Thursday, January 13, 2011

Kobes Nurseries Inc. v. Darren Convery et al, 2010 ONSC 6499 (CanLII)
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9] The invoices from Kobes Nurseries Inc. are all addressed to Maple Lane Landscaping & Nursery to the attention of Darren Convery. There is one cheque payable to Kobes Nurseries by Maple Lane Landscaping & Nursery dated February 3, 2006. The signature line is marked simply as “Maple Lane Nurseries and Landscape” and the cheque was signed by Mr. Convery. He admits that all of his cheques were the same and do not set out the corporate identity as “1553022 Ontario Limited”.

10] There is a facsimile transmission sheet dated April 2, 2008 from Maple Lane Nurseries and Landscape to Kobes. It does not contain any reference to the numbered company.

[15] The plaintiff relies on section 10 of the Business Corporations Act, RSO 1990 c.B. 16 which provides:

10(1) The word “Limited”, “Ltee”, “Incorporated”, “Incorporee”, or “Corporation” or the corresponding abbreviations “Lltd.”, “Lltee”, “Inc.” or “Corp.” shall be part, in addition to any use and figurative or descriptive sense of the name of every corporation, but a corporation may be legally designated by either the full or the abbreviated form.

(5) Despite sub (4), a corporation shall set out its name in legible characters in all contracts, invoices, negotiable instruments and orders for goods or services issued or made by or on behalf of the corporation and all documents sent to the Director under this Act.

[16] The plaintiff also relies on the Business Names Act, RSO 1990 c.B. 17 as amended. Section 2(6) provides:

...A corporation and such other persons as are prescribed carrying on business under a registered name or, in the case of a corporation, identifying itself to the public under a registered name, shall set out both the registered name and the person’s name in all contracts, invoices, negotiable instruments and order involving goods or services issued or made by the person...

[17] Mr. Sapone argues that the burden is on the defendant to show that the plaintiff must be imputed with the knowledge of the existence of the numbered company. He relies on Bridge City Electric (1981) Ltd. v. Robertson, [1986] S.J. No. 396 (Sask. Q.B.) per Kindred J.:
There is ample authority in law to support the principle that the onus is on the individual who contracts with the plaintiff to make it known to the plaintiff that he is acting for a corporate principal. In Corkum v. Lohnes, (1981) 43 N.S.R. (2d) and 81 A.P.R. 477, Cooper J.A., in delivering the judgment of the Appeal Division of the Nova Scotia Supreme Court, stated at p. 486:

If a person incorporates his business, as was done by the appellant in 1977 he must make it clear to those with whom he is negotiating contracts that he is doing so on behalf of his company and not in his personal capacity. If he fails not only to do so but also enters into a contract, as here, signing only in his personal capacity he should not thereafter when sued be allowed to hide behind the corporate veil so called. We should not countenance such an effort.

18] Mr. Sapone also relies on the decision in Nord Ovest Spa v. Gruppo Giorgio Ltd., [1994] O.J. No. 1657 where Stayshyn J. said at para. 19, 24 and 25:

19 In my view it was simply not enough for George Elian to contract using the name "Boutique Cerutti 1881" and have all of the documents use the name "Boutique Cerutti 1881". It was his duty to make it clear to Hitman and Nord Ovest that he was acting as agent for his company 762993 Ontario Inc., and he did not discharge his duty. There was no evidence to suggest that George Elian made it known that the contracts were with 762993 Ontario Inc. Further, it was the evidence of Patrizia Beneventi that when she met with George Elian in 1990 at the store, she, and therefore Hitman was led to believe that Elian was the owner of the store.

24 Neither George Elian nor 762993 Ontario Limited did this. As I see it this should be one factor considered by a Court in deciding the issue of the personal liability of George Elian. It would appear that the purpose of this legislation is to protect the public, and as a consequence if someone expects to take advantage of the limited liability available to him by the process of incorporation, he should make the public aware of such corporation. I am aware that in Short's Backhoe & Trucking Ltd. v. Noseworthy (1992) 101 Nfld. & P.E.I.R. p. 277 Newf. PCJ. this was one factor taken into consideration by the Court in imposing personal liability on the defendant.

25 I note that it was indicated in Excelco Foods Inc. v. Snider (1991) 95 Sask R. p. 314 Sask. Q.B. at p. 316, that if an individual defendant wishes to escape personal liability on a contract that such a person has a duty to make it clear to the person with whom he is contracting that he is negotiating on behalf of his corporation and not in his personal capacity.

The decision was overturned on appeal at
[1997] O.J. No. 4030, but on another basis.

[20] I find that Mr. Convery did not bring home to the plaintiff the fact that the status under which he was carrying on business had changed from that of sole proprietorship to a corporation. The first conversation indicating Mr. Convery’s intent to incorporate did not communicate the fact that he actually did incorporate. Similarly, the discussion about the purchase of a farm in 2005 is of no assistance. Nothing unambiguously and clearly identifies the nursery business as one that was now being operated by the numbered company and not by Mr. Convery as a sole proprietor.

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