Medeiros v. Anderson & Viscount Research Date:, 2011 BCPC 184

Citation: Medeiros v. Anderson & Viscount Research Date: 20110720 2011 BCPC 0184 File No: 0926595 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: MARIA & MANUEL MEDEIROS CLAIMANTS AND: BRIAN ANDERSON & VISCOUNT RESEARCH & MANUFACTURING LTD. DEFENDANTS REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE N.N. PHILLIPS Appearing on their own behalf: Maria & Manuel Medeiros Appearing for the Defendants: Brian Anderson Place of Hearing: Vancouver , B.C.

Date of Hearing: July 12, 2011 Date of Judgment: July 20, 2011 [ 1 ] On July 20, 2009, the Claimants, Maria and Manuel Medeiros, filed a Notice of Claim against Brian Anderson and Viscount Research and Manufacturing Ltd. The Claimants sued for the return of $5,936.30 they had paid to the Defendants for roofing work on their home. The Claimants also sought to recover the money they spent to repair damage to the home caused by the failed roofing work in the amount of $1,837.50.

Finally, the Claimants sought to have the Defendants held liable for the $9,555 they paid to another roofing company to completely re-do the roof of their home less than three years later. [ 2 ] The corporate Defendant, Viscount, did not dispute the claim against it for the refund of the original roofing work and consequential damages. The Defendant Company filed a Payment Order with the court on January 21, 2010 agreeing to payment of $7,970.

In the course of payment hearing procedures subsequently conducted, it became apparent that Viscount was no longer in operation and there are no assets by which to satisfy the payment order. Consequently, the matter has now proceeded to trial against Anderson, the owner and operator of Viscount. This is the decision of the Court following a trial on that aspect of this claim. [ 3 ] The Claimants are a retired couple who contacted Anderson after having looked in the Yellow Pages for roofing companies. On March 18, 2006 the parties met and Anderson provided a written estimate for the roofing job of $3,836.80. Mr.

Medeiros testified Anderson told the couple he would seal the cracks and then apply a rubber seal coating on the roof. The Claimants said Anderson told them it was a “lifetime” roof. Anderson asked for and received a $2000 deposit from the Claimants that day and left. A copy of the estimate Anderson gave the Claimants was provided to the Court. The Estimate has a business card photocopied overtop which reads “Temp-Shield Roof” with the name “Brian Anderson, Viscount Research and Manufacturing Ltd.” printed underneath. The estimate was for $3,936.80 and states $2000 was paid that day by the Medeiros.

The estimate also states: Lifetime Guarantee: Temp-Shield Roof Re-New is conditionally Guaranteed for the life of the surface to which it is installed. Replacement according to

manufacturer’s warranty. [ 4 ] The Claimants testified that months went by without anything further happening. The Medeiros said when they called and spoke with Anderson, he told them he was having difficulty finding workers or he was having issues with his suppliers. Anderson told the Court in the booming economy at the time he simply could not find skilled labour to work on the Claimant’s home. [ 5 ] In early September 2006, Anderson came to the Claimants’ home and asked for another $2000 to put extra tar on the roof. The Medeiros paid this money and the next day Anderson finally began the job. Mr.

Medeiros testified he was troubled from the start of the work due to the appearance of the workers and the fact they seemed to be inexperienced and were using inadequate tools and equipment for the project. Mr. Medeiros said he became more concerned about the roofing work when Anderson started applying the white ceramic coat on top of the tar coat the day after the tar had been applied. Mr.

Medeiros said Anderson had previously told him the tar coat would have to cool for a period of time and that consequently the white sealant coat would not be applied until a week or two later. [ 6 ] A document title “Temp=Shield Roof Conditional Lifetime Guarantee Transferable, Nonprorated and 12 Month Inspection” was provided to the Claimants on September 9 th when the roof was installed. The Guarantee is difficult to interpret but a careful read of it leads one to conclude it would be of little value to the consumer and mostly consists of what might be described as “sales puffery”.

For example, clauses 2, 7, and 11 of the document state: For 1 st 2 years, labour is included on approved claims. After 2 years, labour and cost of labour are not covered. All incidental or consequential damages of any kind are expressly excluded. Product provided free of charge, conditional with Temp-Shield as re-installer according [sic] new written agreement, and any and all associated expenses to accomplish this new installation paid by customer. Roof Restoration Guarantee applies to the Temp-Shield product on the surface comprising the primary roof system.

Expressly does not cover related damage… Leaks: The new Temp-Shield surface is Guaranteed to be “leak proof” through the product membrane surface itself. Temp-Shield is not water permeable. If a roof leak is determined to be caused by water permeating through the Temp-Shield surface, - the roof will be repaired according [sic] the terms of #2 above. [ 7 ] In 2007 the Claimants noticed bits of white roofing falling onto their sidewalk and patio. Mr. Medeiros said it looked like snow and he had to sweep away the debris. However, it was not until March 2009 that significant problems became apparent.

The Claimants testified that they were in their bedroom sleeping when water started pouring from their ceiling. After getting buckets out to capture the water, the Medeiros called Anderson who quickly attended and saw the damage. According to the Claimants, Anderson appeared to take the problem seriously and promised he would fix the roof right away and said he would pay for everything. [ 8 ] The next time the Claimants heard from Anderson was about two weeks later on April 4, 2009 when he provided them with a quotation to fix the leaking roof.

The quote, from Viscount, was for $17,000 less a $6000 credit for the work the Claimants had paid for in 2006. The quote from Anderson indicated there would be a 10 year material and labour warranty provided by the manufacturer. [ 9 ] The Claimants turned down Anderson’s offer and obtained two different quotes both for considerably less than the ‘discounted’ quote provided by the Defendants. Mr. Medeiros told the Court one quote was for $8000 and the other for $10,000. On April 15, 2009 a new “torch on” roof was installed by another roofing company that functions to this day problem free.

Paperwork for the new roof was filed with the Court at trial and it states the roof has a 20 year material warranty and a 10 year labour warranty. It was clear from the testimony of both of the Claimants that the roofing problem they had with Viscount and Anderson has caused them considerable stress and they both expressed an anxiousness to simply put the matter behind them. [ 10 ] The Defendant Anderson told the Court he has been working in the roofing industry since 1993. His first foray into the business involved working with a chemist, Dr.

Ursini, now deceased, who had developed a coating which could be applied to add life to cedar shake roofs. Anderson told the Court he successfully operated that cedar shake business for years, selling it for a profit in 2001. [ 11 ] Anderson then left the roofing business to pursue a career in finance but decided he was unhappy with that line of work and returned to roofing. At that point in time Anderson re-connected with Dr.

Ursini and paid to him what he described to be his life-savings to be enable him to use a ceramic sealant treatment the chemist had invented to add life to tar and gravel roofs in an environmentally- friendly and cost-affordable way. It was this product he was using when the Claimants contacted him. [ 12 ] Neither the Claimants nor Anderson produced any expert testimony at trial. Anderson attempted to give evidence about the chemical properties of the white coat sealant but the Court did not permit him to do so as he is not a chemist or otherwise qualified to give expert evidence on the roofing compound.

The Defendant did not take advantage of the Small Claims Rules which permit a party to tender a written expert report at trial if certain steps are taken. [ 13 ] Anderson told the Court he applied the white coat to many buildings before and after the work on the Medeiros’ home and he thought the product was good. He testified that sometime in late 2006 he learned there might be a problem with the particular chemical composition but he was vague about the details.

Anderson denied having any knowledge that the coating he used on the Claimants’ home was defective and he said to this day he does not know for sure why the roof failed but he conceded it had failed for some reason. He was prepared to acknowledge that by August 2008 he had stopped using the product.

I found Anderson to be less than forthcoming when questioned about when the white ceramic coating first failed and why. [ 14 ] In relation to the Medeiros’ roofing project, Anderson testified that the extra $2000 he received for adding tar to the Claimants’ roof was not an ‘up sell’ by him but rather a “quality enhancer”. He said he did not profit from this added work in that he had to pay for increased labour and material costs to do the tar work. However, Anderson brought absolutely no paperwork with him to the trial to establish any of these costs.

But for the fact the Court had a copy of the previously filed Defense Trial Statement made for Anderson to use at trial, he would have had no documentation to refer to.

[15] When asked about whether he had applied the ceramic coat the day after the tar was applied (rather than wait a week or two),Anderson testified “I think so”. When asked why he had not let the tar cure, he stated “it makes sense hearing it now, to be cool enoughto walk on it has to cool and stabilize”. Anderson added that the curing of tar can be influenced by quite a few variables. [16] Anderson noted that he and the Claimants dealt at length with the Better Business Bureau to try to come to resolve the matter butwere not successful.

Anderson said the plan had been for Viscount to stay in business using a revised chemical formula for the whitecoat. He said too many customers were unwilling to wait for Viscount to re-gain its’ strength to enable the company to pay them backtheir roofing costs and thus Viscount eventually failed. [17] Anderson said he feels bad to this day about the Claimants’ loss and wishes Viscount had been able to remedy the matter forthem.

It was clear from Anderson’s testimony that he feels the Medeiros and other Viscount customers were unreasonable in demandinga refund of the money Viscount received for the faulty roof work and that customers should have been willing to work with the companyas it tried to re-build its’ reputation. Anderson expressed shock at his business failure and left the Court with the impression that hethinks he was a victim of both the product and his impatient customers. [18] Anderson testified that after the failure of Viscount, he suffered a nervous breakdown and was out of the workforce for a periodof time.

He must have recovered quickly as he also said that for the last two and a half years he has been working again in the roofingbusiness under the auspices of a new limited company but with a renewed focus on cedar shake roof coating. He described a flourishingbusiness in this area. The Law [19] In order to be successful in their law suit against Anderson in his personal capacity, the Claimants must establish that there is abasis upon which the corporate ‘veil’ of Viscount can and should be ‘pierced’. The Ontario Court of Appeal in Parkland Plumbing &Heating Ltd. v.

Minaki Lodge Resort 2002 Inc. [2009] ONCA 256 recently reviewed the applicable law in this area. The Court observed(at paragraph 49 – 51): While a corporation is a legal entity distinct from its shareholders, this principle may be disregarded by 'lifting the corporate veil' andregarding the company as the agent or vehicle of its controlling shareholder or parent corporation where enforcing the 'separate entities'principle would yield a result "too flagrantly opposed to justice": Kosmopoulos v. Constitution Ins. Co. of Canada, (SCC), [1987] 1 S.C.R. 2, at para. 12, citing L.C.B.

Gower, Modern Company Law 4th ed. (London: Stevens, 1979), at p. 112. But this does not mean that the courts enjoy 'carte blanche' to lift the corporate veil absent fraudulent or improper conduct whenever itappears 'just and equitable' to do so. In Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), (ON SC), 28 O.R. (3d) 423 (Ont. Gen. Div.), aff'd, [1997] O.J.

No. 3754 (C.A.), Sharpe J. (as he then was) indicated at pp. 433-34: [T]he courts will disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and beingused as a shield for fraudulent or improper conduct. The first element, "complete control", requires more than ownership. It must beshown that there is complete domination and that the subsidiary company does not, in fact, function independently ....

The second element relates to the nature of the conduct: is there "conduct akin to fraud that would otherwise unjustly deprive claimantsof their rights"? [Citations omitted.] Earlier in Transamerica, at pp. 432-33, Sharpe J. accepted the following formulation of the test for lifting the corporate veil, set out inGower, Modern Company Law, 5th ed. (1992) at pp. 132-33: There seem to be three circumstances only in which the courts can [lift the corporate veil]. These are:

(1) When the court is construing a statute, contract or other document.

(2) When the court is satisfied that a company is a "mere facade" concealing the true facts.

(3) When it can be established that the company is an authorized agent of its controllers or its members, corporate or human... [20] In its review of the evidence in the Parkland case the Court of Appeal noted (@ paragraph 59): In this case, the evidence demonstrated and the trial judge found that Archer exercised clear domination and control over theredevelopment project through a stable of companies that included Celestine and Minaki Inc., such that, in effect, these companies actedas a mere corporate facade for Archer's own activities.

On this record, the trial judge's holding that Celestine and Minaki Inc. wereindistinguishable - so that the acts of one were the acts of the other as Archer's agents throughout - is unimpeachable. [21] In ADGA Systems International Ltd. v. Valcom Ltd. (ON CA), [1999] O.J. No. 27, the Ontario Court ofAppeal was asked to consider the question of whether a director of a company could be sued for their action as an individual, assumingthose actions were directed to the best interests of the company.

The Court consider the history of the law regarding the liability ofdirectors and observed (@ paragraph 10): That beginning is found in the House of Lords' decision in Salomon v. Salomon & Co. Ltd., [1895-9] All E.R. 33 (H.L.), whichestablished that a company, once legally incorporated, must be treated like any other independent person, with rights and liabilitiesappropriate to itself.

From time to time, litigants have sought to lift this "corporate veil", by seeking to make principals of the corporationliable for the obligations of the corporation. [22] After reviewing the development of Canadian common law in this area, the Court of Appeal noted (@ paragraph 26): These Canadian authorities at the appellate level confirm clearly that employees, officers and directors will be held personally liable for

tortious conduct causing physical injury, property damage, or a nuisance even when their actions are pursuant to their duties to thecorporation. [23] And finally, the Court of Appeal adopted with approval the reasoning of Finlayson, J.A. in ScotiaMcLead Inc. (at paragraph 38): The decided cases in which employees and officers of companies have been found personally liable for actions ostensibly carried outunder a corporate name are fact-specific. In the absence of findings of fraud, deceit, dishonesty or want of authority on the part ofemployees or officers, they are also rare.

Those cases in which the corporate veil has been pierced usually involve transactions where theuse of the corporate structure was a sham from the outset or was an afterthought to a deal which had gone sour... officers or employees oflimited companies are protected from personal liability unless it can be shown that their actions are themselves tortious or exhibit aseparate identity or interest from that of the company so as to make the act or conduct complained of their own. [24] In Better Off Dead Productions Ltd. v.

Pendulum Pictures 2002 BCSC 462 , [2002] BCJ No. 626, Justice Holmesdismissed a claim against the president of a company stating (@ paragraph 38): I find nothing to distinguish the situation here from that addressed by Clancy J. in Rafiki Properties Ltd. v. Integrated HousingDevelopment Ltd. (1999), (BC SC), 45 B.L.R. (2d) 316 (S.C.), where he dismissed the plaintiff's motion to add asdefendants two officers of the defendant corporation in its claim for negligence and negligent misrepresentations. As here, theindividuals were alleged to have been responsible for the misrepresentations.

Clancy J. reviewed the authorities, including the OntarioCourt of Appeal's decision in ADGA Systems International Ltd. v. Valcom Ltd. (1999), (ON CA), 43 O.R. (3d) 101(C.A.), which recognized some scope for the individual liability of directors and officers for tortious conduct even when committed inthe course of their duty.

He concluded at para. 15 that an individual defendant will bear personal liability for acts committed on behalf ofa company only where the torts are those of the individual and the allegations show an identity or interest separate from that of thecompany. [25] It should be noted that at the start of this hearing I provided the parties with a copy of Judge Gedye’s July 7, 2011 decision in thematter of Muir v. Viscount Research & Manufacturing Ltd. et al (North Vancouver Registry 08-19973).

The decision had been placed onthis court file and I thought it appropriate to provide a copy to the parties at the outset of this case. However, at the conclusion of thistrial I have reviewed Judge Gedye’s decision and determined the facts in the Muir case are different and the decision does not assist mein resolving the claim brought by the Medeiros. Thus I have not applied her decision in this case. Analysis [26] There is no issue in this case that the Claimants did not get what they bargained for and the roof installed by the Defendants wasdefective and needed to be replaced.

On viewing the leak in the bedroom of the Claimants’ home in March 2009, Anderson himselfrecommended it be fixed by the removal of the old surface and the installation of a new “torch on” roof. The admission of liability byViscount was obviously made with this in mind. [27] The only issue to be determined now is whether Anderson is personally liable.

In that regard, the law allows a court to“disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and being used as a shieldfor fraudulent or improper conduct” (Parkland supra @ paragraph 50). [28] In this case, the Defendant Anderson provided some documentary and oral evidence to suggest that the operation of the limitedcompany was not a mere fiction in that it was a corporate entity which paid taxes and did work and operated in the ordinary course ofbusiness.

The issue for this Court, in my opinion, comes down to whether the Claimants have established at trial that Anderson wasusing the company “as a shield for fraudulent or improper conduct”. [29] In that regard, I find the following factors tend toward a finding of improper conduct by Anderson. Firstly, Anderson took the$2000 deposit from the Claimants and effectively disappeared for six months.

Although I accept he may have had difficulty findingworkers, he should not have required the Claimants to post the deposit until he was close to starting the project. [30] Secondly, Anderson told the Claimants their roof would have a lifetime warranty but they hardly got what they thought theybargained for. The written warranty given to the Claimants when the work was done in September does not provide much comfort forthe consumer. Other than coverage for problems in the first two years, the warranty required the consumer to pay for labour and othercosts and did not cover consequential damages.

However, if Anderson misrepresented the warranty coverage by telling the Claimants itwas a lifetime guarantee, I find Anderson did so “in his capacity as the human agent of the corporate entity” (Better off Dead, supra @paragraph 39). [31] When the Claimants roof started leaking in March 2009, Anderson initially said he would fix the defects without charge but thenhe vanished for a couple of weeks leaving the Medeiros in a precarious situation.

The $17,000 quote provided by the Defendants to fixthe problem is consistent with the Tempo-Shield warranty being of no value and the quote appears to be grossly inflated relative tocompetitive quotes the Claimants obtained. If Anderson had been motivated to help his customers (as he claimed), I find he would haveoffered to repair the Claimants’ roof with nominal, if any, charges for labour and materials. [32] Fourthly, I found Anderson to be a smart and articulate litigant but found him to be less than candid with the Court when beingquestioned about topics which would paint him or his business in a bad light.

He was particularly evasive about when he became awareof the problem with the ceramic product and he was also evasive about what had caused the failure of the Claimants’ roof. Anderson didnot contest that he had applied the white ceramic coat the day after the tar was applied. The evidence tends to suggest the closeapplication of the two coats played at least some role in the roof failing. [33] Unfortunately, no expert testimony was lead by either party on this issue and the Court is unable to determine the precise causeof the failure.

However, Anderson made a great deal in his testimony about how he had worked with the chemist, Dr. Ursini, who

apparently developed the white ceramic product. It seems likely that Anderson would have had information about why the product failed and needed to be re-formulated sometime around 2007. I believe it is appropriate for this Court to draw an adverse inference against Anderson for the failure to produce any such product information to this Court and take from this lack of production that it would not have shown that he did his due diligence in relation to use of the product on the Medeiros’ residence. [ 34 ] Finally, the evidence shows that the actions of Anderson and Viscount were effectively one and the same.

Anderson was the operating mind of Viscount and it appears that when the Medeiros roof job was performed, he was the only regular staff member of the company.

The fact Anderson shut down Viscount when the complaints about failed roofing jobs began to accumulate and then quickly started up another roofing company suggests Anderson was acting to shield Viscount from liability and to make it possible for him to regain his financial strength to the detriment of his customers. [ 35 ] In contrast with these elements of improper conduct by Anderson, there was evidence before the Court that Viscount was a viable roofing business and that Anderson made clear to the Claimants they were dealing with a company and not him individually.

The paperwork was prepared on company stock and there was no blurring of the lines in terms of who the Medeiros thought they were dealing with. The winding down of Viscount following a number of claims being brought against the company is unfortunate in that it leaves the consumers with little ability to seek a remedy.

The fact Anderson recently incorporated a new company to start his cedar shake roofing business is something by law he was entitled to do, although it leaves the Claimants without the money he and Viscount profited from. [ 36 ] Although I find the evidence at trial establishes elements of deceitful, misleading and problematic business practices by Anderson, I do not think the high test to establish fraud against him necessary to pierce the corporate veil has been made out on the evidence.

The application of the law in this case may very well leave the Claimants with the unfortunate result of having a judgment in their favour against a company from whom they will never collect a penny. However, that is not something the Court can consider in determining whether to hold Anderson personally liable. [ 37 ] As for the prospect of finding Anderson liable in his personal capacity on the basis of an independent tortious action, it may be that Anderson was negligent in applying the white ceramic coating only one day after the tar had been re-done.

However, the Medeiros did not call any evidence to establish that this application caused the ceramic coating to fail. Nor did the Claimants put before the Court evidence showing that failure later caused the extensive leaking problem to develop which ultimately required their roof to be replaced. [ 38 ] Even had I found there was an evidentiary foundation put before the Court to establish the cause of the roof failure, the Claimants would have also had to establish that Anderson was negligent in how he did their roof work.

The evidence does not permit me to conclude Anderson knew that either the roofing materials he used on the Medeiros’ roof were defective or the manner by which he applied them was improper. Short of either conclusion being supported on the evidence, I am not able to find Anderson liable in tort in his personal capacity. [ 39 ] Finally, it should be noted that if I had found Anderson personally liable, I would only have held him to be responsible for the original costs of the roofing job and the consequential damages.

I would not have found him liable for the costs of installing the new roof three years later. [ 40 ] Thus the Claimants action against Anderson is dismissed. The payment order against Viscount will remain in place. I find this an appropriate case to direct that the Claimants not be required to pay Anderson’s court costs. ______________________ N. N. Phillips Provincial Court Judge