Globex Foreign Exchange Corp. v. Launt, 2011 NSCA 67

NOVA SCOTIA COURT OF APPEAL Citation: Globex Foreign Exchange Corp. v. Launt , 2011 NSCA 67 Date: 20110715 Docket: CA332706 Registry: Halifax Between: Globex Foreign Exchange Corporation Appellant v. Carl Launt and 3077860 Nova Scotia Limited Respondents Judge: The Honourable Justice David P.S. Farrar; (Hamilton, J.A. concurring) The Honourable Justice Peter M.S, Bryson (Dissenting) Appeal Heard: April 1, 2011 Subject: Civil Procedure Rule 13.04

Summary: The appellant appeals a decision granting

summary judgment to the defendant on the grounds that the Chambers judge incorrectly applied the test for

summary judgment by improperly making findings of fact. Result: Appeal allowed. The Chambers judge erred in finding that the respondent had met the first stage of the two-part

summary judgment test. Rather than determining whether there was a material issue of fact for trial, she made findings of fact on the evidence which was presented at the

summary judgment motion. In doing so she erred. Per Bryson, J.A. (Dissenting) The Chambers judge properly found that the respondent had met the first part of the

summary judgment test and that the appellant failed

to show that it had a reasonable chance of success on its claim that Launt was the agent for 3077860 Nova Scotia Limited. This information sheet does not form part of the court’s judgment. Quotes must be from the judgment, not this cover sheet. The full court judgment consists of 35 pages. NOVA SCOTIA COURT OF APPEAL Citation: Globex Foreign Exchange Corp. v. Launt , 2011 NSCA 67

Date: 20110715 Docket: CA332706 Registry: Halifax Between: Globex Foreign Exchange Corporation Appellant v. Carl Launt and 3077860 Nova Scotia Limited Respondents Judges: Hamilton, Farrar and Bryson, JJ.A. Appeal Heard: April 1, 2011, in Halifax, Nova Scotia Held: Appeal allowed; order for

summary judgment set aside per reasons for judgment of Farrar, J.A.; Hamilton, J.A. concurring; Bryson, J.A. dissenting. Counsel: Franco P. Tarulli, for the appellant Tim Hill and Dianna M. Rievaj, for the respondent Carl Launt Reasons for judgment : [ 1 ] The appellant Globex Foreign Exchange Corporation appeals from the Order of the Honourable Justice M. Heather Robertson dated July 20, 2010, where, on the defendant, Carl Launt’s motion for

summary judgment on evidence pursuant to Rule 13.04, she dismissed Globex’s action against him. A default order had already been entered against the defendant 3077860 Nova Scotia Limited (“Numberco”) on January 28, 2010. Numberco took no

part in the motion before the Chambers judge and takes no

part in this appeal. [ 2 ] Globex appeals from the order for

summary judgment on the ground that the Chambers judge incorrectly applied the test for

summary judgment by improperly making findings of fact. Facts [ 3 ] The underlying facts of this case are not complicated. Launt is the sole director and shareholder in Numberco. On December 30, 2008, Numberco entered into three contracts with Globex for the purchase of £1,198,000 pounds sterling at pre-agreed exchange rates. Prior to entering into these contracts, Numberco had not carried on any business for the preceding four years. Nor did Numberco have any assets except for approximately $125,000 that Launt had advanced to it for the currency trades.

[ 4 ] In furtherance of the contracts, Globex purchased the pounds sterling. However, Numberco refused to complete the contracts. Globex sold the currency back to the market at a loss of approximately $90,000. [ 5 ] Globex became aware that Numberco had not carried on business for some four years prior to this trade and that the funds for the trade were advanced to Globex by Launt.

As a result, Globex commenced action against Launt and Numberco on December 9, 2009, alleging: ... at all relevant times, [Numberco] was Launt’s duly authorized agent, servant or employee. [ 6 ] As of the time of the motion before the Chambers judge, discovery examinations and document exchange had not been completed. [ 7 ] In defence of the

summary judgment motion, Launt filed his own affidavit. The salient provisions in that affidavit are as follows: 4. I have reviewed the Statement of Claim herein and state that: (

a) at no time did I ever indicate or state to any employee or agent of the plaintiff that the defendant 3077860 Nova Scotia Limited was entering into any agreement with the plaintiff as my agent; (

b) the defendant 3077860 Nova Scotia Limited was not my agent for that or any other purpose; (

c) I have not received any money from the plaintiff, and to the best of my knowledge and belief neither has the defendant 3077860 Nova Scotia Limited. [ 8 ] In support of the motion, Globex filed the affidavit of Jeff Matheson, which essentially sets forward the facts as I have previously reviewed them here. [ 9 ] The motion was heard on April 20, 2010, and by written decision dated June 11, 2010, the Chambers judge granted Launt’s motion for

summary judgment. Issues [ 10 ] The sole issue for determination on this appeal is whether the Chambers judge properly applied the test for

summary judgment. Standard of Review [ 11 ] The Chambers judge’s decision had a final or terminating effect on the allegations against the respondents, such that the standard of review is whether there arose an error of law resulting in an injustice. An error of law that affects the result constitutes an injustice. AMCI Export Corp. v. Nova Scotia Power Inc. , 2010 NSCA 41 , ¶ 10 and Turner v. Halifax (Regional Municipality) , 2009 NSCA 106 , ¶ 14 . [ 12 ] For reasons I will now develop I have concluded that the Chambers judge, in granting

summary judgment to Mr. Launt, erred

in law resulting in an injustice. I would set aside the Order for

summary judgment. Analysis [13] The prerequisites for

summary judgment to dismiss an action are -- first, that the applying defendant shows that there is nogenuine issue of material fact requiring trial; and second, that the responding plaintiff fails to show that his claim has a real chance ofsuccess (Guarantee Co. of North America v. Gordon Capital Corp., (SCC), [1999] 3 S.C.R. 423 at ¶ 27). [14] Accordingly, the first question the Chambers judge had to ask herself was whether she was satisfied that there were nomatters of fact or of mixed law and fact requiring trial.

Only if she were persuaded that this initial threshold had been met, would shethen go on to ask the second question, that is, whether Globex demonstrated that it had a real chance of success in advancing its argumentthat an agency relationship existed between Launt and Numberco (Frothingham v. Perez, 2011 NSCA 59, ¶ 38-40). [15] In conducting the requisite analysis the clear directions of this Court on a number of occasions bear repeating. It is not thefunction of the Chambers judge on a motion for

summary judgment to determine matters of fact or mixed law and fact which are indispute (Oceanus Marine Inc. v. Saunders, 1996 NSCA 139 , [1996] N.S.J. No. 301 (Lexis)(C.A.), ¶ 20, The Bank of NovaScotia v. A. MacKenzie’s Auto Mart Inc., 2010 NSCA 81 at ¶ 21, Young v. Meery, 2009 NSCA 47). [16] The Court’s role is limited to assessing the threshold of whether a genuine issue exists for trial.

The evaluation of credibility,the weighing of evidence and the drawing of factual inferences (except in limited circumstances) are functions reserved for the trialjudge. [17] With respect, the Chambers judge erred in approaching her task as if she were to determine on the evidence before herwhether an agency relationship existed between Launt and Numberco, rather than determining whether there was a material fact in issuerequiring a trial. I will come back to the Chambers judge’s error after discussing the law of agency.

Agency [18] The legal relationship of agency is commonly described in the following way: Agency is the relationship that exists between two persons when one, called the agent, is considered in law to represent the other, calledthe principal, in such a way as to be able to affect the principal’s position by the making of contracts or the disposition of property. Gerald Fridman, Canadian Agency Law (Markham, ON: LexisNexis Canada Inc., 2009) (“Fridman, Canadian Agency Law”) at p. 4 [19] Whether an agency relationship exists is a question of fact. (Brady v.

Giles (1835), 1 M. &Rob. 494, cited with approval inNelson v. Victoria (County), (1988) 81 N.S.R. (3d) 334(S.C.T.D.)). [20] In Provincial Electric

(1969) Ltd. v. Registered Holdings Ltd., Mister Transmission (International) Ltd., Jerome Etkin Ltd.and Brillinger Investments Ltd. (1980), (NS SC), 34 N.S.R. (2d) 100 (Co. Ct.), Anderson, C.C.J. said the following: 14 A corporation can be an agent for an undisclosed principal just as can any other person. Where a limited company is used, ashere, solely as a front for what are essentially the acts and operations of the principal shareholder, to the extent present in this case, theprincipal is the person primarily liable.

Therefore, any judgment against Registered Holdings is a judgment against the other defendantsas it cannot be regarded in fact or in law as a separate and independent entity but merely a front to deprive the creditors of their legitimateclaims. [My emphasis]

[21] There is a distinction between situations in which courts find that corporations acting as agent for the shareholder whocontrols the corporation and situations in which courts pierce the corporate veil. The Ontario Court of Appeal has explained thedistinction as follows in Dumbrell v. Regional Group of Companies Inc., 2007 ONCA 59: 80 The concepts of piercing the corporate veil and holding that a corporation acts as an agent for the individual who controls thatcorporation achieve the same result in that they both impose personal liability for what appear to be corporate actions.

They achieve thatresult, however, in different ways. The agency relationship assumes that the corporation and the controlling mind are distinct, but that onthe relevant facts the former acted as agent for the latter. Piercing the corporate veil ignores the legal persona of the corporation: BruceL. Welling, Corporate Law in Canada: The Governing Principles, 2d ed. (Markham, Ont.: Butterworths, 1991) at 122-36. [22] However, few courts distinguish between the two scenarios. Our Court has said that the corporate veil may be pierced wherea corporation is a mere agent or puppet of a shareholder. In White v. E.B.F.

Manufacturing Ltd., 2005 NSCA 167 there is an extensivereview of the law and it provides a good

summary of the relevant cases. I will quote extensively from the judgment of Saunders, J.A.: [48] The concept that corporations are separate legal entities, despite the fact they may have the same shareholders, has beenfundamental to the common law since the House of Lords decision in Salomon v. Salomon & Co., [1897] A.C. 22 (H.L.). A morerecent commentary on this principle can be found in the Supreme Court of Canada decision in Kosmopoulos v.

Constitution InsuranceCo. of Canada, (SCC), [1987] 1 S.C.R. 2, where Wilson, J. stated at para. 12: As a general rule a corporation is a legal entity distinct from its shareholders: Salomon v. Salomon & Co., [1897] A.C. 22 (H.L.). Thelaw on when a court may disregard this principle by "lifting the corporate veil" and regarding the company as a mere "agent" or "puppet"of its controlling shareholder or parent corporation follows no consistent principle.

The best that can be said is that the "separate entities"principle is not enforced when it would yield a result "too flagrantly opposed to justice, convenience or the interests of the Revenue":L.C.B. Gower, Modern Company Law (4th ed. 1979) at p. 112. I have no doubt that theoretically the veil could be lifted in this case to dojustice, as was done in American Indemnity Co. v. Southern Missionary College supra, cited by the Court of Appeal of Ontario.

But anumber of factors lead me to think it would be unwise to do so. [Underlining in original] 49 At the hearing before us counsel for the appellant and intervenor urged that the corporate veil ought not to be lifted except in themost serious of cases where fraud, or deceit, or use of a corporation for an improper purpose is both pleaded and proved. With respect, Ithink that submission invites a far too restrictive approach, implying that only the most egregious or criminally unlawful circumstancewill entitle a court to lift the corporate veil.

I do not understand that to be the law. 50 In Littlewoods Mail Order Stores Ltd. v. Inland Revenue Commissioners, [1969] 1 W.L.R. 1241 (C.A.) Lord Denningdeclared at page 1255: ... The doctrine laid down in Salomon v. Salomon & Co. [1897] A.C. 22, has to be watched very carefully. It has often been supposed tocast a veil over the personality of a limited company through which the courts cannot see. But that is not true. The courts can and oftendo draw aside the veil. They can, and often do, pull off the mask. They look to see what really lies behind. ... 51 In Le Car GmbH v.

Dusty Roads Holdings Ltd., [2004] N.S.J. No. 140, 2004 CarswellNS 138 (S.C.), Murphy, J. accuratelyidentified three situations where courts have lifted the corporate veil: (

a) where failure to do so would be unfair and lead to a result "flagrantly opposed to justice"; (

b) where representations are made or activities undertaken for a fraudulent or other objectionable, illegal or improper purpose tofacilitate doing something that would be illegal or improper for an individual to do personally; and (

c) where the corporation is merely acting as the controlling shareholder's agent. (My emphasis)

52 Courts will often pierce the corporate veil where the company is an agent or the mere alter-ego of the controlling shareholder orparent company. There was certainly evidence before McDougall, J. to support a conclusion that FENCE was merely the alter-ego ofBryson and EBF. In Aluminum Co. of Canada v. Toronto (City), (SCC), [1944] S.C.R. 267, 1944 CarswellOnt 71(S.C.C.), at paras. 15-16, Rand, J., referred to the Court's earlier decision in the case of Toronto v.

Famous Players Canadian Corp., (SCC), [1936] 2 D.L.R. 129 as having: 15 ... settled that the business of one company can embrace the apparent or nominal business of another company where the conditionsare such that it can be said that the second company is in fact the puppet of the first; when the directing mind and will of the formerreaches into and through the corporate façade of the latter and becomes, itself, the manifesting agency. . . . 16 The question, then, in each case, apart from formal agency which is not present here, is whether or not the parent company is in factin such an intimate and immediate domination of the motions of the subordinate company that it can be said that the latter has, in the truesense of the expression, no independent functioning of its own. [23] A determination of whether an agency relationship exists requires a contextual analysis.

The case law, as reviewed bySaunders, J.A. in White, supra, shows that there are a few settled legal principles. The cases turn on their facts and what may militate infavour of piercing the corporate veil or finding an agency relationship in one context may not have the same affect in another. This pointwas also recognized by Laskin, J.A. in 642947 Ontario Ltd. v. Fleischer, (ON CA), [2001] O.J. No. 4771 (Lexis)(C.A.) where, again, after a thorough review of the law he concluded: 69 These authorities indicate that the decision to pierce the corporate veil will depend on the context.

They also indicate that theseparate legal personality of the corporation cannot be lightly set aside. Yet, however restrictive corporate law principles for piercing thecorporate veil may be, in the context of an undertaking to the court, the trial judge's findings support going behind Sweet Dreams andimposing personal liability. [24] The decision to pierce a corporate veil is often discussed in the context of cases where there are allegations of fraud on thepart of the shareholders or parties affiliated in some way with the corporation.

However, as was made clear by Saunders, J.A. in White,supra, a party’s conduct does not have to rise to the level of fraud or criminal wrongdoing before the courts will pierce the corporateveil. (White, supra, ¶ 49). [25] I have discussed the case law in some detail to illustrate that a finding of a relationship of agency is highly contextual and factdriven.

I will now return to what I consider to be the trial judge’s error in this case. [26] In her decision she sets forth the evidence as follows: [8] Launt deposes in his affidavit that at no time did he advise the plaintiff that Numberco was entering into any agreements as agentfor him, nor was Numberco ever his agent for any purpose. [9] There is no evidence before the court documentary or otherwise, which would demonstrate that Launt was ever a party to thecontracts in question or that he offered to guarantee the contracts or did he provide any guarantees for payment. [10] To this end, the court is left with the bare allegations made by counsel for Globex in submissions, but there are no facts pleadedin the statement of claim to support his contention.

[ 27 ] I pause here to point out that although the Chambers judge found that there were no facts pleaded in the statement of claim to support the contention, the allegation of agency is itself an allegation of fact. The evidence before her to support the allegation of fact was that Numberco was a shell company, did not have any assets, and its ability to enter into the contract was as a result of monies provided to it by Launt. However, the Chambers judge does not analyse the evidence to determine whether it raises an arguable issue.

She analyses it to determine the ultimate issue: [18] That is exactly the situation in this case. Globex contracted with Numberco. There is no reason to lift the corporate veil on the basis of the evidence before me. [19] The defendant Launt has in my view demonstrated clearly that he was not the principal in the transactions as alleged, nor was Numberco his agent for any purpose .

Launt has demonstrated to my satisfaction that there is no genuine issue of material fact requiring trial. [My emphasis] [ 28 ] The Chambers judge is making the determination of whether it would be appropriate to find an agency relationship on the evidence before her. As I expressed earlier, it is not the function of the Chambers judge on a motion for

summary judgment, to determine matters of fact or mixed law and fact which are in dispute. The evaluation of credibility, the weighing of evidence and the drawing of factual inferences are functions for the trial judge. The Chambers judge here did all three. She reviewed the evidence, determined, by inference, that Launt was credible in his affidavit evidence and “demonstrated” he was not the principal in these transactions. She then made the finding that an agency relationship did not exist between Launt and Numberco.

Again, with respect, that was not her function. [ 29 ] In certain circumstances, a Chambers judge may make inferences of fact based on the undisputed facts before the court, as long as the inferences are strongly supported by the facts. Guarantee v. Gordon, supra , ¶ 30. However, that is not the situation here. This is not a situation where there is a full factual record with no material facts in dispute.

Whether the agency relationship existed is in itself a finding of fact, whether to lift the corporate veil involves considerations of whether the failure to do so would be unfair and lead to a result “flagrantly opposed to justice” and/or whether this was a situation where the corporation is merely the puppet of Launt.

It is not simply a matter of looking at the denial of Launt that Numberco was not acting as his agent. [ 30 ] To illustrate further, there is no explanation in the affidavit evidence of Launt as to how it was that Numberco was going to fund the purchase of the contracts, nor is there any explanation for why the transactions did not close; or is there any evidence why a shell company with no assets was entering into the contracts with seemingly no ability to close the transaction. No explanation is given for the business reason or rationale for having Numberco enter into the contracts.

The evidence does not disclose what business, if any, had been transacted by Numberco in the past. These are just some of the issues that may be considered by a trial judge with a full factual record in determining whether an agency relationship exists. I am not satisfied that Launt has satisfied the first part of the test on the evidence submitted. The prerequisites for

summary judgment have not been met. The Chambers judge, by misdirecting herself on her ultimate task, failed to properly analyse the evidence to determine whether there was a material fact which required determination at trial. [ 31 ] Where there is a disputed issue of material fact involving a comparison of parties’ respective evidence and positions, as was done by the Chambers judge in this case, it is not a proper case for

summary judgment. The fact in dispute is not an incidental fact, it involves consideration of whether an agency arrangement existed. That fact is essential to the plaintiff’s claim. A proper approach would have focussed the Chambers judge on the ultimate issue as to whether Launt had met the requirements of the first stage of the

summary judgment test. Had she done so, the result would have been different. [ 32 ] Although Launt was unsuccessful on this

summary judgment motion, I am not deciding or suggesting that a party can never be successful on a

summary judgment motion where agency is alleged and pleaded. I am deciding that the facts, as set out in the affidavit evidence submitted in this case, are insufficient for satisfying the first part of the

summary judgment test. Conclusion [ 33 ] I am satisfied on the evidence before the Chambers judge that there was a material issue of fact to be determined at trial . The Chambers judge embarked on an evaluation of the evidence for the determination of whether Globex would be successful at trial. In doing so she erred.

[ 34 ] I would allow the appeal, set aside the order for

summary judgment with the costs on the motion below to be costs in the cause. I would award costs of this appeal to Globex in the amount of $1,500.00 including disbursements. Farrar, J.A. Concurred in: Hamilton, J.A. Dissenting Reasons for judgment : [ 35 ]

Summary judgment is a simple but invaluable tool by which litigants and the court can save precious resources and do swift justice in a proper case. This is such a case. [ 36 ] This proceeding arises because Globex Foreign Exchange Corporation (“Globex”) could not collect what it is owed by 3077860 Nova Scotia Limited (“Numberco”). When Globex learned in its first proceeding that Numberco could not respond to a judgment, it brought a second law suit, alleging that Numberco was really an “agent” for its sole shareholder, Mr. Launt. This is Globex’s affidavit evidence: 7.

I am advised . . . that Numberco had not carried on business for at least four years, and its only asset during that time was the shareholder loan that Carl Launt advanced to it for the purpose of carrying out the currency transactions that are the subject of this Action. . . . 9. The first indication that Globex knew that Numberco had no business of its own, and that it had no assets, other than the funds Carl Launt advanced it for the purpose of these currency trades, was when [Globex’s counsel] reported to the company following his conversation with [Mr. Launt’s counsel].

As a result of that conversation, Globex instructed that a new action proceed with Carl Launt as a named Defendant in addition to Numberco. . . . 15. Globex has no information to suggest that Numberco was not acting as his [Launt’s] agent, nor does Globex have any information regarding the purpose of the currency trades that are the subject of this litigation. Globex anticipates that such information is best in the knowledge of Carl Launt, and that this information would be forthcoming during examinations for discovery. That’s it. That’s all. It will not do. What follows is why.

The uncontroverted facts are these: [ 37 ] Numberco entered into three foreign currency contracts for the purchase of £1,198,000 at pre-arranged exchange rates.

[ 37 ] Numberco entered into three foreign currency contracts for the purchase of £1,198,000 at pre-arranged exchange rates. Numberco paid $124,484 Canadian as deposits for these trades. The market moved against Numberco which did not pay the balances when due. Globex closed these positions, realizing a loss of $89,410.84 Canadian which Numberco did not pay. [ 38 ] The sole shareholder, director and officer of Numberco is Carl Launt. He loaned Numberco $125,000 in order to finance the foregoing trades. Numberco itself had been inactive for some years. [ 39 ] Globex sued Numberco which did not defend.

Counsel for Numberco advised Globex’s counsel that Numberco had not carried on business for some years and that its only “asset” had been the $125,000 shareholder loan from Mr. Launt to the company. He sent along Numberco’s tax returns for 2007 and 2008 to counsel for Globex. Following receipt of that advice and information, Globex commenced a second action against Numberco and Carl Launt personally, claiming that Numberco had been an agent for Mr. Launt’s personal currency trading. [ 40 ] Globex demanded documentary disclosure and discovery. Mr. Launt brought a successful motion for

summary judgment. In allowing Mr. Launt’s motion, the Honourable Justice M.

Heather Robertson said: [8] Launt deposes in his affidavit that at no time did he advise the plaintiff that Numberco was entering into any agreements as agent for him, nor was Numberco ever his agent for any purpose. [9] There is no evidence before the court documentary or otherwise, which would demonstrate that Launt was ever a party to the contracts in question or that he offered to guarantee the contracts or did he provide any guarantees for payment. [10] To this end, the court is left with the bare allegations made by counsel for Globex in submissions, but there are no facts pleaded in the statement of claim to support his contention. [11] The defendant Launt relies on MacNeil v.

Bethune , 2006 NSCA 21 and Papaschase Indian Band No. 136 v. Canada (Attorney General) 2008 CarswellAlta 398, 2008 SCC 14 , J.E. 2008-689 at paras. 10-11 , in which the Supreme Court sets out the requirement that each party put its “best foot forward” with respect to the existence or non-existence of material issues to be tried. [12] Although Launt bears the heavier burden of showing there is “no genuine issue of material fact requiring trial,” the plaintiff cannot merely rely on its pleadings and must advance some evidence to support the allegations made.

The plaintiff has not adduced any evidence showing that Numberco was the agent and Launt the principal in these transactions. [13] It is obvious from the evidence before me that the plaintiff and Numberco were the contracting parties, as evidenced from the plaintiff's first action against Numberco solely. Once the plaintiff realized that Numberco was impecunious, the plaintiff commenced its action against Launt. . . . [15] It would be inaccurate to describe Launt as an undisclosed principal as Globex were aware of Mr. Launt.

They chose to contract with Numberco and made no demands for assurances that Numberco was solvent nor any demand for guarantees from Numberco’s sole shareholder Launt. . . . [19] The defendant Launt has in my view demonstrated clearly that he was not the principal in the transactions as alleged, nor was Numberco his agent for any purpose. Launt has demonstrated to my satisfaction that there is no genuine issue of material fact requiring

trial. [41] Globex appeals, alleging that Justice Robertson erred in the application of the

summary judgment test. Globex argues that itis possible on the foregoing facts to infer an agency relationship between Mr. Launt and Numberco. Specifically, Globex complains that: · Numberco has transacted no business (other than the trades in question) for some years; · Mr. Launt is the sole shareholder, officer and director of Numberco; · There has been no disclosure from Mr.

Launt or Numberco regarding the purpose of the transactions; · There is no evidence about the terms of repayment of the shareholder loans; · There is no evidence of any “business plan” by Numberco. [42] The Chambers judge uses some language that suggests she may be trespassing on the role of the trial judge. I agree with thecriticism of my colleagues at paras. 16, 17, 27 and 28 that the Chambers judge should not decide the question of agency but ratherwhether there was a triable issue of agency. However, I think that is what she ultimately did. As I read her decision, she is saying thatMr.

Launt discharged the initial burden by showing that the parties to the written contract were Globex and Numberco. Prima facie,there is no suggestion of any agency. The burden then shifted to Globex to lead some evidence of agency that warranted a trial. As willbecome apparent, where I respectfully differ from my colleagues is regarding whether Mr. Launt discharged the initial burden on him ofshowing that there was no genuine issue of material fact requiring a trial. ISSUE - Was the

Summary Judgment Test Correctly Applied? [43] I concur with my colleagues on both the standard of review and the

summary judgment test, although we differ on itsapplication to the facts. To explain that difference, it will be necessary to review how the test is applied in the context of an allegation ofagency. [44] Although the

summary judgment test uses the same language regardless of whether the applicant is a defendant or plaintiff,the reality is that there is a difference because the party making allegations in the underlying law suit has the ultimate burden of proof. In this sense, a defendant can be at a disadvantage in some cases, because it can be very difficult to do more than deny an allegation (howdoes one “prove” a negative?). In MacNeil v. Bethune, 2006 NSCA 21, the court alluded to this when discussing the two-stage

summaryjudgment test at para. 31: [31] I would underline, however, that as I have said the

summary judgment test has two steps, each of which has a different onus. Thefirst step is that the moving party must show that “there is no genuine issue of material fact for trial and therefore

summary judgment is aproper question for consideration...”: Guarantee Co. of North America, supra. This requirement has been described in Somers Estatev. Maxwell (1995), (MB CA), 107 Man. R.(2d) 220; [1996] M.J. No. 46 (Q.L.)(C.A.), as follows: 10 In some respects a defendant's motion for

summary judgment is like a motion to dismiss a claim as one disclosing no cause ofaction. The most significant [difference] is that, unlike the motion to dismiss on the pleadings, a motion for

summary judgment is notdecided on the assumption that the facts alleged are true. The defendant must prove the facts to be such that, prima facie, the action failsin law. The burden then shifts to the plaintiff to prove facts which establish, if not the validity of the claim, at least a genuine issue fordetermination. 11 The initial question for the motions judge was not therefore that which she asked herself. There was no onus on the plaintiff to

establish either a genuine issue or a prima facie case until the defendant had proven, on a prima facie basis, the absence of a valid claimin law. [32] I have also found the comments of Green, J., as he then was, in Marco, supra, helpful in this regard: 76 . . . 3. To bring himself or herself within the Rule the applying party must: (

a) in a case where he or she has the ultimate burden of proof on the merits, put forward an evidentiary basis for the claim which, ifconsidered alone, would prove each element of the cause of action; or (

b) in a case where the other party has the burden of proof on the merits, put forward an evidentiary base establishing a defence to theclaim as defined in the pleadings or tending to show that the other party's claim has no substance to it. 4.

In either of the foregoing cases, the applying party's case must consist of an organized set of facts set out in a coherent way, eitherfrom primary sources or the best sources available, including admissions on interrogatories and discoveries, that constitute proof of aproper foundation of the claim or defence, as the case may be. [Emphasis added.] Although Marco was applying the Newfoundland “summary trial” rule, the discussion of “genuine issue” relied upon and incorporatedboth traditional

summary judgment jurisprudence (i.e., Ontario) and more liberal

summary trial decisions (ie., B.C.). [45] A party applying for

summary judgment has an initial burden to show that there is no genuine issue of material fact requiringa trial. Subject to the applicant meeting this burden, both parties are expected to put “their best foot forward” and lead evidence. Theycannot simply rely on pleadings (Canada (Attorney General) v. Lameman, 2008 SCC 14 at para. 4; Goudie v. Ottawa (City), 2003 SCC14, para. 32). [46] The Court may draw inferences from undisputed facts provided that they are strongly supported by the facts: Guarantee Co.of North America, at para. 30.

But the Chambers judge should not assess credibility, weigh the evidence or find facts on disputedevidence (Davison v. Rexcraft Sorage and Warehouse Inc., (ON CA), 111 O.A.C. 201 (C.A.) at para. 19, applied in Hogeterp v. Huntley, 2007 NSCA 75, at para. 39; Aylward v. Dalhousie University, 2011 NSCA 20, at paras. 11-13). [47] The following principles summarize the foregoing jurisprudence when applying the

summary judgment test: 1. The moving party (defendant or plaintiff) must lead evidence to show that there is no “genuine issue” requiring trial; this meansthat there is “no genuine issue as to any material fact”, requiring trial; 2. If the moving party discharges the foregoing burden, the responding party must show that it has a “real chance of success”. Thisdoes not mean that the respondent is likely to succeed, but only that she could succeed; the prospect for success cannot be illusory orunrealistic; it must be reasonably grounded in legal principle (Spring Garden Holdings Ltd. v.

Ryan Duffy’s Restaurants Ltd., 2010 NSSC71, at para. 29, quoting from Justice Hood in Eikelenboom et al v. Holstein Canada, 2003 NSSC 241 at para. 10 and Justice Beveridge(as he then was) in Bowden v. Withrow’s Pharmacy Halifax

(1999) Ltd., 2008 NSSC 252, para. 60). 3. In the case of a defendant moving for

summary judgment, he or she must show that the action prima facie fails in law, (Bethune,para. 31, quoting Somers Estate) by providing evidence either of a valid defence to the plaintiff’s claim or tending to show that the claimitself has no substance to it (Bethune, para. 32, quoting from Marco Ltd. v. Newfoundland Processing Ltd., (NL SC),[1995] N.J. No. 168 (Nfld. S.C.T.D.). 4. In the case of a defendant who moves for

summary judgment and who passes the first test, the plaintiff must demonstrate that she

has evidence on which the claims as pleaded can be allowed (Hercules Managements Ltd. v. Ernst & Young, (SCC),[1997] 2 S.C.R. 165; that is to say, that there is a genuine issue for trial, Bethune, para. 33, citing Marco). 5. If the court decides there is no genuine issue of material fact requiring a trial, the duty of the court is to apply the law and decidethe case: Eikelenboom v. Holstein Canada, 2004 NSCA 103, Gilbert v. Giffin, 2010 NSCA 95 at paras. 20-21, where Farrar J.A.helpfully explains the comments of Cromwell J.A. (as he then was) in Lienaux v.

Campbell, 1998 NSCA 70 , [1998] N.S.J. 142(paras. 13-14). 6. Subject to the moving party’s initial burden, each party must put “its best foot forward”. “Bald assertions” without evidence willnot discharge the burden. A self-serving affidavit does not create a triable issue in the absence of detailed facts and supporting evidence(Guarantee Co. of North America, para. 31; Goldman v. Devine, 2007 ONCA 301, para. 23). The Law of Agency: [48] Globex alleges that Numberco acted as Mr. Launt’s agent in entering into the currency transactions with Globex.

This novelallegation arose when Globex learned that Numberco could not respond to a judgment. Globex does not claim that it thought it wasdealing with Numberco as an agent. Rather it concedes that Numberco was acting as principal in its currency transactions. However,Globex says that this does not preclude a finding that Numberco was Mr. Launt’s agent. Globex alleges agency on the basis of Mr.Launt’s “use” of Numberco to conduct business on “his behalf, as his agent”, (factum paras. 27 & 28). [49] Agency is a question of fact: Brady v. Giles (1835), 1 M. & Rob. 494, 174 E.R. 170 (cited in Nelson v.

Victoria County(Municipality) (1988), (NS SC), 81 N.S.R. (2d) 334); DeBlaquiere v. Becker, [1858] O.J. No. 249, 8 U.C.C.P. 167(Upper Canada Court of Common Pleas); W.J. McGuire Co. v. Bridger (1914), (SCC), 49 S.C.R. 632; R. v. Little, (ON SC), [1926] O.J. No. 7, 2 D.L.R. 1056 (Ontario Supreme Court - High Court Division); Michigan State BridgeCommission v. Point Edward (Village), [1939] O.J. No. 248 (C.A.); Donna Rae Ltd. and Roache v. Seaboard G.M. Diesel Ltd. (1979), (NS CA), 29 N.S.R. (2d) 413 (NSSCAD); Hiscock v. Maritime Life Assurance Co., (NL CA),[1999] N.J. No. 49, 171 Nfld. & P.E.I.R. 168 (Nfld.

C.A.). [50] Sometimes agency is treated as a question of mixed fact and law but that usually involves a question about the type of agencyand authority granted to the agent, rather than whether an agency relationship itself exists. (See Berryere v. Fireman’s Fund InsuranceCo., (MB CA), [1965] M.J. No. 44, 51 D.L.R. (2d) 603; Royal Bank of Canada v. 1277520 Ontario Inc., [2001] O.J.No. 144; Winnipeg (City) Assessor v.

Licharson. 2005 MBC This is a test 08:20:00 Real time A 95). [51] A commonly invoked description of agency is found in Gerald Fridman’s book on agency: Agency is the relationship that exists between two persons when one, called the agent, is considered in law to represent the other, calledthe principal, in such a way as to be able to affect the principal’s position by the making of contracts or the disposition of property.

Gerald Fridman, Canadian Agency Law (Markham, ON: LexisNexis Canada Inc., 2009) (“Fridman, Canadian Agency Law”) at p. 4. [52] The law recognizes that transactions can occur with undisclosed principals who may sue or be sued on those contracts. Thedoctrine appears to offend the law of privity.

But the rule seems to have evolved as a matter of commercial practice predating the fulldevelopment of contract law in the 19th Century (Bowstead and Reynolds on Agency, 17th ed. (London: Sweet & Maxwell, 2001),“Bowstead” at 8-070; Gerald Fridman, Canadian Agency Law (Markham, Ont.: LexisNexis Canada Inc., 2009) pp. 159-60, “Fridman”.

[53] The cases that acknowledge an undisclosed principal – agency relationship rest on the intention of the parties (Bowstead, at 8-074). That cannot apply here because Globex does not allege it knew of any agency at the time of the transactions and Mr. Launt hasexpressly denied an agency relationship between him and Numberco. In Covert et al. v.

Minister of Finance, (SCC),[1980] 2 S.C.R. 774, Dickson J. (as he then was) speaking for the minority, stated the usual rule (p. 822): The authors of Fraser & Stewart, Company Law of Canada, 5th ed., 1962, make the point (at p. 20) that the distinction between companyand its shareholders is equally applicable where company is subsidiary of another company, and that company and its wholly-ownedsubsidiary are separate and distinct legal entities, citing Cohen L.J in Ebbw Vale Urban District Council v.

South Wales Traffic AreaLicensing Authority, at p. 370: Under the ordinary rules of law, parent company and subsidiary company, even hundred per cent subsidiary company, are distinct legalentities, and in the absence of an agency contract between the two companies one cannot be said to be the agent of the other. [Emphasis added.] It is also appropriate to remember that in Salomon itself (para. 55 below), the House of Lords refused to find that Mr.

Salomon’s wholly-controlled company was his agent. [54] Nevertheless, in exceptional circumstances the court may infer an agency where it might also “lift the corporate veil”. Globexdoes not primarily rely on this latter argument. But some of Globex’s authorities mention it, because lifting the corporate veil isassociated in those cases with an inference of an agency. They consider agency and piercing the corporate veil together, although theyare legally distinct. In Dumbrell v.

Regional Group of Companies Inc., 2007 ONCA 59 at para. 80, the Ontario Court of Appealexplained: [80] The concepts of piercing the corporate veil and holding that a corporation acts as an agent for the individual who controls thatcorporation achieve the same result in that they both impose personal liability for what appear to be corporate actions. They achieve thatresult, however, in different ways. The agency relationship assumes that the corporation and the controlling mind are distinct, but that onthe relevant facts the former acted as agent for the latter.

Piercing the corporate veil ignores the legal persona of the corporation: BruceL. Welling, Corporate Law in Canada: The Governing Principles, 2d ed. (Markham, Ont.: Butterworths, 1991) at 122-36. [55] In Kosmopoulos v. Constitution Insurance Co., (SCC), [1987] 1 S.C.R. 2 (Q.L.) at para. 12, Justice Wilsondiscussed piercing the corporate veil: 12. As a general rule a corporation is a legal entity distinct from its shareholders: Salomon v.

Salomon & Co., [1897] A.C. 22 (H.L.).The law on when a court may disregard this principle by “lifting the corporate veil” and regarding the company as a mere “agent” or“puppet” of its controlling shareholder or parent corporation follows no consistent principle. The best that can be said is that the“separate entities” principle is not enforced when it would yield a result “too flagrantly opposed to justice, convenience or the interests ofthe Revenue”: L.C.B.

Gower, Modern Company Law (4th ed. 1979) at p. 112. … [56] Kosmopoulos claimed an insurable interest in the goods of his company which had been lost in a fire. He was the soleshareholder and directing mind of his company. Although he succeeded on other grounds, the Supreme Court of Canada declined to liftthe corporate veil in order to “do justice” to Mr. Kosmopoulos.

Justice Wilson discussed the perils of doing so: 14. ...If the corporate veil were to be lifted in this case, then a very arbitrary and, in my view, indefensible distinction might emergebetween companies with more than one shareholder and companies with only one shareholder: for a recent comment on the arbitrary andtechnical distinctions that would be created by lifting the corporate veil in this case, see Jacob S. Ziegel, “Shareholder’s InsurableInterest – Another attempt to scuttle the Macaura v. Northern Assurance Co. Doctrine: Kosmopoulos v. Constitution Insurance Co.(1984), 62 Can. Bar Rev. 95, pp. 102-03.

In addition, it is my view that if the application of a rule leads to a harsh justice, the propercourse to follow is to examine the rule itself rather than to affirm it and attempt to ameliorate its ill effects on a case-by-case basis.[Emphasis added.] [57] Two points about Kosmopoulos warrant special attention. First, the Supreme Court was not prepared to lift the corporate veil

in that case and was not prepared to entertain a distinction between single shareholder and multi shareholder corporations. Second,Canadian jurisprudence since then has not embraced the rather loose language quoted by Justice Wilson from the 4th ed. of Gower, atpara. 12 of Kosmopoulos. For example, in B.G. Preeco 1 (Pacific Coast) Ltd. v. Bon Street Holdings Ltd., (BC CA),[1989] B.C.J. No. 1032 (B.C.C.A.), after referring to para. 14 of Kosmopoulos and the Gower quotation, said this: Professor Welling in Corporate Law in Canada (Toronto: Butterworths, 1984) put it more firmly.

He referred to the American cases thatapply the fair play rationale and said (at p. 129): Little need be said about this rationale, other than that it simply will not do. There are, so far as we know, no such broadly enforceablestandards of “fair play and good conscience,” at least in Canadian corporate law. [58] Mere evidence of control of a company by an individual shareholder or small group of shareholders does not give rise to aninference of an agency relationship. In Edgington v.

Mulek Estate, 2008 BCCA 505 (Q.L.), at para. 20 the British Columbia Court ofAppeal said: 20 ...Shareholders, despite being in a position of control, do not, as a rule, incur liability for the breach of their corporation'scontractual obligations. It is not a matter of control; the shareholders of a closely held company like Westpark invariably have control ofthe company. [59] In 642947 Ontario Ltd. v. Fleischer, (ON CA), [2001] O.J. No. 4771 (Q.L.), the Ontario Court of Appealconsidered potential personal liability of two shareholders.

At para. 68, Laskin J.A. said: 68 Typically, the corporate veil is pierced when the company is incorporated for an illegal, fraudulent or improper purpose. But itcan also be pierced if when incorporated "those in control expressly direct a wrongful thing to be done". Clarkson v. Zhelka at 578.Sharpe J. set out a useful statement of the guiding principle in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co.(1986), (ON SC), 28 O.R. (3d) 423 at 433-34 (Ont. Ct. (Gen. Div.)), aff'd [1997] O.J.

No. 3754 (C.A.): "the courtswill disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and being used as ashield for fraudulent or improper conduct." [Emphasis added.] [60] The law is clear that the use by a sole shareholder of his corporation to shield himself from personal liability is not wrongful. In most cases that is business as usual. Nor is it wrongful to do business with third parties when the corporation has limited assets ormeans to pay. There must be more.

At the very least, there must be some kind of improper conduct, or “unique circumstances”, (perSaunders J.A., in White, para. 47: para. 65 below). [61] In Sutherland (Robert D.) Architects Ltd. v. Montykola Investments Inc. et al. (1995), 1995 NSSC 4 , 142 N.S.R. (2d)137 (rev’d on other grounds), Justice Gruchy also considered Justice Wilson’s dicta in Kosmopoulos and Davison J.’s analysis of the lawin Lockharts Ltd. v. Excalibur Holdings Ltd. et al. (1987) (NS SC), 83 N.S.R. (2d) 181, when lifting the corporate veilfor the benefit of an innocent third party.

Justice Gruchy noted para. 36 of Lockharts, where Justice Davison said this: [36] What can be drawn from the foregoing authorities? In my assessment, the fundamental principle enunciated in the Salomon caseremains good law in Canada and "one man corporations" should be considered as separate entities from their major shareholder save forcertain exceptional cases. A judge should not "lift the veil" simply because he believes it would be in the interest of "fairness" or of"justice". If that was the test the veil in the Salomon case would have been lifted.

On the other hand the courts have the power, indeedthe duty, to look behind the corporate structure and to ignore it if it is being used for fraudulent or improper purposes or as a "puppet" tothe detriment of a third party. [37] One of the fundamental purposes of establishing a corporate existence is to limit the liability of the shareholders.

In doing so,growth of commerce is encouraged by providing a vehicle by which monies can be invested with the knowledge that losses would berestricted to an amount usually equivalent to the extent of the investment. [38] The purpose of the corporate entity was not to defraud or mislead others including creditors and shareholders and in my opinion

where a company is being used for this purpose the "veil" should be lifted and a remedy made available to the victims of such conduct. [Emphasis added.] [ 62 ] Justice Gruchy went on to lift the corporate veil in Sutherland because individual shareholders of Montykola stripped its assets and diverted those assets to themselves after entering into business with the plaintiff. Justice Gruchy was satisfied that they did so in order to frustrate recovery by the plaintiff. [ 63 ] In support of its position, Globex relies on a number of cases which can be readily distinguished. First, Globex refers to White v. E.B.F.

Manufacturing Ltd. , 2005 NSCA 167 for the proposition that courts will lift the corporate veil even where there is no fraud, deceit or improper purpose. In White , Justice Saunders said this about the instances when the corporate veil can be lifted: [51] In Le Car GmbH v. Dusty Roads Holdings Ltd. , 2004 CarswellNS 138 (S.C.) , Murphy, J. accurately identified three situations where courts have lifted the corporate veil: (

a) where failure to do so would be unfair and lead to a result "flagrantly opposed to justice"; (

b) where representations are made or activities undertaken for a fraudulent or other objectionable, illegal or improper purpose to facilitate doing something that would be illegal or improper for an individual to do personally; and (

c) where the corporation is merely acting as the controlling shareholder's agent. [ 64 ] In GmbH , Justice Murphy was quoting from J. Anthony VanDuzer, The Law of Partnerships and Corporations (Concord: Irwin Law, 1997), p. 100, where Professor VanDuzer said: 4) Agency The third basis on which courts have purported to disregard separate corporate personality is by finding that the corporation is merely acting as the agent of someone else. Conceptually, the corporate form is not disregarded by a holding that it is an agent.

Rather, the business of the corporation or whatever activity gives rise to the claim by a third party is determined to be carried on not by the corporation directly, but only as an agent of the controlling shareholder. The courts often use evocative but ultimately unhelpful language to describe the corporation — for example, “sham,” “cloak,” “conduit,” or “alter ego.” The main test for the existence of this peculiar form of agency is whether there is extensive control by the shareholder over corporation. The factors referred to in Smith, Stone and Knight Ltd. v.

Birmingham Corp. are almost universally cited as those relevant to a determination whether agency exists: · Were the profits treated as profits of the shareholder? · Was the person conducting the business appointed by the parent company · Was the shareholder the head and brain of the trading venture? · Did the shareholder govern the adventure and decide what should be done and what capital should be committed to the venture?

· Did the shareholder make the profits by its skill and direction? · Was the shareholder in effectual and constant control? [65] As will be readily apparent from the discussion which follows, the first proposition of Smith, Stone & Knight does not applyin this case. And in White, the court was prepared to lift the corporate veil and find an agency relationship existed in “uniquecircumstances”. Those circumstances were: Mr. White had a licensing agreement with a manufacturing company for the payment ofpatent royalties on product sales. Subsequently a sales company was incorporated to effect sales to the public.

The manufacturingcompany sold to the sales company which in turn sold to third party customers. The question was whether royalties should be paid onthe wholesale price from the manufacturing company to the sales company or on the third party sale price to the public by the salescompany. Both the manufacturing and sales companies were controlled by the same shareholder. The companies’ own lawyerdescribed the sales company as an “agent” of the manufacturer.

In these special circumstances the court was prepared to treat bothcompanies as one and to base royalty payments on the prices charged by the sales company to third parties. Nothing like these “unique”circumstances is alleged in this case. [66] Then Globex refers to the case of Provincial Electric

(1969) Ltd. v. Registered Holdings Ltd., [1977] N.S.J. 731, where thecounty court said that a corporation can be an agent for an undisclosed principal where that corporation is used “solely as a front forwhat are essentially the acts and operations of the principal shareholder” (para. 14). In the absence of analysis and relevant authorities,that quotation is unhelpful and unpersuasive. The real question is in what circumstances the court will come to that conclusion.

We donot know how the result in Provincial Electric was “flagrantly opposed to justice, convenience or the interests of the Revenue”(Kosmopoulos, para. 12). [67] Globex also relies on Clarkson Co. Ltd. v. Zhelka et al., (ON SC), [1967] 2 O.R. 565 for the proposition thata corporation can be an agent for a controlling shareholder who is the real “entity liable on the transaction”.

But the following quotationfrom Zhelka shows what is crucial there (p. 10): 80 If a company is formed for the express purpose of doing a wrongful or unlawful act, or, if when formed, those in controlexpressly direct a wrongful thing to be done, the individuals as well as the company are responsible to those to whom liability is legallyowed. [Emphasis added.] The hallmark of Zhelka is wrongful conduct. [68] Finally, Globex relies on the doctrine of “alter ego” and refers to Buanderie centrale de Montréal Inc. v.

Montreal (City), (SCC), [1994], 3 S.C.R. 29 for the proposition that a corporation may simply be the agent for its shareholder where thebusiness done by the corporation is really that of agent for its shareholder(s). However, it is important to remember that Buanderie is atax case. Many of the cases that use the language of alter ego are tax cases; even so, the alter ego argument was not always successful(ie. Aluminum Company of Canada Ltd. v. City of Toronto, (SCC), [1944] S.C.R. 267; City of Halifax v. Halifax HarbourCommissioner, (SCC), [1935] S.C.R. 215; Toronto (City) v. Famous Players’ Canadian Corp.

Ltd., (SCC), [1936] S.C.R. 141). These cases fall squarely into the exception noted by Justice Wilson in Kosmopoulos that the corporate veilwill be lifted when it is “contrary to the interests of the revenue.” Many of the more recent cases rely upon the English decision ofSmith, Stone & Knight Ltd. v.

Birmingham Corp., [1939] 4 All E.R. 116 (K.B.) where Justice Atkinson listed six factors which were saidto be relevant in determining whether or not it is appropriate to ignore the independence of a subsidiary corporation, (see para. 64,above). [69] Smith, Stone & Knight Ltd. was applied by the Newfoundland Court of Appeal in Bow Valley Husky (Bermuda) Ltd. v. SaintJohn Shipbuilding Ltd., (NL CA), [1995] N.J. No. 150 at para. 44. In declining to lift the corporate veil, theNewfoundland Court of Appeal specifically referred to the English decision of Adams v.

Cape Industries, [1990] Ch. 433 (C.A.) at 544,and endorsed that court’s refusal to accept: 49 [A]s a matter of law that the court is entitled to lift the corporate veil as against a defendant company which is the memberof a corporate group merely because the corporate structure has been used so as to ensure that the legal liability (if any) in respect ofparticular future activities of the group (and correspondingly the risk of enforcement of that liability) will fall on another member of the

group rather than the defendant company. Whether or not this is desirable, the right to use a corporate structure in this manner is inherentin our corporate law. [70] Likewise, in Gregorio v. Intrans-Corp. et al. (1994), (ON CA), 18 O.R. (3d) 527, at 536-537, the OntarioCourt of Appeal rejected the idea that a wholly owned subsidiary could be found the alter ego of its parent in the normal course.

Thecourt said: ...Generally, a subsidiary, even a wholly owned subsidiary, will not be found to be the alter ego of its parent unless the subsidiary isunder the complete control of the parent and is nothing more than a conduit used by the parent to avoid liability. The alter ego principleis applied to prevent conduct akin to fraud that would otherwise unjustly deprive claimants of their rights: see Pauley Petroleum Inc. v.Continental Oil Co., 239 A.2d 629 (Del.); Canada Life Assurance Co. v. Canadian Imperial Bank of Commerce (1974), (ON CA), 3 O.R. (2d) 70; Aluminum Co. of Canada v.

Toronto (City), (SCC), [1944] S.C.R. 267, [1944] 3 D.L.R.609. [Emphasis added.] It is obvious that a finding of agency on conventional grounds is impossible here. A finding of agency based by analogy on “lifting thecorporate veil” requires either wrongful conduct by Mr. Launt or exceptional circumstances. Neither is alleged or in evidence here. Further Disclosure [71] Before the Chambers judge and in its factum, Globex argued two inconsistent positions. First, it asserted that on the knownfacts, a properly instructed jury could reasonably conclude that Numberco was an agent for Launt (Factum, para. 32).

Then itcomplained that there had been no discoveries or full documentary disclosure which meant that a finding of agency “...will have to beinferred partially from facts that are presently before the Court, and partially from facts that have not yet been placed before the Court.” (Factum, para. 33.) [72] Generally speaking, the court is entitled to assume that a party has placed all relevant evidence before the court, as if at trial: Dawson at para. 17.

That does not mean that a motion could not be adjourned owing to a lack of disclosure or where time is necessary toobtain evidence in a proper case (Bethune, para. 34 – the new Rule should make no difference.) Notwithstanding that Rule 13.04(6)permits

summary judgment motions following the close of pleadings, courts should not rush to judgment where there has beeninsufficient opportunity for discovery or disclosure; otherwise how could parties “put their best foot forward”? Equally, however,indolent parties cannot thereby avoid

summary judgment and frustrate the “...just, speedy, and inexpensive determination...” of theproceeding (Rule 1.01). [73] In light of Globex’s complaint about disclosure, it is useful to recapitulate some of the chronology: · July 9, 2009 - Globex sues Numberco. · August 11, 2009 - Globex is advised that Numberco has no assets. · December 10, 2010 - Globex commences a second proceeding against Numberco and Launt, alleging Numberco is an agent forLaunt. · January 27, 2010 - Globex discontinues its first proceeding. · January 28, 2010 - Globex enters default judgment against Numberco in the second action. · February 26, 2010 - Globex threatens a motion to compel Mr.

Launt to provide discovery and further documentary disclosure.

· March 2, 2010 - Mr. Launt brings a

summary judgment motion. · April 20, 2010 -

Summary judgment motion heard. [74] Despite threatening a motion for disclosure, Globex never brought one. It is obvious from the foregoing time line that it hadample opportunity to do so. And it is clear that Globex considered there was sufficient evidence before the Chambers judge to defeat themotion. Two points arise. What kind of material evidence does Globex claim would have been revealed by further disclosure? Andshould the Court decline to rule, because Globex has failed to seek evidence which it says would be helpful?

Should the Court rewardGlobex’s lassitude by assuming helpful evidence will later be forthcoming? [75] The Rule permits a motion after pleadings close. Here there was ample time for Globex to move for discoveries and furtherdisclosure in either proceeding. Globex did not do so. Nor did Globex cross-examine Mr. Launt on the issues that it says remainundeveloped (ie. the purpose for the trades; the terms for repayment of the shareholder loan). Nor did Globex ask the Chambers judgefor an adjournment or a disclosure order. [76] Globex says that further disclosure would relate to Mr.

Launt’s plan for Numberco, repayment terms for his shareholder loanto Numberco, reasons for the loan and purpose for the trading (Factum, para. 33; Affidavit of Matheson - appeal book, p. 119, para. 15). But Globex does not explain how any of this information would render Numberco an agent. Here I would specifically endorse thelanguage of Justice Smith in Goldman, Sachs & Co. v. Sessions, (BC SC), [1999] B.C.J. No. 1226 (Q.L.), at para. 20: 20 Plaintiff's counsel submitted that this matter is not appropriate for

summary disposition pursuant to Rule 18A because he has notyet had full discovery of the relationship between Sessions, AWS, and Kerdos. Further evidence in this regard would demonstratenothing more than the degree to which Sessions controlled the corporate defendants at the material times and would add nothing usefulor necessary to the disposition of this matter. [77] In Sessions, Goldman was owed money by an individual but sued him and his wholly owned company, presumably becausethe company had assets which could respond to the claim.

Goldman’s plea that further disclosure was warranted did not persuadeJustice Smith. In this case, a similar plea by Globex is equally unpersuasive. [78] As previously noted, it is well settled that parties have an obligation to “put their best foot forward” (para. 45 above). InKravontka v. Capital Regional Health Authority, 2002 ABQB 652, Master Funduk dealt with the argument that further helpful evidencemight be forthcoming: 21 There is no expert evidence on behalf of the Plaintiff. Mr.

Erler, for the Plaintiff, says that the Plaintiff will get an expert laterafter the evidence is "gathered" to present to an expert. How much more gathering is needed? Of course Mr. Erler does not say that thePlaintiff will get an expert who will favour the Plaintiff. He could not say that. All he says, and can say, is that the lawsuit should remainalive to let the Plaintiff try to get an expert who will favour him. 22 That submission is essentially the Mr. Micawber approach. The lawsuit should remain alive "In case anything turned up" -Dickens, David Copperfield. Mr. Micawber was rejected in Brown v.

Northey, (1991) 1991 ABCA 75 , 115 A.R. 321 (C.A.),para. 11: In any event, the affidavit filed by the respondent plaintiff does not suggest any additional material facts which should be gone into onthe subject of redemption. None of the evidence filed here by anyone suggests anything which could even arguably disentitle this debtorto redeem, or make it inequitable to have a redemption. Here the appellant defendants (plaintiffs by counterclaim) made out a strongprima facie case for

summary judgment. Therefore, the respondent plaintiff who alleges there is a triable issue and resists

summaryjudgment, had to produce evidence to show a triable issue (as the pleadings did not raise a purely legal arguable issue). It is not enoughfor such a respondent merely to argue that there may be facts somewhere which might emerge at trial and might turn out to be relevant. [Emphasis added.]

[ 79 ] Kravontka was approved by Côté J.A. in his minority judgment in Lameman v. Canada (Attorney General) , 2006 ABCA 392 , at para. 58 . Côté J.A. was upheld by the Supreme Court of Canada, which said this about suggestions of further evidence emerging: [19] We add this. In the Court of Appeal and here, the case for the plaintiffs was put forward, not only on the basis of evidence actually adduced on the

summary judgment motion, but on suggestions of evidence that might be adduced, or amendments that might be made, if the matter were to go to trial. A

summary judgment motion cannot be defeated by vague references to what may be adduced in the future, if the matter is allowed to proceed. To accept that proposition would be to undermine the rationale of the rule. A motion for

summary judgment must be judged on the basis of the pleadings and materials actually before the judge, not on suppositions about what might be pleaded or proved in the future. This applies to Aboriginal claims as much as to any others. [ 80 ] There may be cases where the Court will hesitate to grant judgment if there is a real prospect that material disclosure is incomplete (per Côté J.A. in Lameman at para. 66).

In this case, Globex has neither demonstrated the likelihood of disclosure of further material evidence, nor has it demonstrated an inability to obtain disclosure and discovery within the time lines of the two proceedings. The Court should not do for Globex what it has not done for itself. In the absence of a real prospect that material facts are yet to be disclosed, the Court should not assume that further disclosure would strengthen Globex’s case. Evidence of Agency in this Case [ 81 ] Mr.

Launt has filed an affidavit in which he has demonstrated that Numberco entered into foreign currency transactions with Globex. He denies any agency relationship between himself and Numberco. Regardless of his denial, the contracts clearly show that Globex and Numberco entered into the foreign exchange contracts as principals. Numberco’s tax returns for 2007 and 2008 disclose that Numberco is a separate entity from Mr. Launt for tax purposes. The shareholder loan advanced to Numberco by Mr. Launt also assumes a distinction between himself and Numberco for business and tax purposes.

He does not dispute that he is the sole shareholder and “controlling mind” of Numberco. But that would describe many private companies in this country. Alone that does not establish agency ( Edgington and Fleischer , paras. 59 and 60 above). Mr. Launt also denies making any misrepresentation to Globex that Numberco was his agent. Indeed, Globex does not allege that it was misled. As previously indicated, Mr. Launt was not cross-examined. [ 82 ] By placing before the court affidavit and documentary evidence of the foreign exchange transactions, Mr.

Launt has demonstrated a prima facie case that the exchange transactions occurred between Numberco and Globex and not with him as principal. By doing so, Mr. Launt has displaced his initial burden as moving party. It is legally possible that Numberco could be found an agent of Mr. Launt on one of the exceptional bases discussed in paras. 54-70 above. But it is not Mr. Launt’s burden to positively disprove these exceptions. Rather, the burden lies on Globex to offer evidence of exceptional circumstances. Accordingly, Mr.

Launt’s evidence is sufficient to require Globex to lead the evidence that it has a “real chance of success”. So what is that evidence? [ 83 ] In his affidavit, Globex’s Jeff Matheson says in para. 3: 3. This matter arises from three currency trades in which 3077860 Nova Scotia (Numberco), acting as agent for Carl Launt, placed deposits for the purchase of £1,198,000 and then failed to settle the trade by making good the funds Globex expended in purchasing those funds for the defendants. This allegation is apparently inconsistent with Mr. Matheson’s July 3rd affidavit sworn in the first proceeding where Mr.

Matheson swore that Numberco “entered into contracts with the applicant as follows” (para. 5). As previously noted, Mr. Matheson’s November 10, 2009 affidavit says: Globex has no information to suggest that Numberco was not acting as his agent, nor does Globex have any information regarding the purpose of the currency trades that are the subject of this litigation. Globex anticipates that such information is best in the knowledge of Carl Launt, and that this information would be forthcoming during examination for discovery (para. 15). The two affidavits can only be reconciled if Mr.

Launt is an undisclosed principal.

[84] Globex also argues that Numberco has not carried on business for at least four years before the trades; that its only “asset”was the shareholder loan from Mr. Launt; that it does not know why the transactions were entered into, or the terms of the shareholderloan. That cannot suffice. It is an obvious and reasonable inference that the agency argument only occurred to Globex after it learnedthat it could not collect from Numberco.

Here the words of the Supreme Court of Canada in Guarantee at para. 31 are appropriate: 31 Gordon objected that the various affidavits of Bailey raised a credibility issue sufficient to require a trial. O’Brien J. disagreed.Reading the various affidavits, he was of the view that Bailey’s reversal of position after a limitation period defence had been asserteddid not create a genuine issue for trial. We agree with that finding. The reversal was based on Bailey’s opinion that actual knowledge thatRachar had benefited from his transactions was determinative.

The affidavit of November 22, 1995 states that the June 26, 1991 date wasused only because this was the date at which Gordon knew it had to meet a capital requirement, not because it believed that a loss of thetype covered by the Bond had occurred. O’Brien J. looked at this in the context of the proceedings, taking into account the sophisticationof the parties and the fact that they had been discussing their problem with forensic accountants and outside legal counsel.

We do notfind his conclusion to be unreasonable, especially in view of the fact that the true test of discoverability is an objective one under theterms of

section 3 of the Bond. We would add that the trial judge’s ruling on this point is entirely consistent with previous decisionsholding that a self-serving affidavit is not sufficient in itself to create a triable issue in the absence of detailed facts and supportingevidence. See Rogers Cable TV Ltd. v. 373041 Ontario Ltd. (1994), (ON SC), 22 O.R. (3d) 25 (Gen. Div.);Confederation Trust Co. v. Alizadeh, [1998] O.J. No. 408 (QL) (Gen.

Div.). [Emphasis added.] [85] While it is theoretically possible that a shareholder can be an undisclosed principal in particular circumstances, Globex mustlead evidence to show that its argument of agency has a real prospect of success. It need not establish agency – but it must lead evidenceto satisfy the court that a question of agency is one that should be tried.

To do that, Globex must provide some evidence that a finding ofagency could be made because not doing so would “...yield a result too flagrantly opposed to justice, convenience or the interests of theRevenue.” (Kosmopoulos, para. 12.) There is no such evidence here. [86] Evidence that Numberco is controlled by Mr. Launt will not do it. Evidence that Numberco has no assets other than theshareholders loan, will not do it. If that were so, all small companies which failed a “solvency test” in their business dealings wouldrender the controlling shareholders personally responsible for corporate obligations.

The fact that Numberco had not been active for anumber of years is no more sinister than that Numberco could have been incorporated solely to enter into these transactions. ShieldingMr. Launt from personal responsibility for the transactions is not wrongful – it is a natural consequence of incorporation. There is noevidence that the investment or losses of Numberco were treated by Numberco or Mr. Launt as those of Mr. Launt (per the first factor inSmith, Stone & Knight); or that Mr.

Launt behaved as if the corporation had no independent existence (Bow Valley Husky (Bermuda) Ltd.at para. 44 (para. 69 above); or that “unique” circumstances require the corporate veil to be lifted, (White, para 63-65 above); or that Mr.Launt had misrepresented Numberco’s assets; or that Mr. Launt had misrepresented Numberco’s status; or that Mr. Launt had misledGlobex in any way whatsoever, (GmbH, para. 63 above) [87] This was a commercial transaction between commercial parties.

If Globex had any concerns about Numberco’s assets, means,intention or ability to pay, there are well known commercial practices by which Globex could protect itself. It could have asked forNumberco’s financial statements; or tax returns; or business plans; or bank statements. It could have asked for a personal guarantee fromMr. Launt or his other businesses. It could have asked for security. Globex did none of these things.

Essentially, Globex complains thatbecause it is not able to recover from the entity with which it knowingly did business, it should recover from someone with whom it didnot think it was doing business – Mr. Launt. [88] Globex has arguments and allegations but no evidence. If it is able to avoid

summary judgment on the facts before the court,no sole shareholder corporation of limited resources would be entitled to

summary judgment when faced with a bare allegation that thecontrolling shareholder was the real “principal” and that the corporation was simply his or her agent. Such corporations are shareholder-financed and notoriously under capitalized. It would be easy to allege they do things they cannot afford. Globex’s plea here results inone law for widely held corporations and another for single shareholder corporations – something the Supreme Court expressly rejectedin Kosmopoulos. It would introduce an unwarranted and unjustified uncertainty into the commercial relationships of such corporations.

And as a practical matter where claims are not large, it may force shareholders personally to settle spurious allegations of agency in orderto avoid the time and expense of a trial. The following reminder from the Supreme Court warrants repetition here: [10] This appeal is from an application for

summary judgment. The

summary judgment rule serves an important purpose in the civillitigation system. It prevents claims or defences that have no chance of success from proceeding to trial. Trying unmeritorious claimsimposes a heavy price in terms of time and cost on the parties to the litigation and on the justice system. It is essential to the properoperation of the justice system and beneficial to the parties that claims that have no chance of success be weeded out at an early stage.Conversely, it is essential to justice that claims disclosing real issues that may be successful proceed to trial.

Conclusion [ 89 ] Notwithstanding some infelicitous language, and with great respect to my colleagues, the Chambers judge did not err in allowing

summary judgment here. Her focus on determining a lack of agency was misplaced – but that determination really assumes that there was no evidence raising a material issue of agency. Mr. Launt discharged the initial evidentiary onus on him of showing that Globex’s claim had no merit. Globex failed to lead evidence that would show it had a real chance of success. Globex only resorted to the agency argument when it could not collect from Numberco. I would grant leave but dismiss the appeal with costs. Bryson, J.A.