Kibria v Kay-Pfau, 2023 ABKB 574

Court of King’s Bench of Alberta Citation: Kibria v Kay-Pfau, 2023 ABKB 574 Date: 20231012 Docket: 1903 11965 Registry: Edmonton Between: Shawkat Kibria Applicant - and - Krystle Kay-Pfau; Olusesan Oduwole, and Inderpreet Rai Respondents _______________________________________________________ Reasons for Judgment of the Honourable Justice Douglas R. Mah _______________________________________________________ A. Background [ 1 ] The Plaintiff Dr. Kibria appeals the March 14, 2022 decision of Applications Judge (formerly Master) Smart granting

Summary Dismissal of the action in favour of the Defendants Drs. Kay-Pfau, Oduwole and Rai. That decision is reported at 2022 ABQB 186 .

[ 2 ] Dr. Kibria sued Queen Street Medical Management Ltd, these Defendants and another (Dr. Juan Molina) in an earlier action (the QSMM Action) for unpaid fees in respect of physician services he provided for the period February 13, 2015 to May 9, 2015 at a QSMM clinic. In suing the personal Defendants in that action, Dr. Kibria invoked and relied on

section 119 of the Alberta Business Corporations Act which provides for directors’ liability for unpaid wages in certain circumstances. QSMM counterclaimed for certain overpayments and failure to give adequate notice when quitting QSMM. [ 3 ] The prior Action was part of a series of legal actions between Dr. Kibria or his PC on the one hand and QSMM and a related entity, Queen Street Medical Holding Ltd, and other entities related to Dr. Rai on the other. The specifics of these various Actions and how they are or are not related are described in the decision of the Applications Judge at paras 1-4.

All the Actions were resolved. [ 4 ] The QSMM Action was settled by a written settlement agreement as follows: • QSMM was to pay Dr.

Kibria $75,000 inclusive of interest, legal fees, disbursements, and taxes through $500 monthly installments in the form of post-dated cheques. • The parties would file mutual Discontinuances without costs, with the personal Defendants consenting thereto. • The settlement was secured by a Consent Judgment of $80,000 given by QSMM, which could be entered (by way of a new action) upon unrectified default, less any payments made to date. [ 5 ] The recitals to the Settlement Agreement reference the QSMM Action, defences, and counterclaim and how Dr.

Kibria, QSMM and the Defendant Directors “have deemed it expedient to settle their differences and the Action, fully and finally, and on the basis set out herein, without any admissions of liability on the part of any party.” [ 6 ] The signatories to the Settlement Agreement are Dr. Kibria and QSMM, but not the Defendant Directors. The Settlement Agreement does not say that the basis of payment is unpaid wages, nor does it specifically reserve any recourse against the Defendant Directors under

section 119 of the ABCA . [ 7 ] Paragraph 1 of the Consent Judgment recites how the amount is calculated with reference to the balance owing under the Settlement Agreement. Paragraphs 2 and 3 deal with the process for entry. Paragraph 4 allows the Plaintiff to collect enforcement costs. There is no mention of unpaid wages as forming the basis of the Consent Judgment or a reservation of

section 119 rights. [ 8 ] After making $5,500 worth of payments, QSMM defaulted, resulting in the Consent Judgment being entered on February 20, 2019 for an amount of $74,500. Dr. Kibria’s attempt to enforce the Consent Judgment was unsuccessful. In consequence, Dr. Kibria commenced this action against the same personal Defendants as the previous action, again relying upon

section 119. B. Decision of the Applications Judge [ 9 ] The decision of the Applications Judge released Dr. Molina because of effluxion of the limitation period. That ruling was not appealed. The balance of the decision granting

Summary Judgment in favour of the remaining Defendants was appealed. In his decision, the learned Applications Judge found: • The state of the record permitted him to arrive at a fair and just determination of the

Summary Judgment motion. • The Settlement Agreement functioned as a full and final resolution of the QSMM lawsuit. • The Settlement Agreement and Consent Judgment were both “silent on the characterization of the claim being for wages.” • Dr. Kibria accepted the risk that QSMM might default. • Nothing provided for resuscitation of the wage claim against the directors in the event QSMM defaulted in payment of either the Settlement Agreement or Consent Judgment. • Dr. Kibria bargained for and received consideration from both QSMM and the directors. [ 10 ] The Applications Judge correctly noted that it was premature for Dr. Kibria to sue the directors in the QSMM Action. That is because

section 119 requires suit and judgment against the corporation itself before an action can be taken against the corporation’s directors for the unpaid wage debt. [ 11 ] The parties agree that the applicable standard of review is correctness: Bahcheli v Yorkton Securities Inc , 2012 ABCA 166 at para 30 . For the reasons that follow, I uphold the conclusion reached by the Applications Judge that the present action against these Defendants should be summarily dismissed. C. Position of the Parties [ 12 ] Dr. Kibria’s counsel argued that the Applications Judge made a number of incorrect findings. Specifically, she contended that he erred as follows:

• That the Settlement Agreement and Consent Judgment were silent on the characterization of the QSMM Action being for wages; • That the Settlement Agreement resulted in a full and final resolution between Dr. Kibria and the directors; and • That Dr. Kibria bargained for and received consideration from the Directors. [ 13 ] While I will comment on each alleged error, Dr. Kibria’s basic position at the hearing can be summarized that the Applications Judge was wrong to conclude that: • The Consent Judgment, which springs from QSMM’s failure to pay out the Settlement Agreement, is not a judgment for unpaid wages which grounds a claim under

section 119 of the ABCA ; and • That the case can be summarily determined on the record. [ 14 ] In the latter regard, Dr. Kibria’s counsel contended that there is conflicting evidence in the record and therefore a genuine issue to be tried with respect to whether Dr. Kibria was an employee of QSMM or not. She further argued that for the purposes section 119(2)(

a) of the ABCA , there is incomplete evidence in the record on the question of reasonable belief on the part of the directors as to QSMM’s ability to pay the putative wages as they became due, an issue that also requires a trial. Section 119(2)(

a) provides that a director is not liable if the director believes on reasonable grounds that the corporation can pay the wage debts as they become due. [ 15 ] Counsel for the Defendants argued that the Application Judge’s

Summary Dismissal of the action should be upheld for the following reasons: • The Consent Judgment against QSMM does not represent unpaid wages but rather the settlement of contested liabilities in a series of related actions; • As result of the Consent Judgment, Dr. Kibria is nothing more than a regular commercial creditor of QSMM whose debt is not captured within

section 119; • By his own admission, Dr. Kibria was never an employee of QSMM but rather an independent contractor, and so any unpaid physician fees were not “wages”; • The Defendants had no reason to believe in 2015 that QSMM would not be able to pay Dr. Kibria his fees as they became due, and are thus shielded by section 119(2); • The relaxed standard for

Summary Judgment now applicable in Alberta does not mandate an obvious ultimate trial outcome and permits the

Summary Judgment adjudicator to make contested fact-findings where it is fair and just to do so. D. Discussion of

Summary Judgment in Alberta and “Surrounding Circumstances” in Contractual

Interpretation [ 16 ] In considering

Summary Judgment under Rule 7.3 in Alberta , the Court is required to apply the test for

Summary Judgment from Hryniak v Maudlin , 2014 SCC 7 and the standard of proof for

Summary Judgment per Weir Jones Technical Services Inc v Purolator Courier Ltd, 2019 ABCA 49 . [ 17 ] Under Hryniak ,

Summary Judgment is indicated where the record allows the Court to make the necessary findings of fact, apply the law to the facts and where

Summary Judgment is a proportionate, more expeditious and less expensive means to achieve a just result. Applying Weir Jones , the question is whether the matter can be fairly resolved on a

summary basis or whether the facts, the record or the law reveal a genuine issue requiring a trial. The moving party must meet the burden of showing there is either ‘no merit’ or ‘no defence’ based on facts proven on a balance of probabilities and therefore no genuine issue requiring a trial. If the moving party meets this burden, then the resisting party must put its best foot forward to demonstrate from the record that there is a genuine issue requiring a trial.

Overall, the Court must have confidence that the state of the record is such that judicial discretion should be exercised to resolve the dispute summarily. [ 18 ] There was disagreement in the hearing before me about whether without prejudice communications between these very counsel in 2017 are properly part of the record. The learned Applications Judge, referring to Sattva Capital Corp v Creston Moly Corp , 2014 SCC 53 , wrote at para 12 : ...

One of the challenges here is that much of the negotiation leading up to settlement (at times labeled “Without Prejudice”) has been put into evidence with no apparent objection from either party. Despite the guidance to be taken from Sattva that surrounding circumstances are relevant, ordinarily evidence of negotiations is inadmissible when interpreting a contract. In any event, it can be difficult to know where the line is to be drawn between negotiations and the “surrounding circumstances” as aids to

interpretation. [ 19 ] It turns out that in this appeal, Dr. Kibria’s counsel now objects to the admission of certain email exchanges between counsel as part of the record and argued that a ruling on admissibility should be reserved for trial. The Defendants’ counsel had posited these emails as “surrounding circumstances” within the meaning of Sattva that inform contractual

interpretation. The surrounding facts that the Defendants’ counsel felt were important include the fact that the Settlement Agreement was part of a holistic settlement of all the litigation described in para [3] above and that these Defendants felt strongly that Dr. Kibria did not have a viable cause of action against them.

[ 20 ] I conclude that I do not need to resort to consideration of this email evidence in order to determine this appeal. What was in dispute in first the QSMM Action and now this Action is clearly defined in the respective pleadings. The settlement documents (the Settlement Agreement and the Consent Judgment) are clear and unambiguous. I agree with the approach of the Applications Judge (at para 15) that the applicable terms and the

interpretation of the settlement must be determined from looking at these documents. It is a question of the legal effect of these documents as written. E. Is

section 119 of the ABCA engaged? [ 21 ] Section 119(1) provides that directors of a corporation are jointly and severally liable to employees of the corporation for debts not exceeding 6 months wages payable to each employee for services performed for the corporation while they are directors. Section 119(3) sets out 3 discrete conditions. The relevant one for the purposes of this case is the first one. It requires the employee to sue the corporation within 6 months of the debt becoming due and then “execution” being returned unsatisfied in whole or part. [ 22 ] Between the “has been sued” part and the “execution”

part in section 119(3)(

a) there is a necessary implied step and that is getting a judgment as a result of the suing for which execution (or enforcement as we now call it) can ensue: Montague v Pelletier , 2018 ABQB 1047 at para 112 . The judgment in question is not just any judgment. The judgment must be for a debt that relates back to section 119(1), that is, a debt for “wages payable” to an “employee” and “for services performed for a corporation.” [ 23 ] For the usual wage employee who receives a T-4 slip, these 3 elements are not hard to prove, usually from the employer’s own records. Not so here. [ 24 ] Dr.

Kibria might ask if the Consent Judgment was not for unpaid wages, then what was it for? His counsel argued that “unpaid wages” is a consistent underlying theme or thread that can be traced from the Consent Judgment, through the Settlement Agreement and back to the allegations in the statement of claim against QSMM. She argued that the QSMM Action and now this one is a single continuous and unremitting effort to recover those unpaid wages. That may be so as far as Dr. Kibria is concerned but the Defendants here take a different view. In the settlement, QSMM was prepared to concede that Dr.

Kibria had some money coming to him. However, the position of these Defendants is that Dr. Kibria was not an employee of QSMM and therefore whatever was owed was not wages. These Defendants say he was always paid through his professional corporation, that no source deductions were ever withheld and that he neither requested nor was given a Record of Employment, and that Dr. Kibria has admitted as much. At best, his status at QSMM is in doubt. [ 25 ] Here, it has never been established through adjudication in the QSMM Action or anywhere else that wages were payable to Dr.

Kibria as an employee for services rendered to QSMM. No court or other competent authority has ever said that. Liability for same on the part of QSMM was expressly denied in the Settlement Agreement and neither the Settlement Agreement nor Consent Judgment say that the amounts payable thereunder are in respect of an unpaid wage debt. Despite the claim in the QSMM Action being couched in terms of unpaid wages, the settlement documents (the Settlement Agreement and the Consent Judgment) appear to have been purposely drafted to avoid that language. [ 26 ] The finding that Dr.

Kibria is an employee of QSMM who is owed wages must precede the judgment being returned unsatisfied, not the other way around. That is because section 119(3)(

a) requires the employee first to get a judgment against the employer which, when unsatisfied through enforcement, then imposes liability upon the director. In order to get that judgment against the employer, the claimant must satisfy the court (or other authority) that he or she is, first, an employee and, second, owed wages. The Consent Judgment in this case is not that judgment. The Consent Judgment was entered because QSMM had defaulted on the Settlement Agreement. The legal character of the Consent Judgment is different than the type of unsatisfied judgment contemplated in section 119(3)(

a) which in turn is informed by section 119(1). [ 27 ] Moreover, the Statement of Claim in this Action pleads that the Settlement Agreement was breached, and the Consent Judgment dishonoured and that Dr. Kibria remains unpaid on the latter. Clearly, Dr. Kibria is suing on the unpaid judgment and trying to hold the personal Defendants liable for QSMM’s breach of the Settlement Agreement, an agreement to which they are not parties. [ 28 ] Thus,

section 119 is not engaged for two reasons: • While there is a judgment that “has been returned unsatisfied”, it is not a judgment in respect of a debt for “wages payable to an employee for services performed” since there has been no formal adjudication (by Consent Judgment or otherwise) or by a competent authority that Dr. Kibria is an “employee” or that the debt claimed is for “wages”. This still remains in dispute. • The action that Dr. Kibria now brings against the personal Defendants is for failure of QSMM to honour a settlement in 2019, not QSMM’s failure to pay Dr.

Kibria the physician fees owed from 2015. [ 29 ] Counsel for Dr. Kibria argued that if the personal Directors are allowed to wriggle out of liability in this way,

section 119 is rendered meaningless, or it means that employees should never try to negotiate or settle their wage claims with their employers for fear they lose their

section 119 rights. With respect, that is not the result. Employees wishing to negotiate should assess the state of their security, that is whether as in this case a bare Consent Judgment from the employer is sufficient, or whether as counsel for the Defendants suggests better security should be negotiated. A Consent Judgment could also specifically state that it is for unpaid wages so that hurdle is overcome. Indeed, if the Consent Judgment in this case had stated that the judgment was for wages owed by QSMM to Dr. Kibria as an employee, then Dr. Kibria could have applied for

Summary Judgment. That would have been a different settlement than the one that was reached. F. Policy Considerations [ 30 ] Dr. Kibria’s counsel argued that the Court should not be persuaded by mere technicalities or semantics. There is policy support for a narrow reading of

section 119 that relies on more than just form. Counsel for the Defendants cited Canadian-Automatic Data Processing Services Ltd v CEEI Safety & Security Inc , 2004 CarswellOnt 4993 (ONCA) and Canadian-Automatic Data

Processing Services Ltd v Syntecor Ltd, 2004 BCCA 40 for the proposition that wage protection provisions that impose liability on thedirectors of insolvent corporations are intended to apply to a specific category of vulnerable persons: namely, employees who providetheir services in good faith in the expectation of payment but are otherwise (absent the legislation) unable to protect themselves when thecorporate employer becomes insolvent. Third parties who suffer commercial losses do not fall into the category.

The British ColumbiaCourt of Appeal at para 72, in a passage adopted by the Ontario Court of Appeal, said: In my view, policy provides an even stronger reason to deny ADP's claim than the parties' reasonable expectations. The general rule isthat corporate officers are not liable for the corporation's debts. The separate legal personality of a corporation and its sole liability for itsdebts are fundamental to our economic system. The liability of directors and officers for unpaid wages is a statutory exception to thegeneral rule, intended for the protection of employees, not other creditors . . .

To extend liability beyond the statutory scheme to othercreditors erodes the general rule of corporate responsibility, for the benefit of commercial enterprises undertaking known business risksrather than the vulnerable group of employees the legislation was intended to protect. [31] The Supreme Court of Canada in considering sections 114(1) & (2)(

a) of the

Canada Business Corporations Act (thesimilarly worded and functional federal equivalents of section 119(1) & 3(

a) of the ABCA) in Barrette v Crabtree Estate, (SCC), [1993] 1 SCR 1027 found that, as a matter of statutory

interpretation, the word “debts” as it appears in the

section cannot bedisconnected from its modifier “… for services performed for the corporation.” The Court concludes at pp 1051-2: … Although the purpose of this provision is to ensure that certain sums are paid to employees in the event that the corporation becomesbankrupt or insolvent, the rule it states cannot be separated from either the legal context or the language in which Parliament has chosento state the rule.

In such circumstances, amounts awarded by a Court for damages the basis of which is located, as here, in thenon-performance of a contractual obligation and the wrongful breach of a contract of employment by the employer are not "debts . . . forservices performed for the corporation" for which the corporation's directors can thus be personally liable. [32] In Barrette, the Court concluded that employees who held a judgment for wrongful termination damages did not fall into thecategory of protected persons because their loss did not result from providing services to the corporation but rather breach of theemployment contract in failing to give reasonable notice.

As a result, they were merely judgment creditors no different than any unpaidcommercial creditor, with no recourse to the directors personally. The Court noted that exceptions to the fundamental rule of separatelegal personality are to be applied with exacting precision to limit their reach, in observance of the principle that no one is responsible forthe debts of another. G. Full and Final Settlement of QSMM Action [33] QSMM settled Dr. Kibria’s Action. The Settlement Agreement at

Article 5 contained mutual releases as between QSMM andDr. Kibria. The old liability was gone. Without admitting liability for unpaid wages, QSMM assumed a new liability for the settlement.In this sense, the learned Applications Judge was right when he stated that the Settlement Agreement constituted a full and finalresolution of the QSMM lawsuit. The new liability was secured by the Consent Judgment. Once it was entered, Dr. Kibria became ajudgment creditor of QSMM, no different than any of its other creditors and now outside the ambit of

section 119. In the language ofBarrette, QSMM’s failure to fund the settlement was in the nature of “the non-performance of a contractual obligation ...” [34] I think the Applications Judge was also technically correct in saying that Dr. Kibria received consideration from the DirectorDefendants. They waived their costs of the QSMM Action. But I do not think it matters whether there was such consideration or not. Theeffect of the settlement with QSMM was to extinguish the original cause of action against QSMM for unpaid wages.

It was replaced by acause of action for the settlement (and secured by the Consent Judgment). As noted, those two causes of action are fundamentallydifferent. [35] No one forced Dr. Kibria to settle as he did. He could have negotiated different security or a differently worded SettlementAgreement and Consent Judgment (for example, by insisting that QSMM admit a debt for unpaid wages) or continued with the QSMMlawsuit. As such, I agree with the Applications Judge that Dr. Kibria accepted the risk inherent in settling as he did. H.

Ruling [36] I am satisfied that the record before the Court is sufficiently fulsome and robust to enable a fair and just determination of theAction on a

summary basis. A trial would not improve the Plaintiff's position from what is plain and obvious on this record: The ConsentJudgment in this case is not a judgment for the type of debt contemplated in sections 119(1) & (3)(

a) of the ABCA, and as such thepresent Action cannot succeed. [37] In particular, a trial on the issue of Dr. Kibria’s status at QSMM (whether an employee versus an independent contractor) oron the issue of the state of the Defendants’ reasonable belief concerning QSMM’s ability to pay the physician fees in 2015, would notremedy the nature of the Consent Judgment and thus would not advance Dr. Kibria’s position at all. [38] There is no genuine issue to be tried. The Defendants here have met their burden of showing that there is ‘no merit’ to theaction. The learned Applications Judge was correct to grant

Summary Dismissal. [39] The appeal is dismissed. [40] Counsel may, if they wish, address costs of the appeal by way of written submission in letter form, no longer than twosingled-spaced pages each, excluding exhibits and authorities, and supported by a draft Bill of Costs, within 30 days of the date of this

decision. Heard on the 5 th day of October, 2023. Dated at the City of Edmonton, Alberta this 12 th day of October, 2023. Douglas R. Mah J.C.K.B.A. Appearances: Amy Bassili Bassili Law for the Appellant (Plaintiff) Carter D. Greschner Bryan & Company LLP for the Respondents (Defendants)