Ken Vallis & Helga Halfinger - v. -, 2013 SKPC 124

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2013 SKPC 124 Date: July 16, 2013 File: 257 [2012] Location: Judicial Centre of Saskatoon _____________________________________________________________________________ Between: Ken Vallis & Helga Halfinger - and - Prairie Alternative Energy Solutions Ltd. and Peter Karras Ken Vallis & Helga Halfinger For the Plaintiffs Peter Karras For the Defendant ______________________________________________________________________________ JUDGMENT S. P.

WHELAN , J ______________________________________________________________________________ Introduction [ 1 ] In this matter judgment has been entered against the corporate Defendant, Prairie Alternative Energy Solutions Ltd. in the sum of $4,176.00. The only issue at this trial was whether Peter Karras was liable to the Plaintiffs in his personal capacity for the same sum. [ 2 ] The Plaintiffs maintained that Peter Karras should be personally liable because he did not represent his business as having been incorporated. They stated that nothing in their dealings with Mr.

Karras alerted them to the possibility that he was acting on behalf of a corporation.

[3] Mr. Karras described himself as an employee and shareholder of the corporate Defendant. He maintained that he should not beliable because he never held himself out to be acting in a personal capacity and did not guarantee the work of the corporate Defendant.All dealings, he stated, were under the name of Prairie Alternative Energy Solutions. He testified that it was not until this action wascommenced and after obtaining legal advice that he appreciated the need to specify that his business was indeed incorporated.

Discussion of the Law [4] In civil proceedings the burden of proof is on a balance of probabilities.

This applies to all aspects of this case including factfinding. [5] Pertinent sections of The Business Corporations Act for Saskatchewan are set out below: Name of corporation 10(1) The word “Limited”, “Limitée”, “Incorporated”, “Incorporée” or “Corporation” or the abbreviation “Ltd.”, “Ltée”, “Inc.”or “Corp.” shall be part of the name of every corporation but a corporation may use and may be legally designated by either the full or the abbreviated form if the full and the abbreviated forms are in the same language and represent the same word.

Publication of name 267(1) A corporation shall set out its name in legible characters in all contracts, invoices, negotiable instruments and orders forgoods or services issued or made by or on behalf of the corporation.

(2) Subject to subsection (1), a corporation may carry on business under or identify itself by a name other than its corporatename, where that other name has been registered under The Business Names Registration Act. Offences re use of names 299(2) Subject to subsection 10(2), no person shall carry on business under a name that does not include “Limited”,“Limitée”, “Incorporated”, “Incorporée” or “Corporation”, “Ltd.”, “Ltée”, “Inc.” or “Corp.”, if the name is the name of acorporation, unless: (

a) the name is on the register; or (

b) the name is the name of a corporation that is exempted from registration pursuant to this Act. . . .

(4) Every person who contravenes subsection (1), (2) or (3) is guilty of an offence and liable on

summary conviction to a finenot exceeding $5,000 or to imprisonment for a term not exceeding six months or to both. [6] The leading reported decision is Wolfe v. Moir (1969), (AB KB), 69 W.W.R. 70 (ABSC). After referring to aprovision in the governing Companies Act in Alberta, similar to s. 10 of Saskatchewan’s current legislation, the Court wrote atparagraphs 36 and 37: 36 . . .

It seems to me that for a person to successfully rely upon what is, after all, the extraordinary protection from personalliability granted to an individual by The Companies Act, it is incumbent upon him to establish that at least the formalitiesprescribed by the statute have been complied with. This he has failed completely to do. 37 Further, in my view, the effect of sec. 82(1)(

b) of The Companies Act is that if a person chooses to advertise and to holdhimself out to the public without identifying the name of a company with which he is associated, he runs the risk of being heldpersonally liable. There are many cases in which an individual has been held personally responsible for an obligation because he did notmake it clear when the obligation was incurred that he was acting on behalf of a company.

[ 7 ] In H & D Hobby Distributing Ltd. v. Svatos , [1988] A.J. No. 1136 , upon finding the individual liable, the Court placed the onus squarely on the shoulders of the shareholder, director and officer of the corporation, to advise the other party of the corporate status, stating at paragraph 15: 15 The obligation to bring home to Madsen the fact that the business was operated by a corporation was the obligation of the sole shareholder, director and officer of that corporation, namely Svatos. It was also his obligation, if he wished to avoid personal liability, to comply with s. 10(8) of The Business Corporations Act , ( supra ) which reads:

a) A corporation shall set out its name in legible characters in or on all contracts, invoices, negotiable instruments, and orders for goods or services, issued or made by or on behalf of the corporation. [ 8 ] In Iqaluit Enterprises Ltd. v. Lem , 2009 NUCJ 16 , the Court outlined relevant criteria for determining personal liability for a corporation’s debts, at paragraph 21: 21 The cases relied on by the plaintiff and others found by the Court rely on a number of factual indicia to determine whether or not an individual defendant is personally liable for a contractual debt, rather than acting as an agent for a corporation. These include the following: (

a) The naming of the parties and any other indications of their contracting status in relevant documentation, signage, or advertising that might have come to the plaintiff's attention (see H & D ); (

b) The defendant's non-compliance with applicable business corporations and/or trade names registration statutes (see H & D ); (

c) Any oral exchanges between the parties regarding the contracting party's identity or legal status (see CHED-CKNG FM v. Goose Loonies Inc ., 1995 CarswellAlta 245, [1995] A.J. No. 596 (Q.B.) (" Goose Loonies ") ); (

d) Whether the plaintiff asked the individual defendant for a guarantee (see 301364 Ontario Inc. v. Chetti , 1989 CarswellOnt 1475, [1989] O.J. No. 2380 (S.C.) ); (

e) The relative degree of sophistication between the parties (see Troost v. Ewanchuk , 2002 ABPC 140 , 2002 CarswellAlta 1174); and (

f) The nature of the defendant's business (see Partners Catering Inc. v. Aboya , 1998 CarswellOnt 4769, [1998] O.J. No. 5182 (Ct. J. (Gen. Div.)). The Facts [ 9 ] According to the corporate registry filed by the Plaintiffs, Prairie Alternative Energy Solutions Ltd. is a business corporation, having been incorporated April 10, 2007. Mr. Karras is listed as President/Secretary, shareholder and sole director. [ 10 ] The parties entered into a contract for installation of a geothermal heating system and this was carried out between November 2009 and January 2010. Mr.

Karras was the only person with whom the Plaintiffs dealt. In the material time frame, Peter Karras failed to represent that his business was incorporated. This was so in email correspondence dated in November 2009 and the initial and subsequent invoices, dated November 30, 2009 and January 28, 2010. [ 11 ] There were two documents filed with the Court in which Mr. Karras described the corporate Defendant in its corporate capacity: Mr. Karras’ January 23, 2012 letter to the Plaintiffs which appears to be in response to their complaint and demand for compensation and the GeoExchange System Certification Request.

The latter document, dated March 29, 2010, which is subsequent to installation of the system, is ambiguous. The form identifies Prairie Alternative Energy Solutions as a Qualified Company. It includes an Affidavit, signed by Mr. Karras, which identifies Mr. Karras as President, since 2007, of Prairie Alternative Energy Solutions. Nowhere in this document is the correct name of the corporation used. [ 12 ] Mr. Vallis testified that there was nothing in their dealings with Mr. Karras to suggest that he was other than a sole proprietor with a business name. Mr.

Karras was personally involved in the installation of the system. The first indication that they had that they were dealing with a corporation was in the email response to their demand letter. There was no business name on the truck he drove to the site. There were no business cards. The cheque that they wrote in payment of the invoice was made out to Prairie Alternative Energy Solutions. Ms. Halfinger testified that they knew nothing about a company; they hired Mr. Karras.

[ 13 ] In cross-examination Mr. Karras acknowledged that he didn’t use “ltd.”, “corp.” or “inc.” in the name of his business because he didn’t believe it to be relevant. As a result of this cause of action, he now uses “ltd.” to describe his corporation. [ 14 ] The Plaintiffs claimed costs in relation to the s. 37 application by the corporation to reopen the cause of action, judgment having issued previously against the corporation alone. They also claimed costs because they were required, after attempting to serve Mr. Karras by registered mail, to serve Mr.

Karras personally and for that they claimed personal travel costs to post the mail and to carry out personal service. [ 15 ] The court file discloses that the Plaintiffs initially failed to serve the Defendant in his personal capacity. At the first appearance default judgment was granted against the corporate Defendant, alone, because of this defect in service. The s. 37 application was in relation to the judgment against the corporate Defendant. That application was denied. Any award for costs on the s. 37 application was within the discretion of the judge presiding over that application.

Initially, service upon Mr. Karras as a representative of the corporation was carried out by registered mail. Had the service been correctly carried out at that time upon Mr. Karras as an individual, the Plaintiffs’ subsequent costs and the necessity to re-summons might have been avoided. I noted that the judgment against the corporate Defendant awarded costs in the sum of $76.00, $49.00 of which represented the cost of issuing the summons. The Plaintiffs were not required to pay a further sum for re-issuance of the summons. Decision [ 16 ] Mr.

Karras failed to comply with the provisions of The Business Corporations Act insofar as the proper identification of the corporation under which he was carrying on business. This failure was not dishonestly done. Nonetheless, the law is very clear in this regard and the facts having been clear that he failed to accurately represent the corporate status of his business; he is personally liable to the Plaintiffs. The Plaintiffs will have judgment against Peter Karras in his personal capacity in the sum of $4,176.00. No further costs are awarded. ________________________ Whelan, J