 456, at para. 6.

Wrongful Dismissal Claim

Privity of Contract

[6] The Statement of Claim seeks damages for wrongful dismissal, as well as aggravated damages and punitive damages arising from the manner of termination against both Chair Source and Mr. Malatesta. Mr. Malatesta argues that since there is no privity of contract between Ms. Taylor and himself, he cannot be liable for these damages. This proposition is incontrovertible.

[7] Ms. Taylor’s has delivered a proposed Amended Statement of Claim which clarifies that she is not seeking damages for wrongful dismissal from Mr. Malatesta. Rather, she is seeking damages for the intentional infliction of mental distress which she asserts he caused as well as punitive damages in his personal capacity in respect of such conduct.

Intentional Infliction of Mental Suffering Tort

[8] The original Statement of Claim claims damages for the intentional infliction of mental suffering against both Chair Source and Mr. Malatesta. The Proposed Amended Claim clarifies that the only claim being sought against Mr. Malatesta is for intentional infliction of mental distress as well as punitive damages, and also clarifies that the claim for intentional infliction of mental distress is not being sought against Chair Source at all. It also set out additional particulars for the claim of intentional infliction of mental distress.

[9] The elements of intentional infliction of mental suffering are: 1) the defendant engaged in flagrant or outrageous conduct; 2) The defendant’s conduct was intended to cause harm or occurred in circumstances where it was known that harm would ensue; and 3) The defendant’s conduct caused actual damage to the plaintiff: Bailey v Milo-Food & Agricultural Infrastructure & Services Inc., 2017 ONSC 1789, 138 O.R. (3d) 144, at para 63.

[10] The following paragraphs of the Proposed Amended Claim set out pleaded facts relevant to the claim for intentional infliction of mental distress (inclusive of previous paragraphs already in the original Statement of Claim):

24. After Mr. Malatesta was unable to locate items on the showroom floor, he walked the Plaintiff back to the warehouse. At that time, he changed the subject and began asking the Plaintiff why there was no purchase order for a new Designs by Lisa Taylor Designs piece. The Plaintiff responded that she had not yet finalized the design of the piece. Mr. Malatesta then became aggressive. He lunged towards the Plaintiff forcefully grabbed other purchase orders that the Plaintiff was holding and threw them down to the floor, and screamed profanities at her, including, but not limited to, repeated demands that the Plaintiff “get the fuck out.”

25. During this occurrence, the Plaintiff was frightened and intimidated by Mr. Malatesta. She feared for her physical safety. When she asked if she was being terminated, Mr. Malatesta continued to scream profanities and indicated that he was terminating her employment by screaming “Yes, yes, I’m firing you. Get the fuck out!”

Intentional Infliction of Mental Distress

46. Mr. Malatesta intentionally inflicted mental suffering on the Plaintiff by virtue of his wrongful and tortious conduct as set out in this Claim, conduct which he knew would cause mental suffering to the Plaintiff.

47. Mr. Malatesta’s conduct on February 6, 2018 was flagrant and outrageous and was calculated to produce harm, or were such that he knew the consequences were certain to follow. Finally, his specific acts did cause the Plaintiff harm.

48. As a result of Mr. Malatesta’s conduct, the Plaintiff has suffered and continues to suffer a loss of reputation and character which has further aggravated her damages.

49. The Plaintiff has suffered from extreme anxiety, depression, insomnia, humiliation, mental distress, frustration and the attrition of her self-esteem and confidence.

50. The Plaintiff’s normal enjoyment of familial and personal relationships are severely impaired.

51. The Plaintiff has suffered and continues to suffer a loss of reputation and character which further aggravates her damages.

52. The manner in which Mr. Malatesta, carried out the termination of the Plaintiffs employment from Chair Source has resulted in medical care due to the relentless stress the Plaintiff has, and continues to endure.

[11] The main deficiency with the pleading is that it did not plead the intentionality of Mr. Malatesta’s acts.

[12] In my view, however, the Proposed Amended Statement of Claim adequately sets out the required elements of intentional infliction of mental distress.

Officer/Director/Employee Liability

[13] Mr. Malatesta asserts that to find an employee of a corporation personally liable, it must 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.” He argues that where a tort is alleged, the same facts cannot underly both the claim against the corporation and the tort claim against corporate employees. He cites Colistro v. TBayel, 2010 ONSC 2306 which cites Normart Management Ltd. v. West Hill Redevelopment Co. (1998), 37 O.R. (3d) 97 (C.A.) and ScotiaMcLeod Inc. et al. v. Peoples Jewellers Ltd. et al. (1995), 26 O.R. (3d) 481 (C.A.)

[14] Mr. Malatesta also relied upon Speck v. Greater Niagara General Hospital (1983), 43 O.R. (2d) 611 (Ont. H.C.) (“Niagara”) where the Court dismissed a wrongful dismissal case and a claim for aggravated damages against corporate employees because there was no privity of contract.

[15] The Niagara case does not assist Mr. Malatesta because there was no separate tort asserted against the corporate employee defendants and as set out above, corporate employees may be sued for conduct which is tortious.

[16] Indeed, none of the cases cited by Mr. Malatesta hold that corporate employees may never be sued in tort in respect of the same facts which underly a claim against a corporation. [1]

[17] In ADGA Systems International Ltd. v. Valcom Ltd. et al. (1999), 43 O.R. (3d) 101 (C.A.), cited in 10948420 Canada Inc. v. CY Best Group Inc, 2020 ONSC 6504, the Court of Appeal held that the personal defendants in that case could be sued personally for actions which they took in the course of their duties, which alleged torts arose out of the same factual matrix pursuant to which the corporation was also sued. Justice Carthy noted, at para. 8, that the sole issue before him was whether “on the assumption that the defendant [corporation] committed a tort against the [plaintiff], the sole director and employees of [the corporation] can be accountable for the same tort as a consequence of their personal involvement directed to the best interests of the corporation.” He concluded that they could be at para. 11.

[18] In NDB Bank v. Dofasco Inc. (1999), 46 O.R. (3d) 514 (C.A.), cited in Cy Best, the trial judge found the VP of Finance of A Ltd, Mr. Melville, liable for alleged misrepresentation as to its financial status to a creditor. Mr. Melville was found to be acting in the course of his duties. Mr. Melville appealed citing ScotiaMcLeod and argued that he could not be held personally responsible for actions he carried out as an officer unless it could be shown that his actions were separately tortious or exhibited a separate identity or interest from the company. The Court of Appeal dismissed his appeal, relying on ADGA, at para. 42:

The short answer to the appellant’s submission is that the respondent established to the trial judge’s satisfaction that Mr. Melville’s actions were themselves tortious. In the subsequent decision of this court in ADGA Systems International Ltd. v. Valcom Ltd. (1999), 43 O.R. (3d) 101 (Ont. C.A.), Carthy J.A. speaking for the court confirmed that the general rule is that officers are liable for their own tortious acts.

The consistent line of authority in Canada simply holds that, in all events, officers, directors and employees of corporations are responsible for their tortious conduct even though that conduct was directed in a bona fide manner to the best interests of the company…

[19] In Correia et al. v. Canac Kitchens et al., 2008 ONCA 506, 91 O.R. (3d) 353, at para. 81 the Court of Appeal specifically held that a claim for the tort of intentional infliction of mental distress could co-exist with claims for wrongful dismissal if it is established as an actionable wrong that is separate from wrongful dismissal. The Court stated:

Therefore, a claim for intentional infliction of mental distress should not be struck or dismissed only because it is raised in a wrongful dismissal context or because the facts giving rise to the claim may overlap with those that form the basis for aggravated or punitive damages from the wrongful dismissal.

[20] See also Perell J.’s decision in Watson v. Trojanone Ltd, 2016 ONSC 2740, at paras 9-10.

[21] Therefore, there is no basis to conclude that Ms. Taylor’s claim against Mr. Malatesta for intentional infliction of mental suffering is bound to fail on the basis that it is an impermissible claim against him in his capacity as officer/director/employee.

[22] With respect to her claim for punitive damages as a result of the alleged intentional infliction of mental suffering, Mr. Malatesta provided no argument or caselaw that showed that punitive damages could not be awarded in such a case. It is not plain and obvious that this claim will fail.

[23] Therefore, the only difficulty with her Original Statement of Claim is that it claimed damages for wrongful dismissal against Mr. Malatesta, did not sufficiently differentiate between the two defendants with respect to the tort of intentional infliction of mental suffering and failed to plead the necessary intentionality. As noted above, the Proposed Amended Statement of Claim sufficiently pleads all elements of this tort.

[24] I add that even though Mr. Malatesta sought to strike out the reference to him in many paragraphs of the statement of claim, no argument was made in this regard and there is no basis to do so.

Leave to Amend

[25] Although Mr. Malatesta concedes that amendments are presumptively approved as per r. 26.01, he nevertheless still argues that this court should deny leave to amend on the basis of prejudice citing Marks v. Ottawa (City), 2011 ONCA 248.

[26] In my view there can be no prejudice occasioned by the amendments sought. The same causes of action are pleaded and Ms. Taylor seeks to clarify against whom each are sought. There are but a few additional particulars sought to be plead with respect to the claim for intentional infliction of mental suffering so that it technically sets out all the necessary elements.

[27] Therefore, the claim for wrongful dismissal and intentional infliction of mental suffering are struck out with leave to amend in accordance with the Proposed Amended Statement of Claim to clarify that the wrongful dismissal claim is being sought only against Chair Source, that the tort of intentional infliction of mental suffering is being sought only against Mr. Malatesta, and to provide additional particulars with respect to the tort of intentional infliction of mental suffering as set out in the Proposed Amended Statement of Claim.

Costs

[28] Both parties claim costs.

[29] Pursuant to s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C. 43, costs are in the discretion of the court. Rule 57 of the Rules of Civil Procedure sets out the factors which courts should have regard to when awarding costs. The overall objective is “to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.” Boucher v. Public Accountants Council (Ontario) (2004), 71 O.R. (3d) 291 (C.A.), at para. 26; see also Zesta Engineering Ltd. v. Cloutier, at para. 4; Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66, at para. 52; G.C. v. Ontario (Attorney General), 2014 ONSC 1191, at para. 5.

[30] Mr. Malatesta claims that he was the successful party and is therefore presumptively entitled to costs. He claims approximately $20,627.50 on a substantial indemnity basis plus HST or $14,439.25 on a partial indemnity basis. While he did achieve some success, it was not significant particularly when measured against the various offers to settle which were made and which I will discuss below. Mr. Malatesta was not successful in striking out the claim as against him in its entirety and leave to amend was granted. He was not successful in striking out all the references made to him in the Statement of Claim and Reply. The only real success he achieved was the striking out of the claim for wrongful dismissal as against him and this was not seriously contested. As will be seen, Ms. Taylor had already offered this some time ago.

[31] Ms. Taylor also claims costs on a substantial indemnity basis but in the approximate amount of $14,595.19 plus HST or 9,730.13 on a partial indemnity basis. She says that she was the more successful party as in the end, she was able to preserve the proceeding against Mr. Malatesta and succeeded in the amendments she sought as against him for that purpose. I agree that in all the circumstances, she was the more successful party.

[32] She also references r. 21.02 which provides that a motion shall be made promptly and that a failure to do so may be taken into account by the court in awarding costs: see Fleet Street Financial Corp v. Levinson, [2003] O.T.C. 94, at paras. 12-25. See also Bell v. Booth Centennial Healthcare Linen Services, at paras. 5-6 and Gaska v. G.R.T. Genesis Inc., 2019 ONSC 1491.

[33] The Statement of Claim was issued on January 7, 2019 and the Statements of Defence were delivered on or about March 5, 2019. Mr. Malatesta’s motion record was not served until May 6, 2021 and the motion not argued until today, January 9, 2023.

[34] There has been significant delay. Mr. Malatesta argues that he did immediately advise of his position that there was no basis for a claim against him in 2019 but that he was seeking to negotiate his release and that the intervening pandemic caused delays. In my view, this cannot explain an almost four-year delay. He also argues that the cost consequences of r. 21.02 are only meant to compensate for prejudice citing Gaska v. G.R.T. Genesis Inc., 2019 ONSC 1491, at paras. 9-11. I disagree that this case stands for this proposition. While the court referenced an argument made about prejudice, it did not say that there would have to be prejudice for a court to take into account delay in respect of costs.

[35] Ms. Taylor asserts that the mere fact of there being delay has caused her prejudice as she has been unable to proceed with her case pending Mr. Malatesta’s bringing of his motion. While Mr. Malatesta has delayed, she cannot blame him for the fact that her action has stalled. She could have taken steps to move this forward.

[36] Both parties filed affidavits detailing the extensive communications they had about this issue over the years. They have both expended an inordinate amount of resources writing letters and emails instead of taking steps that would move this matter along. They are both responsible for the delay in this action’s prosecution.

[37] Both parties also rely upon offers which they have made as follows:

[38] On June 13, 2022 Mr. Malatesta’s counsel wrote a letter reiterating its position that there was no tenable cause of action against him, but offering to settle the matter on the basis that the majority of Ms. Taylor’s claims against him be struck out, but that it would permit Ms. Taylor to proceed with her claim in respect of intentional infliction of mental distress as against him. The formal offer attached sought the striking out of entire paragraphs 1(a)-1(g), 1(i), 12, 16, 17, 18, 37, 41, 9, 11, 12, 17, 18, 19, 20, and 21 which were stated to be as they related to Ms. Taylor’s position that Mr. Malatesta was liable for wrongful dismissal bad faith damages, aggravated damages, and punitive damages. Notably, not all of the paragraphs that Mr. Malatesta specifically sought to strike involved allegations against him personally for wrongful dismissal. Many contained facts in support of the intentional infliction of emotional distress claim as well as facts related to an ancillary claim against Chair Source related to a trademark issue. The formal offer also requested costs paid to Mr. Malatesta to be agreed upon or assessed.

[39] On June 30, 2022, Ms. Taylor’s counsel then forwarded the Proposed Amended Statement of Claim together with a Consent which counsel indicated should satisfy Mr. Malatesta’s concerns as it distinguished between the damages and claims sought against Mr. Malatesta and Chair Source. This proposed Amended Statement of Claim also contained many amendments that had nothing to do with the issue of Ms. Taylor’s claim for intentional infliction of mental suffering but included new paragraphs related to the trademark and other issues. The letter from Ms. Taylor’s counsel proposed that these amendments would be without costs.

[40] On July 11, 2022, Mr. Malatesta’s counsel then wrote to Ms. Taylor’s counsel complaining about the scope of the new proposed amendments and taking issue with the fact that Ms. Taylor’s offer did not include the payment of costs.

[41] In all the circumstances, neither parties have done better than their offers which both went beyond the issues relating to Mr. Malatesta’s personal liability.

[42] In my view a significant portion of the costs incurred by both parties result from their failure to communicate and their unreasonable conduct with reference to Offers to Settle made which included matters unrelated to Mr. Malatesta’s personal liability. Nevertheless, Mr. Malatesta’s delay in bringing his motion, as well as his failure to simply agree that the amendments regarding the intentional tort against him could proceed caused the bulk of the costs. Once Mr. Malatesta was satisfied that there was a basis for the claim to proceed against him as pleaded in the Amended Claim, he could have attended at the hearing and simply argued costs. Instead, he caused Ms. Taylor to prepare a factum and also appear and argue the full motion. Therefore, taking this into account as well as the factors set out in r. 57, what I view to be both parties’ unreasonable conduct, as well as what is fair and reasonable in the circumstances, I am awarding Ms. Taylor $7,000 in costs in the exercise of my discretion payable within 30 days.

[43] The parties may submit a draft Order to my attention, approved as to form and content.

Papageorgiou J. Released: January 19, 2023

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: LISA TAYLOR Plaintiff – and – CHAIR SOURCE and RICK MALATESTA Defendants

REASONS FOR JUDGMENT

Papageorgiou J. Released: January 19, 2023

[1] Mr. Malatesta also relied upon caselaw which holds that an employee in a wrongful dismissal action can only claim aggravated damages if such damages are independently actionable: Metz v. Tremblay-Hall at paras 26-29 citing Vorvis v. Insurance Corporation of British Columbia, [1989] S.C.J. No. 46 and Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701. He argued that since Ms. Taylor does not allege that Mr. Malatesta’s actions towards her are independently actionable, she cannot succeed against either the corporate defendant or Mr. Malatesta in respect of the same facts. With respect, Mr. Malatesta’s characterization of the Courts’ discussion of independent actionability in these cases is incorrect. When the caselaw has made reference to this issue, it is with reference to an employee’s claim that she suffered mental distress merely because the employee was dismissed. In such cases, courts have held that for an employee to be entitled to recover aggravated damages, it must have been contemplated at the time the contract was entered into that the employee would suffer mental distress if she was terminated. What courts mean by “independent actionability” in these cases is that there must be some acts in addition to the termination upon which employees assert their entitlement to aggravated damages. It is well established that employees may claim aggravated damages in respect of an employer’s breach of the duty of good faith in the manner of dismissal. This can include conduct that is “unfair or is in bad faith by being unduly insensitive as well as bullying, harassment and intimidation: Wallace, at para. 98; see also Keays v. Honda Canada Inc., 2008 SCC 39, [2008] 2 S.C.R. 362 (“Keays”), at para. 57. As such this argument made by Mr. Malatesta was not persuasive.